100 clinical-stage psychedelic drug companies (see here) research the treatment of a variety of mental illnesses based on the use of 10 different psychedelic substances (see here) but only 8 have market caps of $50M or more, and trade for US$0.50/share or more, and they are tracked in the munKNEE  Psychedelic Compounds-Based Drug Stocks Index.

Psychedelic Compounds-Based Drug Stocks Index

The Index tracks the performance of the constituents for the week ending July 15th below, in descending order, since the end of May (6 weeks), and YTD with each stock's current Operating Cash Flow, Price-to Earnings (P/E) Ratio, Altman-Z Score, Piotroski F Score, Return on Equity (ROE) and Return on Assets (ROA) which should help you assess the financial health of each company, how well the company is being managed and the extent to which the company is over- or under-valued compared to its peers. (The definitions of each metric are detailed at the bottom of the article.)

1. Allied Corp. (ALID): UP 10.6% last week; -28.8% in the last 6 weeks; -70.6% YTD
   • focused on the research, development, and production of cannabinoid health solutions in the United States and has a product in Phase I clinical trial in Columbia for treating post-traumatic stress disorder
     • Positive Operating Cash Flow: No 
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman-Z Score: 38% chance of financial distress in the next 2 years
     • Piotroski F Score: 3
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
2. Mind Medicine (MNMD): No Change in price last week; -20.7% in the last 6 weeks; -50.0% YTD
   • focused on discovering, developing, and deploying the next generation of psychedelic-inspired medicines and therapies to address addiction and mental illness development.
     • Positive Operating Cash Flow: No
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman-Z Score: 62% chance of financial distress in the next 2 years
     • Piotroski F Score: 3
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
3. Zynerba (ZYNE): No Change last week; +16.3% in the last 6 weeks; -60.4% YTD
   • focused on developing and commercializing proprietary next-generation synthetic cannabinoid therapeutics formulated for transdermal delivery.
     • Positive Operating Cash Flow: No
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman-Z Score: 6% chance of financial distress in the next 2 years
     • Piotroski F Score: 3
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
4. Atai (ATAI): DOWN 1.4% last week; +4.4% in the last 6 weeks; -44.3% YTD
   • focused on acquiring and efficiently developing innovative treatments that address significant unmet medical needs and lead to paradigm shifts in the mental health space.
     • Positive Operating Cash Flow: No
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman-Z Score: 12.2; 53% chance of financial distress in the next 2 years
     • Piotroski F Score: 5
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
5. Cybin (CYBN): DOWN 4.8% last week; -7.7% in the last 6 weeks; -50.0% YTD 
   • focused on progressing psychedelic therapeutics by utilizing proprietary drug discovery platforms, innovative drug delivery systems, novel formulation approaches, and treatment regimens for psychiatric disorders.
     • Positive Operating Cash Flow: No
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman-Z Score: 60% chance of financial distress in the next 2 years
     • Piotroski F Score: 0
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
6. Seelos (SEEL): DOWN 5.3% last week; +45.2% in last 6 weeks; -44.8% YTD
   • focused on developing products that address significant unmet needs in Central Nervous System disorders and other rare disorders.
     • Positive Operating Cash Flow: No
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman-Z Score: 44% chance of financial distress in the next 2 years
     • Piotroski F Score: 3
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
7. Compass Pathways (CMPS): DOWN 11.2% last week; +43.8% in last 6 weeks; -45.3% YTD
   • focused on the development of a new model of psilocybin therapy for people with treatment-resistant depression, in which psilocybin is administered in conjunction with psychological support.
     • Positive Operating Cash Flow: No
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman-Z Score: 24% chance of financial distress in the next 2 years
     • Piotroski F Score: 2
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
8. GH Resources (GHRS): DOWN 11.4% last week; +18.3% in the last 6 weeks; -51.2% YTD
   • focused on developing novel and proprietary 5-MeO-DMT therapies for the treatment of patients with Treatment-Resistant Depression.
     • Positive Operating Cash Flow: No 
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman-Z Score: 58% chance of financial distress in the next 2 years
     • Piotroski F Score: 3
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative

In total, the munKNEE Psychedelic Compounds-Based Drug Stocks Index was DOWN 8.9% last week and UP 21.7% in the last 6 weeks but is still DOWN 49.0% YTD.

Hopefully, the above information will help you assess the financial health of each company, how well the company is being managed, and the extent to which the company is over- or under-valued compared to its peers.

Definitions:

Operating Cash Flow:

• Is money involved directly with the production and sale of goods from ordinary operations or, in other words, money coming in through sales minus operating expenses.
• Without positive operating cash flow a business doesn’t survive and, as such, is the best measure of a company’s financial and operational health.

Price/Earnings (P/E) Ratio:

• Is a measure a company's share price to its earnings per share and has the most value when compared against similar companies in the same industry or for a single company across a period of time.
• Helps one determine whether a stock is overvalued (a high P/E) or undervalued (a low P/E) and can also be benchmarked against other stocks in the same industry or against the broader market.

The Altman-Z Score:

• Is a numerical measurement used to predict the chances of a business going bankrupt in the next two years and has an accuracy that ranges from 82% and 94%.
• Is based on five financial ratios - profitability, leverage, liquidity, solvency, and activity. 

The Piotroski F Score:

• Is a back-tested strategy that rates how strong the financial fundamentals are for a value stock and in back-testing of the system against the market between 1976 and 1996 the system it would have beaten the average return on the stock market by 13.4%.
• A score of 0-3 indicates that the company has weak fundamentals while a score of 8-9 indicates a company with powerful fundamentals that are most likely to keep performing well in the future.

Return on Equity (ROE)

• Is a measure of how many dollars of profit are generated as a percentage of each dollar of shareholder's equity and, as such, is a metric of how well the company utilizes its equity to generate profits.
• The higher the ROE, the better a company is at converting its equity financing into profits.

Return on Assets (ROA)

• Is a measure that indicates how profitable a company's net income is as a percentage of its total assets and, as such, factors in a company's debt while return on equity does not.
• A higher ROA means a company is more efficient and productive at managing its balance sheet to generate profits while a lower ROA indicates there is room for improvement.

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