Over the past decade, marijuana has enjoyed a huge turnaround. The drug used to be illegal almost everywhere, but now, it’s widely available in much of North America. Investors have understandably piled into cannabis stocks to ride the boom. Is another such societal transformation under way?
Last November, Oregon legalized psychedelic mushrooms. That set off interest in Mind Medicine (NASDAQ:MNMD), aka MindMed. Indeed, MNMD stock has risen as much as 1,000% in recent months.
Part of MindMed’s sudden rise is due to improved visibility. In addition to Oregon’s move, MindMed made a big leap of its own. The company formerly traded on the Pink sheets, and thus didn’t have much trader interest. Brokerages such as Robinhood tend to not offer trading of Pink sheets companies. In April, however, MindMed jumped to the Nasdaq exchange.
With MindMed now being one of the first stocks of its kind on a major American exchange, it opens up a new frontier for investors. So is the age of psychedelics now upon us? Before investors rush into the stock, however, there are some things to consider.
Game Plan Behind MNMD Stock
MindMed is focused on developing clinical drugs out of various psychoactive substances. Psilocybin is the one that is getting the most attention thanks to the new Oregon law. However, other substances in the MNMD stock arsenal could include LSD, MDMA (commonly known as ecstasy), and the active ingredient in ayahuasca, a South American psychoactive brew used both socially and as ceremonial spiritual medicine among the indigenous peoples of the Amazon.
Using these various ingredients, MindMed is targeting various maladies such as ADHD, anxiety and addictions. This is a pharmaceutical approach. Find a specific condition, and use a particular substance to try to improve the patient’s outcome.
No Likely Overnight Success
This is a good and promising model to follow. However, that’s much different from setting up a retail shop and selling to anyone who wants the substances. Don’t expect MindMed to generate tons of revenues in the near-term. While MindMed is working with what many people call “party drugs,” the company is taking a sober approach to commercialization.
It will likely take years for MindMed to run its clinical trials. And, if successful, there’s still no guarantee of much revenue after that. That’s because the U.S. federal government labels most of the products MindMed is working on as Schedule 1 drugs. These are subject to the heaviest federal legal inhibitions against commercial use. For example, marijuana infamously is on the Schedule 1 list, which has greatly slowed down the development of the U.S. recreational market compared to Canada.
This Won’t Be A Fast Money Trade
With cannabis, the initial investor focus was on medicinal marijuana. Soon, though, it became clear that the recreational market would be the real big prize. The same will likely occur here, assuming that other…