Good afternoon. Now presenting Stephen Lemieux from NeuPath Health.
Hi, welcome to the NeuPath presentation. My name is Stephen Lemieux, and I am the CEO of NeuPath. Skip ahead here for looking again on those measures. Just a little bit to set the stage. NeuPath is one of Canada's largest operators of chronic pain facilities in Canada. We currently operate 13 facilities, primarily in Ontario and Alberta, treating everything from MSK to chronic pain. We have 160 healthcare professionals that work with us. That is about 100 physicians, and those physicians are across a range of specialties. You can think about physiatry, GPs with pain, anesthesiologists, orthopedic surgeons, and neurologists. We treat approximately 200,000 patient visits a year, and majority of our business is a referral business. We have a referral network for over 5,000, mostly GPs, some dentists, and some other specialists that refer into us.
We have a high and growing patient satisfaction score, just north of 4.6 out of five. Just to frame the business for everyone. This is a CAD 30 million market cap business in mid-September. We are running about a CAD 90 million revenue run rate. We did just under CAD 45 million in the first half. CAD 3.2 million of EBITDA, which is about just over 7% of revenue. I am going to spend a little bit of time here on capacity. Capacity utilization, we are currently at 56%. How we measure this is our ability to fill every available patient appointment spot, assuming we work a 40-hour workweek, Monday to Friday. It is not a ceiling on where the opportunity is for the business. It is just a measure of how we are able to grow our network.
Clinics where we are approaching 100%, we will expand those facilities into adjacent spaces, look for new real estate to make sure that we can treat the patients and meet the needs of our physicians. Clinics that are below capacity, as I talk about recruiting new physicians in, this is where we bring the physicians in. That is the opportunity where physicians have to join the business and treat our patients. 56%, this has grown from 52% last year, and that is a combination of adding new physicians, seeing more patients, while we have also put new capacity into the market. On our financial side, just under 10% top-line growth and around 8% adjusted EBITDA growth, and I talked about the capacity. The key thing I want to mention again to growth opportunities is we have net debt of CAD 2.3 million and that is falling. It is a cash flow positive business.
We are just under 4.4x levered. As we look at, I will talk about bringing new doctors in. I will also talk about M&A. We have a partner with National Bank. We have great leverage. We are willing to take the leverage up to 2.5x to 3x to go out and acquire that right opportunity for us in the future. On growth, we had six new physicians that started. Just to give people an idea of the economics behind a physician. A typical physician will, if they work three days a week, that is about CAD 1 million of revenue. This is a 20% gross margin business, so that means about CAD 200,000 of new cash flow. It costs us roughly CAD 40,000- CAD 50,000 to recruit a physician.
It is a great return on investment, and a physician can get their practice up to scale, usually within six months. This is a business, unfortunately, that does not have a patient issue. We do very little to market in most of the regions we are in. We have lengthy wait lists, so for some procedures can run anywhere from two to four months. More complicated spinal procedures done under image-guided, we could have wait lists upwards of 18 months. The whole business here is about bringing new physicians in to treat all the patients we have, whether we recruit them, invest in technology, which I will talk about, or acquire them through other clinics. With this group of physicians, we had a few join us from the U.S., some from Europe. It was an interesting mix here.
We had a neurologist that joined us that is bringing more headache migraine business under our fold. We had a pediatric pain specialist join us. Before we were only treating adults. Now we have brought that pediatric specialty in, so some of our doctors are getting trained to start treating people over the ages of 16 or 14. Then some interventional radiologists in the U.S. that can do more of the complicated spinal procedures as we keep investing in fluoroscopy equipment. Briefly our footprint. In Ontario, we are pretty much well represented from Windsor through Ottawa. We are looking at ways to expand into Northern Ontario. Within Alberta, we are looking to expand both to the south into the Calgary region and north of Edmonton. Then we are also looking at opportunities in British Columbia, Saskatchewan, and the Maritimes at this time. To give everyone a perspective on the market.
As we talk about chronic pain, this is one in five adults in the Canadian marketplace live with chronic pain. One to three over the age of 65. This does not include the pediatric market or the acute market, which we are expanding into. It is a very fragmented market. McMaster University does a good job of publishing all the chronic pain clinics in Canada. There are about 250 pain clinics, which includes the hospital centers. Of those, a lot of them are, I would say, single doctor-owned, whether it is just one facility or two, and this is kind of the target market we look at. Of the 250, probably 140, 160 are good targets. That is the group of physicians that are growing practices, have done a good job of growing but no longer want to run the back office administration, which is where we come in.
