Good afternoon, and welcome to Numinus Wellness Inc.'s Fiscal Third Quarter 2022 Results Conference Call. A question and answer session for analysts and institutional investors will follow the formal remarks. As a reminder, this call is being recorded. I would now like to turn the conference call over to your host, Jamie Kokoska, Vice President, Investor Relations. Please proceed.
Thank you, Emma. Good afternoon, everyone, and thank you for joining us for our fiscal third quarter 2022 results conference call. Discussing Numinus's performance today are Payton Nyquvest , Founder and CEO, and John Fong, Chief Financial Officer. Joining them for analyst questions at the end of our formal remarks is Evan Wood, Chief Medical Officer. The following discussion may include forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. 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 May 31st, 2022, and in our other Canadian securities filings available on SEDAR. Numinus does not undertake to update or revise any forward-looking statements to reflect new events or circumstances except as required by law.
Our third quarter results were made available earlier this afternoon. We encourage you to review our earnings release, MD&A, and financial statements, which are available on our website as well as on SEDAR. As a reminder, all figures discussed on today's call are in Canadian dollars. I'll now turn the call over to Payton Nyquvest, Chief Executive Officer.
Thanks, Jamie, and good afternoon, everybody. Before I provide my comments, I'd like to extend the utmost gratitude that our work is conducted on the unceded homelands of the Musqueam, Squamish, and Tsleil-Waututh peoples and on the sovereign indigenous lands and territories across Turtle Island. We are committed toward the path towards reconciliation through continuous learning, reciprocity, and humility. Overall, we were very pleased with our performance during the quarter. The highlight from our fiscal third quarter was the announcement of our acquisition of Novamind, and the preparation and strategy around our significantly expanding platform and entry into the U.S. markets. While this work was underway, our Canadian clinics and operations stayed focused on client needs and building our strong pipeline of business, which included obtaining approval for our first Special Access Program approval through Health Canada for psilocybin-assisted psychotherapy.
While there was much activity focused on the completion of our acquisition of Novamind, the acquisition closed just after quarter end on June 10th. As a result, our third quarter results do not include any contribution from Novamind's operations, but as it has grown, the scope of our operations so meaningfully, I'll take a few moments to provide an update on that business integration. We're very pleased to see that our teams are already working well together thanks in part to the shared values and culture we recognize the Novamind team had with Numinus. Our clinical operations, product development, HR, and marketing departments are now all working together with team members from both sides of the border, collaborating and sharing best practices.
Similarly, we've taken the first major step in our company-wide rebranding initiative with our new logo and brand now showcased across our websites, social media, and clinic materials across Canada. The launch of this new, better aligned brand will help us grow as we strive for stronger brand recognition and continue to build our client base globally. In the next several months, we will be implementing the new brand across our U.S clinics and digital assets, and by the end of the year, we expect all our clinics and research operations will benefit from one cohesive brand, which will drive increased brand awareness and more effective marketing strategies. Finally, I'm pleased to say that we continue to be happy with our business performance since the acquisition completed.
There was minimal impact in the day-to-day operations at Novamind clinics and research facilities, and we made concerted effort to ensure our Canadian clinic teams remain focused on their clients and growth strategies as we pursue U.S. expansion. Our U.S. clinics continue to operate at near full capacity in June, and our Canadian clinics continue to see growing interest for ketamine services with a growing pipeline of clients who are currently being assessed for ketamine-assisted therapy treatments. On June 10th, in connection with the completion of the Novamind acquisition, we were also pleased to announce several key executive appointments. We welcomed Reid Robison as Chief Clinical Officer of NUMIF. Reid was previously Chief Medical Officer at Novamind and now oversees all of our medical and health professionals. Reid also provides deep subject matter expertise in our clinical research efforts, clinical product development, and practitioner training.
