- The psychedelic drug industry represents the best commercial opportunity in 21st century healthcare
- With both markets and the media distracted by the Covid-19 pandemic, the Mental Health Crisis (a much larger pandemic) is being completely overlooked
- Many psychedelic stocks are currently priced at pennies on the dollar
Psychedelic stocks have been among the victims of recent market turbulence. The flip-side to that is that stocks which were already extremely cheap are now at no-brainer valuations.
Psychedelic Stock Watch has crunched the numbers and come up with our list of companies that currently represent the best-of-the-best in terms of value propositions in the sector. More on this later.
As experienced investors know, a stock is only “cheap” if it has strong future prospects. When a stock price gets pushed down for a company that does not have strong prospects, the stock is not really cheap. It has simply been (rightfully) discounted – as a punishment for the lack of future prospects.
Psychedelic stocks represent amazing value propositions
Why are psychedelic stocks currently so grossly mis-priced at present?
It's not for lack of capital. Institutional investors have been lining up to throw money at these private companies and startups.
Over $2 billion has been raised by this brand-new industry, in just 2020 and 2021.
It's not the lack of opportunity. As Psychedelic Stock Watch regularly chronicles, globally there are
over 2 billion people suffering from treatable mental disorders.
Psychedelic drugs (and psychedelics-based therapies) are not merely the “best hope” for relief for these 2 billion people. They are
the only hope.
Most of these psychedelic drugs have been heavily criminalized (for no good reason) for ~50 years, freezing medical research. Put another way, the healthcare industry had half a century to develop alternatives to psychedelic drugs for treating mental health disorders.
The healthcare industry has failed miserably. That's
why we have
a Mental Health Crisis today, with over 2 billion people in need of treatment. Conventional therapies cannot even control these mental health disorders – let alone cure them.
Unlike conventional therapies, psychedelics-based therapies produce results.
The
Phase III clinical trial of MAPS' MDMA-assisted therapy for PTSD has
reported relief for ~90% of study participants, with two-thirds of those participants effectively cured.
In contrast, with the conventional therapies for PTSD from the Department of Veterans Affairs, roughly two-thirds of veterans report
no benefit from treatment.
Compass Pathways (US:CMPS) recently reported its
Phase IIb results for its COMP360 therapy for Treatment Resistant Depression. The stock was punished by the market because the results were 'only'
~40 times as efficient as conventional depression therapies.
Psychedelic medicine does not represent some minor, incremental improvement in treating mental health. Rather, these are
Miracle Drugs that are about to pioneer a Revolution in mental health care.
5 really cheap companies with strong balance sheets
As Psychedelic Stock Watch observed in a recent article, publicly traded companies in this sector have been discounted to such absurd valuations, that investors could pick stocks
“by throwing a dart against the wall”. However, for investors looking for a little more guidance, we have some specific suggestions.
Small Pharma Inc. (CAN:DMT / US:DMTTF)
Small Pharma is one of a limited number of companies focusing on DMT-based research. DMT offers advantages over other psychedelics in terms of an accelerated onset and reduced “trip” time. This has the potential to dramatically improve the efficiency of DMT-based therapies over even other psychedelic drugs.
Small Pharma is just moving into its Phase IIa clinical trial with its lead drug candidate, SPL026, as a treatment for Major Depressive Disorder.
Statista recently reported that the number of Americans suffering from symptoms of depression
has nearly quadrupled (to
~80 million Americans) just since the start of the Covid-19 pandemic. In other words, an already-huge treatment market is increasing exponentially.
Very well-capitalized with its most-recently reported cash position of CAD$50.3 million, irrational market conditions have reduced Small Pharma’s cash-to-market-cap ratio to a very modest 2.5:1.
Boasting one of the strongest followings of retail investors among public companies, (ironically) NUMI can also now boast as being one of the cheapest companies – and best values – in the sector.
Numinus is one of the more diversified players in the psychedelics industry. It is involved in everything from psilocybin cultivation to hosting clinical drug trials in its Canadian clinics and engaging in its own proprietary drug R&D.
