- $100s of billions of revenues (per year) up for grabs in the U.S. alone
- No viable options to psychedelics-based therapies
- Clinics networks expanding rapidly
- Industry leaders currently priced at pennies on the dollar
Investors looking at the psychedelics space will undoubtedly be drawn to more than the drug development specialists. While companies like
Compass Pathways (US:CMPS),
MindMed Inc (US:MNMD / CAN:MMED), and
Cybin Inc (US:CYBN / CAN:CYBN) have developed enthusiastic followings among investors, the “clinics” companies (also) present investors with superb value propositions.
Rapidly expanding mental health treatment facilities
Originally, investors had basically two choices here among public companies:
Numinus Wellness (CAN:NUMI / US:LKYSF) and
Field Trip Health (US:FTRP/ CAN:FTRP).
Numinus has a strong clinics component as a part of its diversified psychedelics business model. Field Trip has been even more focused in launching and advancing its North American chain of mental health clinics.
Numinus is Canadian-based, with clinic operations in Canada’s three major cities (following its acquisition of the Neurology Centre of Toronto). Revenues for the most-recent quarter (Q3 fiscal 2021) were CAD$562,076, but that does not include any revenues streams from the Neurology Centre of Toronto.
Numinus offers ketamine-assisted therapy. But the company’s principal focus is laying the groundwork for psilocybin-based therapies as these become accessible in Canada. Canada currently leads the way (at least federally) in moving toward the normalization of psilocybin for medicinal use. Equally important, ~80% of Canadians are currently in favor of psilocybin legalization for medicinal use.
Numinus is also
active on the research front. In addition to its own proprietary drug development, NUMI is
a host site for MAPS’ Phase III clinical trial for PTSD.
Field Trip has taken a different approach: a strong focus on (already-legal) ketamine-based therapies. But Field Trip is making preparations for other psychedelics-based therapies as they become legal. The company is also ramping up its
proprietary drug development.
FTRP’s North American network of mental health clinics is growing rapidly, with three new locations
recently announced. The company reported revenues of CAD$867,400 from its most recent quarter (
Q1 fiscal 2022). NASDAQ-listed Field Trip also holds the distinction for the single largest financing for a Canadian-based company: CAD$95 million.
As Psychedelic Stock Watch noted in a recent article, both Numinus and Field Trip are currently
bargain-priced for investors. But as attractive as Numinus or Field Trip look, several smaller companies are providing increasingly intense competition for these clinics leaders.
Novamind Inc (CAN:NM / US:NVMDF) is one of the strong candidates. Its Cedar Psychiatry network of mental health clinics (based in Utah) has been booming. Novamind recently
opened its 6th location, with each clinic (consistently) generating ~$2 million per year in revenues when up to full run rate.
Novamind is also positioning itself as a significant partner for larger pharmaceutical companies in drug development. Novamind has already announced
an R&D agreement with Merck (US:MRK) and has made its own strategic investment in atai Life Sciences.
Novamind reported revenues of CAD$1.8 million for its most-recent quarter (
Q3 fiscal 2021). The company is projecting 8 mental health clinics in operation by the end of 2021 and 12 clinics by the end of 2022. Yet even after a significant run-up in share price, Novamind sits with a market cap of only ~CAD$33 million.
More recently,
Levitee Labs (CA:LVT / US:LVTTF) became a significant player in mental health treatment clinics. On July 29th, Levitee closed on its acquisition of 5 Canadian addiction clinics based in the province of Alberta. Levitee also acquired three “specialized pharmacies” and a telemedicine platform.
Levitee recently reported unaudited revenues of nearly CAD$1 million for
the month of August alone. LVT then just announced
a CAD$12 million credit facility – to power further expansion of its clinics network. Yet Levitee’s market cap is a tiny CAD$31 million.
Even more recently,
Delic Holdings (CAN:DELC / US:DELC) has jumped into this clinics derby in a big way. On September 20th, Delic announced
a binding merger agreement with Ketamine Wellness Centers Arizona LLC (KWC). KWC operates 10 profitable ketamine infusion treatment clinics, across 8 states.
