The relief rally we’ve seen play out last week is once again in full focus on Monday. All major indices have moved higher today. Indeed, investors seem to be taking the view that inflation may have peaked, or is nearing a peak, right now. However, investors in InMed (NASDAQ:INM) have a lot more to cheer. At the time of writing, INM stock is up nearly 60%, greatly outpacing the market.
This move, which has come on heavy volume, is tied to a $6 million private placement financing which was announced on Friday.
For InMed, a company specializing in the research and development (R&D) of rare cannabinoids, this financing could provide the company with significant growth runway. Now, given the fact that InMed’s valuation now sits just shy of $300 million, this capital raise doesn’t appear to be the whole story. After all, it’s a proverbial drop in the bucket for a company of this relative size.
Indeed, other news last week around various R&D updates from InMed appear to be in play as well. The company announced changes to its business, which would see more core research and clinical trials this year. Specifically, the company plans to enroll patients in a Phase 2 clinical trial. It also aims to develop other drugs aimed at epidermolysis bullosa (EB) and ocular diseases.
Let’s dive into what investors should make of this news.
Is Now the Time to Buy INM Stock?
As a pre-clinical therapeutics play, InMed is in and of itself a higher-risk bet. The fact that the company is researching cannabis-related compounds introduces further layers of risk. With regulatory uncertainty high in this sector overall, it’s unclear if InMed’s core products will ever see the light of day in the U.S. market. Accordingly, this smaller-cap company remains a speculative bet, despite these recent updates.
That said, there’s reason for enthusiasm around this stock. More progress is being made on the regulatory front, especially for medicines and therapeutics derived from cannabis. Should the U.S. Food and Drug Administration (FDA) greenlight some of the company’s products, there is significant upside potential with this stock.
Of course, investors should treat any sort of intraday 60% move with caution. It’s clear this stock has momentum right now. However, as we’ve seen with previous rallies, momentum works in both directions.
That said, for investors looking for a unique momentum play in the biotech space, INM stock may be worth adding to the watch list right now.
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On the date of publication, Chris MacDonald 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.
