Two factors immediately make Mind Medicine (NASDAQ:MNMD) stock difficult to analyze objectively.
First, MNMD stock enjoyed a massively strong session on June 7 soaring just a hair under 22%.
Second and more importantly on a personal level, I own shares of Mind Medicine. When I checked my account today, MNMD contributed very handsomely to my overall portfolio value.
So, I hope you’ll forgive me that it’s a challenge to consider the negative side of the trade. Obviously, I just want MNMD stock to keep charging higher, but this is also an incredibly dangerous time for an investor. Lulled into complacency due to prior excellent profitability, you start thinking that you have the Midas touch.
Of course, that’s when things go awry. Therefore, it’s vital to get as many perspectives as possible. For those thinking about buying MNMD stock, you should consider InvestorPlace contributor Muslim Farooque’s breakdown of the company and its underlying psychedelic medicinal industry.
While he acknowledges growth catalysts for MNMD, he ultimately views it as a speculative vehicle.
Among his arguments, Farooque points out that “From a statistical standpoint, success in phase 2 trials in psychopharmacology is around 24%. Hence, there is a chance that none of its big projects move on to phase 3 and beyond.”
Admittedly, I’m not entirely sure where this stat originates. However, it does make sense.
According to bio.org, the “Phase II transition success rate (30.7%, n=3,862) was substantially lower than Phase I, and the lowest of the four phases studied. As this is generally the first stage where proof-of-concept is deliberately tested in human subjects, Phase II consistently had the lowest success rate of all phases.”
Though Mind Medicine entered Phase 2 for its psychedelic therapeutics, this success story today could turn into a heavy liability tomorrow if the proof-of-concept fails to deliver.
MNMD Stock Represents a Vital Necessity
While Farooque and I may appear to be on different sides of the argument, contextually, our perspectives may be more similar than not. After all, he’s absolutely right that MNMD stock is speculative. Back when I first covered Mind Medicine, it was an over-the-counter affair priced well below a buck.
Although I’d like to think that I have some magic intuition for finding such investments, here’s the reality: it’s all just luck, especially when you’re riding the OTC market. Don’t let anyone tell you any differently because that’s a surefire way of losing money in the long run.
Am I getting cold feet now? No. Though I can’t deny that MNMD stock is incredibly risky — especially when you compare the before-and-after price — what I also can’t deny is the overwhelming fundamental narrative. We need Mind Medicine to succeed.
A few years ago, Princeton University economist Anne Case and Angus Deaton, Case’s husband and a Nobel laureate in economics, published a groundbreaking report regarding deaths of despair. Specifically, it looked at the rising mortality rate of “among middle-aged, non-Hispanic white people, especially those without a college degree.”
In short, they wrote that white men were “drinking themselves to death with alcohol, accidentally overdosing on opioids and other drugs, and killing themselves, often by shooting or hanging. Vanishing jobs, disintegrating families and other social stressors had unleashed a rising tide of fatal despair.”
The researchers stated that this trend mirrored that “among inner-city Black people in the 1970s and 1980s.”
You might look at this as a white community issue. But it’s likely a middle-class problem because the middle class is the only demographic that hit its lowest share of total net worth in its recorded history. Even the bottom-half wealth percentile hasn’t hit rock bottom — quite the opposite.
We desperately need a solution for the addiction component of middle-class deaths of despair, considering this is the heart of the American economy. And that’s why I view MNMD stock with optimism.
Be Mindful of the Risks
Now, I want to be clear: just because society needs a solution to the addiction crisis does not mean psychedelics are the answer. And that also means that MNMD stock may not be profitable.
Indeed, Mind Medicine is among the riskiest names I have in my portfolio. I mention this because you don’t want to get into MNMD based on a few fundamental catalysts or recent momentum. Although shares trade on the Nasdaq now, their choppiness reminds you that you can take the stock off the counter, but you can never take the counter off the stock.
Well, never say never but you get the idea. I’m encouraged by Mind Medicine’s therapeutic developments and the underlying need for them. But you should perform your due diligence before proceeding.
On the date of publication, Josh Enomoto held a LONG position in MNMD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.