Based in Vancouver, Canada, Mind Medicine (MNMD) is a clinical-stage biopharmaceutical company that is developing psychedelics-based products to treat brain-health disorders. I am bullish on the stock.
Remember the awesome rally in cannabis stocks in 2017 and 2018? Just maybe, we can all have another chance to get in on the ground floor of an emerging, groundbreaking category of medicine.
That category could be psychedelic medicine. Its legal status in Canada, the U.S., and elsewhere is subject to change, so there’s definitely risk involved for investors in this niche market. However, it’s possible that in the near future, regulators, medical practitioners, and the public will come to accept and embrace psychedelic medicine.
How can you invest in this burgeoning market? There aren’t very many pure-play stocks in the psychedelic medicine category. Among the few tradable ones is Mind Medicine stock, which represents an ambitious company that’s working diligently to develop and commercialize treatments for mental health disorders.
First, the Bad News
While I’m bullish on MNMD stock, there’s no point in trying to hide the risks involved with this stock. For one thing, there’s certainly no guarantee that local and national governments will allow Mind Medicine to pursue clinical trials and to sell substances like psilocybin (“magic mushrooms”), LSD, MDMA, and ketamine.
Bear in mind that some people may view these substances as dangerous, though Mind Medicine is certainly careful to apply them in a controlled, clinical environment.
The other primary risk factor concerning Mind Medicine is that the company has not demonstrated profitability recently. Let’s break down the company’s financials so you can see what I’m talking about.
As revealed in an SEC Form 10-K, Mind Medicine had $80.094 million in cash at the end of 2020. A year later, the company had $133.539 million in cash. So, there’s improvement in that regard, which is encouraging as startup businesses generally need cash to pursue their objectives and continue their operations.
On the other hand, it is undoubtedly costly to run a startup business in an emerging field of medicine. This is reflected in Mind Medicine’s operating expenses (including research and development expenses), which rose from $33.03 million at the end of 2020 to $93.85 million a year later.
As a result, Mind Medicine’s net earnings loss increased from $33.94 million on Dec. 31, 2020, to $93.04 million at the end of 2021. This fact might be a hard pill for some investors to swallow. Yet, it’s the reality of the situation, and oftentimes, rising stars in an emerging business field must go through financially lean periods before (hopefully) getting a windfall later on.
A Major Milestone
If you’re willing to look past the financials and see the possibilities for psychedelic medicine, then Mind Medicine stock may deserve a place in your portfolio. This is an investment that could take years to pay off, but the rewards might be substantial.
In some ways, Mind Medicine is a company in transition. Late last year, the company appointed a new CEO, Robert Barrow. Around that time, Mind Medicine also appointed a chief legal officer and corporate secretary as well as a VP, corporate controller, and principal accounting officer.
Also, in 2021, Mind Medicine continued its ongoing collaboration with the Liechti Lab at University Hospital Basel, located in Switzerland.
Consequently, Mind Medicine had “exclusive worldwide rights to data, compounds and patent rights associated with the Liechti laboratory’s research with LSD and other psychedelic compounds, including data from preclinical studies and over 15 completed and nine ongoing clinical trials,” according to a press release.
2021 was also the year when Mind Medicine completed a Phase 1 study of MM-110. That’s a derivative of ibogaine, which Mind Medicine is developing for the treatment of opioid withdrawal. This year, the company looks forward to conducting a Phase 2 study that will “evaluate the safety, tolerability, and efficacy of MM-110 in mitigating symptoms of opioid withdrawal and facilitating completion of detoxification.”
Furthermore, this year Mind Medicine celebrated what Barrow called a “major milestone” concerning the development of MM-120. That is Mind Medicine’s LSD-based drug candidate, which is being developed for generalized anxiety disorder and other brain-based disorders.
Reportedly, the U.S. Food and Drug Administration (FDA) has approved Mind Medicine’s Investigational New Drug (IND) application for MM-120 for the treatment of generalized anxiety disorder. With that, Mind Medicine prepared for participant enrollment for this exciting clinical-trial phase.
Wall Street’s Take
Turning to Wall Street, MNMD stock has a Strong Buy consensus rating based on three unanimous Buy ratings. The average Mind Medicine price target is $5.45, implying 480.9% upside potential.
The Takeaway
As you can see, the analysts on Wall Street generally have great expectations for Mind Medicine stock. Perhaps they’re anticipating that the company will achieve more “major milestones” in 2022.
Financially, Mind Medicine’s situation is less than perfect. This is true of many startup businesses, particularly when they’re working on the cutting edge of an emerging scientific field.
So, investors will need to be patient with Mind Medicine. Don’t assume that explosive growth will happen overnight. Understand the risks, and watch for ongoing developments as Mind Medicine pursues the cutting edge of psychedelic medicine.
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