Which Psychedelic Drug Has The Most Commercial Potential?

  • The Psychedelics Revolution is opening up massive opportunities in drug development
  • Today, ~2 billion people globally suffer from treatable mental health disorders
  • R&D is currently underway with several different psychedelic drugs to capitalize on this opportunity

As the Mental Health Crisis has become a mental health pandemic, clinical research on psychedelic drugs is showing that these substances are the best – and only – option to address this crisis.

Globally, roughly 2 billion people now suffer from treatable mental health disorders. The Covid-19 pandemic (and associated lockdowns) has dramatically escalated this mental health pandemic.

However, clinical trials are now starting to reach an advanced stage. Due to the severity of this health crisis, the political will to normalize these substances seems to be starting to materialize.

The mainstream media is now finally paying attention to the Mental Health Crisis. It has already been touting the potential of psychedelic medicine to revolutionize mental health care.

As this commercial opportunity begins to crystallize, increasing numbers of investors are becoming interested in the (now) dozens of psychedelic stocks in this emerging sector.

Before investors can zero-in on the companies they consider to be the best investment opportunities, they need to familiarize themselves with the science and potential treatment markets. Specifically, which of these psychedelic substances have the most therapeutic/commercial potential – in targeting the 2 billion treatment candidates.

Several psychedelic substances are demonstrating strong medicinal potential

Most psychedelic drugs are currently prohibited, caught up in the now-failed War on Drugs. The path to legalization (and commercialization) will be different for each of these substances as they have significant differences in both their medicinal applications and their psychoactive effects.

For a more complete discussion of the commercial potential of psychedelic drug development and the individual treatment markets, previous Psychedelic Stock Watch articles provide additional details.

Ketamine is the only psychedelic drug that is broadly legal today. Used primarily as an anesthetic, ketamine has been used off-label in more recent years to treat chronic pain, alcohol withdrawal management, and depression.

It is the latter application that is of greatest interest to most investors in psychedelic stocks. Depression offers both large treatment markets (100s of millions of sufferers globally), robust commercial potential, and an absence of effective existing remedies.

Ketamine is obviously benefitting at present from being the only legal psychedelic (in most jurisdictions). Ketamine-based mental health clinics are spreading rapidly in both the United States and Canada. Not only are these clinics providing treatment for depression but they are also offering therapy for other mental health disorders such as PTSD and substance abuse.

Additional ketamine-based R&D is seeking to extend its medicinal applications to other treatment markets.

While ketamine is already widely available for mental health therapy, it will not and cannot forestall the need for other psychedelic drug development. Ketamine presents treatment issues in terms of both its own addictive properties as well as the drug’s toxicity. Some patients will also not be able to tolerate ketamine’s hallucinogenic properties.

Esketamine, a non-hallucinogic ketamine derivative, eliminates some of these risks/side effects. Johnson & Johnson (US:JNJ) has brought an esketamine drug to market (Spravato). However, therapeutic results in using Spravato to treat mental health disorders such as depression and PTSD have been mixed.

Among the public companies already heavily involved in ketamine-based psychotherapy (and mental health clinics) are Field Trip Health (US:FTRP / CAN:FTRP) and Novamind Inc (CAN:NM/ US:NVMDF).

NASDAQ-listed Field Trip is also pursuing proprietary ketamine-based drug development. But Novamind is actually generating substantially more clinic revenues at present.


Psilocybin is one of the primary psychoactive ingredients in “magic mushrooms”. It is (along with LSD) the most widely-researched psychedelic substance today. There are several reasons for psilocybin’s popularity in clinical research.
  • Minimal toxicity and non-addictive
  • Powerful medicinal and even regenerative effects on the brain
  • Broadly applicable to mental health disorders

The very positive safety profile for psilocybin is an important advantage in drug R&D. It can often allow companies to skip Phase I of the clinical trials process, which tests these drugs for safety and tolerance. That saves on time and costs for a clinical trial.

Scientific research is showing that psilocybin has an especially potent effect in “rewiring” the human brain. It can generate new neural pathways that allow different regions within the brain to “communicate” in new (and more effective) ways.

To date, clinical research involving psilocybin is most advanced with respect to the treatment of depression. Compass Pathways (US:CMPS) just completed a Phase IIb clinical trial of a psilocybin-based therapy for Treatment-Resistant Depression (TRD). This research has been fast-tracked by the FDA via its Breakthrough Therapy Designation.

Cybin Inc (CAN:CYBN / US:CYBN) is preparing to commence a Phase IIa clinical trial using a psilocybin-based therapy for Major Depressive Disorder (MDD). Mydecine Innovations Group (CAN:MYCO / US:MYCOF) is about to start its own Phase IIa clinical trial using psilocybin in the treatment of PTSD – specifically focused on the crisis with military personnel.

