The over-the-top promise of the latest Green Chip Stocks pitch is impressive… this is from the order form:
“Now, Get Ready to Profit from “The Most Important Discovery in Half a Century”
“The last time science came anywhere close to a breakthrough like this, early investors made up to 70,000%”
And it gets better…
“Now, you are in a position to make quadruple, quintuple-digit gains on what scientists are calling ‘the most important discovery in half a century.’
“A ‘magic molecule’ that holds the cure for many ‘incurable’ diseases like depression, alcoholism, opioid addiction, and PTSD.
“And, potentially, other chronic diseases like diabetes, Alzheimer’s disease, obesity, and more.
“Conservatively, the worldwide market for this breakthrough will come to over $2 trillion a year.”
So what’s the tease really all about? Siegel’s Green Chip Stocks ($99/yr) was an alternative energy newsletter many moons ago (I assume that’s where the “green” came from first time around), and seems to me to have been publishing in some form for at least a decade or so, hopping on different trends, but has more recently focused a lot on biotech and on marijuana… so we’re in that same general area now with this “magic molecule” idea, which is basically a pitch about the potential of psychedelic drugs to treat all kinds of ailments, and particularly about psychedelics that are derived from what we used to call “magic mushrooms.”
So we’ll get into the stocks he’s hinting at in a moment, but first he goes through a long spiel about the many ways this can treat or cure some “incurable” diseases that are generally seen as illnesses of the mind…
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“Given its power to treat 10 to 15 different intractable diseases with just a single dose…
“You might think this breakthrough medicine was a complex compound of heavy-duty and unpronounceable chemical ingredients.
“But nothing could be further from the truth.
“It’s unbelievably simple, as many world-changing advances are.
“This new medicine is made up of just one molecule.
“But a molecule so powerful, it’s being called the ‘magic molecule.’
“It’s plant-based and naturally occurring in our environment.
“So its side effects are nil to non-existent — unlike with the medications normally used.”
And he runs through several examples of people who have participated in trials of this “magic molecule” and seen incredible results as it lets them fight off their alcoholism, other addictions, or depression… including some powerful-sounding claims:
“It isn’t invasive and doesn’t kill the disease with poison.
“Only one or two sessions are required for a 60% to 100% cure.
“The results are often permanent.
“And the side effects are non-existent or surprisingly mild.
“Instead, the magic molecule enables the body’s most powerful organ to do the healing:
That’s generally true, at least as scientists understand things right now — the hallucinogenics like belladonna, ayahuasca, mescaline and psilocybin have often been written about and used by people to fight addiction, and part of the way that seems to work is that the hallucination opens up new mental connections and therefore gets a brain “out of the rut” of continually re-seeking the pleasurable pathway associated with alcohol or opioids or whatever else. Or at least, that’s my completely inexpert impression after reading up a little bit on the idea, including the stories of William Burroughs seeking out hallicinogens in the 1950s as an opioid addiction cure, and Bill Wilson founding Alcoholics Anonymous after his own “transformative experience” with belladonna some 20 years before that.
The power and potential of psychedelic drugs, whether natural or chemically invented or enhanced (like LSD or MDMA), has been known for a long time — though the backlash against the “tripping” of Timothy Leary et. al in the 1960s banished them from “real science” for decades and kept research very limited, though it seems to have been experiencing a little bit of a renaissance in the past few years, perhaps coincident with the opioid addiction crisis or just because of the growing permissiveness driven by marijuana’s growing acceptance in “regular” society.
And Siegel things this is about to bust open into a new opportunity for investors, he repeatedly compares it to investing in early medical marijuana and marijuana legalization stocks… here’s some more from the ad:
“This breakthrough is about to rock the world
“And already, things are moving at light speed in that direction.
“Here’s the big picture:
“The FDA has given the green light to several companies to manufacture and distribute medicines made from the magic molecule.
“Giving breakthrough status to a cure means the FDA recognizes traditional treatments don’t work well… and they’re desperate to find a treatment that works.