We also appointed Paul Thielking as Chief Science Officer of NUMIF, a role that he previously held at Novamind. Paul now oversees all research and clinical study operations at Numinus, including bioscience and Cedar Clinical Research . We were also pleased to announce that Michael Tan has been promoted to President and Chief Operating Officer. Michael has been instrumental in Numinus's growth to date. In his expanded role, he will now oversee all company operations and will lead strategic directives to drive revenue growth through future footprint and product line expansion. Today, Numinus is extremely well-positioned to continue our growth trajectory and expand access to important mental health therapies across North America. We now operate 13 wellness clinics, four clinical research sites, and one research laboratory. We have ample cash on hand to execute our strategy with approximately two years of cash runway.
We have built a scalable operating platform that will provide some operating leverage and efficiencies as we continue to drive growth. Most importantly, today we're one of, if not the highest revenue-producing mental health care companies offering psychedelic-assisted therapies. With a forward-looking annual revenue run rate of more than CAD 16 million based on the most recently reported pro forma quarters for Numinus and Novamind, we see a clear pathway to profitability. That is something that truly distinguishes Numinus from others in the space. With profitability achieved in the near term, our focus is squarely on making that happen. We believe we have the right tools and environment to achieve operational profitability within two years. Specifically, we have significantly strengthened revenue streams and a growing number of client services, and we see positive regulatory reforms underway both in Canada and the United States.
Our strategy to accelerate our path to profitability also includes expanding higher-margin services, increasing our business development activities, and proactively managing our operating costs. This plan has also resulted in some strategic realignments to best leverage the opportunities we see for the company ahead. This has led us to make some important decisions about where we invest across our operations and the timing of certain projects. First, following the acquisition of Novamind, it was clear to us that some intriguing growth opportunities have already been identified for locations in the United States, which we believe could generate a higher ROI than we expected to achieve at our previously announced second location in Vancouver, Canada. As a result, we have decided to postpone the second location in Vancouver and reallocate that capital to the United States-based growth opportunities we are currently reviewing.
Second, we have realigned the strategy at Numinus Bioscience, our bioanalytical research lab, to focus purely on proprietary research activities for the foreseeable future, ceasing our third-party analytical testing services for now. This decision was made in part due to changing sector dynamics and sector consolidation, with fewer companies in our space currently looking for these kinds of services. Our analytical testing capabilities remain available for our own proprietary research and for on-request projects. However, we have stopped business development activities for these services to reduce expenses. As a result, we do not expect bioscience to be revenue-generating in the near term. Finally, we have made the decision to postpone our phase I and phase II clinical studies for NBIO-01 and NBIO-03 due to the significant cost of carrying out these trials.
There have been no clear regulatory pathway to monetize in the near term. We believe this was a prudent decision until the regulatory environment for unique compounds becomes more viable. We continue to believe in the merits of these formulations and see the value of their discovery. Once we see a clear path to regulatory approvals in Canada or the U.S., we'll reevaluate launching these clinical studies. Turning to our third quarter performance, which as a reminder, occurred prior to the Novamind acquisition. Overall, we are very pleased with our results, with 7.5% revenue growth from our clinic network compared to the previous quarter. Overall, our clinic network achieved a 23.8% gross margin during the quarter and CAD 174,000 of gross profit.
The 7.5% growth in clinic revenue was due mostly to increased client appointments, which were up 5.9% from the second quarter. All our clinics experienced meaningful growth in client appointments, with significant improvements seen at our Vancouver clinic, which has the most room for capacity growth. As contributions from Novamind will begin to be included in our next quarter's performance, we expect client appointment figures will spike given the high volume of business that occurs across our new U.S. clinics. To provide some context, during our fiscal third quarter, Novamind clinics completed more than 14,000 appointments, compared to the more than 5,600 that occurred at Numinus's existing clinics. We're excited by the significantly increased scale of our wellness clinics now operating within the Numinus network.
