Markets and media are covering more commonly what could become the most significant change in how patients with psychiatric and addiction disorders get treated. No, it's not another or new formulation of CBD. This time, psychedelic-based therapeutics are the focus. And not just from patients wanting an alternative to traditional and often addictive prescription medicines.
Medical practitioners, governments, and regulators are also evaluating this new class of therapeutic which shows promising signs of effectively treating mental and addiction disorders. But attention is going beyond the potential these innovative therapeutics may offer, and it's going to the companies ushering in the potential treatment revolution. Lucy Scientific Discovery, Inc. (NASDAQ: LSDI) is one of them.
In fact, few, if any, can argue that Lucy Scientific isn't ideally positioned to take advantage of opportunities in a red-hot psychedelics sector. Nor can they make a case that the company hasn't made the connections needed to advance quickly through research and development processes. The fact is they are, and they have.
And that's excellent news from a company and investor's perspective. From a business front, LSDI is positioned to tap into a sector that analysts already estimate as a more than $6 billion treatment opportunity. But by 2030, they expect the market to surge by treating indications including anxiety, PTSD, depression, and addiction disorders. If treating those conditions prove effective, psychedelics could theoretically target a combined $100 billion treatment opportunity. Of course, psychedelics won't earn the entire opportunity paycheck, but if similar to the track taken by CBD, they could enjoy a significant slice of the market potential.
Psychedelics- Not An "If" Proposition Anymore
Here's more to consider. It's not a matter of "if" but of "when" psychedelics go mainstream. Even the perception of psychedelics use in the counter-cultural fad of the 1960s is receding, replaced by the expected value that these treatment alternatives can add to 2020's medicine.
And expectations are high, with a number of psychedelic pharmaceutical companies already in clinical-stage programs evaluating treatment candidates that follow a regulatory approval pathway similar to traditional drug candidates. These innovators, including Lucy Scientific, are blazing trails and showing through research that hallucinogens, including psilocybin, can be as effective or better at treating conditions like depression, addiction, and schizophrenia without the severe side effects and risks associated with conventional prescription medicines.
If so, this sector, and its leaders, are presenting a potential ground-floor opportunity to investors to take advantage of a sector emerging from its infancy. In other words, these "magic mushroom stocks," "shroom stocks," or "acid stock plays," as they are often referred to, are worthy of immediate attention. Still, similar to uncovering investment gems in other billion-dollar sectors, due diligence matters here. The good news is that it's not difficult to separate potential winners from industry posers.
The even better news is that valuation disconnects are there for the taking.
Leveraging A Health Canada Manufacturers License
Take Lucy Scientific as an example. At roughly $3.29 a share, it boasts a $53.86 million market cap. While impressive for a freshly listed company, it's short of others in the sector, including the market caps of Atai Life Sciences (NASDAQ: ATAI) and Compass Pathway (NASDAQ: CMPS), which boast $285.3 million and $379.2 million, respectively. Notably, those valuations are considered low by some analysts who understand that the psychedelic-treatment market could be exchanging billions of dollars for services faster than many think. Based on how fast companies in the sector are moving, that's likely.
ATAI is evaluating using ibogaine and ketamine to develop multiple drugs targeting various indications. And Compass is focused on the value of psilocybin as the lead in its lead drug candidate. Others, like Cybin (NYSE: CYBN) and Mind Medicine (NASDAQ: MNMD), with market caps under $100 million today, are advancing studies as well, testing the value of psychedelic substances for separate indications. In other words, there's plenty to evaluate before making any investment decision. And, as noted, applying some due diligence with a risk mitigation strategy could yield the safest play. That's where Lucy Scientific comes back into play.
A Valuable Health Canada License In Hand
Smaller in market cap than those listed, Lucy has a unique set of advantages. Foremost, it's been granted a Controlled Drugs and Substances Dealer's License under Part J of the Food and Drug Regulations promulgated under the Food and Drugs Act (Canada). That license was provided through Health Canada's Office of Controlled Substances in August 2021, allowing LSDI to explore the medicinal side, development, and manufacture of psychedelic compounds. The license does more.
It also helps separate LSDI from the conceptual stage pack and allows risk mitigation by being licensed as a manufacturer. In other words, Lucy Scientific could end up working with all those companies mentioned if they don't have a connection to Canada. Moreover, they wouldn't face the significant trial risk or missed endpoints.
Better still, LSDI presents more than a single shot on goal. According to its website, research and development is a large part of LSDI's plan. And that could open the door to millions, even billions, in revenue-generating opportunities from other clinical-stage companies that need to show manufacturing capability to appease FDA concerns. It's no different in Canada.
Companies wanting to penetrate that market need connections, too. The excellent news there is that the Canadian government is receptive to the data shown thus far from psychedelic-based drug studies. That's shown through them granting a valuable and hard-to-secure license to Lucy Scientific, which is expected to get plenty of work.
Moreover, as a Health Canada-licensed company, LSDI has a considerable head-start against a competitive landscape still evaluating conceptual phases. Furthermore, the license can be instrumental in advancing the frontiers of mind science and facilitate the development of psychotropic and psychedelic treatment therapies purposely dedicated to producing various high-quality natural, synthetic, and biosynthetic products. Each can meet the needs and demands of the rapidly growing psychotropics-based medicines market.
LSDI Is Already Exploiting Sector Opportunities
There's more to justify a higher market cap for Lucy Scientific. Unlike others trying to break into the space, LSDI is already leveraging research and development partnerships that can unleash intrinsic value from its products and research services portfolio. Those relationships can accelerate tapping into the inherent potential of expediting the development of medicines and experimental therapies to treat specific psychiatric health and other medical needs disorders.
Interestingly, big pharma names like Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ) are conspicuously absent from the player's list above. But it would be naive to believe they aren't interested in the space. More than interested, they are probably looking for ways to protect their mainstream treatment assets. To succeed, they will probably do what worked best over the past decade or two- acquire instead of develop. Thus, big pharma's interest presents an opportunity for emerging companies with tangibles to match ambition. Lucy Scientific has that.
Led by an expert management team, including a CFO that served mega-cap publicly-traded companies, LSDI has accrued credibility and value from customer acquisitions and relationships with leading universities, hospitals, and other public, private, and government institutions worldwide. And they are aligned in the same objective: research the benefits and conduct clinical studies to understand the therapeutic potential of a range of psychedelic substances.
Checking The Right Boxes For A Breakout 2023
Thus, with a NASDAQ listing providing credibility and assuring transparency, a valuable Health Canada license, and a management team able to execute on every level of product and market development, considering siding with a company undervalued compared to its peers and with a mitigated risk profile may be a wise consideration. Lucy Scientific Discovery checks those boxes.
And with many assets being put to work, the best news is that catalysts could be near. Speculation, yes, but remember that accredited investors don't often take an interest in a shell company; they likely know what's in the pipeline. Notably, they provided over seven million dollars as a vote of confidence, an indication that they may have liked what they saw. Thus, as is often the case for Wall Street considerations, the best strategy for investing in LSDI may be to follow the money.
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