Field Trip Health Ltd.

Field Trip Health Ltd. (CSE: FTRP) is a global leader in the development and delivery of psychedelic therapies, which are used for mental health conditions like depression, anxiety disorder, trauma, or hallucinations. With the Field Trip Discovery, the company's research division leads the development of the next generation of psychedelic molecules and conducting advanced research on plant-based psychedelics, and its Field Trip Health division is building centers for psychedelic therapies across North America and Europe along with the digital and technological tools that will enable massive scale.

Key highlights 

• Open psychedelic-enhanced therapy center in Houston: In the city of Houston, Texas, the organization recently announced the launch of its fifth site in the United States. The Houston site, which is located in the River Oaks District, is the second Field Trip Health centre to open this year. It has signed leases and begun work on Field Trip Health centres in San Diego, California, San Carlos, California, Seattle, Washington, Washington, DC, and Fredericton, New Brunswick. 

• Developing digital tools: In October 2020, the company launched its proprietary digital portal, along with an updated version of its Trip mobile software application. The company’s "Trip" app’s user base grew by 144%, increase from the second fiscal quarter. The group also anticipates a "Trip" premium version would be released in the second half of calendar 2021.

• Boosting liquidity: Recently the company closed CAD 12.7 million public transaction and subsequent CAD 20 million bought deal offering in January 2021 strengthens its ability to further advance on the development of FT-104 and continue expansion of Field Trip Health Centers in North America and Europe. Furthermore, it has also closed the bought deal form prospectus offering. In connection with the Offering, Field Trip issued 14.66 million common shares, at a price of CAD 6.50 per Common Share, for aggregate gross proceeds of CAD 95 million. 

• Negative Cash from operating activities: During the nine months ended December 31, 2020, the company’s cash used in operating activities stood at CAD 9.0 million, primarily due to the net loss of CAD 15.1 million partially offset by the non-cash items such as share-based payments of CAD 2.3 million, reverse take-over costs of CAD 2.1 million, depreciation and amortization of CAD 0.8 million and net changes in non-cash working capital of CAD 0.6 million. 

Financial overview of Q3 2020

Source: Company

• In Q3 2020, the company posted its patient services revenues of CAD 0.31million.
• The company witnessed increase in each line item under its operating expenses, as a result its total operating expense increased to CAD 5.9 million, against 1.0 million in the previous corresponding period.
• The net loss for the reported period stood at CAD 8.0 million, against CAD 1.0 million in pcp, partially offset by exchange gain from translation of foreign subsidiaries.

Risks associated with investment

The Company has negative cash flow from operating activities and has historically incurred losses. If the Company continued to have negative operating cash flows in future periods, it may need to deploy a portion of its existing working capital to fund such negative cash flows.

Stock recommendation

The organization is making rapid progress by building Field Trip’s complementary business lines that focus on both the development and the delivery of psychedelic therapies. With its early-mover advantage, and a strong and growing reputation as thought leaders in the industry, the group is well-positioned to propel its growth in the emerging market of psychedelic therapy. However, the company is yet to report stable revenue from its operation and higher losses are an area of concern; hence, we prefer to remain on the sideline. On the valuation front, the stock is available at forward EV/Sales multiple of 15.3x, which is higher compared to the Industry median multiple of 13.5x. Hence, considering the aforesaid rationale, we have given an “Avoid” rating in the stock at the closing price of CAD 5.69 on May 7, 2021.

1-Year Price Chart (as on May 7, 2021). Source: Refinitiv (Thomson Reuters)

Mind Cure Health Inc

Mind Cure Health Inc (CSE: MCUR) is a mental health and wellness company, which focuses on the development, manufacture, and distribution of a branded line of organic, functional mushroom extracts. 

Key Highlights:

• Bearish Technical Trend: The stock of MCUR slide ~45% and ~43% in the last three months and six months, respectively. Moreover, the stock is trading in a downward trend and is correcting since December 14, 2020 and failed to make a positive comeback.         

Source: Refinitiv (Thomson Reuters)

• Recent Collaboration and equity raise: The company entered into a partnership with Speak Ai Inc. and SOMA Breath Inc., wherein the company would focus on developing science-backed, personalized psychedelic and non-psychedelic mental health care at scale. With the above collaboration, the group would optimize several inputs like biometric data, location, weather, and other variables, which would further enhance the effectiveness of psychedelic treatments and would support the company’s upcoming growth strategy. Moreover, the company also raised CAD 23 million of equity to support its liquidity.
• Management Update: On April 22, 2021, the company reported appointment of Mr. Wolfe for the position of CFO and Ms Larissa Chaikowsky for the post of Director.

Financial Highlights for the nine months ended February 28, 2021:

• For the nine months ended February 28, 2021, MCUR incurred total expenses of CAD 5.920 million compared to CAD 3.283 million. Expenses include consulting fees and employee payroll of CAD 1.141 million and Investor relations and marketing expense of CAD 1.465 million. Moreover, the group reported share-based payments of CAD 1.882 million.
• Net loss widened to CAD856 million during the nine months, which includes an income from interest earned amounting to CAD 0.006 million.
• The group reported Cash and cash equivalent of CAD 21.230 million, while total assets were recorded at CAD 24.724 million.

Source: Company Report

Risks: The company is yet to report an income till date and continuation of such trend would increase accumulated deficit, which might lead to liquidity crunch.

Stock Recommendation:  The company is developing technology and products, which would support the patients suffering from mental disbalance. Moreover, the company is conducting research and discoveries which would further lend support to psychotherapy. This would increase the business prospect considering the recent trend of mental health concerns. However, on the flip side, the group is in the nascent stage and is yet to report any income from its products and technology. Lack of revenue for an extended period of time would affect the financial flexibility. We prefer to remain on the sidelines on account of lack of growth drivers. Hence, considering the above facts, we suggest an ‘Avoid’ rating on the stock at the last closing price of CAD 0.375 on May 07, 2021.

One-Year Price Chart (as on May 07, 2021). Source: Refinitiv (Thomson Reuters)

Disclaimer

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