Psyence reports no revenue in Q4, but returns a profit

Psychedelic drug developer Psyence Group Inc. (CSE: PSYG) saw a mixed bag in its quarterly report ending Dec. 31, 2023, turning a profit despite no revenue coming in.

The firm is fixed on streamlining operations and honing in on its key growth areas, but a financial review shows an ongoing liquidity problem.

Psyence posted a comprehensive profit of $269,611, an improvement from the loss of $743,364 in the same period last year, though the firm had cash balances of $213,451 and negative working capital of $936,156 as of Dec. 31, 2023.

The company’s total comprehensive profit, despite having no revenue, can be attributed to a combination of factors detailed in filings, particularly its cash flow from operating activities.

Psyence posted a net gain of $360,020 and had various non-cash items contributing to the balance sheet. These included a non-cash unrealized foreign exchange loss of $114,304, share-based compensation of $247,990, as well as interest expense of $24,737 and depreciation and amortization of $22,597.

All of it together resulted in a net cash from operating activities of $980,977 for the period.

Regarding its expenses, the company significantly reduced its sales and marketing expenses to $1,952 from $46,444 in the comparative period, mainly focusing on fundraising activities, conferences, content, promotional materials, and website design costs.

Research and development costs for the quarter came in at $62,638, down from $263,244 in the previous year. The fall in spending is due to a more targeted approach in the company’s research initiatives, particularly in the cultivation of natural psilocybin mushrooms, which aligns with the company’s adherence to the Mind Health Lesotho Permit regulations.

General and administrative expenses increased slightly, to $202,806 from $157,643. Despite the rise, the company said it has managed these expenses to keep them in line with the overall budget.

Psyence made progress in its drug development and clinical trials during the period, particularly when it comes to its palliative care trials. On Oct. 10, 2023, the firm submitted responses to the initial Human Research Ethics Committee review. Management expects to receive full approval for a Phase IIb study in the first quarter of 2024, with preparations for initiating the study in Australia already in the final stages.

According to regulatory filings, Psyence relies on a limited number of licensed suppliers for its drug candidate materials and is primarily dependent on Filament Health (OTCQB:FLHLF) (Cboe CA:FH) for the supply of PEX010. Any interruptions in Filament’s supply chain could threaten Psyence’s drug development timelines.

Psyence also depends on third-party organizations, such as iNGENū, for clinical development activities.

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