Q1 2024 Numinus Wellness Inc Earnings Call
Good afternoon, I'll walk you through the numinous walnuts King.
First quarter fiscal 2024 results conference call.
Question and answer session for analysts and institutional investors will follow the formal remarks as.
As a reminder, this call's being recorded.
I would now like to turn the conference call over to your host Craig Macdougall.
Craig Macdougall: Please proceed.
Craig Macdougall: Thank you operator.
Craig Macdougall: Afternoon, everyone and thank you for joining us for our fiscal first quarter 2024 results conference call.
Craig Macdougall: This performance to date, our patent that quest, founder and CEO and Nick He'll hand, Chief Financial Officer George.
Speaker Change: Joining them for analyst questions at the end of our formal remarks are read Robinson, Chief clinical officer, and Paul Field team Chief Science Officer.
Speaker Change: The following discussion May include forward looking statements that are based on current expectations and are subject to a number of risks and uncertainties.
Speaker Change: The risks and uncertainties that could cause our actual financial and operating results to differ significantly from our forward looking statements are detailed in our MD&A for the quarter ended November 32023.
Speaker Change: Indeed, our other Canadian securities filings available on SEDAR.
Speaker Change: Newness does not undertake to update or revise any forward looking statements to reflect new events or circumstances, except as required by law.
Speaker Change: Our first quarter results were made available early this afternoon.
Speaker Change: Cause you to review our earnings release, MD&A and financial statements available on our website and SEDAR.
Speaker Change: As a reminder, all figures discussed on today's call are in Canadian dollars.
Pait Nyquist: And now I'll turn the call over to paint Nyquist, Chief Executive Officer.
Pait Nyquist: Got it.
Pait Nyquist: Thanks, Craig and good afternoon, everyone.
Pait Nyquist: Like to start by extending our utmost gratitude that our work is conducted on the unseated homeland.
Pait Nyquist: Squamous and play with it people and on other sovereign indigenous lands and territories across Turtle Island.
Pait Nyquist: We are committed to a path of rep towards reconciliation through continuous learning reciprocity and humility.
Pait Nyquist: We're looking forward to the opportunities available to us in 2024.
Pait Nyquist: It will be a pivotal year for psychedelics as more drugs or advance to commercialization and regulatory approval.
Pait Nyquist: This past December not submitted a new drug application to the FDA for the treatment of PTSD with MDMA.
Pait Nyquist: This follows a successful phase III trial, which indicated that over 70% of participants no longer met the criteria for having PTSD after receiving three dosing sessions together with therapy.
Pait Nyquist: And then the MAA has been designated as a breakthrough therapy. The FDA has 60 days to accept the application for review and decide whether MBNA will receive priority review of six months.
Pait Nyquist: This development was very well received by the psychedelic therapy community as it puts us significantly closer to providing transformational care for millions of Americans afflicted with PTSD.
Pait Nyquist: The markets also reacted well to that with some apps news now rebranding as <unk> Therapeutics has raised $100 billion with an oversubscribed private placement.
Pait Nyquist: It's important to note that this application for the treatment of PTSD with M. DMA is just one of several psychedelic therapies under development.
Pait Nyquist: According to the new service psychedelic alpha there are over 30 psychedelic compounds in the phases in the phase two or phase III clinical trial stage with most addressing conditions for which there is no effective treatment.
And new minutes is well positioned to benefit from that.
Pait Nyquist: Advanced stages of drug development drive the demand for installation and clarify critical research.
Pait Nyquist: Once approved these drugs will be required to be administered and monitored in treatment clinics using FDA approved methodologies.
Pait Nyquist: Considering the expected strong demand once these drugs are approved they will.
Pait Nyquist: B a high demand for trained psychedelic therapy practitioners.
Pait Nyquist: On all three fronts newness is well positioned with the most comprehensive offering in behavioral health care.
Pait Nyquist: Let's start to look at the details of the quarter with our wellness clinics.
Pait Nyquist: Conducted almost 20000 critical appointments in the first quarter slightly declining from 21000 in the fourth quarter 2023 year over year apartment appointments were up about 3%.
