In the 2022– Year in Psychedelics Report, we predicted that 2023 would bring about the downfall of several psychedelic companies that had not been wise with their strategy. It seems that the time has now come. Over the last month, several companies have announced the closure of psychedelic clinics worldwide, and one of the industry’s brightest prospects, Field Trip Health ($FTHW), is one of them. The company has also announced it has obtained CCAA protection, leaving everyone in the industry wondering what the future holds for Field Trip Health.
Field Trip Health is a wellness company focused on creating a new form of holistic treatment for mental health conditions. Currently, their clinics provide ketamine therapy along with integration support and plan to offer other forms of psychedelic treatment as they become legal. Unfortunately, the current state of the company leaves us wondering whether it will survive long enough to see that vision come to fruition.
There have been a few concerning announcements from Field Trip Health in the past few weeks. First, on March 15 they announced the closing of five clinics in the network. The clinics closing are in Chicago, Washington DC, San Diego, Fredericton, and Seattle. These closings were– presumable– in preparation for the receiving of a letter that came just a week later.
On March 22, Field Trip Health announced that it had received an order for creditor protection from the Ontario Superior Court of Justice. CCAA protection allows companies that are nearing bankruptcy the time to restructure and create a plan to settle debts and continue operations. So, while the company is not officially closed yet, things certainly don’t look good.
It is impossible to be sure of what the future holds for Field Trip Health and its Clinics. The closing of the five clinics leaves just four locations open. Though this will reduce company expenditures, it will also reduce revenue. CCAA protection will allow the company to restructure and attempt to continue operations. The company does (theoretically) still have a chance of survival. However, there is no way to spin this positively– things do not look good.
It is unfortunate for the patients who have been receiving treatment through Field Trip Health, as their holistic approach is difficult to come by. The company will continue operating the four remaining clinics and its online treatment operations for people in New York for now.
There is yet to be any information about the state of the company, apart from the two press releases that came out in March. We reached out for a comment but have had no response. More information is needed to fully understand why Field Trip is in this mess, but we can make some speculations based on the company’s activities over the past few years.
There is a lot of speculation out there as to why the company is in trouble. The failure of a company can’t be narrowed down to just one issue– there was likely a series of poor decisions based on unrealistic expectations that put Field Trip Health in the position that it now finds itself in.
Last year, we saw many people in the psychedelic industry– investors and executives alike– hit with the reality that the industry wasn’t going to be quite the instant gold rush that was initially expected. Many companies, in realizing this, moved to cut excess cash burn and increase efficiency. However, it appears that Field Trip failed to be one of the companies repositioned for success.
Field Trip Health moved too fast to create a long-term sustainable company. The company’s original goal was to open up 75 clinics by 2023. Frankly, that’s a bit laughable. There is no conceivable way that could come to fruition. It’s admirable that they sought to help so many people with mental health services that are difficult to come by, however, nothing good has ever come from scaling professional medical services too fast.
The company’s financial reports showed that income had been increasing only slightly while operating expenses remained fairly high. The company did make an effort to cut spending in 2022– compared to the previous year– but it wasn’t enough. On December 31, 2022, the company was left with 6.7 million in cash, while quarterly expenses had historically exceeded that by a few million dollars.
Setting up psychedelic clinics is incredibly cash intensive. One can only assume that Field Trip’s executives expected much quicker returns than what they have actually seen. In December 2022, they formed an independent committee of the board of directors in order to create a strategic plan to face the ‘unfavorable market conditions,’ but it may have been too little too late for the company.
While it is unfortunate to see such a bright prospect falling, there are some valuable lessons to be learned here. The psychedelic space is highly volatile because there is so much uncertainty in every aspect of the industry. Field Trip Health bet big, and it cost them greatly. Other companies can learn from their mistakes and better navigate the tumultuous waters that the industry finds itself in.
The lesson here is to be conservative and prepare for long-term success, not immediate returns. This is, unfortunately, not the first time that the psychedelic industry has learned this lesson. Many investors– expecting significant returns rather quickly– were struck with a harsh reality when psychedelic stocks began to plummet at the end of 2021. The economy began to take a downturn, and the “gold rush” mentality that had been present in the industry was hit with the reality that legal psychedelic treatment is a long game.
When this happened, many companies began making big changes in order to weather the bear market. Some sold off assets, while others closed down services or cut down spending in other ways– all in anticipation of needing to make their cash runway last longer than initially expected. Field Trip Health, however, doesn’t seem to have made those preparations.
It is an exciting time for psychedelics. Many people have waited decades for even the faintest promise of a future where psychedelic medicines are legal. There have been significant strides in the last five years, but it would be foolish to think that after half a century of stagnancy, things are going to turn around completely in a matter of a few years.
Companies and investors alike should be focused on creating value five to ten years from now. Businesses with conservative positions are more likely to survive than those putting all their eggs in one poorly-built basket. Excitement for the future of psychedelics should still be alive and well, but realistic plans to build that future are the only way to create sustainable access to these life-changing treatments.