institutional investors Archives - Green Market Report

Dave HodesMay 19, 2022
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When looking at the data coming out of psychedelics research, there is tantalizing evidence that the promise of psychedelics is becoming more of a reality every day. 

Companies and organizations such as Compass Pathways NASDAQ: (CMPS) the Multidisciplinary Association for Psychedelic Studies (MAPS) and Awakn Life Sciences are either planning or working on phase 3 clinical trials, one of the last steps before U.S. Food and Drug Administration (FDA) approval.

And these are not just clinical trials with positive outcomes that last for a few weeks. Studies of psilocybin, ayahuasca and lysergic acid diethylamide (LSD) on psychiatric diseases and addictions found a quick response after psychedelic administration that lasted for several months, even after a single dose. 

In light of this seemingly diminishing risk of investing in a psychedelics drug, it’s no wonder that institutional investors are taking a closer look as the industry matures into mainstream investor territory with more psychedelics companies going public. 

Going public can help make a company more attractive to an institutional investor because it helps generate capital for the company to expand, and requires the company to provide detailed disclosures about their operations.

There are now 48 publicly traded psychedelics companies: most are on the Canadian Securities Exchange (CSE); eight on NASDAQ; and one, (Cybin, Inc.), is traded on the New York Stock Exchange. 

Cybin Inc. has 55 institutional owners and shareholders, holding a total of 16,411,827 shares. 

Atai Life Sciences has 105 institutional investors. GH Research has 36 institutional investors who own almost all of the available stock (61.72%), with six new institutional investors all coming three days after the company’s 2021 full-year report to investors in March 2022, where company executives showed a significant cash position of $276.8 million to fund operations into 2025.

In fact, this year’s first-quarter reporting on the results of 2021 for various psychedelics companies was the catalyst for serious institutional investment movement. One example: Of the 205 institutional investors listed for MindMed, 31 are new investors who jumped in at the end of March, 2022. Those included heavy hitters like Barclays and Oppenheimer and Company.

Huge institutional investors like BlackRock, the world’s strongest asset management brand according to the 2021 Fund Brand 50 study, an annual dataset from Broadridge Financial Solutions, are a big part of the investment picture in psychedelics. BlackRock holds shares in MindMed, Cybin, Atai, Compass Pathways, Seelos Therapeutics, and GH Research. All are listed as stocks to watch by U.S. News

How can an institutional investor choose a psychedelics company to invest in? A securities lawyer told the Canadian Investment Review that he advises that psychedelics institutional investors focus on identifying sophisticated management teams inside companies who have a deep understanding of the regulatory framework, and an ability to map out a path through drug development to commercialization. He added that any potential investment should also be backed by strong science and medical advisors.

Psychedelics investment opportunities are broadening.

The psychedelic sector includes the full biopharmaceutical and healthcare value chain. According to a global business strategy company, LEK, while investment has traditionally focused on biopharmaceutical research and development, there is now an increasing trend to distribute funding across the value chain more broadly. 

Some psychedelics companies primarily focused on development are using this strategy by establishing clinic networks and digital platforms to create the infrastructure for clinical trials they need, and the delivery of psychedelic-assisted psychotherapies. 

“This approach has two immediate advantages,” according to an LEK executive insight finding. “Firstly, it generates short-term revenue through other applications for these assets. Secondly, it allows companies and investors to reduce the level of risk inherent in developing new drug therapies.”

That’s just the sort of reassurance that institutional investors need today for getting involved in an emerging, risky industry dealing with drug discovery and development that has to deal with more uncertainty than other healthcare-related companies. 

Investors today in general are bracing for increased volatility, higher inflation, and upward pressure on interest rates. These conditions reflect a fundamental change from what investors working with institutions have experienced over the past several decades, according to a 2022 global investment study by Nuveen, a global investment management company. “As plan sponsors and asset allocators, we’re tasked with achieving these lofty return expectations, north of 7%, all within the parameters of prudent risk management,” a U.S. public pension investment officer reported in the study. “Those two things are becoming incongruent. … It’s challenging conventional wisdom, for sure.”

Still.. psychedelics are looking more and more like a sure thing for institutional investors today.

Ben Bei, director and product strategist on the Global Emerging Markets Equities Team within BlackRock’s Active Equity Group, wrote in an investment insight article that, compared to other sectors, demand for healthcare is resilient and less impacted by economic swings. “Historically, the sector has been the strongest performer in late cycle and recessionary periods, suggesting this may be an area investors should look into amid uncertainty over the broader macroeconomic outlook,” Bei wrote. “This sector is also a greenhouse  of innovation: an array of R&D companies constantly delivers new products to fulfil unmet demand, which, we believe, act as a long-term driver for the sector’s growth.”


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