Numinus Wellness inc: Leading in the psychedelics race
Numinus is a life sciences company with a focus on mental health and wellness. The company is engaged in research, development and delivery of safe, evidence-based psychedelic-assisted psychotherapy. During 2021 the company has made steady progress in revenue generation and in the development of new capabilities. In this report, we examine some of these developments.
Numinus has recently released its results for Q4 2021 (period ending August 31). The company reported revenue growth of 81% versus Q4 2020, and 72% growth in full-year revenue. Growth was driven by increased activity at the therapy clinics, with 2,671 therapy appointments in Q4. We expect continued growth in revenue during FY 2022, and we maintain our revenue forecasts for the company. Our full forecasts can be found on p8-10.
In September 2021 Numinus completed the acquisition of the Neurology Centre of Toronto (NCT), a leading Canadian provider of clinical neurological care with specialist expertise in the use of medical cannabis. Going forward NCT will expand into a clinical neurology centre with specialization in psychedelic neurology. The acquisition takes Numinus to five wellness clinics in total and will contribute to further revenue growth in the coming quarters.
Also in recent months, the company announced that it had finalized the study design and protocol for a phase I clinical trial for a proprietary formulation called PSYBINA, which is based on psilocybin derived from mushrooms. The trial will ascertain the safety and bioavailability of the formulation in comparison with pure psilocybin. There is growing evidence that psilocybin based therapies can provide benefit to patients being treated for a variety of indications, and we believe that Numinus’ work with PSYBINA positions the company to become an early implementer of these therapies as and when regulations allow wider patient access.
Numinus has also been selected to host clinical trials for the use of MDMA-assisted therapies in treating Post-Traumatic Stress Disorder, in a trial programme being conducted by MAPS (a nonprofit organization). This further expands the range of treatments that Numinus could potentially offer to patients going forward.
Review of progress during 2021
The company ended FY Aug 2021 with C$59.2mln of cash on the balance sheet, and we believe that this provides sufficient resources for Numinus to continue advancing its business plans during 2022, and also potentially to acquire new assets to accelerate growth.
We conclude Numinus offers investors exposure to the great potential growth in a new generation of mental health care treatments employing the properties of psychedelics, with visible revenue drivers in the coming quarters, and a strong balance sheet position. The company addresses a market opportunity in the US$100bn range, and we argue that as the growth journey progresses, shareholders could realise significant upside from the current market cap.
Financial position and investment conclusion
Year end Aug 31 · 2020 · 2021 · 2022
Revenue (CA$-000's) · 881 · 1,514 · 4,751
Cash Balance (CA$-000's) · 1,635 · 59,293 · 41,235
Numinus is a mental health company focused on research, development and delivery of safe, evidence-based psychedelic-assisted psychotherapy. The company stands out among the market listed psychedelics names as Numinus benefits from currently existing revenue streams with potential for strong growth in the near term and medium term.
The company has two separate business lines, both of which are already at revenue-generating stages:
Numinus Health provides psychedelic-assisted psychotherapy through five clinics in Canada, with plans for rapid growth. These clinics are developing ketamine-assisted psychotherapy (KAP) protocols for a range of mental disorders, and are also working on new compassionate access trials enabling the introduction of therapies with psilocybin and MDMA under Health Canada approvals.
Numinus Biosciences operates a licensed laboratory for applied research and IP development and R&D partnerships. The company holds a federal government approved dealer’s license covering multiple psychedelic compounds, and as well as license to produce and extract psilocybin from mushrooms, and for the testing of cannabis products. Numinus Biosciences is a leading provider of lab services to the psychedelics and cannabis industries.
