Numinus Wellness: Integrating The Medical Psychedelic Industry

Upshot & Recent Activity

• Q1 2023 revenue of C$5.7 million, a 35.7% sequential increase from C$4.2 million in Q4 2022, and a 669.5% increase compared to C$789,617 million during the same period last year.
• Impressively, they achieved a 41.9% gross margin and could likely be the first medical psychedelic company to achieve net profitability within 24 months.
• The strong revenue growth was a result of increased demand for psychedelic-assisted therapy provided by their network of 12 wellness clinics in the USA and Canada (generated 88% of revenue). Numinus' clinics offer a much wider range of services than their competitors, who are limited to ketamine-assisted therapy. This explains the nearly 19,800 appointments completed during the quarter a 13.7% increase over the prior quarter.
• This rapid growth is due in large to Numinus' acquisition of Novamind in June 2022, which expanded Numinus' network of wellness clinics and provided Numinus with new CRO capabilities and 2 new research sites in which to conduct clinical trials.
• Central to Numinus' brick-and-mortar growth strategy is the acquisition of trained psychotherapists. In 1Q23, the company added 37 new psychedelic-assisted therapists to their growing network of 155 clinicians distributed across 12 wellness clinics. Given the newness of the field, acquiring trained psychedelic-assisted therapists, or training traditional therapists on how to use psychedelics to assist their therapy, appears to be the rate limiting component of generating a profitable psychedelic wellness clinic. Numinus' CEO believes they can achieve full profitability with the existing clinic infrastructure if they achieve a full roster of practitioners to reach clients.
• Numinus is expanding multiple business units, and it positioned to be the first vertically-integrated psychedelic company and service provider to the entire industry.
• ‍Numinus' Clinical Research Organization called Cedar Clinical Research ("CCR") generated C$680,000 revenue in 1Q23, a 38.8% increase compared to the prior quarter. CCR managed 15 independent clinical trials in Q1 2023(for other biotech companies) and achieved a gross margin of 70.9% (the greatest of all Numinus' business units). Numinus also owns a total of 4 clinical research sites in which to conduct the clinical trials managed by CCR.
• On October 5, 2022, the company announced that Numinus Bioscience has developed a psilocybin-containing tea bag for use in clinical research and, if appropriate regulatory approvals are granted, eventual treatment of clients in psychedelic-assisted therapy. Numinus has submitted a CTA to Health Canada for this Phase 1 clinical trial.

The Problem & Solution

Depression, addiction, and PTSD

Let’s face it. As well-intentioned as they may have been, the COVID-19 lockdowns added to the omnipresent pandemic-related anxiety and have taken an immeasurable toll on the mental well-being of the global population. The true extent of the damage remains to be determined, but the preliminary analysis paints a grim picture. The WHO reports a 25% increase in the prevalence of anxiety and depression worldwide (280M adults worldwide), and attributes this phenomenon to multiple stress factors such as loneliness, fear of infection, grief, and financial troubles. Loss of loved ones, rapid dissolution of relationships, and dire financial troubles have manifested in post-traumatic stress disorder (PTSD) in 6.8% of US adults within their lifetime [Link]. Unsurprisingly, the incidence of PTSD among US military veterans is almost double that of the civilian population, and the US government spends nearly $3B each year to treat suffering soldiers and veterans. The Pentagon has formally acknowledged this growing problem amongst our nation's heroes by investing $26.9M in a UNC project to develop novel PTSD therapeutics [Link].

Ironically, those least likely to suffer from COVID-related morbidities and mortality have suffered the most mentally; young people are disproportionately at risk to suffer from suicidal thoughts and self-harming behavior (including developing drug addictions) [Link]. Today’s youth have had two (going on three) of their most vibrant years robbed from them; isolated from friends, forced to cancel graduation parties and birthdays, made to delay weddings, and even prevented from visiting dying grandparents in hospitals, it is no wonder that many young people have turned to self-medicating their depression, PTSD, and anxiety, developing dangerous drug addictions in the process. It is estimated that 20% of people will suffer from a substance abuse disorder sometime in their lifetime [Link], and there were over 90,000 opioid-related deaths in 2020 (this figure has been climbing exponentially since 2019). Clearly, the available first-line treatments (SSRI antidepressants, tricyclics, and atypical antidepressants such as Zoloft, amitriptyline, and Wellbutrin, respectively) are not nearly effective enough to combat the global decimation of mental health, and there remains an enormous unmet medical need to address mental illness and the substance abuse disorders that arise when they are left untreated.