We were also pleased that psychedelic-assisted therapies have been approved through Canada's Special Access Program during the third quarter. In May, Health Canada approved our first psilocybin-assisted therapy client for treatment outside of clinical trials, which was one of the first approvals in Canada. We continue to work with clients seeking psilocybin or MDMA-assisted therapies to navigate the special access application process. Numinus is taking a thoughtful approach to these SAP processes, ensuring that the clients we submit applications for are likely to receive approvals. This approach ensures our clients benefit from appropriate expectations and ensures Numinus remains in high standing with Canadian health regulators as we continue to drive for further access.
As a reminder, range of mental health care services alongside psychedelic-assisted treatment. These include traditional therapies, group therapies, couples therapy, and neurological care. Collectively, these services will continue to drive reliable revenue streams and cash flows across our clinic network as we grow our psychedelic therapy offering in line with regulatory reform. On the research side of our business, we continue to see opportunities for our unique proprietary processes and testing techniques, which we believe could have meaningful commercial value as regulatory changes in certain states in the United States continue to support and focus on natural psychedelic substances. Just a few weeks ago, we filed a patent application to the World Intellectual Property Organization.
This application is expected to provide additional patent protection around our proprietary rapid production process for Psilocybe and other fungi species containing Psilocybin and other compounds, and is additional to the provisional patent application we made to the U.S. Patent and Trademark Office last year. As a reminder, this proprietary process significantly increases production of psilocybin and other fungi species for the use of psychedelic-assisted therapy while reducing product variability, increasing production efficiency, and ultimately reducing commercial costs. Over the next several months, we will continue to refine our strategy for our research lab to ensure our activities are best aligned with the opportunities we see within the regulatory environment, changing sector dynamics, and with a broader clinical research organization now that Novamind Cedar Clinical Research Division has joined Numinus.
There's substantial value in our bioscience activities, licenses, and talent, and we continue to see long-term opportunities for the division as regulatory environment becomes clear in Canada and the United States. To note, our Numinus Bioscience processes one of the most, if not the most extensive licenses to work with psychedelics in Canada as well as abroad, allowing our lab to process, produce, assemble, sell, export, deliver, test, and research a wide variety of psychedelic substances, including DMT, ketamine, LSD, mescaline, MDMA, psilocin, psilocybin, and Psilocybe fruiting bodies, ayahuasca, and San Pedro. We think there may be many opportunities to better leverage this licensing in the years ahead. With that update on our strategy and operations, I'll now turn the call over to John Fong to review our fiscal third quarter results in more detail.
Thanks, Payton, and good afternoon, everybody. Our third quarter results demonstrated the strength of our growing wellness clinic network and the strategic realignment underway at Numinus Bioscience. Total revenues for the quarter were CAD 741 ,000 and was the result of an increase in revenue from our wellness clinics compared to last quarter, but was offset by the decline in revenue due to stopping revenue-generating activities at Numinus Bioscience partway through the quarter. Overall, revenue was 5.7% lower than the prior quarter, but up 31.8% year-over-year. Revenues from our wellness clinic network increased 7.5% from the prior quarter and 59.5% from the same quarter last year to CAD 731,000 .
As Payton mentioned, most of this increase in revenue is attributed to a 5.9% increase in client appointments, but also an increase in the proportion of higher-value services, including ketamine-assisted therapies. Gross profit for our clinic network grew to CAD 124 ,000 during the third quarter, representing a 23.8% gross margin. As revenue-generating activities were underway for part of the third quarter at Numinus Bioscience. Going forward, we do not expect Numinus Bioscience to contribute to revenue in the near term and will instead focus entirely on developing proprietary processes and patents that can be monetized in the long term.
Overall, our company-wide gross margin was 24.4%, up from 6.5% in the last two quarters, due to a significantly higher proportion of revenues coming from the higher-margin clinic network segment. Corporate expenses grew alongside the expansion of our business, but also due to transaction-related activities related to the acquisition of Novamind. In total, there were CAD 6.6 million of corporate expenses, which included some additional travel and regulatory costs related to the acquisition and CAD 456,000 of direct transaction costs during the quarter. Overall net cash outflow during the quarter was CAD 6.5 million, higher than normal due to cash expenses related to the acquisition of Novamind, but otherwise in line with our expectation of CAD 1 million to 2 million per month.
