Why Field Trip Health Is Dividing in Two — and What This Means for Investors

In a surprise move, Field Trip Health Ltd. (TSX: FTRP, Nasdaq: FTRP) announced on Thursday that they will be separating their company into two independent publicly traded entities.

Assuming the ratification of shareholders and regulatory approval, come July 2022, Field Trip Health will be no more. From its ashes will rise Reunion Neuroscience Inc, and Field Trip Health and Wellness Ltd.

Reunion will be the successor to Field Trip’s Discovery division, which was the part of the company which worked on next generation psychedelics. This includes FT-104, a psilocybin-like compound which is a prodrug to 4-HO-DiPT, and the company’s FT-200 series of psychedelics, which they call third-generation.

Once the deal is ratified, Reunion will keep Field Trip’s listing on the TSX and the Nasdaq, though it will be traded under a different ticker symbol, which has yet to be revealed. The company will have Joseph del Moral at the helm as CEO. 

Field Trip Health and Wellness, on the other hand, will inherit the company’s 12 psychedelic therapy clinics. These clinics currently use ketamine-assisted therapy to treat mental health issues like depression, and hope to use other substances such as MDMA and psilocybin once they become legalized. It will also offer clinical trial services, operate their psilocybin research center in Jamaica, and partner with Nue Life on Field Trip at Home™, a digital at-home ketamine assisted therapy program.

Field Trip Health and Wellness will have Ronan Levy as its CEO, and hopes to trade on the TSX Venture Exchange, pending approvals.

If you currently own stock of Field Trip Health, once the deal is finalized, for each share you own you will automatically receive 1 share of Reunion, and 0.86 shares of Field Trip H&W. Current shareholders of Field Trip Health will own 100% of Reunion, and 50% of Field Trip H&W. Of the remaining 50%, 10% will be owned by Reunion—so essentially current shareholders—and 40% will be held by new investors, led by the Oasis Management Company.

As for the cash positions of the two companies, Reunion will have $43 million CAD, and Field Trip H&W will have $23.7 million, $18.7 million of which comes from the above-mentioned new investors.

This move follows a strategic review of the company, which concluded that both parts of their business would be more likely to succeed if they operated independently from each other. 

In a press release, Field Trip Health gave four strategic rationales for the move. They said that following the transaction, both Field Trip H&W and Reunion will:

• “have separate and focused management and governance best suited to each company’s operational and strategic needs;
• be able to establish distinct capital structures and capital allocation plans matched to the unique strategies and requirements of each company;
• maintain current strategic synergies through a Collaboration Agreement, which will provide access to data, assistance in protocol development, preferential access to clinical trial sites and other benefits;
• provide differentiated investment characteristics and a focused investment thesis for long-term investors in each company.”

Adding to this, in a conference call with investors, future Reunion CEO Joseph del Moral said, “the proposed separation will allow us to pursue a singular focus and commitment to innovation, while maintaining the current synergies of the integrated company through the collaboration agreement between Field Trip Health and Wellness and Reunion Neuroscience.”

I find this move fascinating, as it moves in precisely the opposite direction of what I expect to see in the psychedelics space in the coming months and years: consolidation.

For example, earlier this month Numinus Wellness (TSX: NUMI, OTCQX: NUMIF) announced that they are acquiring Novamind Inc. (CSE: NM, OTCQB: NVMDF). At the time, I wrote that “in the coming months I expect to see more, perhaps many more, of such deals being announced.”

To be clear, I still expect that to be the case, which would make this current transaction the exception, not the rule. 

Nevertheless, this decision has already helped Field Trip Health and Wellness raise $18.7 million. That is an early sign that this decision may be in the best interests of its current shareholders.

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Full Disclosure: James Hallifax holds positions in MindMed, Compass Pathways, atai Life Sciences, the Horizons Psychedelic Stock Index, and the Advisor Shares Psychedelics ETF.

The views of the author are for informational purposes only, and should not be construed as financial advice, but rather his own personal opinion. Furthermore, the views of the author are not necessarily representative of Psychedelic Spotlight. His views and opinions are his own.