Coronavirus vaccines and variants have grabbed a lot of headline space and airtime over the past year, and for good reason. And not-so-behind the scenes, a lot of the world’s scientific firepower has been brought to bear on easing the pandemic that’s upended life across the globe.

Setting aside the obvious upside to ending the pandemic for all of us, these scientific strides have paid big dividends to investors who took up positions in Pfizer Inc. (NYSE: PFE), Moderna Inc. (NASDAQ: MRNA), and the other blockbuster “vaccine stocks” over the last year.

But even as all this has been happening, there have been other incredible advancements made in other fields – advances that could be even more lucrative for investors, but that haven’t made the same media waves… yet.

Let me fill you in on what’s happening – and name the stock I think makes the most sense to move on at this stage in the game…

A New Look at an Old Field of Study

The New York Times recently broke news of an important, successful Food and Drug Administration (FDA) phase 2 clinical study into the use of MDMA to treat severe post-traumatic stress disorder (PTSD) – “There is nothing like this in clinical trial results,” a neuroscientist said.

In plain English, this result means scientists have cracked the life-changing potential in once-taboo psychedelic drugs. They’re racing to harness and develop the, shall we say, “sky-high” potential of once-forbidden substances. It’s not too dissimilar to what’s happening in cannabis right now, truth be told, except the profit potential is even bigger.

Humans have been dabbling in these substances for thousands of years, all around the world. But today, what we think of as psychedelics come in two forms.

There are lab-derived “synthetics” like MDMA (ecstasy or molly), or lysergic acid diethylamide (LSD), synthesized from the ergot fungus that grows on grains. Some folks also include anesthetics like ketamine and phencyclidine (PCP) in this group, too.

And then there are the “entheogens,” psychedelics derived from plants – psilocybin found in “magic mushrooms,” mescaline found in peyote cactus, ibogaine, a naturally occurring psychoactive that’s now being researched as a cure for drug addiction, and 5-MEO-DMT, found in certain tree barks, to name just a few.

From the late 19th century into the middle of the 20th, many of these substances were studied – and even celebrated – until, in the late 1960s, several U.S. states and ultimately the federal government made their possession a heavy felony. That slowed research to a snail’s pace; in 1980, according to data derived from the FDA, Health Canada, Psychedelic Research Publications, and the Special Education Data Reporting Application (SEDRA), there were just 50 papers published on psychedelics.

But as that relatively small body of research proves, work didn’t quite stop altogether. A (very) few intrepid scientists and researchers persevered against mountains of red tape to continue exploring the massive potential in these chemical compounds.

Particularly over the last five or 10 years, renewed interest in the therapeutic potential of these drugs has jump-started research and lent fresh new momentum to scholarly work, to the point that 700 scholarly papers were published last year.

Psychedelics Research Is Kicking (Back) into High Gear

Top-tier, world-class institutions are heavily into psychedelics research. Aside from that phase 2 study I mentioned a moment ago, Johns Hopkins, New York University, and Imperial College London are funding programs to study the efficacy of using psilocybin, lysergic acid diethylamide (LSD), and MDMA (3,4-methylenedioxymethamphetamine) as treatment options for those struggling with their mental health.

In 2017, the Multidisciplinary Association for Psychedelic Studies (MAPS) was granted Breakthrough Therapy Designation for MDMA-Assisted Psychotherapy for PTSD, on Special Protocol Assessment for phase 3 clinical trials. Breakthrough Therapy is a special U.S. Food and Drug Administration designation that accelerates the development of drugs with the potential to leapfrog existing treatments.

Barring any change in the trajectory of the research, we could see FDA approval of MDMA to treat PTSD in the relatively near future – with approval for psilocybin, the hallucinogenic compound found in many “magic mushrooms,” to treat various conditions, following that.

Jennifer Mitchell, a neuroscientist at the University of California, San Francisco, and a researcher involved with the PTSD study I talked about earlier, said, “This is a wonderful, fruitful time for discovery because people are suddenly willing to consider these substances as therapeutics again, which hasn’t happened in 50 years.”

These studies represent hope for suffering people, but they’ve sent dollar signs dancing in front of my eyes – more about that in a second.

These Problems Cost Society Billions of Dollars

The horrific human toll of afflictions like anxiety, depression, post-traumatic stress disorder, obsessive-compulsive disorder, addiction, and mental health disorders in general is probably impossible for us to quantify here – and I think that’s a discussion for another forum, besides.

What is quantifiable is the cost to the public and private sector.

Take anxiety – a common enough condition. Globally, 284 million people are afflicted. In terms of bottom lines, the lost productivity alone costs us $1 trillion. The outlays for drugs used to treat this malady add another $4.7 billion to that tally.

The treatments for depression, attention-deficit hyperactivity disorder (ADHD), and addiction are just as expensive, costing an additional $9.6 billion, $9.5 billion, and $5.8 billion, respectively, on a worldwide basis.

That adds up to some serious coin. And the treatments, expensive as they are, frankly aren’t doing such a hot job easing the suffering of family members, friends, co-workers – or even ourselves.

The Addressable Market and Opportunity Are Huge

According to Data Bridge Market Research, the market for psychedelic drugs could grow from about $2.01 billion last year to $6.86 billion in 2027 – a compound-annual growth rate (CAGR) of 16.3%.

Other forecasts are even more bullish: ResearchAndMarkets Inc. says this opportunity will zoom from $4.75 billion last year to $10.75 billion in 2027.

From all the years I’ve spent doing this, I can say one thing with confidence: In paradigm-shifting markets like this one, forecasts of this kind often understate the upside and the growth-rate potential.

For instance, if you take the drug markets for just the four maladies we talked about a moment ago, you’re talking about an aggregate opportunity of $29.6 billion – a total that’s more than double the ResearchAndMarkets forecast. It’s not unreasonable to project this market could hit $100 billion before it’s all said and done.

Here’s How to Cash In

The market is just beginning to wake up to the potential here, which means people who move now will enjoy that coveted first-mover advantage that can mean the difference between cleaning up and ho-hum returns.

With that said, there are relatively few options – for now – to get broad exposure to the opportunities psychedelics represent. Now, the obvious “wide-net” way to play the psychedelics revolution is the iShares Biotechnology ETF (NASDAQ: IBB), one of the market’s top-performing biotech ETFs, up around 22% in a market that’s been tough on biotechs.

When you drill down, there are a few “psychedelic” exchange-traded funds to choose from, too. The Horizons Psychedelic Stock Index ETF (NEO: PSYK), which trades on the Canadian NEO exchange, is well-suited to speculators out there; it trades for a little more than C$8.30 ($6.60), and tracks a basket of companies trading in the United States and Canada with a focus on some of the psychedelic therapies I mentioned. While it holds some small, cutting-edge companies, it also holds shares of Johnson & Johnson (NYSE: JNJ), for instance.

— Shah Gilani

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Source: Money Morning