The loss for the quarter was CAD 7 million or 0.03 per share. In terms of liquidity, we ended the quarter with a strong balance sheet and CAD 41.8 million of cash in hand. With growing revenue streams offsetting some of our expenses, we continue to be well positioned financially to sustain our business model, pursue our long-term strategy in achieving operating profitability. As the acquisition of Novamind completed on June 10th, our first quarter of combined results will be our fourth quarter results for the period ending August 31st. We look forward to sharing the performance of our significantly larger business when we announce our annual audited results in November, and we'll also look to provide an update on key operating metrics in September. With that overview of our financial results, I'll turn the call back over to Payton for some closing remarks. Payton.
Thanks, John. With the acquisition of Novamind now behind us and the integration of our businesses, business operations well underway, we've never been more excited about the future of our business. We continue to see opportunities to expand in key markets that we believe could drive strong ROI. We are in the process of expanding many of our virtual therapy services into the United States, where Novamind has traditionally not offered these programs. Ketamine and psychedelic-assisted treatments being completed in our clinics in Canada continue to grow, and we have ample cash runway to execute our strategy within the next two years as we aim to become operationally profitable. We are also seeing positive momentum build within the regulatory space, both within Canada and the United States.
With SAP applications now being approved for psychedelic therapies in Canada, access to psilocybin-assisted therapies coming in Oregon and California potentially, and anticipated MDMA-assisted therapies reaching federal U.S. FDA approval in 2023, there's a lot of opportunity ahead. Despite this positive momentum within our business and in the regulatory environment, we continue to contend with challenging capital markets conditions. We, like others in the sector and the markets overall, have been faced with market pressures. I can assure you we are doing everything we can to get our story heard and understood. More than that, we are laser-focused on delivering results and believe the strategies we've recently undertaken have firmly positioned Numinus as a leader in the sector and a company well positioned for continued growth.
We are confident that the real power of our growing mental health platform is demonstrated in our results, we will also see it reflect in the value of our stock. With that, I'd like to open the call to questions from analysts and institutional investors.
Thank you. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Sep Manochehry from Eight Capital. Your line is now open.
Hi, and thanks for taking my question. Congrats on the continued scaling of the business. Obviously, you were kind enough to comment on the go-forward business a little bit. I wanted to ask just whether in the U.S. or in Canada, are you guys looking to provide info around reimbursement success when it comes to proportion of revenue that is being reimbursed or proportion that's out-of-pocket? I know historically Novamind had provided that for their U.S. operations. Is there m etrics like that you're looking at kind of going forward to put together in that September type update that you mentioned?
Yeah. Absolutely. Just to provide a little bit of color there as well. Novamind had done an exceptional job of having their services being reimbursed and, you know, in particular their ketamine-assisted psychotherapy services, which obviously is new territory and they've already brought on five different insurance providers to provide financial support. But do also offer a host of therapies that are fully reimbursable as well, and we've certainly looked to leverage that as we look to expand that business into other states as well and obviously up in Canada, really reimbursable services as well. John, I don't know if you wanna maybe add anything to that.
Yeah. I just want to add if that information was previously disclosed with Novamind, that's certainly something that we can continue to provide.
Yeah. I think they last kind of updated it in 2021. Yeah, I imagine it's something that can be periodically updated. Maybe just jurisdiction.
Maybe just one thing to add to that as well is being able to take those relationships and bring them up to Canada for reimbursement, in particular around our ketamine-assisted psychotherapy services. Obviously being able to transition that north of the border helps us really grow and scale our ketamine services in Canada as well, and we do look to leverage that as a short-term opportunity also.
