What Field Trip’s Huge Financing Tells Investors

In a rocky week for global markets – and psychedelic stocks – investors might have missed some big news.

Field Trip Health (CAN:FTRP / US:FTRPF) has announced a CAD$82.875 million bought deal financing. The placement was upsized from an original CAD$50 million offering.

This becomes the third largest financing by a psychedelic drug public company. The offering is behind only Compass Pathway’s US$146 million IPO financing and MindMed Inc.’s CAD$92.1 million dollar bought deal.

With psychedelic drug stocks currently on sale, here are four important takeaways for investors from this announcement.
  1. Field Trip is now one of the industry leaders among public companies
  2. Institutions continue to have a nearly insatiable appetite for the psychedelic drug space
  3. Other psychedelics companies pursuing ketamine therapy are undervalued
  4. Most psychedelic stocks are undervalued

Field Trip is an industry leader among psychedelic drug public companies

It’s an obvious takeaway from Field Trip’s bought deal, but still worth noting.

Compass Pathways (US:CMPS) and MindMed Inc (CAN:MMED / US:FTRP) had already established themselves as industry leaders among public companies in this space. But beyond that, no public company had clearly emerged in third place.

Field Trip has now separated itself from the rest of the pack. We can see this with the company’s new market cap.

FTRP traded as low as CAD$6.50 (the financing price) after the announcement. Let’s assume the share price stabilizes around CAD$7.

This isn’t unreasonable. Field Trip is a tightly held company with a small public float. It could even recover further toward its recent all-time high (CAD$9.89).

When we add the additional 12.75 million shares to the current 42.4 million, total shares issued and outstanding will rise to just over 55 million. That means an implied market cap for FTRP of ~CAD$375 million.

At its CAD$8.50 target price (in a recent analyst report by Stifel GMP), FTRP would have a market cap of over CAD$460 million. Numinus Wellness (CAN:NUMI / US:LKYSF), the previous favorite to claim the #3 position, has a current market cap of ~CAD$250 million following the recent pullback in these stocks.

Field Trip’s market cap is roughly 50% larger. And if it approaches its February highs, its market cap will be approximately double that of NUMI.

Institutions continue to have a nearly insatiable appetite for psychedelic stocks

Field Trip originally announced a $50 million bought deal financing. This would have merely tied the deal as the third largest pubco financing. Cybin Inc (CAN:CYBN / US:CLXPF) raised CAD$50 million for its RTO financing.

Ultimately, the Field Trip financing was upsized by an additional 65%. That signals a very strong appetite among institutional investors. But it’s not just Field Trip for which the Smart Money hungers.

With virtually all recent financings by public psychedelics companies we see two phrases pop up over and over.

First we see “bought deal”: guaranteed money from the underwriter. Investment banks don’t offer such bought deals (to everyone) unless they are very confident they can sell the units.

Why shouldn’t these bankers be confident? After the bought deal is announced, we quickly hear that the financing has been “upsized” – sometimes on the same day as the original announcement.

A nearly insatiable appetite for a piece of the action in the emerging psychedelic drug industry. And that appetite equates to fully cashed-up public companies.

As Psychedelic Stock Watch frequently observes, this is a critically important factor in the industry’s favor – as drug development is a capital-intensive enterprise.

Other psychedelic drug companies pursuing ketamine therapy are undervalued

Field Trips operational focus is ketamine-assisted psychotherapy clinics. FTRP has been one of the top performers in the psychedelics space, rising from an initial price of CAD$2 to (as previously noted) as high as CAD$9.89.

Currently priced at roughly CAD$7 (and a CAD$375 million market cap), some investors may think they have missed most of the upside with Field Trip.

What do investors do in that situation? They look for other public companies pursuing ketamine-assisted psychotherapy – and see if they are more bargain-priced.

In fact, two public companies look very cheap in comparison to Field Trip’s present market cap.

Novamind Inc (CAN:NM / US:NVMDF) only recently went public (on January 5, 2021), but it is well-established in the ketamine treatment market. In fact, Novamind is generating more revenues off its clinics than Field Trip.

