Numinus Wellness (TSX: NUMI) is developing innovative mental health care and providing access to safe, evidence-based psychedelic-assisted therapies. The Numinus model is multi-fold, including psychedelic production, research, and clinic care. This comprehensive approach to developing mental health therapies is at the forefront of a transformation aimed at healing rather than managing symptoms for depression, anxiety, trauma, pain, and substance use. Numinus is leading the integration of psychedelic-assisted therapies into mainstream clinical practice and building the foundation for a healthier society. The company is divided into three separate, but synergistic, business units:
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.
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”).
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.
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.
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:
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'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 .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.”
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'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.
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].
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."
FYE August 31, 2022; Q1 2023 is from 9/1 – 12/31/22
First Quarter Financial Highlights
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.
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.
Author owns shares of Numinus at the time of publishing and may choose to buy or sell at any time without notice.
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