“Dozens of elite institutions worldwide have funding to research the magic molecule’s power to treat a host of deadly chronic diseases — from diabetes to Alzheimer’s Disease and beyond.
“Over 60 research studies have already been published in peer-reviewed scientific journals.
“Start-ups researching, manufacturing, and marketing magic molecule-based medicines are going public, funded by venture capital funds and deep-pocket investors like… Kevin O’Leary, Bruce Linton, and Peter Thiel.”
And apparently the big fellas are starting to be interested as well…
“Big Pharma is starting to come out with magic molecule-based treatments, including a nasal spray from Johnson&Johnson.
“There’s even a nationwide network of walk-in clinics where people will be able to get doses of the magic molecule when they’re away from home….
“Some are calling this breakthrough “cannabis 2.0,” but I disagree….
“I can already see that the magic molecule will be much, much bigger than this.
“Most likely, about 10 times bigger.”
That Johnson & Johnson drug, by the way, is Spravato — it’s a ketamine nasal spray, Doc Gumshoe shared some more detailed thoughts on this new focus on ketamine last year if you’d like a little more background, and that longtime anesthetic is perhaps not as much a hallucinogen as some others but certainly has some impact in that area.
And Siegel describes the “flywheel” of building interest in hallucinogens…
“All the companies and start-ups I’ve talked to are working with the FDA to get their efforts fast-tracked.
“Which, in turn, has attracted new start-ups and a growing number of investing gurus and VC funds to get in.
“Which is also why Big Pharma is entering with its own products — like Johnson & Johnson’s anti-depression nasal spray…
“….and will, undoubtedly, pay top dollar to buy the most promising ‘magic molecule’ start-ups.”
The “magic molecule” talk in the ad is mostly focused on psilocybin, and the molecular diagram he shares is of the psilocybin molecule, seemingly lifted from Wikipedia, though the quotes from people who have been helped are not all from psilocybin users.
And we could go on and on on this topic for a while, as the ad does, but we’ll jump forward to the part where he starts pitching some actual stocks that he calls “Three Magic Molecule Picks for Quadruple-Digit Gains.” Here are our first clues…
“My First Recommendation Has Just Gone Public
“It’s a small company developing molecular medicine to cure opioid addiction. It’s just gone public and its stock is already up 30% proving its massive potential.
“If you want to claim your share of the mega-profits coming from the ‘magic molecule,’ this company is the place to start.”
And apparently that IPO was a big hit…
“In pre-IPO funding, this powerhouse raised $24 million and won the backing of high-profile investors who regularly write seven-figure checks.
“On the day it went public, the stock was ‘very active’ with over 14 million shares traded. The stock was up 27% on the day, making it the best capitalized of all its competitors.
“And now, going public has opened up huge opportunities to attract institutional capital and ramp up its pipeline of clinical trials for treating a wide range of illnesses.”
And we get a quote from “one major investor”…
“As one major investor noted, ‘As an investor, I am attracted to this company because they are solving health problems through federally-authorized clinical trials.'”
So that gets us back to the Kevin O’Leary reference, since it turns out he’s the one who supplied that quote to the company. That means we’re being teased here about Mind Medicine, also called MindMed, which O’Leary and Canopy Growth’s Bruce Linton participated in “seed funding” rounds last year (it was araising $6 million in total), the company has now raised a total of about US$30-35 million and gone public, though in a very small way using the NEO exchange in Canada (at MMED), and also now trades over the counter in the US at MMEDF.
And yes, MindMed did have a strong showing on its IPO day on the NEO Exchange on March 3 and traded about 14-15 million shares a day for the first two days of its existence, though it has been much more lightly traded since and has generally declined following that first spurt of optimism.
