Big Financings Powering Future Profits In Psychedelic Stocks

TM Editors' Note; This article discusses penny stocks and/or microcaps. Such stocks are easily manipulated; do your own careful due diligence and be mindful of risk.

Drug development is expensive. All investors with experience around the pharmaceuticals industry are aware of this.

Drug development costs can run into the $100s of millions. The clinical trials process (for formal drug approval) usually stretches out over several years.

As the emerging psychedelic drug industry has taken off, skeptical investors would want an important question answered. Are these startups capable of making it to the finish line in such a capital-intensive industry?

Over the past 10 weeks, the psychedelic drug industry has answered that question. Yes – with an exclamation mark.

Look at the size of these numbers, from both pubco financings and private equity rounds.

Compass Pathways (US:CMPS) -- $146.6 million (IPO financing)

ATAI Life Sciences -- $125 million (Series C financing round)

Mindstrong Health -- $100 million (Series C financing round)

That’s over $370 million right there.

Over the same time period, MindMed Inc (CAN:MMED / US:MMEDF / GER:MMQ) and Cybin Corp (CAN:CYBN / US:CLXPF) have collectively raised in excess of CAD$100 million. Given the size of Canadian capital markets, these deals are even larger in proportionate terms.

What does this mean for investors?

Along with smaller financings, close to half a billion dollars has recently been injected into an industry still in its infancy. This is sufficient to not only finance all of the near-term operations objectives for these companies, there is plenty left over for M&A activity.

Lots of news-flow + lots of acquisitions. No need for most of these companies to go back to capital markets in the near future.

In turn, this can drive enormous additional growth in market caps (and share prices) – on top of the big rallies that many of these stocks have already produced. Rally on!

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DISCLOSURE: The writer holds shares in MindMed Inc and Cybin Corp.

 

The writer holds shares in MindMed Inc and Cybin Corp.

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