Pait Nyquist: The quarter over quarter sequential decline in appointment was mainly due to the reduction reduced appointments in our Canadian clinics as we scaled back services that we're not focused on a core of mental wellness and also with an increased focus on higher margin service lines.
Pait Nyquist: The year over year increase resulted from improved clinic utilization across the clinics as a result of an operational focus on expanding appointments for ketamine services.
Pait Nyquist: New clients made up about 7% of the appointments in Q1 and about 22% were ketamine to provide a related.
Pait Nyquist: And our Canadian clinics, we we are also treating patients with PTSD.
Pait Nyquist: We're treating patients with MDMA and psilocybin assisted therapy under health, Canada Special access program.
Pait Nyquist: Delivering excellent patient care and experience continues to be a priority at all our clinics and in the past quarter, we put in place several initiatives to elevate service across the clinics.
Pait Nyquist: One was in eight weeks in House Education program for all clinical staff to establish consistent best practices across the network.
Pait Nyquist: This covered all aspects of our clinic operations, including service standards patient care and operational systems.
Pait Nyquist: We take pride in delivering excellent patient care and a great patient experience and programs like this will ensure that every patient benefits from a consistent high quality numerous experience at all of our clinics.
Pait Nyquist: We also took important steps to remove the obstacles preventing patients from seeking help.
Pait Nyquist: This included improving our digital presence with a refreshed website, a unified numinous digital presence on search engines and an enhanced patient booking process we.
Pait Nyquist: We also expanded our hours of operation in our transformative care center, including opening earlier and staying open later, along with seven day a week access.
Pait Nyquist: Together with expert care.
Pait Nyquist: These initiatives will drive appointment growth clinical utilization and ultimately strong financial performance.
Pait Nyquist: Next I'll talk about our practitioner certification training program, which we see as our strategic growth channel and an important source of high margin revenue.
Pait Nyquist: Over 700 learners have enrolled and numerous training programs and we expect that number to increase with the recent launch of our introduction to psychedelics program.
The Street course will introduce learners to the new munis.
Pait Nyquist: The numerous and encourage them to continue into full practitioner training.
In January the entire training program was mitigated to a new learning management migrated to a new learning management system platform, which ensures we continue to provide a leading training program that improves lenders engagement satisfaction navigation and community experience.
Pait Nyquist: We'll drive success and numerous practitioner training is that our differentiated offering combines highly experienced instructors with real life experience administering psychedelic assisted therapy in our clinics and clinical research expertise that informs our training.
Pait Nyquist: Soon we will add experiential learning opportunities so learners get firsthand experience with these medicines.
Pait Nyquist: This is delivered in a blend of learning format.
Pait Nyquist: Blended learning format that Optimizes adult learning Patrick.
Pait Nyquist: After completing the course accreditation is available through majority through major regulatory bodies in both Canada and the United States.
Pait Nyquist: We are working with the Oregon Health authority to receive formal approval under their guidelines.
Pait Nyquist: This enhances the credibility of our certification pathway and increases the programs visibility. When it is included on authorities' list of approved training programs.
Pait Nyquist: The progress we are making with new minutes learning pathway position that positions us to be the essential training provider to meet.
Pait Nyquist: To meet the high demand for therapist and psychedelic assistant therapy.
The third essential component of our business is Cedar clinical research.
Pait Nyquist: CCR as the research partner of choice for leading drug development companies, including traditional pharmaceutical companies research organizations and the leading psychedelic drug development companies.
Pait Nyquist: CCR also provides numerous with frontline experience and administering breakthrough psychedelic therapies and knowledge of patient care and clinical practice that informs the rest of our business.
Pait Nyquist: In fact, both Paul and read have helped design training.
Pait Nyquist: And are the faculty of Noumena certification pathway.
Pait Nyquist: The first quarter of 2020 for CCR managed 22 clinical trial sites, including 456 patient appointments.
Pait Nyquist: One of these was four ketamine for the Ketamine Research Foundation with CCR, providing one of five research sites investigating the potential of cat and improving the quality of life for individuals facing end of life challenges.
Pait Nyquist: In December CCR was chosen as one of multiple sites for <unk> cutting edge phase <unk> clinical trial for treatment resistant depression.