Via its Cedar Psychiatry division, Novamind generated revenues of CAD$1.9 million in 2019. The company has already reported that 2020 clinic visits have doubled (but hasn’t yet released revenue numbers). It’s not unreasonable to expect an approximate doubling in revenues in 2020.

Obviously, Novamind is not as well-funded as Field Trip. But having recently closed on its own (oversubscribed) CAD$10 million bought deal, Novamind is also well capitalized.

The company plans on branching out into psychedelic retreats (once pandemic conditions ease). And Novamind also wants to get into MDMA-assisted psychotherapy – as soon as legislation permits. Market cap for Novamind: CAD$77 million – 1/5th of Field Trip’s market cap.

Then there is Mind Cure Health (CAN:MCUR / US:MCURF).

MINDCURE isn’t as far advanced in clinic development as either Field Trip or Novamind. It plans to open its first ketamine-assisted clinic in May 2021 – as a hub for further expansion in the treatment market.

With its clinic based in Canada (Kelowna, British Columbia), MCUR plans on accessing Health Canada’s “medical exemptions” – to provide psilocybin-assisted therapy to clinic patients. In addition, MINDCURE has an LOI in place to acquire an interest in ATMA, a psychedelics-assisted therapy center in Calgary, Alberta.

MINDCURE has also been more aggressive than either Field Trip or Novamind in IP development.

Its iSTRYM digital therapeutics platform is designed to not only optimize mental health therapies but also support MCUR’s drug development initiatives. Further supporting the company’s digital therapeutics, MINDCURE recently announced PsyCollage.

This is a bioinformatics platform specifically designed to accelerate drug development. And MINDCURE has been more active in drug development than Field Trip or Novamind. It recently announced the full framework for its drug R&D program. Included in this strategy is MINDCURE’s R&D targeting the enormous traumatic brain injury market (TBI). The TBI market is already a ~US$121 billion market (in 2019), projected to reach $182 billion by 2027.

MINDCURE's product line of organic nootropics are now available for sale online. And it has two new "adaptogen" post-psychedelics treatment supplements expected to be available for online sales in mid-2021.

MINDCURE is also one of the better-funded psychedelic drug companies. The company recently closed on an (upsized) CAD$23 million bought deal.

With a current market cap of only CAD$50 million, MCUR isn’t merely the cheapest psychedelic stock entering the mental health treatment market. It’s the cheapest psychedelic stock in terms of cash-to-market-cap, trading at roughly two times cash.

Novamind’s market cap is 70% higher than MCUR’s. And Field Trip has roughly 8 times the market cap of MINDCURE.

Most psychedelic stocks are undervalued

The Field Trip financing tells us more than that companies like MINDCURE and Novamind are undervalued.

Unless investors believe that institutions are totally out-to-lunch in funding FTRP to this level, this huge financing tells us that most psychedelic stocks are undervalued.

Yes, Field Trip has done well in executing on its business model. But so have other public companies.

And most observers of the psychedelic drug industry believe that ultimately the biggest gains in this sector will be driven not by the (mental health) medical treatment market, but through drug development.

Compare Field Trip to a company like Cybin Inc.

Cybin is another recent public company. With two large financings already under its belt, CYBN has raised CAD$80 million – roughly equally capitalized with Field Trip.

Cybin is well-advanced in its drug development. It is entering a Phase 2 clinical trial using psilocybin-assisted therapy to treat Major Depressive Disorder – the largest individual treatment market for depression.

Yet CYBN’s market cap is only $224 million, not much more than half that of Field Trip.  

Psychedelic Stock Watch is in no way suggesting that Field Trip is overvalued. On the contrary, we see this huge financing as a market endorsement of its business model.

But if you regard Field Trip as a legitimate CAD$350 million to CAD$4450 million market company, then many other public players in this space are dramatically undervalued in comparison.

Field Trip's big deal is a "big deal" for all investors in psychedelic stocks.

DISCLOSURE: The writer holds shares in MindMed Inc, Numinus Wellness, Cybin Inc, Novamind and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock Watch.
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