Irwin wants to open 100 ketamine clinics by 2023’s end.
Cantor Fitzgerald analyst Pablo Zuanic initiated coverage on supplement company Irwin Naturals Inc. (OTC: IWINF) with an overweight rating and a $7 price target. The stock currently trades at roughly $1.58 per share. The shares are listed on the Canadian Securities Exchange (CSE) with a limited free float, but a NASDAQ listing is possible in the future.
Irwin has a 28-year track record of growth, logging $100 million in revenues in nutraceuticals, but has the goal to be the leader in psychedelic mental health clinics. Irwin hopes to open 100 clinics by the end of 2023 that will provide ketamine-assisted psychotherapy and later other psychedelic-based treatments as they become federally legal.
The analyst tempered the robust rating by noting the company has no track record in running clinics. However, the company is banking on its 80% brand recognition and its ability to do all stock deals with potential acquisitions. The company hopes that with its war chest from selling supplements, it will be better positioned than others in the field. At this time, Irwin has plans for at least 50 clinics by the end of 2022.
Analysis
Zuanic wrote in his report, “After generating $100Mn in sales in CY21 ($88Mn in nutraceuticals, $12Mn in CBD), Irwin has ambitious sales growth targets as it scales up its ketamine clinic strategy and projects revenue to double in 2023 and again in 2024 (for modelling purposes, to be conservative, we are below that). We model 100 clinics by 1Q24 and no more after that, but we realize that number could also double by the end of 2024, according to the company’s stated goals. We project an EBITDA of $61Mn for 2024 and a $50M run rate by the end of 2023 (vs. $7.2Mn now if we annualize 1H22). Our Dec. ’23 price target of $7.00 vs. the current price of $1.51 takes a blended approach, 45% on a SOTP valuation method, 50% on an EBITDA-based multiple of 12x, and 5% on a DCF TAM-derived price of $85. Given the sector’s potential, we believe TAM should be considered. If we say Irwin can reach 20% share, 45% EBITDA margin, and conservatively take 10x EBITDA (see clinics comps), the stock could be worth $45Bn (vs. a $505Mn EV now), taking a 5-year view ($34Bn in PV terms). Still, as we have seen in the cannabis space, TAM-based valuations are theoretical in industries with great regulatory uncertainty. In the case of Irwin, moreover, we would say execution and franchise development risks are greater than for a top MSO in the cannabis space.”
The analyst outlined the many risks that the company could face, such as a regulatory crackdown on Ketamine clinics and a slowing of psychedelic drug legalization. The report also suggested that potential patients could slow down their adoption of the treatment and that the company might not have all the money it needs to accomplish the goal of 100 clinics. Acquiring and integrating numerous clinics across various states with varying laws could be difficult.
Irwin Naturals has said there is a 1-year lock-up on the stock used for deals, and management hopes that instead of wanting to sell the stock, those parties will remain partners. Zuanic says he will watch for that risk. The report stated, “There is also the risk that some of the existing 14,000 behavioural clinics also decide to get into the psychedelics-assisted therapy segment. If Irwin can deliver on its 100-clinic target, it should garner a strong, first-mover advantage.”
Expansion
Irwin Naturals also announced that it had reached a binding agreement to buy Ketamine Infusions of Idaho, PLLC, which operates a clinic in Idaho Falls. It will be the chain’s first in Idaho. Ketamine Infusions will be paid in cash and stock, with the maximum payable contingent on several milestones related to profitability and operational goals. The company said it would provide more details at the closing.
Klee Irwin, CEO of Irwin Naturals, said, “We are so impressed by the care and expertise that Christina Stubbs and her team provide, and we are truly excited to welcome this clinic into our rapidly expanding family. Additions like this are the way we’ll realize our goal of putting Irwin Naturals Emergence at the forefront of psychedelic mental healthcare in this country.”
Competition
Companies such as Delic, Revitalist, Numinus, and Field Trip Health & Wellness (OTC: FTHWF) already offer Ketamine-assisted therapy. Field Trip recently reported that its 12 clinics generated $1.8 million in the most recent quarter.
Cantor Fitzgerald is hosting a “Symposium on Mental Health Clinics” on Tuesday, October 11, 2022.
Disclaimer: https://www.greenmarketreport.com/cantor-gives-irwin-naturals-a-7-target-price/
Posted by: Times Of Hemp, TOH, #TOH, #TimesOfHemp