More than just a “trip”

Psychedelic-inspired medicines are novel, chemical entities based upon a psychedelic molecule, such as the psilocybin found in “magic” mushrooms, that possess chemical modifications to enhance certain properties of the base psychedelic substance. Natural psychedelic molecules found in plants have been used as therapeutic agents in sacred therapies for thousands of years, spanning cultures and geographies, since approximately 5000 BCE (and are still being used today). Under the guidance of a Shaman (i.e., a tribal medicine man), these ceremonies are de facto therapy session – a form of psychotherapy accelerated by the psychedelic medicine (some patients report the experience as “10 years’ worth of psychotherapy crammed into four hours”).

‍Read MedicalGold’s introduction to medicinal psychedelics

Anecdotal evidence aside, psychedelics first collided with Western medicine in the 1930s, when Dr. Albert Hofmann (Basel, Switzerland) first synthesized Lysergic Acid Diethylamide (LSD) and discovered its remarkable ability to induce altered brain states (often characterized by intensely amplified acuity and cross-over of the senses). LSD was later hijacked by the CIA in the 1950s for experimentation in the “MK ULTRA” project (and subsequently labeled a Schedule 1, banned substance), but not before psychotherapists began experimenting with psychedelic-assisted therapy. Clinical research on psychedelics ended with the Controlled Substances Act of 1970, but a recent reinvigoration of interest in the potential of psychedelics to treat mental illnesses has sparked a bonfire of early-stage, biopharmaceutical research and development.

Read MedicalGold's analysis of the state of medical psychedelic industry

The data is clear

So far, the clinical evidence is clear: psychedelic substances offer a completely different and more effective treatment modality compared to traditional antidepressants.  While the exact mechanism of action is not completely understood, the prevailing hypothesis is that these molecules "jump start" the brain and induce neuroplasticity (i.e., new synapse formation). On March 5, 2019, esketamine (Janssen Pharmaceuticals, a J&J company) became the first approved psychedelic drug by the FDA for the treatment of psychiatric disorders. Delivered as a nasal spray, esketamine is a pure ketamine substance that has been indicated for major depressive disorder (MDD). The industry is still waiting on the first approvals for psilocybin, MDMA, and DMT, which will surely catalyze the entire sector. Leading the way is The Multidisciplinary Association for Psychedelics Studies (MAPS), which recently raised $30M for its MDMA study in the treatment of PTSD and was granted the “Breakthrough Therapy” designation by the FDA. MAPS’ Phase 3 clinical trials are complete and we should expect the data in 1H23 and the New Drug Application in 2H23. Once approved, psychedelic-assisted therapy clinics will be able to start administering MDMA treatment for PTSD. One company is uniquely positioned to administer the first doses of MDMA: Numinus Wellness. Numinus partnered with MAPS in 2020 and managed the Associations Phase 3 clinical trial unit in Canada. The wealth of data collected while running the clinical trial is what positions Numinus ahead of the pack, and their network of wellness clinics spanning the USA and Canada will be the first to provide MDMA-assisted therapy to patients.

From Bench-To-Bedside

Numinus is unlike any other company in the medical psychedelic space due to their multiple business units that operate in concert, effectively vertically integrating drug development and delivery, and creating the capacity for future synergies predicated on the vast amount of data collected both in the laboratory and clinic. The company is focused on three core activities that advance experimental new drugs from the laboratory benchtop to the patient's bedside:

1. Developing novel psychedelic substance formulations to treat patients (Numinus Bioscience)
2. Providing contract research services (i.e., managing clinical trials) for other biotech companies (Cedar Clinical Research)
3. Operating wellness clinics that provide psychedelic-assisted therapy under the supervision of trained clinicians  (Numinus Health)

The only aspect of drug development and clinical care that they do not participate in is drug manufacturing (this is not typically performed in-house by small biotechs and is usually outsourced to Contract Drug Manufacturing Organizations specializing in industrial-scale production of GMP drug product).

Numinus Bioscience

Numinus's Bioscience unit received a Health Canada license to conduct psychedelic research in a non-clinical setting (e.g., perform preclinical experimentation to identify new psychedelic analogs and refine production and purification processes of natural substances). This Controlled Drugs & Substances license enables the lab to possess, produce, assemble, sell, export, deliver, test, and research a wide variety of psychedelic substances, further enabling preclinical work on the company's novel psilocybin tea formulation ("EnfiniTea") and new initiative to study ayahuasca and San Pedro. On January 14, 2022, Numinus submitted a clinical trial application (CTA) to Health Canada for its Phase 1 study ("HOPE") of its novel tea formulation ("NBIO-01") containing the naturally derived psilocybe extract [Link]. NBIO-01 is Numinus Bioscience's first, proprietary formulation developed from extracts generated using a patent-pending process to dramatically increase the production of psychedelic compounds from fungi [4].The purpose of this clinical trial is to study the safety and bioavailability on 20 healthy volunteers, followed by testing against a comparator in 28 additional patients. The company filed a second CTA to initiate al training study ("NUMT2") of practitioners delivering psychedelic-assisted therapy (PAT), with the purpose of furthering practitioners' understanding of PAT through experiencing and observing therapy sessions. This clinical trial will also feature EnfiniTea as the psychedelic component of the therapy sessions, producing additional safety data for NBIO-01 [Link].