Pait Nyquist: The study aims to evaluate the efficacy and safety of different doses of <unk> proprietary intranasal formulation of the short acting psychedelic compound five immuno DMT.
Pait Nyquist: With the continued increase in psychedelic drugs under investigation and CCR is expanding expertise, we expect steady growth in our clinical research division.
Pait Nyquist: Faced with the significant opportunities ahead for us.
Pait Nyquist: To benefit fully we continue to maintain financial discipline.
Pait Nyquist: Increasing revenue and gross margin, while optimizing our overhead will continue to be the focus for 2024.
Pait Nyquist: As we said on our last call. We are seeing the positive impact of our cost containment measures and starting in October have reduced our annualized cash expenses, such as such that our cash burn is now under a million dollars a month.
Pait Nyquist: As a result, our operating expenses declined by 19, 9% in Q1 of <unk> 24, compared to Q4 of 'twenty three.
Pait Nyquist: We see further opportunities to optimize operations and are now focused on achieving positive EBITDA on a consolidated basis with our current operations.
Pait Nyquist: With that I'll now turn the call over to Nikhil to discuss our quarterly results in more detail. Thank you.
Nikhil: Thanks, David and good evening, everyone. This quarter driven by the ramp up of our services in the United States and Canada revenue grew four 9% to $5 $9 million compared to the same quarter last year revenue from our wellness Clinic network was $4 9 million declining by one two.
Nikhil: Percent compared to the same period last year and decreasing by <unk>, 7% compared to Q4 2023.
Nikhil: Revenue from TCR Rose 49, 5% to $1 million from $700000 in the same period last year.
Down 12, 9% from $1 2 million in Q4 of 2023.
Nikhil: Revenues from our wellness clinics comprised 83% of total revenue during the first quarter up from 80% in the prior quarter, but down from 88% in Q1 2023, highlighting a more diversified revenue mix year over year.
Nikhil: U S operations comprised 84% of total revenues this quarter compared to 87% last quarter.
Nikhil: First quarter gross margins were 36, 1% up from 29 29, 5% the previous quarter and down from 41, 9% and same quarter last year.
Nikhil: We again decreased operating expenses through our cost optimization initiatives as we continue to focus operating expenses.
Nikhil: Support revenue generating activities.
Nikhil: This quarter operating expenses were $6 3 million falling from $7 9 million last quarter. Once you exclude the onetime costs in the last quarter and down from $9 $1 million in Q1 2023.
Nikhil: As a result of our expense optimization efforts, we narrowed our net loss substantially this quarter to $4 4 million or <unk> <unk> per share compared to $9 3 million in the prior quarter and $6 1 million in the same period last year.
Nikhil: Total net cash outflow during the quarter was $3 8 million.
Nikhil: A decrease of <unk> $6 million compared to the previous quarter.
Nikhil: We ended the quarter with $4 $7 million of cash on hand, and $4 6 million of working capital our monthly cash outflows remain under $1 million due to our cost containment measures.
Nikhil: In Q1, 2024, we implemented an aftermarket equity program that allows us to issue and sell up to $10 million in common shares in the quarter. We issued 628500 common shares for net proceeds of $74779.
Nikhil: Subsequent to the quarter, we issued an additional $3 million 468000 common shares for net proceeds of 300 $394920.
Nikhil: Combination of our focus on driving high margin revenue optimizing our operating expenses and further industry catalysts, such as the expected and DNA therapy approval in the U S.
Nikhil: And a solid roadmap to achieving strong revenue growth and positive EBITDA on a consolidated basis and with that overview of our financial results I'll turn the call back to Pete for some closing remarks.
Pete: Thanks, Nicole to reiterate we see 2024 is a pivotal year for the adoption and expansion of psychedelic treatment to address the significant behavioral health crisis.
Pete: And new minutes as diverse business operations provide the crucial infrastructure to make these advances a reality for many patients in need we.
Pete: We look forward to updating you as our progress in the upcoming quarters with our focus on leveraging our operational focus into positive cash flow and profitability.
Pete: Before we open the call for live questions.
Pete: We will take some questions that were sent to us by investors.
Speaker Change: Hi, Steven.
Steven: Hi, Pat and I have two questions sent to us from investors by email.
