Water Tower Research has started coverage of Numinus Wellness Inc. (TSX:NUMI, OTC:LKYSF) and sees a great opportunity for the mental health and well-being company to tap into the multi-billion psychedelic industry.
The broker said Numinus is positioning itself as a leading provider of infrastructure to enable the industry to develop by providing accessibility to and support for ongoing research in psychedelics as well as accessibility to patient-facing sites into which psychedelic-assisted psychotherapies can be funnelled to treat patients.
Water Tower Research pointed out that most of the roughly 50 publicly traded psychedelic companies are focused on drug discovery and development while Numinus’ end-to-end service capabilities offer a more unique and relatively low-risk way to gain exposure to the emergent industry.
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Led by its driven CEO and founder Payton Nyquvest, and an accomplished leadership team, Numinus has expanded rapidly by acquisition and now has a network of 13 wellness clinics in North America to tap into the demand, the broker noted.
Water Tower Research highlighted the recently completed acquisition of Novamind as being transformative for Numinus both strategically and financially establishing its first footprint in the US with eight wellness clinics.
Novamind also quintuples Numinus’ run-rate revenue base to around C$16 million, making it one of the largest revenue generators in the psychedelic space and the broker projected that revenues could expand at a compound average growth rate of 116% over the next three years to around C$70mln.
Novamind will also improve the group’s gross margins and this will accelerate the path to profitability for Numinus which the broker now expects to be achieved by 2025.
Together with the Novamind acquisition the key drivers to profitability according to the broker are revenue acceleration from the expansion of Numinus’ wellness clinic network from the current 13 to 35 by the end of full-year 2025; expansion of higher-margin product offerings which could drive gross margins from the mid-20% range currently to the low 40% range; and operating leverage efficiencies because of scaling up.
Buttressed by a strong balance sheet, with more than C$40mln and no debt, Water Tower Research said Numinus is well positioned to continue to expand its clinic network across North America where the regulatory barriers to psychedelics for therapeutic purposes are slowly being dismantled.
Contact the author at jeremy@proactiveinvestors.com