Some of the clinics we are talking to, they are like, "We used to practice three or four days a week. Now we are doing two days of clinic time, two days of running back office." For a physician, that includes all the stuff that we manage. Managing the regulatory environment with the government, because all of our facilities are out-of-hospital inspected premises. They go through regulatory inspection. You can think of them as one level below a surgical center. They have to do all that on their own. They are doing finances, HR, ordering medical supplies, dealing with staffing, filling physician schedules. The value add we add for these groups is you come in, everything is turnkey. All you do is you see your patients. We guarantee you will get out when your day is over. We will manage your day so you do not run behind.
For our physicians that are doing image-guided procedures, that is your suite for the day. You will not be bumped out like you would in a hospital setting if there is an emergency situation. It gives them that comfort of knowing they will get to come in, do a good day work, see all their patients, and not have to worry about working hours after their shift because they still have a backlog of patients to see. When you think of areas we treat, and knowing we first start talking to people, it is like chronic pain, and a lot of people, it is like, it does not really apply to me. When you start breaking it down to what this is, you have got anything that, talk about arthritis pain, back pain, head and neck pain, migraines, even sports injuries.
One of the new doctors we brought in was the sports medicine doctor from University of Hawaiʻi. He is helping us build out our sports medicine business in Ontario. We do everything to complex pain, like complex areas like fibromyalgia, where there is no real cure for this. It is just providing a good treatment path for a patient to help them, give them the tools to manage their pain, to help them live the best life that they can. Some of the things that give us an advantage. I talked briefly about having regulated healthcare facilities. All of our clinics, the government comes in on a regular basis, inspects them. You have got to remember, we are giving our anesthesiologists doing spinal injections. We are doing spinal RF procedures.
You are talking about pretty close to a sterile environment, not to the level that surgery needs, but one step below. A lot of our physicians, it is all specialized equipment, like ultrasounds, EMGs, fluoroscopy. Fluoroscopy is just real-time image-guided procedure, so the doctor can target the exact area they need to hit while they are doing their procedure. We have had a strong organic growth profile to date, so with the patient backlog, we have really been focused on bringing new physicians into the market or into our business to treat those patients. A lot of the growth you have seen, the numbers I presented early, none of that is M&A related. That is all from organic growth and bringing new physicians in. We have a strong growing cash flow, this is helping us invest in new equipment, invest in new facilities to attract new physicians to our business.
We talk about growth priorities. This is, I will slow it down a little bit. It is all about adding available physician hours. I have talked about physician recruitment. How we tackle that is we have a recruiter that works with us in the Canadian marketplace. We have a recruiter that works with us for the U.S. and European markets. Then we have recruitment from word of mouth, like our own physicians or our own staff recruiting colleagues that they know. That is the biggest driver we have. The second is having our own physicians add time with us. A lot of physicians, when they come and join, they will be, "Let us give you a day a week. Let us try out how this works.
Let me get a feel for community-based pain before I step away from a hospital setting." As they get more experience, get comfortable with the offering we do, a lot of them will add and go to two days. The majority of our doctors do three days a week. That is a good average because some of them will still keep their surgical rotations, still do ER shifts to keep their hospital privileges. We typically see doctors going about three. You will see that as we, like the doctors that we just brought on, majority of them are already at three days because they have come through the LMIA process, so they have to guarantee us 30 hours. Some of the ones we recruited in Canada last year started at a day a week.
Most of them are up to three days, and you will start seeing that growth trickle through our numbers. The other piece is investing in technology. You can think of a typical physician day, like think of whether you see your GP or specialist, you are in that meeting with them. Majority of the time, historically, they are taking notes or they are typing at their keyboard because keeping, like charting and doing all their records, that is a very onerous part on physicians. It is very detail-orientated. Adding tools like AI scribe, where when you walk in now, the doctors wear a microphone, it records the entire conversation. It improves the patient experience because now the doctors pay attention to everything that you are saying. They do not have to worry about taking notes. It will all be transcribed for them after the patient visit, but it is more one-on-one time.
The other key to this is as the systems get trained, when they go in our clinics, they will leave the meeting, the nurse will come in, do a discharge. They will go to the chart to see the transcription. The AI tools will be like, "Okay, we heard this during the dialogue with the patient. You did not talk about this, or maybe this was left open," so the physician can go in and just provides a better continuity of care at that time. Then their charting process becomes easy. A lot of them in a 20-minute appointment spot can finish the patient visit and do the charting and move on to the next patient. For our doctors, we are rolling this out across our clinic.
