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Bull Of The Day: Cybin (CYBN)

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Cybin Inc (CYBN) is a Zacks Rank #2 (Buy) that is down more than 80% from its 52 week high of $3.38.  This is a very small company with a market capitalization of just about $100M and an equally small stock price of $0.59 as this article is being written.  This is most certainly not your average stock that is highlighted as a Bull of The Day, so let’s take a trip to Wonder Land and explore the idea of how psychedelics can become therapeutics.

Description

Cybin Inc., a biopharmaceutical company, focuses on developing psychedelic-based therapeutics. The company's development pipeline includes CYB003, a deuterated psilocybin analog to treat major depressive and alcohol use disorders; CYB004, a deuterated dimethyltryptamine for treating anxiety disorders; and CYB005, a discovery-phase phenethylamine derivative to treat neuroinflammation and psychiatric conditions. It has also developed EMBARK, a psychedelic-assisted psychotherapy. The company is headquartered in Toronto, Canada.

Penny Stock As The Bull Of The Day?

I know what you are thinking, why is this micro-cap name the Bull Of The Day?  We normally try to avoid penny stocks and micro-caps, but this name is rather interesting and there was some good news this week.

Before I go over some of the things that make this a super interesting story, I want to hit on all the normal sections I would highlight in a Bull Of The Day article.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

For CYBN, I see one beat and three misses of the Zacks Consensus Estimate.  That isn’t great to see, but by itself that is not enough to make the company a Zacks Rank #1 (Strong Buy).

The average positive earnings surprise over the course of the last year works out to be -18%.

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher.  For CYBN, I see annual estimates moving higher.

Over the last 60 days, I see a two small increases.

The full fiscal year 2022 has moved from a loss of $0.31 to a loss of $0.30.

Next year has also increased from a loss of $0.32 to a loss of $0.31.

Positive movement in earnings estimates help push the Rank higher.  What we can also derive from these movements is that a one cent move in this year and next year is enough to get this stock to a Zacks Rank #2 (Buy).  That means that a majority of stocks are seeing negative estimate revisions.

Valuation

The valuation for CYBN is a nebulous one.  Without earnings, there is no forward PE to lean on.  There aren’t any sales yet either… but I do see a price to book multiple of 1.5x.

Biotech investing is its own animal.  The seasoned investors in the space look at the pipeline and the addressable market for each indication.  From there, it becomes more of an art than a science.

 

Cybin
Cybin


Image Source: Cybin

Just two days ago, the company announced that enrollment has begun for Phase 1/2aclinical trial of CYB003.

On To The Interesting Part

A few months back I attended the Magic Mushroom conference in Miami and talked to the CEO of Cybin.  The concept is very new, but the idea is that a person that is looking to break a bad habit takes a psychedelic with the intent of helping the body more or less reprogram how it reacts to the idea of the target behavior.

This sounds a lot like EMDR that psychotherapists use to help reprogram the emotions around a traumatic event.  It turns out that our cells have memories, and sometimes we might not even notice our bodies being triggered into a vulnerable state.

I can tell you first hand about a recent personal experience that proves this.  I recently almost cut my finger off with a circular saw… and a few days after the event I saw the electric power tool that wounded me.  My finger immediately started to swell which caused a fair amount of pain.  My story is centered around me not taking personal responsibility for my less than intelligent decisions, but the opposite is true of those who use these psychedelics to help themselves.

Target Treatments

Psychedelics can be used to treat depression, alcohol and drug abuse as well as anxiety disorders.

The one thing the CEO and I discussed was the use of psychedelics to combat the opioid crisis.  We talked at length about how someone that is addicted could use the psychedelic to help break free from the addiction for even a small amount of time and give that person the clarity they need to want to make significant changes to their lives.

This is a very powerful concept and one that is still undergoing testing.  That, however has not stopped a lot of people from trying it.  One of the more famous advocates is Mike Tyson.  I saw him as one of the speakers at the conference but missed his talk.

Tyson attributes the psychedelic properties of psilocybin as powering his mental and spiritual exploration at a time when he was facing many difficulties and was even suicidal.

Stressful Times

The market has been very weak of late and I know that is causing a lot of stress for some investors.  The worry around finances is a common one and something that is pretty controllable.  That said we should all be grateful for what we have, much less what we have to invest.

I for one am rooting for CYBN to get to clinical trials and hopefully they can help people.  If you know someone struggling with addiction, by all means, look into this avenue of possible treatment.

Finally, I want to leave you with a concept that the CEO shared with me and I will probably never forget it.  I asked about side effects … and he mentioned that following a medically supervised session, patients will often exhibit an “after glow” and I just loved that.  Think of the “after glow” as the opposite of a hangover as patients see how life can be without the constant struggle of addiction.


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