Numinus clinic network delivers record annual results
Numinus Wellness Inc now has an extensive network of 12 clinics in the US and Canada delivering mental health wellness services through safe, evidence-based psychedelic-assisted therapies. Controlled doses of psychoactive agents are given under careful supervision are used as part of structured therapy programs. These aim to help people with depression, anxiety, trauma, pain and substance addiction.
The acquisition of Novamind in June 2022 has given Numinus a substantial base in the US by adding seven clinics in Utah and Arizona plus two laboratory research facilities. The acquired clinics generated revenues of approximately CA$3.6mln in Q4FY22 (to 31 August). This represents around 85% of total Q4FY22 revenue which increased by 464% quarter-on-quarter to CA$4.2mln.
Numinus delivered 17,000 client appointments in Q4 (a 202% increase on Q3), 12.5% of whom were new clients.
Record growth powered by business and client acquisition
Revenues for the year to 31 August 2022 were CA$6.5mln, up 643% from CA$1.5mln in FY21. About 50% of this increase was in most part due to the acquisition of Novamind in Q4. Gross profit at quarter-end was CA$1.3mln at a gross margin of 31.5%. In the last full quarter before its acquisition (Q3 FY22), Novamind's operations ran at a gross margin of around 32% with Numinus in its Q3 FY22 posting a gross margin of around 24%. This indicates a positive FY23 outlook for Numinus' gross margin rate with Novamind now integrated into the business.
The Novamind acquisition was a share-based transaction with 0.84 Numinus shares per Novamind share. After the issue of shares, there are now about 256mln in issue, up from 205mln at the start of Q4. The acquisition has delivered on revenue expectations for Q4, which means we expect up to an estimated CA$15mln in additional annual revenue from Novamind which includes some growth in the new financial year to August 2023.
FY22 operational cash outflow was CA$26.2mln up from CA$15.6mln in FY21. This includes increases in costs associated with administration, salary and office costs. Cash at year-end was CA$33mln, a reduction of around CA$26mln year-on-year, and comprehensive loss for the year was CA$44.8mln.
From FY23, the consolidated company aims to achieve good growth with cost reductions. Numinus could have revenues of around CA$20mln, a loss of about CA$31.5mln and a cash outflow of about CA$25mln. Cash, proforma, at year-end of CA$33mln should mean that Numinus can invest more into its operations in FY23.
The Numinus share price at year-end was CA$0.36 and is as of 12 December CA$0.22. Number of shares outstanding at FY22 year-end was 256,237,380 giving a market capitalization of CA$56mln. The enterprise value (EV) with CA$33mln year-end cash is therefore CA$23mln.
Annual results and conclusion
Year end Aug 31 · 2020 · 2021 · 2022 · 2023
Revenue (CA$-000's) · 881 · 1,514 · 5,494 · 20,886
Cash Balance (CA$-000's) · 1,635 · 59,293 · 33,044 · 3,036
Numinus offers services which include ketamine-assisted psycotherapy, neurology-related appointments and services, transcranial magnetic stimulation, individual and group therapy appointments, and is also funding research and filing patents to potentially expand their offering to psilocybin treatments. The network is composed of:
- Numinus Health with 12 operating clinics in Canada and the US and several small trials units; and
- Numinus Bioscience (psychedelic research and a licensed psilocybin producer).
Exhibit 1 - Rebranding
The Novamind acquisition boosted Q4FY22 revenues 464%, and we expect it to contribute annualized revenues of up to CA$15.2mln including 25% FY23 growth; Numinus have forecasted CA$16.7mln in Novamind revenue based on Q4 figures. This revenue is derived from seven mental wellness clinics in the western US: five in Utah operating as Cedar Psychiatry, two in Arizona operating as Foundations for Change (Exhibit 2). The Cedar Clinical Research business (CCR) provides locations for third-party clinical trials. These add to the five Canadian clinics and two research clinics already run by Numinus. CCR added Q4 revenues of CA$0.5mln.