Steven: Here's the first one.
Steven: There has been positive news from new munis and the industry in general on the advances and psychedelic treatment. However, the share price remains disturbingly low what are you doing about that.
Speaker Change: Yes, it's a great question with management among the largest shareholders of numinous, we're well aware of the share price activity.
Speaker Change: To me it seems like the market does not fully understand the value of our business.
Speaker Change: As you may have seen from the earnings release today. The board is reviewing some strategic alternatives available to us to unlocking shareholder value. The focus of this is how we unlock some of the value that we believe is not properly reflect reflected in our share price and ensure that we have a strong capital position.
Speaker Change: This could take various forms whether that'd be a partnership or other means to bolster our capital base and also to support support shareholder value creation over the medium term.
Speaker Change: Shareholders will be informed should the board decide on a course of action.
Speaker Change: Thank you.
Speaker Change: Here is the second one.
Speaker Change: What is the expected pace of growth in demand for your certification pathway.
Speaker Change: And do you have the personnel and facilities to keep up with the demand.
Speaker Change: Okay.
Speaker Change: Based on the large population of potential patients needing psychedelic assisted therapy, we expect that demand will be high, particularly once <unk> is approved and the bottleneck in providing care will be a shortage of trained therapist.
Speaker Change: We have designed the certification packed pathway to be scalable. This comes from the learning management system, we have implemented and the faculty available.
Speaker Change: Any of that come from our experienced and highly qualified care providers. Many come from our experienced and highly qualified care providers at our clinics.
Speaker Change: We can easily increase the cohort in our programs with a minimal cost increase.
Speaker Change: As training scales, we expect it to provide strong support in the delivery of MDMA assisted therapy and also strong financial contributions to numerous.
Speaker Change: With that we'll open the call to questions from analysts and institutional investors operator.
Speaker Change: We do have a question from the line of Michael <unk> with Maxim Group. Please go ahead.
Michael: Hi, there. Thank you for taking my question and congratulations on the progress this quarter.
Speaker Change: Thanks, Michael.
Michael: So I guess to kick things off I'd like to see if you could just.
Michael: Highlight where some of that improvement that you saw in particular, the gross margins came from Vince revenues did go down slightly but overall your gross profit increased fairly significantly is this a result of a reduction in unprofitable services could you just give a bit more color on that please.
Speaker Change: Yes, I can maybe start and then I'll hand, it over to Nikhil, but as we mentioned on the call really looking to shift some of the services, obviously as more and more people get interested in ketamine assisted therapy, which is a longer form of therapy, but with higher margins associated with it and an offering.
Nikhil: Other opportunities for accessibility, whether through our virtual platform, which are.
Nikhil: Which helps increase the margins as well, but maybe you can talk a little bit more about that.
Yeah, Thanks, Dane and thanks, Mike for the question good to hear from you. So I think Theres a couple of things here. So first of all as part of our just reviewed generally.
Nikhil: So another way of saying expenses.
Nikhil: For revenue generating activities and that is primarily focused on operating expenditures, but some of it is on the cost of goods sold as well. So youll see that <unk> focus that we've had and nourish with enhanced focus on this.
Nikhil: It was primarily an operating expenditures, but there was some on gross margins or cost of goods sold how can we be more efficient with our resources and the services, we deliver while at the same time enhancing the client experience. So ensuring we are delivering the highest quality of care, but also with our high client experience. So.
Nikhil: There is that generally that we saw really benefits across the connection both Canada. The U S. An intriguing and as Tim was saying its part of it is mix as well as you can appreciate in the U S clinic network in specific and we are.
Nikhil: Offer more traditional services, such as Med management and psychotherapy, and then more innovative services like ketamine assisted therapies, <unk> and ketamine medicine, only perspective, and all of those have different margin profiles and so we saw.
Nikhil: It's been and we're seeing a mix change over the past quarter and if you look at the gross margin compared to last year in the comparable period Youll see its actually down.
Nikhil: This gross margin, we hope to see a trend higher but they are likely may be some volatility in coming quarters as we look to.
Nikhil: You bring on new clients, but also just ensuring that they are all receiving the best treatment plant as possible. We have to really be mindful of the best treatment plan for the may actually be lower margin products and so just making sure we offer the full suite and each of those suites really focused on what is the best client outcome and within that the best client experience, but obviously for <unk>.
