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Buy the Dip in This Biotech After Negative FDA News, Says Analyst
Last week, a U.S. Food and Drug Administration (FDA) advisory panel declined to approve MDMA as a treatment for post-traumatic stress disorder (PTSD), driving shares of Mind Medicine (MNMD) lower. The ruling was a setback for advocates of the drug, as they believe psychedelics such as MDMA will be effective in treating mental disorders.
It was the first time the FDA considered a psychedelic as a medical treatment, and panel members raised concerns about the data submitted by Lykos Pharma, a drug manufacturer. According to the advisory panel, the data was flawed due to poor study design and misconduct allegations.
An NBC report stated the panel’s decision was based on the results of two Phase 3 clinical trials that included almost 200 patients suffering from PTSD. Researchers found that treating PTSD with MDMA over three eight-hour therapy sessions across four weeks worked better than the placebo in reducing the severity of patient symptoms.
Generally, a randomized, double-blinded trial is considered a gold standard for any clinical trial. However, the drastic changes in mood and cognitive abilities following an MDMA dose make it easier for patients to identify if they have been given a placebo, which was considered to artificially inflate the results.
RBC is Bullish on Mind Medicine Stock
According to analysts at RBC Capital (RY), investors should buy the dip in Mind Medicine stock, despite the FDA’s negative reaction to Lykos’ trial results. RBC explained that the advisory committee sparked a conversation around the known complexities of psychedelic drugs, many of which were specific to Lykos.
The investment firm also noted that the advisory committee is not entirely dismissive of MDMA, and that Mind Medicine could integrate these learnings into its Phase 3 study.
Is MNMD Stock a Good Buy?
Valued at $586 million by market cap, MindMed stock has more than doubled in the last 12 months. However, it is also trading 38% below its 52-week highs, making it attractive to contrarian investors.
In its Q1 results, the healthcare company announced its Phase 2b trial of MM120 for generalized anxiety disorder hit a key secondary endpoint, with clinically significant activity observed through week 12 of the study.
MindMed’s CEO, Rob Barrow, stated, “Additionally, the results we shared from our Phase 1 pharmacokinetics bridging trial support the advancement of our MM120 oral dissolving tablet (ODT) formulation into pivotal clinical trials, with our Phase 3 program of MM120 in GAD on track to initiate in the second half of 2024.”
As MindMed is a pre-revenue company, it's impossible to value it on the basis of sales or earnings. However, MindMed ended Q1 with $252.3 million in cash, which should allow it to fund operations through numerous key milestones in the next 12 months.
What is the Target Price for MNMD Stock?
Out of the nine analysts covering MNMD stock, eight recommend “strong buy,” and one recommends “moderate buy.”
The average target price for MindMed stock is $23.38, indicating an upside potential of over 210% from current levels.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
