What's worse than FOMO (fear of missing out)? FOAMO -- the fear of having already missed out. Some investors could be experiencing a case of FOAMO with cannabis. The cannabis market in Canada is maturing, and marijuana is already moving into the mainstream in the U.S.
I don't think it's too late to profit from the cannabis boom by any means. However, investors who like to get in on the ground floor of a promising new market probably have missed their opportunity with cannabis.
There's another new market that's still only in its infancy, though. And there are some intriguing stocks in it that are worth watching closely. I'm referring to the psychedelics industry. If you missed the initial cannabis boom, you might want to check out one of the top psychedelics stocks on the market -- Cybin (CLXP.F +6.13%).
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Similar but different
Psychedelic stocks sometimes get lumped in with cannabis stocks, and there are some similarities. Both have tremendous growth opportunities and involve plants or fungi with mind-altering ingredients.
However, there are some glaring differences, as well. Perhaps most importantly, many cannabis stocks have underlying businesses that are involved in the retail sale of either medical or adult-use cannabis products that don't require an extensive regulatory-approval process. It's a much different story for Cybin and other leading psychedelic stocks.
Cybin doesn't sell mushrooms containing psilocybin in a similar manner as companies such as Tilray and Trulieve sell cannabis products that contain THC. The better comparison for Cybin is with Jazz Pharmaceuticals (JAZZ +7.68%).
Jazz's acquisition of GW Pharmaceuticals brought cannabinoid medication Epidiolex into its lineup. Like Jazz's other drugs on the market, Epidiolex had to win U.S. Food and Drug Administration (FDA) approval and is sold in pharmacies to patients with physicians' prescriptions. Cybin is pursuing a similar FDA approval path for its pipeline products.
What makes Cybin stand out
Psychedelic drug companies, as a category, target an enormous potential market. The global direct cost from mental disorders totals around $800 billion, according to the National Centre for Biotechnology Information. Clinical trials have shown that psychedelic chemicals such as psilocybin could be effective in treating some of these mental disorders.
But what makes Cybin stand out? Most importantly, its pipeline. In May, the company received a green light to advance its lead psilocybin candidate, CYB001, into phase 2 clinical testing in Jamaica as a potential treatment for major depressive disorder (MDD).
Cybin currently has three other active drug programs, as well, in preclinical testing. CYB003 targets alcohol use disorder -- a key indication, considering that around 5.8% of Americans ages 18 and older have alcohol-use disorder. CYB004 targets anxiety disorders, while CYB005 targets therapy-resistant psychiatric disorders.
In addition to these programs, Cybin boasts a discovery pipeline with more than 50 psychedelic molecules. The company recently completed its 51st preclinical study.
Cybin is also following in GW Pharmaceuticals' footsteps by securing its intellectual-property rights. The company's patent portfolio includes 12 filings that cover its novel psychedelic compounds, delivery-platform integration, and more. Cybin has also filed an international patent application that could extend its patent coverage to 153 countries.
It's not surprising that the first psychedelic exchange-traded fund (ETF), Horizons Psychedelic Stock Index ETF, includes Cybin as one of its top three holdings. Neither is it surprising that Cybin has been one of the best-performing psychedelic stocks so far this year, with its share price soaring more than 35%.
My standard warning
Anytime I discuss clinical-stage biotech stocks, I advise caution. These stocks aren't for every investor. There's no guarantee that their pipeline candidates will succeed in clinical testing and go on to win regulatory approvals.
That standard warning applies to Cybin. The company's pipeline appears to be promising, but it's possible that its psychedelic drug candidates won't meet expectations. Cybin, by the way, issues a similar cautionary note when releasing statements about its products. The company acknowledges that the efficacy of its products hasn't been confirmed yet and that more research is needed.
Risk-averse investors will be better off looking at other stocks. However, aggressive investors might want to check out Cybin before missing out on what could one day be known as the psychedelic stock boom.
