Dave Hodes
The stock market has been tough over the last month, as has most of the U.S. economy.
The Federal Reserve raised interest rates by 0.75 percent on Wednesday, June 15, and that reduces the amount of money in the economy.
Besides mortgages, rising interest rates impact the stock and bond markets, credit cards, personal loans, student loans, auto loans, and business loans according to Forbes. It’s the third hike this year and the largest since 1994. The move is aimed at countering the fastest pace of inflation in over 40 years. Another rate hike could come in July, according to Fed Chairman Jerome Powell.
The stock market reacted instantly. For example, GE’s stock price was down on Friday, June 17, from $69.64 Wednesday to $64.96 a share. Amazon was down from $108.36 a share on Wednesday to $102.42 a share on Friday. Apple was down from $136.61 Wednesday to $129.54 on Friday.
Many of the psychedelic stocks dipped briefly as well, but appear to be recovering as of this writing, basically going against the latest economic trend… even as most of them still are not showing any significant revenue yet.
What’s driving the ability of some psychedelics companies to survive—even thrive—amidst this economic turmoil: Cash on hand? Results of clinical trials? Insider buying? Yes, yes, and yes.
Let’s take a look at three examples:
- Good cash runway. Atai Life Sciences (NASDAQ:ATAI). Its stock was up 4.5% percent on June 17. Analysts are not worried about this company that finally showed a bit of revenue as of March 2022, in part because of a strong cash runway. A company’s cash runway is calculated by dividing its cash hoard by its cash burn. Atai reported $335 million in cash that it held as of March 2022. “Importantly, its cash burn was $73 million over the trailing twelve months,” analysts reported. “So it had a cash runway of about 4.6 years from March 2022. A runway of this length affords the company the time and space it needs to develop the business.”
The company is also showing strong execution of its clinical pipeline, anticipating several clinical milestones in 2022 and beyond, including data from the Phase 2 proof-of-concept study of a potential at-home-use therapy in treatment-resistant depression. The company is also expecting other Phase 1 and Phase 2 results on other compounds this year. “It’s a testament to our phenomenal team that we anticipate having 10 compounds in the clinic,” Srinivas Rao, chief scientific officer and co-founder of Atai, said in a May 16th press release.
- Clinical trial moves. Cybin, Inc. (NEO:CYBN) (NYSE:CYBN) stock was up 5 percent on June 17. According to Tip Ranks, based on three Wall Street analysts offering 12-month price targets for Cybin in the last 3 months, the average price target is $9.00 with a high forecast of $10.00 and a low forecast of $7.00. The average price target represents a 1453.06% change from the last price of $0.58. Analysts rate it as a strong buy.
But what is really driving this analyst frenzy is Cybin’s announcement of the first human clinical trial of their psilocybin compound—and it’s a big deal.
On May 31, Cybin announced an investigational new drug application to the U.S. Food and Drug Administration for its Phase 1/2a first-in-human clinical trial evaluating CYB003 sometime in mid-2022, a proprietary deuterated psilocybin analog being developed for the treatment of the major depressive disorder.
The Phase 1/2a trial is a randomized, double-blind, placebo-controlled study evaluating people with moderate to severe major depressive disorder. Human subjects will receive two administrations (placebo/active and active/active) and a response/remission will be assessed at Week 3 (after a single dose) and at Week 6 (after receiving a second dose).
- Insider buying. Seelos Therapeutics (NASDAQ:SEEL). It’s stock was up 5.69 percent as of June 17. The stock is rated a buy or strong buy by analysts.
Analysts also report that multiple insiders are buying stock, sending out a positive message to the company’s shareholders. For example, in the last twelve months, the biggest single purchase by an insider was when Founder Raj Mehra bought $57,000 worth of shares at a price of $0.85 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being $0.64). “While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future,” according to analysts at Simply Wall Street. “In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.”
