- Compass Pathways IPO has ignited investor interest in psychedelic stocks
- Trading volume has spiked for most public companies
- Three psychedelic stocks have been setting the pace
Summer is over. But psychedelic drug stocks are starting to heat up.
Major news has driven much higher trading volumes.
Compass Pathways (US:CMPS) has made its IPO debut. And it raised a whopping $146.6 million for its IPO financing.
MindMed Inc (CAN:MMED / US:MMEDF) has announced its application to up-list on the NASDAQ. With the most advanced R&D portfolio among public companies, the added financial punch of a NASDAQ listing could really launch this stock – as it has already done with CMPS.
Smaller Mind Cure Health (CAN:MCUR) commenced trading a day after Compass Pathways. But MCUR has outperformed even CMPS to date.
While volume is up across the sector, these three companies have translated that increased investor interest into the biggest gains.
Something for everyone
As an emerging sector, prudent investors will want to spread around their psychedelics investing dollars – to mitigate risk.
Together, these Three Musketeers of the psychedelics space could comprise a mini-psychedelics portfolio by themselves, since each brings something different to the table.
Compass Pathways is the Big Dog. US/UK based. High profile investors. Well capitalized. NASDAQ listing.
MindMed Inc is (at this stage) the Research Leader among public companies as psychedelic drugs emerge from the shadows – after 50 years of drug Prohibition. Second to Compass among the pubcos in raising capital. Second to Compass in terms of high-profile investors.
Mind Cure Health is the High-Growth Microcap. Unlike CMPS and MMED, Mind Cure has a hybrid business model: functional mushrooms (first) as a stepping stone to psychedelic drug clinical research.
The Big Dog
Emerging sectors need a bellwether. An industry leader to focus attention and rally support for the industry as a whole.
It’s quickly becoming apparent that Compass Pathways is filling that role for the psychedelics space.
Expected to do its IPO financing between $14 – $16 per share, CMPS began trading at $17 – and took off from there. Now trading at $42.90, a nice 146% IPO profit.
Not a big surprise. CMPS ticks all the boxes for aggressive investors looking for the next opportunity with unicorn potential.
- Silicon Valley and Wall Street icons (like Peter Thiel and Mike Novogratz) are leading investors in CMPS, lending it instant credibility.
- Well capitalized. Even before going public, Compass has had no difficulty raising money, including $80 million in its Series B financing alone.
- Its Phase 2 clinical trial using psilocybin-based therapy for treatment-resistant depression is the best-positioned drug trial in the industry – thanks to Breakthrough Therapy Designation from the FDA.
- Premier public listing. Going public on the NASDAQ was the icing on the cake for investors.
There is more than just hype and big names to this story.
Globally, depression afflicts well over 300 million people – with those numbers spiraling due to the many stresses of the COVID-19 pandemic. Front-line drugs to treat depression deliver abysmal efficacy.
Yet Big Pharma has largely walked away from R&D for mental health-related drug therapies. This leaves the playing field wide open for psychedelic drug startups.
Clinical trials are already providing strong indications that psychedelic drugs could (will?) become the new standard of care. Not only for depression, but also for anxiety, addiction, PTSD and perhaps several more common medical disorders.
Do psychedelic drug companies offer unicorn potential for investors? With CMPS, we can now scratch the word “potential”.
When Compass Pathways closed its IPO financing, it sat with a market cap of $1.3 billion.
Where will the next billion-dollar market cap come from?
The Research Leader
It could very well be MindMed Inc.
Compass Pathways has the best (individual) clinical trial initiative in the psychedelic drug industry today. But MindMed has the most research at the clinical trials level – by a large margin.
MMED has three clinical trials program that have reached Phase 2. Testing microdoses of LSD to treat adult ADHD. Another LSD-based clinical trial to treat cluster headaches. And a third LSD-based program for an anxiety treatment.