The company has made strong progress during calendar year 2021. We highlight some of the main achievements:
Good progress at Q4 results
Numinus recently reported results for Q4 ended August 31st 2021. Financial highlights include:
- Full-year revenue growth of 72%
- Gross profit of $31,818 for the fourth quarter
- A year-end net cash position of CA$59.2mln
We believe that Numinus is positioned for continued growth in the company quarters, with the benefits of expanded capacity and capabilities at Numinus Biosciences, and the addition of the fifth clinic (Toronto) in Numinus Health. The following chart summarises our revenue forecast:
Developments in recent quarters
Strong revenue growth forecast, driven by Numinus Health
Revenue progress and outlook
Source: Proactive Research
Revenues in Health recovering following COVID-19 impact in 2020
We note that Numinus Health was impacted by COVID-19 restrictions during 2020 which led to lower revenue in the quarters ended August 2020 – February 2021. We believe that the company is now on track to build on the momentum of the last two quarters and to continue delivering revenue growth.
Addition of a further clinic, Toronto
In September 2021 Numinus completed the acquisition of the Neurology Centre of Toronto (NCT), a leading Canadian provider of clinical neurological care. NCT was founded in 2017 and has established itself as a clinical neurology leader, in particular regarding the use of medical cannabis for both adult and pediatric patients. In addition, NCT has developed a rapid access care model that increases patient throughput, reduces wait times, improves cost-effectiveness and facilitates scaling of services. As a Numinus clinic, NCT will leverage its existing operating model to expand into a clinical neurology center with specialization in psychedelic neurology.
Numinus Health has plans to continue expanding both in terms of the number of clinics and the range of therapies that will be offered. The following diagram summarises:
Expansion through additional clinics and additional therapies
Routes for further business expansion - Numinus Health
Source: Proactive Research
Mental health services market approaching US$100bn
The market for mental health services in North America is approaching US$100bn per year (market sources) and growing at an annual rate of around 5%. Within this market, we believe that psychedelic-assisted psychotherapy has potential to play an increasingly important role, and we believe that Numinus Health is well positioned to lead the expansion of this segment.
Proprietary drug formulation - PSYBINA
In October 2021 Numinus announced that it had finalized the study design and protocol for a Phase 1 clinical trial for its proprietary psilocybin based formulation, PSYBINA. Psilocybin is a naturally occurring psychedelic found in psilocybe mushroom species, and is being widely studied in the industry, for its therapeutic potential across multiple indications.
The phase I clinical trial is titled: 'A Healthy Adult Investigation Observing Endpoint Measures of Safety and Relative Bioavailability of Psilocybin in Comparison to a Psilocybe Extract: A Fasting, Blinded, Crossover Study', or (HOPE) for short. It will ascertain the safety and bioavailability of the formulation PSYBINA RX developed to stably deliver psilocybin and other synergistic compounds. The trial will compare PSYBINA with synthetic Psilocybin, using exploratory brain scans to visualize the potential differences in neuroactivity.
Numinus' fully licensed lab will produce, package and label both PSYBINA RX and the psilocybin comparator for the clinical trial. The trial will be conducted at Numinus' clinical site in Vancouver on 14 healthy volunteers.
The company has been building a position around psilocybin-based therapies with a view to leading the way in providing new treatments to patients. Psilocybin is among the strongest candidates, in our view, for expanded patient access in the near term, with potential regulatory changes in Canada as early as 2022. The following timeline summarises Numinus’ activities relating to psilocybin over the last year.
Numinus' involvement with psilocybin
Source: Proactive Research
We argue that through the development of PSYBINA as a proprietary formulation, Numinus strengthens its position as a potential leader in providing psilocybin based therapies through its clinics.
MAPS - a leading institution in psychedelics research
Trials for MDMA with MAPS
In November 2021 Numinus announced that it would host an extension of the study of MDMA-assisted (Methylenedioxymethamphetamine) therapy for post-taumatic stress disorder (PTSD) sponsored by the Multidisciplinary Association for Psychedelic Studies (MAPS). MAPS is a leading nonprofit organisation that is among the leading institutions in raising the scientific understanding of psychedelic substances.
The study was granted Health Canada approval in July 2021 as an open-label safety and feasibility study for MDMA-assisted psychotherapy to be conducted at Numinus’ Vancouver clinic and will be extended to additional sites following the November announcement.
These trials build on strong results that MAPS has already achieved from a phase III randomized clinical trial, which demonstrated that 88% of patients exhibited a clinically-significant reduction in symptoms after a course of three supervised MDMA- assisted therapy sessions.