MindMed is working with a bunch of different hallucinogen-derived drugs, including psilocybin, though the highest-profile studies they’re advancing right now use ibogaine, which is also in use in several clinics overseas as an opioid addiction therapy. You can see the highlights of this and some of their other work in the investor presentation they prepared around the time of the March IPO. They’re also advancing “microdosing” LSD as an ADHD treatment, and do expect to have some “catalysts” this year as Phase 1 trials generate some data and a couple Phase 2 trials begin (they’ve also licensed in a bunch of data on past LSD trials from a Swiss researcher, including eight ongoing or planned clinical trials that they’ll collaborate on).
This one will be very story driven, and they’re going to need a lot more capital to advance their clinical trials once the size of the trials becomes substantial (assuming the early rounds are successful), so I assume that the company will continue to be very promotional and will cozy up with any newsletter pitchmen who will listen. They are not established enough to really even have any idea what their “burn rate” will be for cash, they spent about $4 million on operations (and another $2 million on “going public” costs) in the first quarter and had about $20 million in cash as of the end of March, but I’d assume that with trials moving forward they’ll probably spend a bit more freely during the balance of the year — so I’d guess they will be raising money again in the next few months… probably the next time they have something optimistic to say about one of their clinical trials (the general rule for a startup biotech seems to be, “raise money following every bit of good news you report”).
That doesn’t mean it’s a terrible idea, of course, just that it’s not terribly likely that the stock will go straight up from here — it’s an extremely early stage investment at this point, and while they are arguably the highest-profile public startup working on psychedelics they are far from being the only researchers investigating the power of psychedelics for mental illness, depression or addiction. This is a “story stock” idea of the clearest sort, with no real connection to any financial fundamentals just yet, so if you go into it be prepared for some serious volatility — and if you’re thinking about holding through to eventual acquisition or drug approval, be ready to be patient, they’re really just getting started on a process that typically takes at least several years if everything goes really well, even with FDA “fast track” attention (and often more than a decade if any hiccups appear, or the FDA doesn’t put you on that “fast track”).
I really hope this works well for some intractable diseases, particularly depression and opioid addiction, but I’m not crazy about investing in speculative early biotech projects so I’ll cheer it on from the sidelines. There are also several companies who are much more specifically focused on Psilocybin than MindMed is, including Compass Pathways (an Atai portfolio company still getting venture funding, not public), and Champignon Brands, which went public just about a week before MindMed and has also talked about opening ketamine clinics, but appears to be currently halted for some regulatory review following recent acquisitions (SHRM on the CSX, SHRMF OTC in the US).
And what else is Siegel pitching? Let’s check the clues…
“My Second Recommendation…
“Has already launched a complete production, packaging, sales, and distribution program for approximately 300 applications of the magic molecule.
“Including established retail operations across the country.
“For example, it has the arrangement to sell all of its products to the Union of Health Care Workers as a buying club of 1.2 million members.”
And this is apparently a cannabis company, though apparently Siegel thinks they’ll have a “running start” on developing its own magic molecule medicines because of their established distribution. So who is it? One final clue…
“Though it’s still a small, young firm by most standards, over the last two years, it’s blown past the S&P 500 by almost 800%!”
That’s the little cannabis-focused investment firm Captiva Verde (PWR on the CSX in Canada, CPIVF), which is mostly focused on getting approval for an outdoor cannabis growing operation in Canada but has also made some deals in Mexico (where that union deal was made) for marijuana cultivation, and has acquired some pharmaceutical businesses in Mexico that include a psilocybin growing, packaging, sales and distribution operation. They don’t say anything about this in their investor presentation, so I don’t know the extent of their focus on it at the moment, but it did get some attention from the “shroom press” last year. They are also 50/50 partners on a planned housing development in California.
This is a company that talks about land and projects and proposals, including a large development they’d like to build in California in partnership with Greenbriar Capital (that’s Sage Ranch, in the town of Tehachapi, not far from Bakersfield, I don’t know anything else about it), and that gives the feeling of “assets,” but they don’t actually have many assets to speak of on their balance sheet… most of these are “planned” or “negotiating” projects (as of January 31, the Sage Ranch housing development plan is carried at a $3.4 million value, the Solargram farm plan at $1.8 million). It sounds interesting and they model out some impressive-looking cash flow in their investor presentation, with “year 1” generating $27 million in cash flow from the Mexico project and growing to earn some capital as well from Sage Ranch (the residential development) and Solargram (the Canadian cannabis farm), leading to an incredible $200+ million in pretax cash flow in year seven, but as far as I know that’s all just spreadsheet tinkering — and they also envision raising a could hundred million to cover construction costs, mostly of Sage Ranch, using mostly debt.
