Mindset Pharma has a 184 per cent upside, says Echelon

Echelon Capital Markets analyst Stefan Quenneville is staying bullish on psychedelic drug developer Mindset Pharma (Mindset Pharma Stock Quote, Charts, News, Analysts, Financials CSE:MSET) after the company’s latest quarterly earnings release. In a Healthcare & Biotechnology report on Thursday, Quenneville maintained a “Speculative Buy” rating on MSET and a $1.25 target price, saying the stock looks undervalued at present levels.

Toronto-based Mindset Pharma, a neuro-pharmaceutical drug discovery and development company with psychedelic compounds for treatment-resistant neurological and psychiatric disorders, released its fourth quarter fiscal 2022 financials on Wednesday, coming in with $1.6 million in revenue and $0.3 million in adjusted EBITDA for the quarter ended June 30. The company’s operating cash burn before accounting for working capital was negative $0.5 million, while Mindset ended the quarter with $8.7 million in cash.

Last month, Mindset entered into an exclusive licensing agreement with psychedleics firm Cybin, which has acquired the IP rights to a subset of Mindset’s preclinical Family 1 compounds in exchange for US$0.5 million and a further US$9.5 million in potential clinical milestones as well as a two per cent royalty on future product sales.

Taking a look at the fiscal Q4, Quenneville called them in line with expectations, with the $1.6 million topline comparing with his estimate at $4.3 million, while EBITDA at $0.3 million was below his forecast at $0.6 million. Operating cash burn was a touch greater at negative $0.5 million compared to the analyst’s estimate at negative $0.4 million, while Quenneville said the $8.7 million in cash should be enough to bring the company’s various preclinical assets to the clinic stage.

“With recent progress in selecting a lead Family 2 compound to move forward in the program partnered with Otsuka Pharma, as well as the signing of a licensing agreement with larger psychedelic medicines peer, Cybin for IP rights to a subset of its Family 1 compounds (excluding lead drug candidate MSP-1014), we continue to view Mindset as meaningfully undervalued,” Quenneville wrote.

On the Cybin licensing deal, Quenneville said it validates Mindset’s strong IP position, while he also said it’s likely that Mindset will obtain a similar licensing and development agreement for its lead candidate MSP-1014, possibly within the next three to six months.

On his estimates, Quenneville is forecasting fiscal 2023 revenue of $17.9 million compared to fiscal 2022’s $3.9 million and an adjusted EBITDA loss of $3.3 million compared to the loss of $3.8 million in fiscal 2022. At the time of publication, Quenneville’s $1.25 target represented a projected one-year return of 184 per cent.