“Our new clinical trial application for experiential psilocybin-assisted therapy training research will use our EnfiniTea for trial dosing, making this one of the first clinical trials globally to be conducted with whole Psilocybe mushrooms to assess their safety. This will also be one of the first training programs with the option to participate in an experiential trial for practitioners looking to expand their psychedelic-assisted therapy education.”

~ Payton Nyquvest, CEO of Numinus

Cedar Clinical Research

Cedar Clinical Research (CCR) is a contract research organization (CRO) owned by Numinus that manages clinical trials for third part biotech and pharma companies. CCR operates across four clinical research sites in the USA and Canada, and its capabilities include Phase 1-4 clinical trails focused on psychedelics and mental health, clinical trial design, psychedelic therapy protocol development, patient screening and enrollment, patient management, and data collection. Fifteen clinical trials were managed by Cedar Clinical Research in 2022, including MindMed's Phase 2b study of LSD and a clinical trial sponsored by Merck, generating almost $700,000 in revenue. While this revenue figure pales in comparison to the top line generated by Numinus's wellness clinics (see below), CCR boasts a 71% profit margin.

Numinus Health

Numinus's main source of revenue comes from their network of 12 wellness clinics, facilitated by over 150 PAT-trained therapists, across the USA and Canada. Approximately C$5.0 million was generated by this business in 1Q23, representing 88% of all revenues. Instead of focusing solely on ketamine (like their competitors), Numinus Health provides end-to-end mental health services spanning traditional therapy, neurological services, and mindfulness programs, to psychedelic-assisted therapies and transcranial magnetic stimulation (TMS). This explains the nearly 19,800 appointments completed during the first quarter (a 13.7% increase over 4Q22). Central to Numinus' brick-and-mortar growth strategy is the acquisition of trained psychotherapists. The company added 37 new psychedelic-assisted therapists to their growing network of 155 clinicians distributed across 12 wellness clinics in the USA and CA. Given the newness of the field, acquiring trained psychedelic-assisted therapists, or training traditional therapists on how to use psychedelics to assist their therapy, appears to be the rate limiting component of generating a profitable psychedelic wellness clinic.  Numinus' CEO believes they can achieve net profitability with the existing clinic infrastructure if they achieve a full roster of practitioners to reach clients.

Operational highlights:

• During Q1 2023, Numinus completed more than 19,774 client appointments – including one-on-one and group therapy sessions, neurology-related appointments, paid group programs, Ketamine-assisted psychotherapy (KAT), Transcranial Magnetic Stimulation (TMS) and Ketamine/Spravato medicine appointments, representing a 13.7% increase in clinic appointments compared to more than 17,000 appointments in Q4 2022.
• 9.7% of appointments during Q1 2023 were made by new clients and 3.7% of appointments during Q1 2023 were KAT or Ketamine/Spravato medicine related
• At the end of Q1 2023, Numinus had 138 practitioners in network providing client treatments through its wellness clinics and virtual services, a 13.1% increase from the beginning of the quarter.
• On September 13, 2022, Numinus launched a new financing option for clinic patients in Canada. This new payment option will increase the accessibility of its traditional therapy and Ketamine-assisted therapy to a wider client population. Offered through iFinance, a third-party financing partner, Numinus' new financing option will allow Canadian clients to apply for financing with interest rates based on the applicant's credit history. Once approved, Numinus will provide the requested therapy services and collect full payment from iFinance following the completion of the treatment plan.
• On September 19, 2022, Numinus expanded its Ketamine-assisted Therapy offering to its Toronto location (The Neurology Centre of Toronto), to provide KAT services to patients with neurologic conditions.
• On October 28, 2022, Numinus announced the launch of its Ketamine for Chronic and Serious Medical Illness Program. This new program will be introduced first in Numinus' clinics in Utah, British Columbia and Quebec. The Company intends to expand the program to other clinics in later months.