Delic is aiming to open
15 additional clinics over the next 18 months. The company just on a
CAD$7 million private placement to help facilitate this expansion. Delic’s current market cap? A microscopic CAD$11.4 million.
Incredible value propositions
Regular readers of Psychedelic Stock Watch are already familiar with
the size of the treatment market here.
Globally,
~2 billion people are suffering from treatable (but generally untreated) mental health disorders. This directly leads to
~8 million preventable deaths per year.
Conventional mental health therapies are
totally inadequate.
In the United States, two-thirds of U.S. veterans receiving treatment for PTSD report
no benefit from therapy. Two-thirds of Americans exhibiting symptoms of depression
don’t even seek treatment – because conventional therapies (and drugs) are so ineffective.
Addiction ‘therapy’ is little more than a revolving door, because (
without psychedelic drugs) therapists lack any drugs to effectively control addictive cravings.
Consequently, in the U.S.:
a) A
Suicide Epidemic is now in its
8th year
b) A Drug Overdose Epidemic is rapidly worsening, with fatalities
soaring by 30% in 2020 alone
c) Since the
start of the Covid pandemic, rates of “moderately severe depression” have
quadrupled and rates of “severe depression” have
quintupled
Over $300 billion per year is currently spent on mental health in the United States, with practically nothing to show for it.
The only hope of addressing this Mental Health Crisis is through psychedelics-assisted therapy. And today, that means
ketamine treatment clinics.
Psychedelic drug companies are in position to claim much (most?) of this $300 billion per year in revenue. Yet the combined market caps of the treatment leaders above are well below $1 billion.
Numinus Wellness and Field Trip Health are two of the early leaders in this emerging sector. Despite growing revenue streams and clinic operations, they are currently trading at only 2.3X and 3.7X cash, respectively.
Very cheap.
But the current revenue leader is among these companies is Novamind. The only one of these treatment companies to have negotiated a credit facility is Levitee. And in terms of pure value, the cheapest of the cheap is Delic.
Investors could pick stocks here by throwing a dart against the wall.
In this race, everyone is a winner
The mental health treatment companies above are the early movers in what is
the greatest investment opportunity in life sciences of the 21st century.
Psychedelic drugs aren’t merely the best option to address the Mental Health Crisis. They are literally our only choice. Big Pharma had 50 years (of Prohibition) to come up with more effective drugs.
These multinational drug companies have failed miserably. Indeed,
these drug companies have largely quit even trying to improve the standard of care in mental health.
By 2016, funding by Big Pharma for mental health-related research had been
slashed by 70% -- while the Mental Health Crisis has been turning into
a mental health pandemic.
Incorporating psychedelic medicine (rapidly) into our healthcare system is not merely a good idea. It is an absolute necessity.
The U.S. economy is currently
crippled by a worsening labor shortage. Not enough workers for U.S. employers, and
mental health disorders are the leading cause of disability.
U.S. employers have a record 11 million jobs they can’t fill. Meanwhile, ~50 million otherwise employable Americans without jobs are currently grappling with one or more untreated mental health disorders.
There is no “shortage of workers” in the United States.
In a population of 332 million, only ~160 million Americans have jobs.
There is a critical shortage of healthy workers. Psychedelic medicine is not only the answer to the U.S.’s largest health crisis, it’s also the answer to the U.S.’s worsening economic crisis.
A
massive commercial opportunity. An
economic necessity. And psychedelic medicine is the only game in town.
The early movers in this industry should be trading at massive premiums. Instead, they are trading at absurdly compressed multiples of their current cash and/or revenues.
Which of the companies above will be an investment winner?
Given the parameters that have been outlined, how can any of these well-capitalized companies
not succeed?
As these mental health treatment companies race to claim a massive commercial prize, most investors will be wanting to place their own bets on one or more of these horses.
DISCLOSURE: The writer holds shares in MindMed Inc, Cybin Inc, Numinus Wellness, Novamind Inc, Levitee Labs, and Delic Holdings.