Nikhil: Every service we're doing I'm also looking at the margin profile for this quarter, specifically just to sum it up and there was some efficiencies on cost of goods sold and also a change of mix in the services that we provide our clients.
Speaker Change: Alright, thank you for that Nikhil.
Speaker Change: As a follow up I would like to just do some general housekeeping question, Steve you can give us an.
Steve: An update on the transition to full time employees, especially in Canada as well as the numinous network and if you've seen an uptick in interest since maps filed.
Speaker Change: I can maybe touch on the numerous networks and Nick Hilton can take the other part of your question but.
Nick Hilton: <unk> definitely seen a huge increase.
For not just not just given us network, but I think now with maps financed and and in the application process. I think the question on everybody's mind for 2024 is really into integration and implementation of these services and we've seen a huge amount of people very interested.
Nick Hilton: And the new wellness network, but also our training because not only have we been the clinical trial sites for.
Nick Hilton: A number of these different studies, but we've also actually offer these treatments in a real world setting with the special access program up in Canada. So I think everybody, especially in the in the early days is really looking towards who had some some experience and expertise to lean on.
Nick Hilton: Now the Big question is it's looking like approval is going to happen how are we actually going to do this in clinical practice and how do we provide scale knowing that there is a huge demand of people looking for these services.
Nick Hilton: But limited access to it especially.
Nick Hilton: In the early going.
Nick Hilton: Mikael do you want to take the other part of that question yes.
Mikael: Yes. Thank you.
Mikael: Just on the full time versus part time, I think that the main focus for US Mike is it what's the best way to provide great patient care and a wonderful client experience and so we believe full time employees, which is how we largely operate in the U S.
Mikael: Provide not only a more fulfilling opportunity for the actual health practitioners, but greater engagement greater focus on the clients that are in our clinics and as their full time. So we have seen some changes in Canada with a certain greater emphasis on full time employees, but that being said the part time practitioners that we have.
Mikael: Clients with us in our clinics in Canada, and also clients elsewhere, I still a crucial part of our business and likely will be for quite some time.
I think for US, it's really a balance of what do we want to commit to you from a full time perspective to ensure that we have high patient care and great employee engagement at the same time respecting some of the flexibility that some of our practitioners, which I'm a part time perspective. It also frankly provides us a certain amount of financial flexibility. So we will see that.
Mikael: Solely evolve over time, but really the focus is what are we hearing from the practitioners in terms of engagement and their desire and really importantly, what are the patients actually are providing in terms of feedback. We just launched a net promoter score program, which is a really wonderful way for us to get direct feedback. In addition to the other avenues that you have for communication. So we will continue to enter.
Mikael: Handset and as Peter mentioned on the call you had seen a real focus this past quarter for us on just going back to some of the basics. So what we call the philosophy of care and transformative care and so our operational team along with all the practitioners in a different clinics really we're focusing on what are some of the fundamentals we should do from a patient care perspective.
Mikael: <unk>, but also more broadly just the client experience in terms of when the client comes into the clinic, how theyre treated how we want them to go through the client journey to ensure that it's not just the clinical component that's obviously.
Mikael: Very high caliber, but also some of the other.
Mikael: Aspects of the client experience so back to your initial question, we haven't seen a migration to more towards more full time practitioners part time will still be though a core part for us, especially in Canada, but we will look specifically as to what's the best mix in relation to providing wonderful patient care and also a great client experience.
Speaker Change: And if I could just add on to what <unk> was saying regarding the numinous network.
Speaker Change: When you look at what's happening with <unk> therapy coming up for approval likely in mid this calendar year as Peter was mentioning there's a few aspects really too.
Speaker Change: And to be implemented prior to delivering actually mdma's therapy in the clinic. So one of them and the first one we see as really training. So how kin practitioners feel confident in the safety and efficacy of delivering this novel therapy, and how can the regulators and others until we think that our.
Speaker Change: The pathway is a premium product.
Speaker Change: Not only innovative but really provides.
Speaker Change: Best learning experience and also the best confidence to practitioners going forward and we think we will first see the greatest uptake in that.
