A new psychedelics exchange-traded fund has hit the market.
The AdvisorShares Psychedelics ETF (PSIL) kicked off trading on the NYSE on Sept. 15. For long-term growth investors, I'm a big fan of this sector. It's going to be volatile. It's fair to expect similar pushes and sharp drops like we've seen in the cannabis sector.
I wasn't surprised to see Cybin (CYBN) listed as one of the top holdings. It's my favorite name in the space. Atai Life Sciences (ATAI) is another core name I believe should be owned as well. What surprised me was the ETF announced yesterday it was adding Mindset Pharma (MSSTF) to its holdings.
Given the small, somewhat unknown nature of this name, I thought it worth a bit of a look to see if there might be something to it that could make it worth consideration.
Mindset Pharma is taking a radically different approach to the psychedelics market with its development of next generation psychedelic medicine.
The company is examining the use of molecules that share a common chemical structure with psilocybin but have been altered into a new compound. In the case of Mindset, these compounds could have different characteristics than psilocybin -- things like potency, duration, and side effects -- which can change quite dramatically with minor changes in chemical structure.
This allows Mindset the opportunity to patent its drugs, giving the company exclusivity for virtually two decades. Patents and intellectual property are two keys for me when I'm analyzing companies, especially smaller companies. Often, they can be bought out simply for their IP or patents.
Mindset has three final PCT applications and three provisional applications for psilocybin-inspired drugs. Additionally, they have over 75 compounds synthesized and screened. It is not realistic to expect patents on every one of those, but that's a deep pipeline to draw from. Thus far, they've narrowed their research to five candidate families.
The company is currently pursuing one candidate, MSP-1014, as a "next generation psilocybin" with the intention to commence clinical trials within the next 12 months.
Extracting natural psilocybin is time consuming and expensive. Mindset believes that its psilocybin synthesis process can yield GMP-grade psilocybin at a discount to the current market price. This creates a competitive advantage or possible revenue opportunity licensing the process or selling to others in the space.
Given the small size and early nature of the company, research, and industry, this will be a highest risk, highest reward type of play. It's not for the faint of heart, but it is nice to see an ETF adding shares which should help boost the volume and liquidity around the stock.
