Mental Health Clinic Poised To Become Leader In A Projected $50B Industry, Analyst Says

Zinger Key Points
  • Currently, Irwin Naturals has 18 clinics in the U.S. and licenses its brand in seven states for THC sales.
  • The company plans to provide ketamine-assisted treatments and other psychedelics-based therapies.

Irwin Naturals Inc. IWINF reported Tuesday a 7% year-over-year decline in revenue to $22 million for the third quarter of 2022.

The Los Angeles-based company attributed the revenue drop to supply issues in the CBD segment.

Nevertheless, Irvin Naturals CEO Klee Irwin said that the company is pawing its way to becoming a leader in the psychedelics sector.

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"In Q3, Irwin Naturals moved close to becoming the world's largest chain of dedicated psychedelic mental health clinics," he said.

Cantor Fitzgerald's analyst Pablo Zuanic is of a similar opinion.

The Analyst

Zuanic retained an "Overweight" rating on the company stock while lowering his price target to $6.20 from $7.

The Thesis

"We rate the stock Overweight on the potential that Irwin will become the leader of the mental health clinics via its roll-up strategy and leveraging its nutraceuticals brand," the analyst said.

The company plans to provide ketamine-assisted treatments and other psychedelics-based therapies once the substances become legal on the federal level.

"Assuming that in the next five years, 15% of the U.S. adult population with a diagnosed mental illness (15% x 25% x 258mn) uses ketamine-assisted therapy and other psychedelics-based therapy (if legal by then), the market could be worth ~$50Bn (taking an average of $5,000 per patient for the treatment)," Zuanic said in one of his recent notes.

Currently, the company has 18 clinics in the U.S. and licenses its brand in seven states for THC sales. On Friday, Irwin completed the acquisition of the assets of Clare Clinic, Inc., which is doing business as Florida Mind Health Center.

Irwin's further plans include having 100 clinics under its banner by the end of next year. However, Zuanic is not that optimistic.

"We have tweaked the ramp to 100 clinics by March 2024 and lowered our sum-of-the-parts assumptions, all of which explain our reduced price target," Zuanic said Thursday.

Touching on the third-quarter revenue decline, Zuanic identified several reasons.

"The decline was caused by a loss of distribution in the brick & mortar channel (stores/doors) for the nutraceutical lines, as well as inventory destocking by the trade in general," he said.

Price Action

Irwin's shares traded 1.33% higher at $2.28 per share at the time of writing on Friday morning.

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Photo: Courtesy of Maxim Hopman on Unsplash

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Posted In: Analyst ColorCannabisEarningsNewsPenny StocksPsychedelicsPrice TargetReiterationTop StoriesMarketsAnalyst RatingsCantor Fitzgeraldfinancial resultsKlee IrwinPablo Zuanicpremiumthird quarter report
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