Speaker Change: So I think for us from a mission perspective, it's crucial because we think that will help support safety and efficacy from the MD&A assisted therapy perspective. There is also financial gain to that but I think more importantly will help train practitioners for.
Speaker Change: The upcoming clinical setting second is once you have those practitioners train some of them who wished essentially to start their own click or or are in the clinical setting that is not equipped for the delivery of revenue maintenance therapy will need some assistance as patient as taken was mentioning on.
Slp's protocols set in setting and that's where numerous network would come in and then eventually we will see it in the clinics as well both in our clinics in the U S. When it is permissible and other clinics outside of our clinic network. So I think theres a few steps there, but really prior to the new minutes network really taking off I think youll see that leading.
Speaker Change: Later, we will be our training pathway, taking off and seeing some of the results there and we're already seeing some early traction. So I just wanted to add that on and thank you for your question.
Speaker Change: Yes. Thank you I really appreciate the additional insight and then one more for me and I'll hop back in the queue.
Speaker Change: I'd like to just take a little bit of a longer term look and especially in the context of the recent news we saw from Compass and Green book as well as with the comps 360, <unk> phase III data coming up in pretty short order.
Is there anything in particular that youre doing on the silo from something like Cop 360 to make sure that you are prepared to launch that down the line or is the focus more on MDMA in the near term given that that's likely to have a much quicker path right now to revenue generation.
Speaker Change: Yes, I can I can touch on that.
Speaker Change: I think it's a bit of both.
Speaker Change: Obviously with our with our training pathways, we offer opportunities for people to deepen their learning on MDMA assisted therapy, but also psilocybin assisted therapy and ketamine assisted therapy.
Speaker Change: And two to kind of continue with that we've also had the opportunity now up in Canada to treat a number of people with psilocybin assisted therapy through the special access program. So it continues to be something that we.
Speaker Change: We engage with and I think compass has has initiated or signaled that they are starting to really look at what does commercialization look like which I think is very smart on their part knowing how long it takes to get things set up and making sure that they are ahead of that.
Speaker Change: But we've also been the clinical trial sites for more complex than others, who are using psilocybin to treat different indications and so that's really given us the opportunity to deepen those relationships with those drug developers like campus, but also run their protocols in our clinics, which is also.
Speaker Change: Clinics, where we treat people so we've been able to sort of implement this as close to a real world setting as possible. So I think there's a natural opportunity to to be prepared and be kind of some of the first sites prepared for it.
Once approved.
Speaker Change: And I think that's probably where you see a lot of the opportunities with MDMA is is I think there's a lot of headway, we can make focusing on MDMA and commercializing.
Speaker Change: We're helping commercialize that therapy that infrastructure that will be very valuable to other drug developers once approved being that there's a forged pathway. There already so we see lots of opportunity this year.
Speaker Change: To deepen those relationships, but also get into practice hopefully with approval of MDMA in the second half of this year.
Speaker Change: Alright, Thank you very much.
Speaker Change: If I could just add to that I think the keyword that Peyton I use there was infrastructure.
Speaker Change: I think Mike.
Speaker Change: Not binary as to visit Mdma's therapy or is it.
Matt: Tom This is Matt.
Matt: It's more we have an infrastructure in place straight from clinical trials to the clinics the training really for a variety of medicines and as we obviously.
Matt: Expertise in psychedelics as you'll see with our clinic.
Matt: Clinical trials from CCR.
Matt: For everything so we think that there is really a platform here, while MD&A therapy will likely be the one that's approved first and we don't see that but theyre mutually exclusive of statements, saying, they're actually reinforcing the experience that we have with all of them will reinforce one another as they all.
Matt: Go towards commercialization with the infrastructure that we have.
Speaker Change: Alright, thank you for that additional insight.
Speaker Change: I would now thanks for the questions Michael appreciate it.
Okay.
Speaker Change: I would now like to turn the call over to Pete <unk> for closing remarks.
Pete: Thanks, operator, and thanks, everybody for joining us today for the conference call. We look forward to speaking with you in April when we will report our fiscal second quarter 2020 for our results.
This concludes today's call you may now disconnect.
Pete: Okay.
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