In terms of crossover, you touched on virtual therapy and that being in the midst of a rollout in terms of kind of part of the integration. That's one thing you've touched on. Is there certain metrics you can point to whether you already said HR and marketing have already been integrated as to how far along in the integration process we are?
Sure. Yeah. Maybe just to quickly give people a little bit of a summary and an update. Novamind being primarily operating in Utah and Arizona, which were states during COVID, really saw very short lockdowns before being able to go back to in-person, never really needed or were forced into looking at virtual opportunities, and so had primarily stayed with in-person services. Obviously, that landscape was very different in Canada, and our clinic network in Canada at one point in time was at almost 90% virtual. During that period, we actually saw those services continue to increase. Numinus had a really unique opportunity to develop and grow that virtual services platform.
Now being able to take that down into the U.S. where there are a lot of folks that obviously continue to be interested in in-person care. Being able to also offer that virtual platform really helps us grow and scale quite rapidly in the U.S., obviously, because of not needing the physical infrastructure. That work is underway and should be already starting to be integrated now, and we see that really picking up over the next couple of quarters.
Do you think kind of that's something that drives this quarter's revenue for that combined business in terms of the period ending in August? Or is that something that's
Yeah.
Okay.
I think you'll start to see that growth or start to see that be represented in some of the growth. I would say this quarter, but in particular, probably the following couple quarters as well, as obviously this quarter's been busy with just integrating the two businesses from an operations standpoint.
Got it. Just one on the regulation part. You touched on some of the specific regulations in the U.S. that might be to your favor. In Canada, there's been some updates in BC. I'm wondering if since kinda last quarter, if you guys have gained some clarity as to whether you'd be able to be, for example, qualified in psychedelic administration if there is a decriminalization of, for example, psychedelic drugs, if that's something that's been assessed or if that's still in progress.
Yeah. I think in British Columbia, you know, to your point around some of those regulation changes, we're still waiting for a little bit more clarity from Health Canada in regards to what that means for psychedelic therapy services. I would kind of bring us back to SAP as well, where we've spent the last couple of quarters really getting a deep understanding of what it is that Health Canada is looking for in regards to those SAP applications, and obviously highlighted by our approval for psilocybin-assisted therapy, but also a really significant amount of legwork being done to start to get approvals for MDMA-assisted psychotherapy, which Health Canada has not approved yet. But we feel very, very clear and confident on that process. Obviously, our collaboration with MAPS is a big initiator for that.
We do anticipate over this next quarter to potentially see some momentum in that direction and obviously highlighted by MAPS anticipating MDMA being legal and approved through the FDA process by this time next year. You know, similarly with what we're seeing in the United States, feels like every week there's a new state that's either decriminalizing or even taking a step further and moving towards legal approval. Oregon, obviously, out in front with anticipating the change for natural psilocybin-assisted therapy in January of next year. States like California are really picking up steam and probably along a similar kind of trajectory. You're seeing a lot of widespread change within the United States and Canada.
We do anticipate within the next 12 months, those services really starting to expand as well.
Got it. Then just the last one. You mentioned for September, you may provide kind of KPIs that you look to. Is that things like, volumes in terms of appointments, or can you kind of characterize the sorts of things you guys are building in to track, whether it's patient success measures or clinic flow or just kind of top-line things like appointment volume?
Yeah. Primarily non-financial. Maybe I'll let John and maybe Jamie answer that one.
Sure. Definitely non-financial information, like you said, except some information around clinic visits, the types and percentage of treatments and services, various service lines.
Got it.
That's the main things we're looking at.
Got it. Thanks so much for that detail. Really appreciate you taking my questions today. Congrats on the continued growth.
Thank you.
Sounds great. Thanks.
There are no further questions at this time. I would like to turn the call back to Payton Nyquvest.
Thanks, operator. Thanks everybody so much for joining us for our conference call today. I look forward to speaking with you in November when we will report our fiscal fourth quarter and annual 2022 results.
This concludes today's conference call. Thank you for attending. You may now disconnect.