Thinking outside the box has been a hallmark of Elon Musk’s behavior, and now you might be curious about how he actually reaches those ‘out of the box’ thought patterns. Musk has recently been touting the credentials of ketamine, an anesthetic known for its dissociative qualities. The Tesla CEO has said that he occasionally indulges in microdosing of the drug, believing it to be a better choice than traditional antidepressants for treating depression. Musk has also mentioned experiencing depressive bouts and believes his wild mood swings might indicate that he is bipolar.
“Depression is overdiagnosed in the US,” Musk recently commented. “However, for some people, it truly is a brain chemistry issue.
Microdosing is nothing new in Silicon Valley culture with tech execs and employees claiming that tiny doses of psychedelics help with focus and increase creativity. Further away from the tech hub, and mirroring Musk’s use, the potential of psychedelics in treating different medical conditions has also been gaining popularity.
In fact, psychedelics have even been part of the investing landscape for a while now, too. The past few years have seen several companies in the healthcare space have designs in getting treatments with drug compounds approved for use in treating all sorts of conditions such as anxiety, addiction, post-traumatic stress disorder and depression.
With this in mind, we delved into the TipRanks database and got the lowdown on two psychedelic stocks that have received a ‘Strong Buy’ consensus rating from the analyst community and offer substantial upside potential. In fact, one of these stocks could potentially skyrocket over 400%. Let’s take a closer look.
COMPASS Pathways (CMPS)
We’ll start with COMPASS Pathways, a pioneering biotech company focused on developing innovative therapies for mental health disorders, with a particular emphasis on treatment-resistant depression (TRD).
The company’s origins go back to 2015 when The Compass Trust Limited was established, a non-profit organization aimed at promoting research and development of psilocybin (the hallucinogenic chemical referred to in magic mushrooms) therapy for individuals experiencing anxiety towards the end of life. This work paved the way for the transformation of Compass Pathways into a for-profit company the following year, and by September 2020, COMPASS had become a public entity.
The focal point of COMPASS’s work is COMP360, a proprietary formulation of synthetic psilocybin being assessed across several indications, with the most advanced being the TRD program. In fact, the company oversaw the biggest clinical study ever conducted on psilocybin therapy with its phase 2b study assessing COMP360 in TRD. Based on the trial’s positive results, the drug has now advanced to the Phase 3 stage, and a global program is underway, with patients being treated in the program’s two pivotal trials.
It’s the catalyst ahead from the data readout of this study which informs Canaccord analyst Sumant Kulkarni’s bullish thesis for COMPASS.
“We continue to believe CMPS presents a particularly good opportunity for investors that have a strategic, longer-term focus, and would like to own shares of a bellwether in the mental health-focused psychedelic therapeutics space,” Kulkarni said. “We view the COMP360 Phase 2b dataset as solid, and are cautiously optimistic heading into the Phase 3 dataset next year. Given the unmet need and size of the opportunity in TRD, we continue to believe CMPS remains significantly undervalued.”
Undervalued is an understatement. According to Kulkarni, the upside potential here reaches 462%, considering he has a $60 price target for the shares. It hardly needs adding, but Kulkarni has a Buy rating for this stock. (To watch Kulkarni’s track record, click here)
The rest of the Street is hardly less bullish. Not only are analysts unanimous in their take – the stock receives a Strong Buy consensus rating based on 6 Buys – but the $48.17 average target makes room for 12-month returns of a big 441%. (See CMPS stock forecast)
GH Research (GHRS)
For our next psychedelic stock, we’ll turn to GH Research, a clinical-stage biotech looking to transform the way psychiatric and neurological disorders are treated.
Like COMPASS above, the company’s initial focus is to find a therapy for TRD, which it is doing with the use of psychedelic drug Mebufotenin (5-MeO-DMT). This is a substance derived from Dimenthyltryptamine (DMT), a widely recognized hallucinogenic compound. These two substances share notable similarities, although studies suggest that Mebufotenin is less potent and toxic compared to DMT, and its effects are of shorter duration. Generally, Mebufotenin is administered in significantly lower quantities than DMT.
GH’s lead candidate is GH001, a Mebufotenin (5-MeO-DMT) formulation administered by inhalation. GH001 has been through two Phase 1 trials in healthy volunteers and a Phase 1/2 trial in TRD and is currently being assessed in a phase 2b trial.
Additionally, GH001 is also being evaluated in Phase 2a proof-of-concept clinical studies in bipolar II disorder and in postpartum depression. These are expected to conclude in 4Q23. GH’s portfolio also includes GH002 and GH003, respective proprietary injectable and intranasal 5-MeO-DMT drug candidates in the early stages of development.
Overall, it is the potential of GH001 in TRD that drives H.C. Wainwright analyst Patrick Trucchio’s positive take.
“Phase 2b trial evaluating GH001 in TRD is underway… We believe that positive results could be generated from this study based on compelling data already generated to date in the GH001 program. For instance, in several Phase 1 studies, GH001 treatment was well tolerated. Moreover, in Part B of the Phase 2 portion of a Phase 1/2 trial (GH001-TRD-102), seven of eight patients (87.5%) achieved a MADRS remission (p<0.0001). Of those seven patients, all were in remission beginning on day one with five in remission as early as two hours after dosing,” Trucchio noted.
“Overall,” Trucchio summed up, “we are pleased with the progress GH has made on multiple fronts and believe GHRS shares are undervalued ahead of the next expected catalysts.”
Should the drug gain approval, Trucchio reckons it could rake in annual revenues of more than $3 billion in TRD. Meanwhile, he has a Buy rating on the shares backed by a $45 price target. Should the figure be met, investors stand to pocket returns of a hefty 260% a year from now. (To watch Trucchio’s track record, click here)
3 other analysts have recently chimed in with GHRS reviews and they are all positive, making the consensus view here a Strong Buy. The forecast calls for 12-month share appreciation of a very healthy 217%, considering the average target stands at $39.67. (See GHRS stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.