Mindset Pharma is undervalued, says Echelon

Echelon Capital Markets analyst Stefan Quenneville is staying bullish on Mindset Pharma (Mindset Pharma Stock Quote, Charts, News, Analysts, Financials CSE:MSET) after reviewing the latest quarter report from the company. In a client update on Friday, Quenneville maintained a “Speculative Buy” rating and $1.25 target price on MSET, which implied at the time of publication a projected one-year return of 363 per cent.

Psychedelic drug developer Mindset, which is developing candidates for treatment-resistant neurological and psychiatric disorders, released its fiscal second quarter 2023 financials on Thursday for the period ended December 31, 2022. Revenue came in at $2.5 million compared to zero a year earlier, while the quarterly net loss was $2.1 million compared to a loss of $6.8 million a year ago. Basic and diluted loss per share was $0.02 compared to $0.08 per share a year earlier.

The whole of the quarterly revenue came from Mindset’s collaboration with Otsuka Pharma to cover preclinical R&D associated with Mindset’s Family 2 and 4 compounds. In total, Otsuka has agreed to provide about US$30-$40 million to fund the development of the lead candidates through Phase 1b. 

On lead candidate MSP-1014, Mindset is expecting to enter a ten-patient Phase 2a clinical trial over the first half of the 2023 calendar year and is aiming to follow up with a 60-patient Phase 2b trial, both of which will be for patients with major depressive disorder (MDD).

Commenting on the development timeline, Queneville wrote, “While the Company is currently positioned and sufficiently funded to execute both Phase II and IIb on its own, management continues to expect to sign a partnership agreement in the relatively near term to help fund the ongoing clinical development.”

Quenneville said the quarterly revenue of $2.5 million was under his estimate of $4.3 million, while the company’s operating loss of $2.1 million was slightly better than the analyst’s expected loss of $2.7 million. Quenneville noted that Mindset finished the quarter with $9.3 million in cash and said that amount should be sufficient to bring its various preclinical assets to the clinic.

“With the Company having received multiple composition of matter patents covering its Family 1 compounds, including lead candidate MSP- 1014, in recent months, the ongoing progress in moving its multiple families of next-generation psychedelic drugs towards the clinic, and the potential signing of a partnership deal for MSP- 1014 in the coming months, we continue to view Mindset as meaningfully undervalued and reiterate our Speculative Buy rating and $1.25 target price,” Quenneville wrote.