They raised about C$3.8 million in a private placement a couple weeks ago, with each share priced at 25 cents and including a two-year 75-cent warrant, so the shares are well above that price now at C$0.42. Their last quarter (Jan. 31) indicated that they’re spending at a pace of about a million dollars per quarter, though half of that is share-based compensation, so the basic administrative work of the company doesn’t appear to burn a lot of cash, but that doesn’t mean much to me — they’ll presumably be spending all the money they raised and a lot more on trying to advance their various projects. This is the kind of project that I’d hesitate to get involved with without actually knowing the participants and operators, since it’s mostly in the “planning” stages and I have no idea how viable any of their projects or plans or ideas might end up being — but from the company’s own website, you wouldn’t know that they have anything to do with psilocybin… so if that’s what you care about, I wouldn’t count on that being their major focus anytime soon.
And there’s one more stock he hints at in the ad…
“My Third Recommendation Is…
“The only legitimate picks and shovels play in the space.
“The company is actually an agtech firm, but it’s created a machine that’s producing a certain type of magic molecule which is currently being used by Johns Hopkins University researchers, and is commonly used by veterans suffering from PTSD.
“And here’s the rub …
“This machine can produce these molecules in a way that – when compared to the competition – cuts labor costs by 235% and increases profitablity by 25%. It’s a game-changer of epic proportions, and the company is now gearing up to be the production technology of choice for what could soon be hundreds of magic molecule producers.”
Johns Hopkins has been getting a lot of psychedelic press in the last year, mostly because they launched a “first of its kind” Center for Psychedelic and Consciousness Research . Much of the focus there has been on psilocybin in the early days, so that’s presumably the “molecule” being teased here… and there are several “mycotech” companies out there trying to develop better methods for synthesizing or extracting the key compounds in magic mushrooms, particularly psilocybin, but most are still private and I’m not sure exactly which one is being teased here.
So I’ll leave you with an educated guess… this is likely Yield Growth (BOSS on the CSX, BOSQF OTC in the US), which says it is revolutionizing plant science, primarily in marijuana and hemp, with a few wellness brands, but also has branded some functional mushroom products through Neonmind Biosciences, which they recently talked about taking public, and recently launched a new brand called Flourish Mushroom Labs. They do talk about their mushroom extraction methods and licensing of those technologies, but not with any specifics about profitability or cost impacts.
This is the only one of the group that has some rational-sounding financials on the surface, with actual revenue, though it’s also so tiny (market cap below $10 million) that I probably shouldn’t even be writing about it… and when you look closer, the trailing revenue that makes it look somewhat rational is all lumpy, which means it’s probably from one-time sales or cash infusions of some sort, not from actual ongoing operations. They had about $100,000 worth of retail sales and license income in the first quarter, without much growth, so if you annualize that it looks much worse than their trailing twelve month financials that have a couple million dollars worth of lump revenue hiding in their somewhere.
And with that, I’ll leave you to your own thinkifyin’ on the subject — psychedelics have arguably been getting more attention in the past few years than at any other time since they were all criminalized about 50 years ago, and I hope these different drugs do provide wonderful relief for those suffering from depression and addiction, among other things, but we’re still in the very early stages of this becoming a business and I won’t be betting on any of these particular names at the moment… but biotech speculation doesn’t tend to be my thing, anyway, so that doesn’t mean it won’t interest you. Have a favorite name in the group of newer psilocybin or other hallucinogen researchers or producers? Think this will be a rehash of the first marijuana “gold rush” like many cannabis speculators believe? Let us know with a comment below