By Ciara Linnane
Shares of psychedelics company Mind Medicine Inc. slid 50% Wednesday, after the company priced a dilutive secondary offering of 7.1 million shares.
The offering was priced at $4.25 a share, or a 30% discount over the stock’s closing price Tuesday of $6.12. The company also offered an equal number of warrants, which can be used to purchase one common share.
Proceeds are expected to total about $30 million. RBC Capital Markets and Cantor were lead underwriters on the deal, with Oppenheimer & Co. acting as co-manager.
MindMed /zigman2/quotes/204960205/lastsale MNMD -0.75% stock enjoyed a rally of more than 50% in a single day in August, after it was named as a key holding by a young investor who made $110 million from meme stock Bed Bath & Beyond /zigman2/quotes/209801102/composite BBBY -7.51% .
Jake Freeman, a 20-year-old student, had purchased a 6.2% stake in the troubled retailer in July, and SEC filings show he profited royally. Freeman has interned for New Jersey hedge fund Volaris Capital, according to his LinkedIn profile.
Freeman and his uncle Scott Freeman, a former pharmaceutical executive, had amassed an activist stake in MindMed, according to a Financial Times report from August. Freeman said he was planning to have a “constructive” dialogue with the board of Mind Medicine as he completed his studies in complex analysis and mathematical statistics at the University of Southern California. He’s now studying for the GRE.
MindMed recently conducted a Phase 2 placebo-controlled, investigator-initiated trial of LSD as a treatment for anxiety and published a paper on the study in the peer-reviewed scientific journal Biological Psychiatry in September. The paper expanded on data offered in an oral presentation at the PYSCH Symposium in London in May, the company said in a statement.
The data showed a significant reduction in anxiety in patients who took LSD for up to 16 weeks, showing effects that lasted up to week 50. It also showed a reduction in depression. It was the first trial to use LSD on patients suffering from anxiety who did not have a life-threatening illness. The study was conducted in Switzerland — where psychedelic research is allowed — and involved 44 participants.
“This paper further reinforces the positive preliminary evidence for LSD in patients who suffer from anxiety disorders,” said Rob Barrow, chief executive of MindMed, in a statement.
The results “are encouraging and supportive of our proprietary MM-120 product candidate in its potential to one day offer a therapeutic benefit for patients suffering from GAD (generalized anxiety disorder) after just a single-dose administration,” he said.
The company is currently running a Phase 2b study.
Oppenheimer analyst Francois Brisebois said the results were encouraging, including the crossover data, which showed a decreasing trend in anxiety symptoms in patients once they moved from placebo to LSD. He reiterated his outperform rating on the stock and $52 price target. The stock is currently trading around $3.
MindMed has also launched a placebo-controlled study that seeks to evaluate the effects of MDMA-like substances in healthy volunteers. Those substances include MDA, Lys-MDMA and Lys-MDA.
The topic of psychedelics and their potential for use in mental-health disorders has become popular of late, in part boosted by a new Netflix documentary with Michael Pollan, “ How to Change Your Mind ,” which features promising stories of cancer patients losing their fear of death and veterans overcoming post-traumatic stress disorder. But researchers caution that there are still unknown risks to the therapy and that not every patient responds the same way.
MindMed shares have fallen 85% in the year to date, while the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.73% has fallen 22%.