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

Best value opportunities in the smaller companies

Originally, “concentration” in psychedelic drug stocks was one company: Compass Pathways.

Then two more leaders emerged: MindMed and Numinus. And then two more after that (Cybin and Field Trip). But for the past 6 months, the industry has remained frozen, in terms of concentration.

The massive capital flows alone dictate that more public companies should be joining this winners’ circle.

As noted, atai doesn’t alter this dynamic, since it was always assumed the company was going public. And atai has been the best-capitalized company (public or private) since Day 1 of this industry.

When will some of these smaller, dynamic players in the psychedelic drug industry start outperforming their larger peers?

It should have already happened. In terms of both the capital raised by these companies and their own progress on operations, they merit more competitive market caps versus the largest pubcos.

More pertinently, if (when?) it does happen, the upside potential of these smaller companies dwarfs the larger pubcos.

We need to look no further than Compass and MindMed.

Compass Pathways immediately had a market cap in excess of $1 billion. At that time, MindMed’s market cap was under US$100 million.

Today, the market caps are roughly equivalent. In other words, MindMed has outperformed CMPS by greater than a 10:1 margin.

Obviously, those who bought into MindMed at/before the CMPS IPO have done very well for themselves.

With MindMed’s deep drug development pipeline, this is a rather extreme example. But as noted, some of these other developing companies also offer some exciting investment prospects – prospects that are currently not being recognized (and priced in) by the market.

Early MindMed investors have already reaped a ten-bagger in their psychedelics investments.

But it’s much less likely that MindMed will duplicate that performance going forward (i.e. generate a 100X return).

Those investors will now be looking elsewhere for their next 10X return in psychedelic stocks. Where will you look for the next psychedelics ten-bagger?

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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!