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Numinus’s Acquisition of Novamind May Signal More Consolidation to Come

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Numinus’s Acquisition of Novamind May Signal More Consolidation to Come

The psychedelics industry is seeing the first signs of a much anticipated consolidation. Vancouver-based mental health care company Numinus Wellness Inc. is set to acquire Novamind Inc., which operates a network of psychiatry clinics with a focus on psychedelics. The all-share transaction for the acquisition of Toronto-based Novamind is expected to be complete in June 2022. Numinus projects that it will lead other companies in the sector in 2022 with annual revenue of approximately CAD$10 million ($7.9 million U.S.) based on the trailing four quarters.

“We expect this acquisition will significantly bolster our financial performance, growing Numinus’ annual revenue to more than five times our current levels, and driving meaningful margin improvement through identified operating efficiencies,” says Payton Nyquvest, Numinus founder and CEO in a press release. “Our combined capabilities will deliver exceptional value for our clients, employees and shareholders.”

“This transaction offers significant value for Novamind’s shareholders,” adds Yaron Conforti Novamind CEO and co-founder in the statement. “The combination of Novamind’s network of mental health care clinics and research sites in the U.S., and Numinus’s leadership in psychedelic-assisted psychotherapy in Canada creates a best-in-class company.”

According to Nyquvest, the acquisition has been in the planning for several months. He says that part of what attracted him to Novamind was its business model, which he says is both sound and scalable.

“They’ve gotten a lot of support from insurance providers, so a number of their ketamine protocols are actually covered under insurance,” Nyquvest tells Lucid News. “They are the clinical sites for a host of different trials with LSD as well as psilocybin.”

Novamind has provided clinical research sites for both MindMed and the Usona Institute, says Nyquvest. He says Novamind will join Numinus’s existing partnerships, including a collaboration with MAPS. When the acquisition is complete, Nyquvest says Numinus will operate 13 clinics in two countries, creating a cross borders platform for psychedelic therapy and clinical research.

“I’ve always been an admirer of what they’ve put together in the U.S.,” says Nyquvest of Novamind. “I think they’ve really stood out amongst a number of groups that have emerged in the space as really a group that was very aligned in terms of our ethos around accessibility, looking toward the future of being able to provide psychedelic assisted psychotherapy in a very trusted and high integrity, high quality way.”

The acquisition perhaps represents a trend in consolidation in the psychedelic space that Nyquvest expects to see more of in the next year. Consolidation is expected, agrees Sam Sabrin, senior advisor to Tabula Rasa and JLS, which invests in companies developing psychedelic-assisted therapies. “Scale will be necessary to drive down per patient acquisition cost and drive revenue,” says Sabrin.

Sabrin says he would not be surprised if Numinus continues to acquire additional locations from other startups. “This is especially true as more psychedelic therapies become approved by the FDA and available to patients that need them,” he adds. 

Potential challenges to that model could include psychedelic treatments not catching on with patients, the FDA failing to approve therapies which use these substances, or the development of non-hallucinogenic psychedelics that don’t require a clinician’s assistance to administer, explains Sabrin. “Delix Therapeutics and the good work out of David Olson’s Lab at UC Davis is a good example,” he says.

Another threat to this strategy could be failing to get reimbursements from third-party payers. One of the benefits of Novamind could be their expertise in dealing with insurance companies tempered through experience, says Sabrin. He notes that this is an important feature for a business model that will likely make much of its money through commercial third-party payers. The more patients that the company has worked with, the more opportunities they’ve had to deal directly with insurance.

“They’re saying we’ve become experts at the process,” says Sabrin about Novamind. “Scale their experience with insurance companies across multiple [clinical] sites.”

For Nyquvest, the move toward consolidation is necessary. “I think you saw a lot of excitement and a lot of encouragement come into this space about a year or so ago,” he says. “People who are putting their dollars toward supporting this space, they want their investment to do something. They want it to make an impact.”

While the movement of capital has been important, a consolidation of platforms is what could create that impact. Nyquvest envisions a kind of hub in the psychedelic space that allows groups like Compass and MAPS to flow through and reach patients. That service provider space is where Numinus has always wanted to play, he says.

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“I don’t think there’s the capital around to just go, OK, we’re going to spend potentially a couple hundred million dollars on a clinical trial pathway, and we’re going to go build a global clinic network at the same time,” says Nyquvest.

“We all recognize that there’s a need for a scalable service provider in the space that is establishing a brand that is trusted,” he adds. “We’re at a point where looking at all the research that needs to get done, there’s a critical mass or an opportunity to put a flag bearer organization in the space that is looking at not just one particular drug, but mental health and wellness as a whole.”

Such an organization could provide both research and therapy, as well as training clinicians how to safely distribute therapy to clients. Recently, Numinus says it saw an increase in demand and appointments for its ketamine-assisted therapy (KAP), an increase it attributes to more trained practitioners, says Nyquvest.

Numinus’s experience with KAP harmonizes with Novamind’s own, which includes established and reputable clinical KAP services, group therapies and insurance coverage expertise, adds Nyquvest. He notes that training is a particularly important frontier in a young market where there are currently no universal standards. Nyquvest theorizes that different organizations will implement their own standards based on both treatments and individual mental health issues.

“We’ve created our own ketamine assisted psychotherapy training that we’ve developed,” he says. “If MAPS [MDMA-assisted therapy for PTSD] gets approved, are you going to have to have the MAPS training in order to be an MDMA provider? Our guess is probably. That’s why that collaboration with MAPS is such an important one.”

Many players in this space question how big the market can get. It’s a question with more speculative answers than Nyquvest can count. “I don’t think anyone has a full grasp of what the total market is,” he says. “There was this assumption that the cannabis market was this infinitely large market, and then we sort of over commodified it or overproduced it.”

“I think the thing we all know crystal, crystal clear is that we’re suffering from a host of mental health challenges, and it’s not getting better,” says Nyquvest I think that when you look at depression, whether you look at anxiety, suicidality, substance use disorder, PTSD, these are all numbers that are continuing to go up,” he adds. “I think in terms of the market, psychedelic assisted therapy, psilocybin and MDMA in particular, present a very, very special opportunity to address a host of these different indications.”

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