Rapid Expansion

Novamind acquistion

On June 10, 2022, Numinus acquired Novamind [Link], a network of integrative mental health clinics and contract research organization specializing in psychedelic medicine. This purchase added eight new wellness clinics to Numinus's existing five centers, as well as two additional research sites for the conduct of clinical trials. Not only did this acquisition expand Numinus's presence into the USA, but they also attained CRO capabilities via Cedar Clinical Research. The transaction was immediately accretive to Numinus's revenue and gross profit, growing the former by 464% (compared to the previous quarter) for a total of $4.2M in 4Q22. Quarterly revenues continued to swell to $5.7M in 1Q23, and gross profit margin grew to 41.9% from 31.5% in 4Q22 [Link].

Growing clinical network

Swelling balance sheet

We should expect an annualized forward revenue run rate of $23M and $9.6M gross profit based on Q1 2023 performance.

"We continued to focus on driving margin expansion during Q1 2023, through ongoing cost containment initiatives and a focus on reaching a growing number of clients. Overall, client appointments grew 13.7%, G&A expenses declined 8.5%, and gross profit increased 80% from last quarter to $2.4 million in the first quarter – representing a 41.9% gross margin. We are proud of the growth and margin improvements we're seeing across our organization, and will continue to identify ways to reach profitability as soon as possible."

~ Payton Nyquvest, CEO of Numinus

Upcoming catalysts

Regulatory

• CO recently voted to allow psychedelic-therapy healing centers
• Alberta, CA recently proposed regulatory changes that would oversee psychedelic-assisted therapies
• US Senators from HI and JN called on NIH and FDA to conduct more research into the potential therapeutic uses of psychedelics

Research & Development

• MAPS Phase 3 study MDMA as a treatment for PTSD – Data expected in 1H23 and the New Drug Application (NDA) is expected to be submitted in 2H23. Once approved, Numinus will be ready to offer MDMA-assisted psychotherapy in its growing network of wellness clinics.
• Numinus's clinical trial application (CTA) for a Phase 1a study of their psilocybin tea has been submitted to Health Canada for review (December 8, 2022).

Business development

• One of the key catalysts for NUMI shares in 2023 will be an uplisting to a senior exchange in the US (expected in 1H 2023
• Rebranding initiative to drive PTA awareness
• Evaluating growth opportunities for Cedar Clinical Research to deepen relationships within the sector
• A greater focus on US growth and exploring service expansion opportunities to drive additional revenue streams will tie in well with greater US investor visibility via a US exchange listing.

Financials & Stock Performance

FYE August 31, 2022; Q1 2023 is from 9/1 – 12/31/22

First Quarter Financial Highlights

• Revenues grew 618% year-over-year to $5.7 million in Q1 2023. Sequentially, revenues grew 35.7% from the prior quarter.
• Gross margin grew to 41.9% during Q1 2023 compared to 6.5% in Q1 2022. The improvement in gross margin is due mostly to the completion of the Novamind acquisition between periods and the offering of higher-margin services. Sequentially, gross margin grew 1,040 basis points from 31.5% in Q4 2022.
• Gross profit was $2.4 million in Q1 2023, a significant increase compared to gross profit of $50,965 in Q1 2022, and an 80% increase compared to $1.3 million in the prior quarter.
• G&A expenses declined 8.6% from the prior quarter as a result of ongoing cost containment initiatives.
• Cash balance of $26.4 million as of November 30, 2022.

TSE:NUMI.TO

There is mounting evidence that NUMI put in a major tax-loss selling capitulation bottom in December 2022 at C$0.165 per share. Since then, NUMI has staged two strong impulses higher and the CMF indicator (Chaikin Money Flow) shows strong signs of steady accumulation so far in 2023. Next resistance levels are $0.31 followed by $0.40, with important support at $0.24.

Numinus shares made a triple-bottom at C$.165 in the final week of December and Numinus CEO Payton Nyquvest decided to use the opportunity to add to his stack of shares with an open market purchase of 100,000 shares.

Pro forma

C-suite

Conclusion

Numinus was one of our three end of 2022 tax loss capitulation picks. Since the end of December NUMI shares have jumped ~70%; however, there is a good chance that this is the beginning of a potentially much larger move higher in 2023. Numinus has a strong balance sheet, improving cash flow, and a vertically integrated brand that is poised to benefit from a wave of capital flowing into the mental healthcare space. The Numinus model - including psychedelic production, research and clinic care - is at the forefront of a transformation aimed at healing rather than managing symptoms for depression, anxiety, trauma, pain and substance use. All of this, in addition to a top notch management team, has led MedicalGold to make Numinus its top pick in the medical psychedelics sector in 2023.

Disclosure

Author owns shares of Numinus at the time of publishing and may choose to buy or sell at any time without notice.