Psychedelic drug stock picks are growing from the new legal medical mainstream and this professional stock analyst has a few for your 2024/2025 portfolio.
Expert analyst Patrick Trucchio has spent many years researching the psychedelic drug stock sector.
Mr. Trucchio has 17 years of experience on the sell side.
Patrick Trucchio, Managing Director of Equity Research at H.C. Wainwright & Co.
Prior to joining H.C. Wainwright, Mr. Trucchio was a senior equity research analyst at Berenberg Capital Markets (BCM) covering biotechnology and specialty pharmaceutical companies.
Prior to Berenberg Capital Markets, Mr. Trucchio worked at Wells Fargo Securities and BMO Capital Markets.
At Wells Fargo, Mr. Trucchio worked on an Institutional Investor ranked analyst team covering specialty pharmaceutical companies.
“On a formal basis, I’ve been involved in researching psychedelic drug development companies for the last six or so years, and informally, I’ve had a very good understanding of what’s been going on and the potential with psychedelics for, I would say, the last 20 years.
It’s really just an interest that I’ve had in how these mechanisms work.
It is a little more controversial, but how they work in ways that might create windows of opportunity for people to resolve what it is that’s bothering them, particularly if the problem is causing depression or anxiety…
These are companies that are looking to develop treatments through the formal FDA approval process, and would include SPRAVATO — esketamine — though would not include racemic ketamine, which is FDA-approved as an anesthetic.
Notably, ketamine is Schedule 3, and the other psychedelics are all Schedule 1, which means that they’re all technically illegal.
Typically, a novel or repurposed compound goes through the formal FDA approval process.
If the compound is Schedule I but demonstrates a medical use, as did EPIDIOLEX —cannabidiol — in epilepsy, and achieves FDA approval, there will be a time in which the drug sponsor will have to get their specific drug rescheduled by the DEA.
As mentioned, there’s precedent for that with EPIDIOLEX in epilepsy.
We’ll have to see exactly how that goes, but when I am talking about the psychedelics market, I’m talking about the drugs that are going through the formal FDA approval process, including generating preclinical data, as well as Phase I, Phase II, and Phase III data, followed by a New Drug Application submission and approval.
Our research does not cover areas such as psilocybin mushrooms that people are growing.
There are efforts to decriminalize these compounds in states like Oregon.
I don’t really consider that to be the same thing.
Ketamine is available.
It’s an anesthetic and it’s used throughout the United States on an off-label basis for depression at sub-anesthetic doses.
That means the FDA has not approved its use for depression at lower doses.
So, sub-anesthetic doses are administered for people who are looking to get their depression treated.”
Psychedelic drug development has not been a smooth path for researchers or publicly traded drug development companies.
“…In June 2021, we hosted our first neurology conference, and we had so much interest.
It was the first sell-side-organized, big psychedelic-focused conference, to my knowledge, focused on second-generation psychedelics that are being developed for mood disorders, including depression or anxiety, and we had an enormous amount of attendance — more than 300 institutional investors.
The final keynote speaker that year was Rick Doblin, who is one of the founders of MAPS, or what has become Lykos, which is evaluating MDMA-assisted therapy in PTSD.
It was virtual.
We had more than 700 attendees, and that is a very large number for a virtual keynote address.
Around that time, while many of the questions focused on the investment merits of the companies that were emerging in the space, we fielded as many if not more questions around the potential health benefits of psychedelic use.
For example, a lot of questions being asked were like, can I take a psychedelic to make me smarter, or will it help me in my role in some way, will it help me think about things differently? In other words, will it give me an edge in what I’m doing?
These types of questions are outside the scope of our role, which is focused on evaluating the investment merits of the public companies in our coverage universe.
However, I do believe that the questions around health benefits of psychedelics have helped the microdosing trend really take hold.
There’s a couple of important things there.
First is that there’s no evidence that microdosing does anything in any way for any disease.
Second, Mind Medicine ran a study with microdosing for ADHD, and they decided not to go forward with the program.
They didn’t release what that data looked like, but I think we can conclude it didn’t look great.
Also, there was a study out of Imperial College London that looked at microdosing in ADHD specifically.
I don’t know that they’ve released those results, but in conversations that we had, it sounded as if it was more disappointing.”
Psychedelic drug stocks are getting attention from the popular “micro dosing” concept but this may lead to an FDA dead end.
“…The classic psychedelics have activity at a receptor called 5-HT2B, which is present in cardiac tissue and it’s known that this activity can lead to or contribute to valvular heart disease.
So, as we think about what the industry wants to promote, is that helpful in any way?
I don’t think it’s helpful, and none of the companies that we cover are in any way promoting that.
I think it was happening more in pop culture.
You might have had some of these people on podcasts and things like that saying, “I microdose with LSD, and it helps me. I’m so much more productive.”
The interesting thing is with something like ADHD, and for sure with depression and anxiety, there’s a very significant placebo effect.
That’s why it’s hard to get drugs approved in these disease areas, because the FDA wants to see that a drug is actually doing what it’s intended to do.
The short answer is, I think it has an impact just in terms of increasing interest in the space at large.
It’s not really going to have an impact as far as how these drugs are administered because the way these drugs are being researched is actually not as a microdose, but as what’s called a macrodose or a perceptual dose where it’s administered maybe once or twice a year, or four times a year in some cases for the longer-duration psychedelics.
For the shorter duration ones, like DMT, 5-MeO-DMT, where maybe the drug effect lasts like 20 to 45 minutes, possibly those will be administered more frequently, perhaps monthly.
And then you have something like SPRAVATO.
At the start of treatment, patients could be receiving SPRAVATO a few times a week and the intervals lengthen after that, but it’s a bit complicated. None of them are being administered as a microdose.
The FDA also released their guidance for drug makers in June 2023 that detailed the potential for valvular heart disease to be triggered by the 5-HT2B agonism and basically saying that we want to see the research that’s been done.
If the drug is going to be a daily microdose, the FDA would require some sort of cardiotoxicity data to be conducted.
And then for these drugs, it’s different just in terms of how they’re being administered.
The impact is just in terms of increasing the interest overall, and in some ways that’s helpful, in other ways, it may not be as helpful.”
Patrick Trucchio does have his top picks in the psychedelic stock market.
“Focusing on the names that have readouts coming within the next year, if we had to pick three, COMPASS Pathways would be our top pick. That’s because they have two Phase III readouts coming. One is expected in December or January and then one in the middle of 2025.
After COMPASS, GH Research also has a Phase IIb trial reading out on GH001. And then ATAI Life Sciences has a Phase IIb readout coming on BPL-003. Those are near-term, later stage data readouts for those three.
It’s going to be a little bit of time for Cybin and Mind Medicine for their Phase III trials in depression and anxiety before we have data. That’s the only reason I don’t have those two in the top three.”
Get the complete interview with Patrick Trucchio, Managing Director of Equity Research at H.C. Wainwright & Co., exclusively at the Wall Street Transcript.
WNS (NYSE:WNS) and Globant (NYSE:GLOB) are Two Top Picks from this Award Winning Professional Equity Analyst
May 25, 2023
Expert Analyst John Benda of the National Securities Corporation Picks the Winners in Multifamily and Other REITs
August 14, 2017
Biotechnology Equity Research Expert, Yun Zhong, Ph.D., Picks Gene Therapy Stocks for Investors
March 22, 2019
Expert Nicholas Jansen from Raymond James & Company (NYSE:RJF) Reveals his Top Stock Picks
October 10, 2017
Janney Montgomery Scott Equity Analyst Picks Montana Based Bank as his Top 2020 Stock
February 18, 2020
