The release of quarterly financial reports over the past few weeks is providing some much-needed insight into the state of the industry. It is becoming apparent which companies are rising to the top and which are struggling to stay afloat. The recent release of Braxia Scientific’s financial statement raises some questions about its ability to do the former.

A press release from the company bragged about positive revenue growth from its ketamine clinics. Braxia did report a 26% increase in treatment volume and a 27% increase in revenue from its clinics from the previous year. However, the whole picture is a bit more complicated. 

As of March 31, 2023, the company had about $8k in working capital and $1.46 million in total cash and cash equivalents. Given its burn rate of $13.1 million for the year, the current cash runway is not long enough to get the company off the ground. 

The company recently completed a phase 2 trial for psilocybin. Results have not been released yet, but if Braxia plans to continue onto phase 3 with the treatment, it will need a significant amount of capital, which is not easy to come by in the current market conditions. 

Braxia, like many companies in the psychedelic sector, is still a long way from turning a profit. Revenue from its clinics is just barely higher than the cost of sales.

Over the past year, many psychedelic biotech companies have been narrowing their focus to help reduce cash burn. Ketamine clinics have been a tough business recently. Many companies have had to make the difficult decision to shut them down and narrow their focus on drug development pursuits. While other companies were selling off their clinics, Braxia was opening new ones. 

The CEO, Dr. McIntyre, said about the company’s financial state: “It has been a difficult time for companies in this nascent industry. Accessing capital in the public markets has been challenging.  The Company will need to access alternative sources of capital if the public markets are not available or seek other partnerships to support our growth objectives.  If we are unable to raise additional funding in the short term, we will look at alternate courses of action, including, but not limited to, further cost reductions, restructuring, and the potential scaling back of clinic locations. I remain confident that we can continue to grow our promising clinical business.” 

Clinics offer biotech companies a more immediate source of revenue. Though, it isn’t enough to financially support clinical trials, especially since new clinics are cost-intensive and take a few years to actually start turning a profit. 

If the company is to survive, we will see some significant fundraising in the coming months. Another thing to look out for from Braxia is the release of its phase 2 trial with psilocybin. The results, whether positive or negative, will likely affect investor confidence in the company at a time when they need investors to take a bullish position.