Mind Medicine (NASDAQ:MNMD) is a clinical-stage biotech company that is developing multiple psychedelic treatments for various mental health conditions. With numerous therapy programs in development, the goal is to effectively leverage the latest innovations to develop medicines that have never been commercialized previously. However, with no revenues, mounting losses, and an array of business risks, MNMD stock isn’t for the faint of heart.
MNMD stock is up a modest 15% since the beginning of the year. Since January, the stock has averaged in at slightly over $3.20 and has overall been a sluggish mover. The company had filed for a Nasdaq-uplisting application back in September last year, without a mandatory form F-10. The management has yet to comment on why the form wasn’t part of the listing. Furthermore, several other risks make MNMD stocks bear case more compelling at this time.
The Bull Case for MNMD Stock
MindMed is developing a variety of psychedelic therapies that target several expanding markets. Some of these markets include addiction, anxiety, depression, and others. These markets account for more than $25 billion in global spending each year. Hence, if it’s able to siphon off even a fraction of the market, it could help its investors become incredibly rich. The company currently has several ongoing clinical trials at phase-2A or beyond.
Many of the drugs that are in use currently are habit-forming and involve major side effects. On the flipside, MindMed’s therapy programs effectively build on a massive body of research and indicate that it could lead to long-lasting relief. Hence, the company may have a competitive advantage over its peers once it effectively passes through the clinical trial process.
The Bear Case
Multiple obstacles are facing MindMed in the commercialization of psychedelic drugs. Psychedelic treatments are illegal in most countries, and there is a lack of awareness about them in general. Moreover, there is a social stigma attached to them, which will inhibit their widespread adoption. On top of that, drug development is a long and arduous process, where companies can quickly fail to demonstrate efficacy with their products.
A recent U.K.-based study has questioned the efficacy of LSD-microdosing due to its link with the placebo effect. Moreover, the FDA has criticized the company’s plans to provide LSD-assisted psychotherapy via telehealth.
As of March, its cash balance was up to $160 million for the quarter, with a cash burn of just $10 million in funding its day-to-day activities. However, as it gets deeper into the development of its product pipeline, its expenses related to research will rise significantly. Moreover, revenue projections for its products are also unavailable, making it incredibly difficult to gauge its liquidity position in the near future. Most of its products are in phase-2 trials, and completion is at least a couple of years away.
MindMed has also been getting a lot of flak for its association with alternate medicine advocate Deepak Chopra. Deepak Chopra is a controversial figure who has been linked to various fringe religious and new-age movements. Such an association is bizarre, considering how the company is already tackling societal stigma from the get-go.
Bottom Line On MNMD Stock
MindMed is on a mission to revolutionize mental healthcare with its novel therapeutics. However, at this stage, there are multiple risks regarding its product pipeline, its financial flexibility, and its business model. Hence, investors with a substantial risk appetite would only want to invest in the stock at this time. The bearish narrative makes far more sense for MNMD stock, which is why it’s best to avoid it.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.