Considerable additional psilocybin-based R&D is either in Phase I testing or at the pre-clinical level. And psilocybin has also shown significant research promise in the gigantic substance abuse treatment market(s).

A recent poll in Canada shows that nearly 80% of the population favor legalizing psilocybin for medicinal use. Health Canada has already been granting special “exemptions” to allow patients with critical healthcare needs to be treated with psilocybin-based therapies.

Psilocybin will likely become the first psychedelic drug to be de-scheduled by a major government and legalized for medicinal use (in Canada).

In the U.S., psilocybin also enjoys rapidly increasing grassroots support at the local and even state level. However, psychedelics research remains blocked at the federal level by a herd of gray-haired politicians still mired in (failed) War on Drugs thinking.

Legal use (and commercialization) of psilocybin may advance much faster in the EU and UK via their “real-world evidence” pathway to drug approval. This is a practical means to advance drugs that are “proven safe substances”, a category into which psilocybin fits.

For a variety of reasons, psilocybin offers robust commercial potential and is likely the most-popular psychedelic drug among investors in psychedelic stocks.


MDMA, more commonly known by its street-drug name (Ecstasy), is a somewhat different psychedelic. While also possessing hallucinogenic properties, it is observed to produce feelings of “emotional warmth” as well as an “increase in self-awareness and empathy”.

It is these properties that have made MDMA a natural fit in the treatment of PTSD: severely traumatized individuals. The Multidisciplinary Association for Psychedelic Studies (MAPS) leads the way in MDMA-based clinical research.

It is currently in a Phase III clinical trial using MDMA-based psychotherapy to treat PTSD. This has also been granted Breakthrough Therapy Designation from the FDA.

Clinical results for MAPS have been outstanding. Currently, only 1/3rd of veterans receiving treatment for PTSD from the Department of Veterans Affairs report obtaining any benefit from treatment.

Conversely, in the MAPS clinical trial roughly 90% of participants have reported benefits. And 67% (2/3rds) “no longer qualify for PTSD diagnosis” – i.e. they have been cured. Revolutionary.

Twenty-two U.S. veterans commit suicide each day, most of the deaths due to PTSD. Tens of thousands of veterans from recent U.S. wars are partially or totally disabled from PTSD.

This greatly exceeds all other attrition from recent U.S. wars. It is a massive crisis within the U.S. military, at a time when 70% of Young Americans can’t even qualify for military service due to obesity, lack of education, or a criminal record.

It is likely the only crisis that might get the dotards in Congress to enter the 21st century and support legal reform of (first) MDMA and other psychedelics.

MDMA also enjoys a strong safety profile, as explained in this 2015 article from The Guardian.

While all drug use, recreational or otherwise, can cause harm, pure MDMA is one of the least dangerous drugs known. Indeed, it is much less dangerous than drugs like alcohol, tobacco or cannabis [sic]. MDMA is rarely habit-forming.

This would seem to make MDMA a good candidate as well for the “real-world evidence” pathway to drug approval in the EU/UK.

With the most-advanced clinical research and viable pathways to commercialization/legalization, MDMA research is also a leading investment prospect for investors in psychedelic drug stocks. As with other psychedelics, MDMA-based research is also advancing in many other areas of mental health treatment.


LSD is another psychedelic drug with well-known hallucinogenic properties, and is perhaps equally well-known by its street-drug name: “acid”.

However, as with psilocybin and MDMA, it is known to be very safe. It is non-toxic in standard dosages and non-addictive. This makes LSD also a good candidate for real-world evidence drug development.

Along with psilocybin, LSD is the most-researched psychedelic drug, with a large body of clinical research pre-dating War on Drugs prohibition. This means that clinical research on LSD-based medicinal applications is generally more advanced than with other psychedelics.

Discovered (accidentally) by Swiss chemist Albert Hoffman in 1938, even microdoses of LSD have been shown to repair neurons in pre-clinical testing on everything from rats to zebrafish.

Clinical research on LSD-based mental health applications is already well-advanced using both microdosing and “experiential” treatments.

Leading the way in LSD-based psychedelics research is MindMed Inc (US:MNMD / CAN:MMED). MindMed already has Phase IIa clinical trials underway for both a microdose-based treatment for ADHD and an experiential treatment for anxiety disorder. It is about to commence a Phase IIa clinical trial using LSD-assisted therapy to treat cluster headaches.

Private company, Eleusis Ltd is preparing to enter a Phase IIa clinical trial using microdoses of LSD to treat Alzheimer’s disease.
All of these applications offer potentially large treatment markets. However, at this stage of industry development, LSD-based research does not seem to have generated as high a public profile as have psilocybin and MDMA, or (legal) ketamine.

