Why Smaller Psychedelics Companies Should Start Catching Up To The Sector Leaders

There is more than enough capital entering this sector to drive the stocks of a lot more than five public companies. And yet today we’re seeing only five winners.

Psychedelic Stock Watch has already pointed toward one investment window where we may start to see this market cap disparity recede. ATAI IPO Strategy: Load Up On OTHER Stocks First

Will atai’s IPO lead to greater market cap equality?

Atai Life Sciences has now filed for its IPO financing. A trading date on the Nasdaq could be announced at any time.

It’s easily the most-anticipated psychedelics IPO, as atai is immediately expected to become the new industry leader among public companies. That would broaden the concentration from five to six stocks.

But it doesn’t really alter the concentration equation. Atai is already a (private) behemoth in this industry.

Given the fever that surrounds highly anticipated IPOs these days, it is very likely that many would-be investors in atai will experience sticker shock on IPO day, and not be willing to buy into atai at such an inflated market cap.

Where will those extra dollars go?

Yes, companies like Compass and MindMed and Cybin all have ongoing Phase II clinical trials. But so does Mydecine Innovations Group (CAN: MYCO / US: MYCO) – and it’s market cap is a compact CAD$64 million (~US$50 million).

Yes, Field Trip and Numinus are developing robust networks of mental health clinic services. But Novamind Inc (CAN: NM / US: NVMDF) has clinic operations of a comparable scale to the two larger companies. Its current market cap is only CAD$56 million (~US$45 million).

Private company, Mindstrong, closed a US$100 million financing in 2020. Its operations are solely focused on its AI-powered digital therapeutics platform.

Mind Cure Health (CAN: MCUR / US: MCURF) is building out its own AI-powered digital therapeutics platform and already has a mental health treatment site in place to deploy that platform as it seeks to commercialize this IP.  MCUR is also active in drug development and nootropics manufacturing/distribution. But it’s market cap is only CAD$38 million (US$30 million).

These are not fly-by-night companies. They are well-capitalized smaller players in the industry. With any significant operational breakthrough, they could quickly/easily start closing the market cap gap with the larger companies.

And they are not alone.

Several other psychedelics pubcos offer (at least) interesting investment possibilities. One major announcement, or even one major institutional investor coming onboard, and some of these other stocks could take off as well.

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Disclosure: The writer holds shares in MindMed Inc, Numinus Wellness, Cybin Inc, Mind Cure Health and Novamind Inc.

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Lorimer Wilson 2 months ago Contributor's comment

Another very interesting article, Jeff. Your readers might also be interested in my latest article (updated weekly) entitled "Psychedelic Drug Stocks Category Is +6% Month-To-Date" talkmarkets.com/.../psychedelic-drug-stocks-category-is-6-month-to-date. Keep up the great work!