PTSD is a serious and sometimes debilitating condition that affects some 8mln people in North America or 3.5% of the population in any given year. The lifetime prevalence (percentage of population affected at some time during their life) runs at 6.8% of the population. This is a significant public health issue, and there is evidence that cases may be rising, driven by factors including medical staff who have dealt with COVID-19 wards.
It is also one of the more difficult mental health conditions to treat effectively with existing drugs and therapies. The following diagram illustrates the main types of drugs that are currently prescribed for PTSD.
Existing treatments for PTSD
Source: Proactive Research
Existing treatments for PTSD - low success rates, or symptom-specific treatment
The main type of drug prescribed are antidepressants such as selective serotonin reuptake inhibitors (SSRIs). These have a 60% success rating, meaning some significant relief from symptoms, but only 20%-30% of patients achieve full remission (National Institutes of Health data). Other categories of drug such as anxiolytics (anti-anxiety) and anticonvulsants do not aim to provide a ‘cure’ for PTSD but address specific symptoms.
Through its involvement in the MAPS study, we believe that Numinus places itself in a strong position to become one of the first providers of MDMA- assisted therapies for PTSD as and when patient access begins to expand.
Industry background - psychedelic medicine
The medical usage of psychedelic drugs was a major field of research in the 1950s and '60s. However, much of this research was terminated in the late '60s when the major categories of psychedelic compounds were classified as controlled substances.
There has been a significant resurgence in research into psychedelics as pharmaceuticals during the last decade. This has been driven by renewed interest in the attractive characteristics of psychedelics, including:
- Proven effects on the neurotransmitters in the brain, based on the legacy research
- A well-understood safety profile, with low levels of addictiveness, few harmful side effects, and overdoses almost unknown.
Within the life sciences industry and academia, there are numerous psychedelic compounds now being evaluated for therapeutic use across a range of indications. The organisations carrying out this research include a number of stock-market listed companies. The following diagram gives an overview of the psychedelic medicine landscape.
The psychedelic renaissance - multiple compounds, multiple target indications, corporate investment
The psychedelic medicine landscape
Source: Proactive Research
The use of ketamine-assisted psychotherapy has already been made available in Canada for patients diagnosed with treatment-resistant depression and other mental health conditions. We believe that there is a good likelihood of expanded patient access for other types of psychedelic-assisted therapies in the coming years, with potential regulatory change in relation to psilocybin as early as 2022 in our view.
C$59.mln in cash on the balance sheet
Financial position
Numinus ended FY 2021 (period ending August 31 2021) with C$59.2mln on the balance sheet. The company reported CA$16.3mln of cash utilization (Cash Flow From Operations plus Cash Flow From Investing) during the year.
The following chart illustrates the evolution of the cash position:
Capital raised and utilised over 6 months, since Feb 2021
Source: Proactive Research
Pressure on asset prices in the psychedelic space
We note that asset valuations in the psychedelics space have declined during 2021. We believe that Numinus’ strong cash position allows the company to continue advancing its business plans while some of its peers may begin to struggle.
Furthermore, we argue that there is a likelihood of some consolidation within the psychedelic space. Numinus has the balance sheet strength not only to sustain its own business activities but also potentially to benefit from any opportunities which may arise to expand its asset base.
Conclusion
Numinus offers investors exposure to the great potential growth in a new generation of mental health care employing the properties of psychedelics.
The company benefits from the following advantages:
Numinus Wellness - differentiated, well capitalised, revenue generating
- Existing revenue streams, with visible growth drivers for 2021 and 2022e
- Early mover advantage in integrated therapist-led psychedelic healthcare solutions
- Strategic partnership with MAPS gives Numinus exposure to leading-edge clinical developments in psychedelic-assisted therapies
- A strong balance sheet position
The company addresses a market opportunity in the US$100bn range. We argue that as the growth journey progresses, shareholders could realise significant upside from the current market cap.
Financial forecasts
The following tables summarize our financial forecasts for Numinus.
Income statement
Source: Proactive Research
Balance Sheet
Source: Proactive Research
Cash Flow
Source: Proactive Research