MindMed has several other clinical trials into Phase 1 of testing. This includes 18-MC, a non-psychoactive ibogaine derivative to treat opioid addiction. And its about to commence the first-ever clinical trial to combine LSD and MDMA as a drug therapy.
Forging this industry-leading research platform (in collaboration with the University of Basel, Switzerland) has earned MindMed some high-profile support.
Bruce Linton, cannabis pioneer and former CEO of Canopy Growth Corp is on the MindMed board. High-profile Canadian analyst and investor Kevin O’Leary is also a major shareholder.
MindMed lags well behind Compass Pathways in raising capital (~US$40 million to date). But it’s well ahead of other public companies. A new NASDAQ listing would dramatically improve its access to capital markets.
After months of sideways trading, MMED has broken out on two catalysts – the excitement generated by the Compass IPO and its own up-listing application. The stock has taken off from CAD$0.44 to CAD$0.94.
This may just be the start.
The High-Growth Microcap
Compass Pathways and MindMed Inc are obvious additions to almost any psychedelics-based investing portfolio.
Mind Cure Health? Not nearly as obvious a choice. But with one less trading day under its belt, MCUR stock is already outperforming even the Big Dog.
Mind Cure started trading last Monday, at an IPO price of CAD$0.20 and a lean market cap below CAD$10 million. But that has quickly swollen after a sizzling first week of trading.
Now sitting at CAD$0.72, its market cap has risen to CAD$32.6 million. That’s a 260% spike in the first week of trading.
What has gotten investors excited? Mushrooms.
Not magic mushrooms, not yet.
Functional mushrooms. Nootropics.
Psychedelic drugs have grabbed a lot of headlines for their potential to disrupt a number of multi-billion dollar treatment markets.
Functional mushrooms are a multi-billion-dollar market with revenue streams that are up for grabs today. A $23 billion market, growing to $37 billion by 2025, according to Mordor Intelligence.
Mind Cure’s Moonbeam product line of organic functional mushrooms already has its Health Canada Authorization (and Natural Product Numbers) to commence commercial retailing in Canada.
Why build a business model as functional mushrooms/psychedelic drug hybrid? Strong synergies.
Psychedelic drugs are achieving great success in clinical testing for stress-related mental health disorders like depression, anxiety, addiction and PTSD. Reishi mushrooms are being touted for their capacity to reduce stress – and thus help prevent stress-related disorders.
Psychedelics-based research is also advancing with respect to cognitive decline – another huge part of the Mental Health Crisis. Nutritional supplements experts like Paul Stamets cite clinical research showing that Lion’s Mane mushrooms can halt and even reverse the neural damage that leads to Alzheimer’s disease.
Mind Cure already has a Reishi mushroom and Lion’s Mane mushroom formulation for its Moonbeam product line. It is also preparing to market a Turkey Tail mushroom formulation.
Turkey Tail is known for its immune-boosting properties. Thanks to a little known as “COVID-19” immune-system support is a top priority with nutritional supplements consumers.
This revenue potential is accessible today – and can help significantly offset the burn rate once Mind Cure commences its own psychedelics-based R&D. Strong synergies with psychedelic drugs.
It’s a business strategy that is clearly resonating with investors.
But Mind Cure is already looking even further road. Management sees a day when biohacking with functional mushrooms and microdosing with psychedelic drugs merges – and forms a much larger market.
Microdosing with psychedelic drugs is already a hot trend even in advance of these substances being legalized for consumption.
We’ll explore this subject in greater depth in an upcoming feature on Mind Cure.
The train is leaving the station
Psychedelic stocks are hot – again. This comes even as broader markets have seen some steep selloffs in choppy trading.
At the moment, a trio of stocks are powering most of the investor gains.
As investors build a psychedelics portfolio to capitalize on opportunities in mental health treatment, due diligence should probably start with these Three Musketeers.
DISCLOSURE: The writer holds shares in MindMed Inc and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock Watch.
Published at Fri, 25 Sep 2020 17:16:10 +0000