Numinus is starting its Phase I trial for its proprietary psilocybin derivative.
The company has a chain of Canadian mental health treatment clinics with near-term plans to expand into the U.S. Numinus' clinics have also hosted part of the MAPS Phase III clinical trial, with other such partnerships already underway.
Sitting with CAD$63.2 million in cash and equivalents, Numinus has also slipped well off its 2020 high and is currently bargain-priced with a cash-to-market-cap ratio of only 1.9:1.
Red Light Holland (CAN:TRIP / US:TRUFF)
Red Light Holland provides psychedelics investors with a recreationally-oriented business model in the psychedelics space.
The company is already generating
significant revenues with its psilocybin products in the Netherlands, where psilocybin is currently legal. Red Light Holland has also been a first-mover in importing/exporting psilocybin, in anticipation of psilocybin-based products becoming increasingly available (legally) going forward.
For investors wanting exposure to the recreational side of psychedelics, Red Light Holland is the leading public option. With a cash position of CAD$29.1 million, TRIP offers investors an excellent value proposition, with
a cash-to-market-cap ratio of only 1.7:1.
Novamind is one of the early revenue leaders in the psychedelics space via its Cedar Psychiatry network of mental health clinics in Utah.
Novamind is preparing to launch two more clinics by early 2022, it's 7th and 8th. Meanwhile, the company just
announced an LOI to acquire two Arizona-based clinics as Novamind expands its footprint.
Novamind just reported quarterly revenues of CAD$1.86 million. Its Utah clinics have revenue capacity of ~CAD$2 million per year when up to full run-rate, so that quarterly revenue figure can be expected to grow rapidly in 2022.
The company is also planning to be active in hosting clinical trials with its U.S.-based mental health clinics, and currently has strategic relationships with multiple companies, including
atai Life Sciences (US:ATAI).
Well-capitalized and with a strong revenue stream, Novamind's cash-to-market-cap ratio of 3.7:1 is simply silly.
Last, but certainly not least, among the best value opportunities in the sector is Mind Cure Health.
MINDCURE is also a diversified player in the psychedelics sector. It's proprietary ibogaine synthesis is rapidly moving toward commercial production. The company already has plans for ibogaine drug development.
The company's new
“Desire Project”: where MINDCURE is hoping to move into a human clinical trial later in 2022.
However, the principal investment driver for MINDCURE at present is obviously its industry-leading
iSTRYM digital therapeutics platform. Digital therapeutics is not merely the future for mental health care, but healthcare in general.
For patients and practitioners, digital therapeutics improves both the efficacy and efficiency of treatment. For companies, it's an excellent tool to leverage opportunities in providing mental health treatment to 2+ billion people and scale-up treatment operations.
MINDCURE is already
ahead of schedule in rolling out its initial launch of iSTRYM. The company is targeting a total reach of 150 clinic partners across North America and Europe by the end of 2022.
With CAD$15.6 million in cash and equivalents (as of its most recent statement), MINDCURE is well-capitalized with
an eye-popping cash-to-market-cap ratio of only 1.6:1.
Bargains aplenty and infinite blue sky
As already noted, with revolutionary therapies and a global treatment population in excess of 2 billion people, the psychedelic drug industry does not merely represent years of growth potential. It represents
decades of spectacular growth potential.
Yet, as the numbers above clearly illustrate, the market is not currently pricing these companies (and the entire sector) at even remotely rational valuations.
These stocks are being priced like companies in a dying industry. In other words,
they are being priced like companies delivering conventional therapies for mental health – therapies that have clearly failed.
Psychedelic stocks represent the future of mental health care, a future that (at present) hasn't even begun to be priced into these stocks.
Pick a company by throwing a dart against the wall. Or, for a more focused strategy, have a look at the spectacular value propositions above.
DISCLOSURE: The writer holds shares in Numinus Wellness, Novamind Inc and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock Watch.
