Psychedelic medicine biotech company Mind Medicine (MindMed) Inc. (MNMD - Get Rating) made its debut on Nasdaq Capital Market on April 27, 2021 while retaining its listing on the Neo Exchange Inc. under the symbol MMED. The company didn’t have a great market debut as its shares fell 29% on the first day of trading on the Nasdaq. And the stock has lost 25.6% over the past month to close Friday’s trading session at $3.40.
While the demand for treatments based on psychedelic substances is growing because mental health issues are on the rise despite the easing of restrictions related to the COVID-19 pandemic, MNMD’s psychedelic inspired medicines are still in their developmental stage. Also, its net and comprehensive loss for fiscal first quarter ended March 31, 2021 came in at $14 million.
MNMD still has a long way to go to complete the development of its products, so its near-term prospects look bleak. As the company’s co-founder and CEO JR Rahn told Yahoo Finance, “These are still very early innings for us.”
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Here’s what I think could shape MNMD’s performance in the near term:
Psychedelic Drugs Yet to be Widely Accepted
According to Data Bridge Market Research, the psychedelic drugs market is expected to reach $6,859.95 million by 2027, growing at a 16.3% CAGR. This assumes that the rising prevalence of mental depression and anxiety and the availability of off-label drugs are expected to drive an increasing demand for psychedelic drugs. However, the market faces some challenges, such as uncertainty surrounding FDA approval, the early stage in the lifecycle of the psychedelics industry, and a stigma associated with the use of psychedelic drugs, among others. As a result, MNMD may continue struggling for some time.
Most of MNMD’s Products Still in Developmental Stage
MNMD is assembling a compelling drug development pipeline of innovative treatments based on psychedelic substances, such as Psilocybin, LSD, MDMA, DMT, and an Ibogaine derivative, 18-MC. Its LSD experiential therapy, named Project Lucy, is in Phase 2A development, while its 18-MC substance use disorders project is in its Phase 1 development stage. Its LSD Microdosing Adult ADHD is also in Phase 1 development. So, it will likely take the company a significant period to generate revenues from the deployment of these drugs.
Selling Shares to Fund Growth Activities
MNMD announced on March 9, 2021 that it had closed its offering of 6 million units to raise gross proceeds of CAD$19.5 million ($16.15 million). Following the offering’s closing, its cash in hand has increased to CAD$205.2 million ($162.0 million).
MNMD is expected to use proceeds from the offering for general working capital and for further investment in Project Lucy, the Microdose LSD Program and Project Albert, which is now integrated with MNMD’s most recent technology acquisition, HealthMode, to build a comprehensive mental health platform to deploy psychedelics medicines.
POWR Ratings Reflect Bleak Prospects
MNMD has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, MNMD has a D grade for Quality, which is in sync with its negative ROE and ROTC.
The stock has a D grade for Momentum, which is consistent with its 25.6% loss over the past month. It has a D grade for Stability also.
Beyond what we’ve stated above, we’ve also given MNMD grades for Growth, Value and Sentiment. Get all the MNMD ratings here. MNMD is ranked #268 out of 491 stocks in the Biotech industry.
Better than MNMD: Click here to access 27 top-rated stocks in the same industry.
Bottom Line
MNMD is an emerging player in the psychedelic drug space, but it still has a long way to go. Its EPS is expected to remain negative in its fiscal years 2021 and 2022 because its drugs are still in their early development stage. So, we think it’s wise to avoid the stock now.
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MNMD shares were trading at $3.14 per share on Tuesday morning, down $0.26 (-7.65%). Year-to-date, MNMD has gained 2.95%, versus a 12.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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