MindMed's stock soars 51.5% after FDA grants breakthrough designation to LSD therapy for a form of anxiety

By Ciara Linnane

Biotech also issues new shares and reports positive data from Phase 2b trial

Mind Medicine Inc.'s stock jumped 51.5% on Thursday after the biotech company said the Food and Drug Administration has granted breakthrough designation for its MM120 LSD-based treatment for generalized anxiety disorder.

The positive news offset a separate announcement that the company is issuing new stock. Analysts are bullish on MindMed, which is seeking to develop psychedelic-based treatments for brain-health disorders, with all six who cover the stock on FactSet rating it a buy.

The FDA's move will expedite the development of the therapy, which has already shown positive results in a Phase 2 trial, demonstrating statistically significant improvement in scores by week four as compared with placebo.

The company said its Phase 2b trial met its key secondary endpoint and that 12-week data showed clinically and statistically significant durability of activity.

"That MM120 exhibited rapid and robust efficacy, solidly sustained for 12 weeks after a single dose, is truly remarkable," said David Feifel, professor emeritus of psychiatry at the University of California, San Diego, and director of the Kadima Neuropsychiatry Institute in La Jolla, Calif. Feifel was an investigator on the MM120 study.

MindMed (MNMD) is now planning to hold end-of-Phase 2 meetings with the FDA in the first half of the year and aims to initiate a Phase 3 trial in the second half of 2024.

The Phase 2b trial was based on a 100-microgram dose (one microgram is one millionth of a gram) and showed a 65% clinical response rate and a 48% clinical remission rate that held through week 12, compared with placebo. The treatment was well tolerated and most adverse events were limited to the dosing day.

Generalized anxiety disorder presents a significant unmet medical need for the many patients who do not respond to existing medications. It is the second most common mental disorder among adults aged 18 to 65, experts told analysts on a call.

Chief Executive Rob Barrow said GAD has been "severely overlooked" for the past several decades, and the current prevalence of about 10% of adults in the U.S. is triple what it was two decades ago. The last drug approved for GAD was Cymbalta in 2007.

"Roughly three-quarters [of patients] have moderate to severe symptoms, and only a fraction respond to first-line treatments," Barrow said, according to a FactSet transcript. "Given the poor efficacy and limited tolerability of these current therapies, new options are desperately needed."

Separately, MindMed announced it has priced an offering of 16.6 million common shares at $6 a share. Its closing price Wednesday was $5.94.

The company has entered into a concurrent private placement of 12.5 million shares at the same price. Proceeds of the deal are expected to come to about $75 million.

The private placement will bring in new investors Deep Track Capital and Commodore Capital, while the underwritten offering will bring in new investors Ally Bridge Group, Driehaus Capital Management, Great Point Partners, Janus Henderson Investors, Marshall Wace, Octagon Capital, Soleus Capital, Special Situations Funds, Woodline Partners and a leading biotechnology investor associated with one of the largest alternative-asset managers.

Other companies seeking to develop therapies using psychedelics were also higher Thursday. Atai Life Sciences N.V. (ATA) was up 14% and Compass Pathways PLC (CMPS) was up 7%.

MindMed's stock has gained 184% in the last 12 months, while the S&P 500 SPX has gained 29%.

From the archive: 20-year-old investor who made $110 million on a meme stock is now pushing for change at psychedelics company MindMed

-Ciara Linnane

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03-08-24 0840ET

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