We're probably 15% or 20% adopted right now, but the physicians that have early adopted this are seeing on average of three to five more patients a day over their normal eight-hour day, which is equivalent to almost an hour and a half to two hours of new time that they've been able to give to the business, is why you're seeing record patient record increases in patient visits, and that's adding to some of the growth that you're seeing as well. Clinic expansion. We've opened a clinic just recently in Guelph, and this was a group of GPs that approached us to put a pain clinic into a new medical building they're looking at. This is another area that we look at. In addition to acquiring groups, we're talking to GPs where they're opening new medical practices.
They're trying to offer a continuum of care for their patients, whether it's cardiology, pain, and so on. There's opportunities like that we can partner. It gives us a referral source because the GP business is located right into the clinic. It helps us grow from that perspective. Broader services. We're always looking and talk to pharmaceutical companies. Arthrosamid was our first pharmaceutical partnership. This is a product Contura had. It's a permanent knee injection for people suffering from arthritis. It's a cash paid business. It's around CAD 4,300 an injection. We launched it last year in May to a small group of our doctors. We're slowly rolling that out as doctors adopt it, see the success they're having, and they add it as a tool to their toolkit. We don't force doctors to use any treatments.
It's all based on what that doctor thinks is in the best interest of their patient. It's running at about a CAD 1.4 million, CAD 1.5 million run rate right now. Other services I talked about, like bringing the pediatric pain doctor on, so now we can treat pediatric patients. We have the sports medicine doctor that's in, so it allows us to expand more into the sports medicine. Part of the recruiting is we're not looking for just the same doctor. Pain is so vast and diverse. You can think from sports injuries all the way through to stuff requiring surgery. There's a big opportunity here to recruit doctors that all bring something different to the table, and that can not only add their practice to our business but can help train our physicians to add that as a tool to their toolkit.
Selective acquisition. The difference I talked about, like recruiting a doctor, it's a good return on investment. On the acquisition side, you're paying a multiple of EBITDA, so it's not as a quick return on investment as recruiting, but we do have a number of these conversations going. It is a long process to close some of these. I'll just give you an idea of what a typical cycle's like. When we first get introduced to doctor groups, their biggest question they ask us is, "Are you going to dictate the medicine I have to practice to hit a margin, or do I have full discretion to offer the right care that I think is appropriate for my patients?" The answer is that doctors get full control over their practice, but it takes time.
What we do is we introduce any doctors we are looking to bring in to our group of doctors. We invite them to our physician forum we run once a year. Give them the comfort that everyone else that has joined us, they still have full reign over their business, no matter how long they have been with us. As we get through that comfort piece, it is getting reliable and recent financial information from the physicians that we can audit and use to value what the business is. Then the last part is discussing valuation with physicians. Some get it, and they understand valuation multiples. Some it takes a longer discussion. Then it is really just getting their time to negotiate a definitive agreement. As you imagine, these physicians are busy, especially when they run their own practices. A lot of them doing surgery.
There are times that we are fortunate to even get a few hours of their day, like in an evening or on a weekend, to take advantage of it to try to move this process forward. It is very different from if you think of a corporate to corporate acquisition, where the teams sit down for a week, but plow through it and get it done. It is something the doctors are focused on. We have groups we have been talking to for probably three, four years that are at different stages of those discussions. That is the part that really bogs down is when you flip a 40, 50-page agreement to a physician, and they have got to go through a lawyer and work through that piece. Just expanding on why physicians choose NeuPath. The other piece, too, is we have a national network.
I talked about all the different specialties we have. If a physician is starting, coming out of university, they have got a great group of physicians that they can talk to, talk about their cases with, learn different skills, and learn different procedures. For physicians that are more mature in their practice, it gives them an opportunity to mentor. Like in university in Alberta, we have residents that come through our program. In Ontario, we just partnered with TMU’s med school, so we have 47 residents that are coming through our clinics now. So it gives those physicians a chance to mentor new residents, but also learn from their colleagues. We continually invest in technology. I am fortunate to have Sandee with us today.
He is our Chief Information Officer, but he will spend a lot of the time with physicians in their clinics and just understanding their workflow, what we can do better, what technology solutions are there, and then we have the capital to invest in those solutions. Then they get access to modern equipment, like investing in fluoroscopy, ultrasound. Different from a hospital model where they are constrained by budgets, we look at it as a return on investment. We are investing in fluoroscopy. That brings new doctors in, and depending on the number of days we get, that return on investment could be, a payback could be within six to eight months of putting one of those machines in our clinics. We do our physician forum every year, so we bring all of our physicians together. They get to sit with all their colleagues.
