PSIL: 3rd Quarter 2024 Portfolio Review
Portfolio
Performance
In the third quarter of 2024, PSIL performance declined reflecting the sector’s vulnerability to market volatility. The net asset value (NAV) dropped by 20.43% while the S&P 500 gained 5.89% during the same period.
Portfolio
In Q3, the portfolio remained steady, with no new positions added or fully removed. Tactical adjustments included increasing the holding of Incannex Healthcare Inc. (IXHL) to a total of 126,990 shares, a company focused on developing medicinal cannabinoid and psychedelic therapies. Meanwhile, the position in Mind Medicine Inc. (MNMD) was reduced by 15,000 shares.
On August 9th, Quantum BioPharma (QTNM), formerly known as FSD Pharma (HUGE), announced its name change and a reduction in its outstanding shares effective August 15th. The company is focused on developing treatments for brain and inflammatory disorders, such as multiple sclerosis.
Cybin (CYBN) completed a 1-for-38 reverse stock split on September 19th. The company is advancing two proprietary drugs in FDA clinical trials—one derived from psilocybin for Major Depressive Disorder and the other from DMT, targeting Generalized Anxiety Disorder.
Winners / Losers
During the quarter, Alkermes PLC (ALKS) saw a 16.14% increase, while Compass Pathways PLC (CMPS) recorded gains of 4.30%. However, many holdings underperformed with MindMed Inc. (MNMD) experiencing a significant decline of 21.08% and Psyence Biomedical Ltd. (PBM) plunging by 66.67% during the period.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| MNMD | MIND MEDICINE MINDMED INC | 14.09% |
| CYBN | CYBIN INC | 9.90% |
| CMPS | COMPASS PATHWAYS PLC | 6.27% |
| IXHL | INCANNEX HEALTHCARE INC | 5.73% |
| ALKS | ALKERMES PLC | 5.26% |
| RLMD | RELMADA THERAPEUTICS INC | 5.04% |
| NRXP | NRX PHARMACEUTICALS INC | 4.99% |
| DRUG | BRIGHT MINDS BIOSCIENCES INC | 4.97% |
| GHRS | GH RESEARCH PLC | 4.74% |
| CMND | CLEARMIND MEDICINE INC | 4.72% |
As of 9.30.2024. Cash is not included. Subject to change.
Please see our complete fund holdings at advisorshares.com/etfs/psil. The holdings details are updated each market day.
Psychedelics Landscape
In Q3, funding for psychedelic companies saw a sharp decline compared to the first half of the year, largely due to regulatory uncertainties. In early August, the U.S. Food and Drug Administration (FDA) rejected Lykos’s new drug application for MDMA-assisted therapy to treat post-traumatic stress disorder (PTSD), a condition affecting around 13 million Americans annually. However, industry insiders view the FDA’s decision as a temporary delay rather than a rejection. Many companies are now revising their programs based on FDA feedback before resubmitting their drug applications. Lykos plans to conduct an additional Phase 3 trial to further assess the safety and efficacy of its therapy.
Additionally, a 10-day hearing is scheduled for November on the Drug Enforcement Administration’s (DEA) proposal to classify the psychedelic compounds DOI and DOC as Schedule I drugs under the Controlled Substances Act (CSA). Researchers and advocates are challenging this proposal, arguing that the DEA has not demonstrated that these compounds have a high potential for abuse and that research shows they have therapeutic potential.
In Missouri, the Senate modified provisions to SCS/SB-768 in August, related to alternative therapies, including psilocybin. The bill allows veterans and individuals aged 21 or older with qualifying conditions to use psilocybin for personal therapeutic purposes without facing state or local penalties. The law allocates $3 million in grants for psilocybin research and mandates annual reporting on its outcomes, while also protecting personal data from being shared with the federal government or unauthorized parties. It also expands access to investigational drugs for life-threatening conditions by permitting the use of Schedule I substances.
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To get updates on the funds, tune in to AdvisorShares’ AlphaNooner Show streaming live each regular weekday starting at 12:00 pm (East Coast time), where I am a guest almost every Tuesday. Other important guests from the psychedelics world often join too. Find it on most major social media platforms or visit our the AdvisorShares “Events” webpage for more information.
Cheers,Past Commentary
Definitions:
The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks.
Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus or summary prospectus, a copy of which may be obtained by visiting www.advisorshares.com. Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.
There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund is subject to risk, including the possible loss of principal amount invested.
Psychedelic drugs, also known as hallucinogens, are a group of substances, including psilocybin, that are used to change and enhance sensory perceptions, thought processes, and energy levels. Psychedelic medicines, therapeutics, and healthcare treatments may be used in the treatment of illnesses such as depression, addiction, anxiety and post-traumatic stress disorder. Psychedelic medicine companies include life sciences companies having significant business activities in, or significant exposure to, the psychedelics industry including producers or distributors of psychedelic medicines, biotechnology companies engaged in research and development of psychedelic medicines, and companies that are part of the supply chain for psychedelics.
Psychedelics Companies Risk. Psychedelics companies are subject to various laws and regulations that may differ at the state/local and federal level. These laws and regulations may significantly affect a psychedelics company’s ability to secure financing, impact the market for psychedelics and business sales and services, and set limitations on psychedelics use, production, transportation, and storage. There can be no guarantees that such approvals or administrative actions will happen or be favorable for psychedelics companies, and such actions may be subject to lengthy delays, and may require length and expensive clinical trials. Additionally, therapies containing controlled substances may generate public controversy. Political and social pressures and adverse publicity could lead to delays in approval of, and increased expenses for, companies and any future therapeutic candidates they may develop. All of these factors and others may prevent psychedelics companies from becoming profitable, which may materially affect the value of certain Fund investments. In addition, psychedelics are subject to the risks associated with the biotechnology and pharmaceutical industries.
In Canada, certain psychedelic drugs, including psilocybin, are classified as Schedule III drugs under the Controlled Drugs and Substances Act (“CDSA”) and, as such, medical and recreational use is illegal under Canadian federal laws. In the United States, certain psychedelic drugs, including psilocybin, are classified as Schedule I drugs under the Controlled Substances Act (“CSA”) and the Controlled Substances Import and Export Act (the “CSIEA”) and, as such, medical and recreational use is illegal under the U.S. federal laws. There is no guarantee that psychedelic drugs or psychedelic-inspired drugs will ever be approved as medicines in either jurisdiction.
In the United States, scheduling determinations by the Drug Enforcement Agency (“DEA”) are dependent on Food and Drug Administration (“FDA”) approval of a substance or a specific formulation of a substance. Unless and until psilocybin, psilocin, or other psychedelics-based products receive FDA approval, such products may be prohibited from sale, which could limit the growth opportunities for certain portfolio companies of the Fund. Even if approved by the FDA, the manufacture, importation, exportation, domestic distribution, storage, sale, and legitimate use of such products will continue to be subject to a significant degree of regulation by the DEA.
Security prices of small cap companies may be more volatile than those of larger companies and therefore the Fund’s share price may be more volatile than those of funds that invest a larger percentage of their assets in securities issued by larger-cap companies. These risks are even greater for micro-cap companies.
Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times.
Holdings and allocations are subject to risks and change.
The views in this commentary are those of the portfolio manager and many not reflect his views on the date this material is distributed or any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.