Stifel GMP said it was encouraged to see the recent investment by The McQuade Center for Strategic Research and Development (MSRD) into Mindset Pharma Inc (CSE:MSET, OTCQB:MSSTF), which the broker said, signaled the interest of Big Pharma in the psychedelic sector, adding that it believes more partnerships in the space could be on the way.
As reported on January 5 this year by Mindset, the tie-up consists of a US$5 million upfront cash payment and operational support to develop two 2nd generation psychedelic families in Mindset's pipeline through Phase 1a and Phase 1b trials.
In return, MSRD has the right of first refusal to any exclusive licensing, asset sale, or collaboration of Mindset's drugs, along with the right of first negotiation to any sale, merger or acquisition of the biotech.
MSRD is an affiliate of Otsuka Pharmaceutical, a global healthcare group and subsidiary of Otsuka Holdings, which employs 47,000 people and generated a whopping US$13.3 billion in sales in 2020.
READ: Mindset Pharma partners with McQuade Center for Strategic Research and Development to develop psychedelic medicine
"Overall, we are encouraged to see big pharma's interest in the sector and believe more partnerships could be forthcoming, with a larger transaction potentially being a catalyst for the sector," said Stifel analysts in a note.
Mindset could also receive single-digit percentage royalty payments under certain circumstances when the right of first refusal is not consummated or the agreement is terminated, they also highlighted.
Stifel analysts also pointed out that Mindset was a drug discovery and development company with a pipeline of four drug families and one lead candidate (MSP-1014) in preclinical development, all of which are novel 2nd generation psychedelics with the potential for the highest intellectual property (IP) protection.
Analysts noted too that The McQuade Center for Strategic Research had "considerable experience in the psychedelic sector, having been an investor in COMPASS Pathways' $80 million Series B financing in April 2020.
MSRD President Robert McQuade sits on the company's board and is the chief strategic officer for Otsuka Pharmaceutical Development & Commercialization, they added.
Mindset Pharma is focused on creating patentable next-generation psychedelic medicines to treat neurological and psychiatric disorders with unmet needs.
On January 5, James Lanthier, CEO of Mindset, said of the collaboration with MSRD: "We look forward to leveraging their extensive experience in drug development and CNS indications to accelerate and de-risk our development pathway as we prepare to launch clinical trials. There is a high unmet need for innovative treatments of mental illness.
"This collaboration further validates our belief that optimized and patentable next-generation psychedelic compounds will be the future of treatments for mental illness."
Contact the author at giles@proactiveinvestors.com