They choose the topics they want to learn about. This year we did, we talked about mental health, AI technology, and different procedures, new techniques that they could do, like even from dry needling to help their patients. Then we provide the full professional environment for them to come into, professional nurses, medical staff, and a full office, back office. On our cap table, we have a very clean cap table. So 64 million shares outstanding, fully diluted. Only stock options and RSUs. No warrants, and about a CAD 32 million enterprise value. We have 27% institutional ownership. The largest investor is Claret out of Montreal. They own 12%. They helped us invest in our expansion into Edmonton and have been a great partner with us throughout this. Board and management includes Bloom Burton.
They own roughly 8% of the company. The rest of it is owned by myself, our leadership team, and members of our board of directors. We have an active share buyback program that has been in place for about 18 months. We are just a little bit higher this now. We are about 1.5 million shares that have been bought back and canceled. Just to wrap up here, it is a simple business model. This is about bringing in new physicians into our business to generate more top-line revenue and cash flow, and there are multiple ways we can do that. So through bringing new doctors in, adding new services, improving the technology that they use to improve their work efficiency, and through M&A. There is a growing demand for pain treatments.
We are seeing it in our space, and you see when you talk to new clinics, the referrals and trying to help these patients navigate through a system where it is burdened by long wait lists. It is hard for them to come in and solve some of the problems that they have. It is really just what we can do as a company to be a solution with this and try to reduce wait lists. We are working better with the academic institutions. We have just implemented a pilot program with an ER in the GTA where any patients that come in now that are showing chronic pain situations, they get referred directly to us, and we try to see those patients within one or two days to take some of the backlog out of the ER system.
We have a great leadership team that has experience both in the medical space, the technology space, to really drive a lot of the growth initiatives that we have. We have a low market valuation compared to our peer group. We are trading roughly around the five. The peer group is roughly in that 8-9 times range. With that, I will open up to questions. Jason.
Just thinking about growth in this business, and it looks like you guys are going to add maybe 10 to one doctors by the end of the year, maybe two more to seven.
Yeah.
If the analysts have you doing about CAD 7.8 million this year. If I look at this business over the next three to five years, not only you're only in Alberta and Ontario.
Yeah.
Is the plan just to go right across to maybe B.C., Saskatchewan, Manitoba? Where do you see this one?
Yeah, my vision for this, and if we look five years out, is to have NeuPath be present in every province across the country and become that brand where if someone's suffering from chronic or acute pain, it's like, "I want to be referred to NeuPath. That's the place I want to go," and building that standard of care across the country. Yes, Alan.
You said your NCIB is active.
Yeah.
How many shares since when? How many shares have you bought back and at what price?
Yeah. So it's been in place for 18 months. We bought back 1.5 million shares. The range is probably from CAD 0.25 upwards to the high fifties. Yep.
What level of EBITDA margins are you guys really expecting, and optimal utilization levels?
Yep. This is a good, great question.
For your existing clinics, and where do you think it makes the most
Yes. You think a mature clinic that is running at capacity, it is roughly about, let us say, a 15%-17% four-wall EBITDA in those clinics. As a consolidated business, as we start approaching that CAD 100 million mark, the target is to get EBITDA into that 9%-10% range. As we grow into that CAD 120 million, CAD 140 million, somewhere in that 11%-12% range. Yes.
How long does it take to fully ramp up a doctor? The first few months, and once it is fully ramped, what is the average revenue you expect?
Yeah. It's typically within the first six months. What we'll do is, you think of the Guelph location that's new. We started going around to the market there saying, "We're coming." We built the wait list. When that doctor started, the wait list is already there. When they first come in, the first few months are like seeing all the patients, doing their consults, developing treatment plans for the patient. Then the back six months, you see it ramp up. Typically, I'd say if they're doing three days a week for us, they can do upwards of CAD 1 million in top-line revenue. Okay. Oh yeah, one more.
These calls or presentations talk about the bottleneck being the physicians.
Yes.
Can you talk a little bit about that and how that's going?
Yeah. That's our biggest bottleneck is finding physicians. We've been fortunate this year. We started investing last year and this year in our LMIA status, which helps us immigrate doctors in from Canada and Europe. We've got our status. We've initially got six spots, and we can expand to 12. We're still looking for that. That's the short-term solution. The long-term solution is we're partnering with TMU. As those residents go through medical school and they start picking pain as their specialty, they can come through and work with us. It's what we see working in Alberta, and now we're in talks with York University and different schools at that level. It's really just the recruitment as the government. You're starting to see the government. You think of Ontario, they've added TMU, York University.
They are starting to build new medical schools, open up spots. That will help create some long-term stability in the doctor market. Perfect. I just want to thank everyone. I will be around for a bit, and we are at table 50, so enjoy the rest of the conference.