After new quarterly results from psychedelic drug development company Mindset Pharma (Mindset Pharma Stock Quote, Charts, News, Analysts, Financials CSE:MSET), Echelon Capital Markets analyst Stefan Quenneville kept a “Speculative Buy” rating on the stock in a Wednesday report to clients, saying MSET remains undervalued. Founded in 2019, Toronto-based Mindset Pharma has psychedelic compounds for treatment-resistant neurological and psychiatric disorders. The company reported fiscal first quarter 2023 numbers on Tuesday for the period ended September 30, 2022, featuring $1.7 million in revenue compared to zero for the same period a year earlier. The net loss for the quarter was $0.5 million compared to a loss of $7.9 million a year ago. In a letter to shareholders on Wednesday, Mindset CEO James Lanthier touted the company’s multiple drug candidates that are moving to clinical-stage development, industry partnerships with names like Japanese pharma company Otsuka and Toronto psychedelics biopharma company Cybin as well as Mindset’s psychedelic drug discovery program and IP portfolio. “Mindset is focused on a singular goal – to bring best-in-class optimized psychedelic medications to patients in need,” Lanthier wrote. “This year we have made significant progress in advancing our rich pipeline of new drug programs to the clinical stage, expanded the frontiers of psychedelic drug discovery with development of new chemical classes, formed industry leading partnerships, and continued to expand and enhance our scientific innovations and intellectual property portfolio.” With a market cap currently at about $37 million, MSET’s share price has been in the $0.40-$0.70 range for the past 12 months. Quenneville sees better days ahead, however, reiterating in his report a $1.25 target price, which at the time of publication represented a projected one-year return of 213 per cent. “With the recent signing of an exclusive sales agreement with PharmAla for the sale and distribution of Mindset’s low-cost, pharmaceutical-grade psilocybin, 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 its lead program, MSP-1014, in the coming months, we continue to view Mindset as meaningfully undervalued,” Quenneville wrote. On the fiscal Q1 numbers, Quenneville said they were largely in line with his expectations, with the $1.7 million topline comparing to his estimate at $5.0 million and the consensus call at $2.5 million. The Q1 EPS of negative $0.01 per share was in-line with Echelon’s forecast at negative $0.01 as well as the Street’s negative $0.02 per share. On its assets, Quenneville said the psilocybin sales agreement with PharmAla is a minor revenue opportunity but it will help reduce the company’s cash burn, while Quenneville sees Mindset’s MSP-1014 as having an attractive clinical profile. He said Phase 1 clinical trials for the drug should be coming sometime during the 2023 calendar year. “We continue to value MSET at $1.25/share using a probability-adjusted DCF (14 per cent discount rate, five per cent residual growth, ten per cent probability of approval of its lead asset for TRD and end-of-life cancer angst). Our Speculative Buy rating reflects anticipated share price volatility as well as the inherent clinical trial risks,” he said.