Exhibit 2 - Numinus wellness and research clinics
Source: Numinus investor presentation
Table 1 - Shares FY22
Source: Numinus
Shares in issue and value
The number of Numinus shares in issue was 203mln at the end of FY21, Table 1. 43.47mln shares were issued to acquire Novamind, along with issue of shares for Neurology Centre of Toronto (NCT) and other smaller acquisitions, transactions, and deal fees in FY22. This gives 256.24mln shares in issue at year-end.
The value has suffered short term due to a share price fall. If sales can grow to the estimated CA$20mln in FY23 then the prospective EV/sales ratio appears to be about 1.2 times [see Table 2]. At a less ambitious CA$15mln in sales, the EV/sales would still be around 1.6.
Table 2 - Numinus valuation
Source: Numinus
Operations and research
The clinics offer ketamine-assisted psychotherapy (KAP) for mental disorders; ketamine is a legal pharmaceutical. The Neurology Centre of Toronto (NCT), acquired in September 2021, specializes in medical cannabis treatments for conditions such as epilepsy, concussion, brain injury, headaches and migraines.
In addition to Q4 announcements like the launch of b2b programs such as the KAP program for employee mental health, post-period announcements — including the introduction of its Ketamine for Chronic and Serious Medical Illness Program, an integrated ketamine-assisted therapy operating alongside patients' existing healthcare provision — shows that Numinus is utilizing its greatly expanded clinic network to scale client acquisition.
Since January 2022, compassionate access trials for medical-grade psilocybin and MDMA can be used under the Health Canada special access program. Its research division is also developing training trials and programs for its psychotherapy practitioners. It announced in December an application to Health Canada to conduct a clinical trial which will see trainees in psylocibin-assisted therapy observing real psilocybin sessions.
CCR, two clinical laboratories newly acquired from Novamind, will allow Numinus to develop key relationships with other companies in the sector through the management of third-party clinical research trials at CCR sites.
The bioscience unit complies with Good Agricultural and Collection Practices and produces specific Psilocybe mushroom clones. It holds a license covering the handling of multiple psychedelic compounds, including the purification of psilocybin. Numinus' complimentary research offering places the company in a strong position at the forefront of psychedelic-assisted therapy in North America.
Financial consolidation
The acquisition of Novamind cost based on 0.84/share and a price of CA$0.36 was about CA$13.2mln net of cash. Transaction fees were CA$700,000 of which CA$200k was paid in shares (Table 1).
Novamind delivered around CA$3.6mln in Q4 revenue, meaning Numinus can expect around CA$14.4mln in annualized additional revenue, before growth in client numbers is accounted for. 25% increase in revenues across all three segments of the business in FY23 could deliver an estimated CA$20.9mln in revenue.
Chart 1 - Revenue by quarter showing Novamind
Source: Numinus reports
Financial forecasts and FY23 outlook
For FY23, sales could be about CA$21mln which, at an averaged 28%+ (Numinus and Novamind Q3 pre-acquisition) gross margin, could yield CA$5mln+ gross profit, and possibly more if higher-margin business is gained. We note that psychotherapy has a lot of time-consuming personal interaction and counseling that is essential as an integral part of the treatment, but expensive to provide and hard to scale. Corporate health insurance coverage could expand the use of KAP.
Numinus' annualized costs are about CA$26mln with Novamind's being about CA$14mln, which gives CA$40mln total. Minus CA$4mln savings and our estimated CA$5mln FY23 gross profit for implies an FY23 operating loss of about CA$31mln.This includes non-cash items such as share compensation which are difficult to estimate.
Assuming careful cash conservation and CA$2mln capital expenditure on clinics, our estimated cash outflow is about CA$30mln leaving around CA$3mln cash at the close of FY23 (31August 2023). A further funding round in calendar 2023 is needed in our view. This will give Numinus the resources to grow its integrated businesses as the psychotherapy market develops.
Table 3 - Revenue and profit forecast
Source: Numinus reports. ProActive estimates
Table 4 - Cash flow
Source: Numinus reports. ProActive estimates
Table 5 - Balance sheet
Source: Numinus reports. ProActive estimates