Both psilocybin and MDMA have received Breakthrough Therapy Designation from the FDA, but this has not yet been extended to LSD-based research. At the local/state level, it is psilocybin decriminalization and legalization initiatives are enjoying the most support among all psychedelics.

MDMA is also seeing some regulatory thawing in the U.S. at the state level, due to the healthcare emergency among U.S. veterans. Consequently, the path to legalization for LSD seems more uncertain than psilocybin (in Canada) and MDMA (in the United States) – even as drug research reaches advanced stages.


Ibogaine is a natural psychedelic drug derived from the iboga shrub. It has also seen considerable use by indigenous peoples for everything from fever and influenza to HIV/AIDS and nerve disorders.

Ibogaine is much more toxic than psychedelics like psilocybin, MDMA and LSD. Its use can present some cardiac risks as well as other side effects such as seizures, paralysis and difficulty breathing.

Given the much safer alternatives in psychedelic medicine, why is ibogaine-based R&D seeing considerable interest among many of the players in the psychedelic drug industry? In a word, addiction.

Ibogaine has shown in both empirical research and clinical studies to exhibit unique properties in neutralizing addictive cravings. A 2017 clinical study on the use of ibogaine to treat opioid addiction reported that 50% of the addicts had stopped consuming opioids within a month of commencing treatment.

Ibogaine presents minimal health risks in a controlled medical setting. Opioids are a deadly killer. That’s a pretty good trade-off for drug development.

Psychedelic Stock Watch sees addiction/substance abuse therapy as providing the most long-term commercialization potential for psychedelic drugs.
Including the ~1 billion nicotine addicts (with over 7 million people dying from their nicotine addiction each year), substance abuse offers by far the largest total treatment population.

With each form of substance abuse/addiction exhibiting different properties, this means that each form of substance abuse is a separate treatment market (and drug development opportunity) for the psychedelic drug industry.

Because of its potential health issues, ibogaine-based R&D has been largely bypassed and is still in the early stages. A synthetic form of ibogaine should generate a more consistent treatment profile – and potentially reduce some of these risks and side effects. Mind Cure Health (CAN:MCUR / US:MCURF) is busily advancing its own research on a synthetic ibogaine derivative.

While still at an early stage of R&D, ibogaine’s addiction-fighting properties mean that this is a psychedelic drug that most investors in psychedelic stocks will not want to ignore as they create their basket of stocks.

DMT (ayahuasca)

Ayahuasca is an extremely potent psychedelic compound. It is produced by the blending of two distinct plant species. It has been used for centuries by indigenous tribes in cultural and religious rituals.

DMT is the synthetic version of ayahuasca. It also produces intense hallucinogenic and psychoactive effects. It also presents a list of possible side effects.

Because of its potency, DMT hasn’t seen the same degree of drug R&D as other psychedelics. Drug research is still at an early stage.

However, both DMT and ayahuasca produce a rapid onset and a brief trip duration. This offers important commercialization advantages versus other psychedelic drugs, particularly with respect to experiential (supervised) treatments.

Experiential therapies using other psychedelic drugs require multi-hour supervised sessions by trained medical professionals. That’s expensive.

A DMT “trip” (and therapy session) can be over in under an hour. This means that DMT-based treatment is potentially much cheaper than other psychedelic drugs. In turn, this raises the prospect for greater patient accessibility (affordability) and is more appealing to health insurers.

This makes DMT drug R&D and DMT investment opportunities the ‘wild card’ in psychedelic drug development.

With less grassroots support than other psychedelic drugs and at a much earlier starting point for research, DMT investment opportunities in the psychedelics space need to be seen as more long-term propositions – but with (perhaps) an enormous upside.

Diversifying in psychedelic drug R&D investment

As investors can see for themselves, each of these psychedelic substances offers different strengths (and weaknesses) as this emerging industry seeks to commercialize these drugs. This means that most investors will see value in diversifying their investments in psychedelic stocks among different companies – and different fields of drug research.
  • Ketamine clearly offers the most immediate commercial potential.
  • Psilocybin and LSD have the deepest pools of drug research.
  • Psilocybin and MDMA seem to have the most certain paths to legalization/decriminalization.
  • Ibogaine has unique properties in neutralizing addictive cravings.
  • DMT drug R&D may provide the best long-term commercialization potential.

One industry. Several different drugs. Two billion potential treatment candidates. Enormous commercialization potential in a large (and growing) number of multi-billion-dollar treatment markets.

Psychedelic Stock Watch sees these Miracle Drugs as representing the best life sciences opportunity of the 21st century. Choose your horses. The race is already underway.

DISCLOSURE: The writer holds shares in MindMed Inc, Cybin Inc, Mind Cure Health and Novamind Inc.
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