An Objective Look at the Psychedelics Industry for 2023

Business analysts take to their crystal balls to provide an industry outlook.

It’s one thing to hear from business owners about the future of their industry; it’s quite another to talk to business analysts who have a more objective approach to prognosticating about an industry that appears to be struggling as it pushes on through the noise and clutter of running complex biotech companies.

The Psychedelics Invest Index showed that psychedelics stocks were down significantly in October 2022, taking a hard dive beginning Oct. 6. But the trend appears to be shifting up a bit as this new year begins.

Leading the stock comeback in the 59 constituents of the index so far are Reunion Neuroscience, BioMind Labs, and Pharmadrug. Fifteen others also have shown small but positive changes recently.

The index report stated that the psychedelics market has “reached a sort of stalemate” at the end of 2022 and has “taken a beating.”

Going forward into 2023, the index predicts:

  • Mergers and acquisitions will continue to increase.
  • 2022 will be chalked up as a losing year with investors still forging ahead.
  • Companies will continue to extend their cash on hand for as long as possible.

As of December, the index reported just eight companies trading at over a $50 million market cap. Five traded over $100 million; and only two traded over $500 million.

In other words, it appears that the industry is hanging on by a thread.

What’s the root of the problem?

In a podcast back in January 2022, Brom Rector, founder and general partner of Empath Ventures, said that he thinks the psychedelics industry is in a shakeout phase where a lot of the weaker companies are going to fold. What will be left are companies attracting serious, disciplined institutional money, Rector said, adding that the space is crowded, and there are a lot of companies that are pursuing similar ideas.

Even with good news about the industry as 2023 begins — the start of legalized psilocybin operations in Oregon, the legalization of psychedelics in Colorado, the creation of a psychedelics caucus in Congress — investors are still wary of getting too deeply involved, as reported in Business Insider. Money guys want in, but they are digging in and doing more homework now.

“We want to ensure that the human beings that we are partnering with are human beings that we trust, and who we believe are good custodians of bringing these medicines to the marketplace,” Greg Kubin said as co-host of a podcast.

Kubin is a principal in PsyMed Ventures, a community-focused fund and syndicate providing capital and support to companies revolutionizing how mental health is treated. PsyMed started a $25 million fund in January 2022 to invest in psychedelics.

“I think we have all seen across many different industries in our capitalistic society that it is very easy for a company to be run by somebody who is just trying maximize profits at all costs and can often be at the cost of the patient,” he said.

“We are operating in a highly regulated framework,” Mattias Serebrinsky, the other podcast co-host, said. He is also a principal of PsyMed Ventures. “That is not only about companies going through FDA trials but any company that is working with health care data and with medical records that needs to be compliant in multiple ways. So companies that are able to fully comprehend the regulatory framework have a much better chance of being successful.”

Maybe this year, after the page is turned on the failures of 2022, industry leaders can find the resources needed to help boost the psychedelics industry.

“I think the thing to say is we’re in quite an early stage,” David Nutt said, professor of neuropsychopharmacology and director of the Neuropsychopharmacology Unit in the Division of Brain Sciences at Imperial College of London. Nutt was speaking to the European Parliament last month in one of the first-ever policy sessions on that continent to discuss psychedelics.

“We’ve only been going for 10 years. And we’ve gone through a phase of enormous hope and hype. Now there’s a lot of concerns as to whether there’s actually enough resources even to take perhaps any psychedelic through to being sort of positioned in a class as a regulated medicine,” he said.

“The driver has got to be more than just the traditional model of IP and commercialization. There are very, very few, or maybe none, of the major pharma companies that still work in the brain space who are actually interested in a psychedelic presence. And they’re the ones that do have a lot of resources. And if we can’t unlock those, we’ve got to find other sources,” Nutt added.

Dave Hodes

David Hodes is a business journalist based in the Washington D.C. metropolitan area. He has contributed feature articles to several cannabis and psychedelics publications, as well as general business/lifestyle publications, on a variety of topics. Hodes was selected as 2018 Journalist of the Year by Americans for Safe Access. He is a member of the National Press Club, and the deputy booking agent for the National Press Club Headliners Committee.


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