Irwin Naturals Inc. had a busy year in 2022 as it acquired ketamine clinics throughout the U.S.
And it appears that 2023 will feature additional purchases by the company.
CEO Klee Irwin said in a May 16 press release, “With over 100 clinics in our M&A pipeline, we are well-positioned to work towards our goal of establishing the nation’s largest clinic chain.”
According to the LevinPro HC database, the activity mirrored an uptick in deal activity within the Infusion Services subsector, which includes ketamine clinics. There were 27 Infusion Services deals reported last year, compared with 10 such transactions in 2021, 5 in 2020 and 2 in 2019.
“The biggest buyer of ketamine clinics at this point has been Irwin Naturals,” said Kevin Taggart, managing partner and co-founder of Mertz Taggart, a healthcare M&A firm. “Private equity is starting to make some acquisitions, but not at the rate that Irwin has. There is good data supporting the efficacy of ketamine, so buyers are starting to get more active in the space. There will be more ketamine transactions in 2023 than there were in 2022. The demand for mental health deals will continue into 2023.”
The clinics join Irwin Naturals Emergence, a wholly owned subsidiary of Irwin Naturals Inc., which offers mental health care.
The company filed results for its third quarter of fiscal 2022 on December 5. This included a 7% decline in overall operating revenues due largely to supply issues in the CBD segment related to a reduction in supply at a key supplier.
Income from operations in the third quarter totaled $600,000 compared to $1.2 million during the same period in the prior year. The reduction in income was driven primarily by the decrease in business volume and startup costs related to Emergence (ketamine clinics) and Irwin Naturals Cannabis (intellectual property licensing to the cannabis industry).
In 2018, the company expanded into the cannabis industry by launching hemp-based CBD products into the mass market.
The company’s 2022 acquisitions included:
- Serenity Health, LLC in Louisville, Kentucky, on November 25.
- Tri-Cities Infusion & Wellness Clinic, PLLC on November 5 in Kennewick, Washington.
- Dura Medical on November 1 in Naples, Florida.
- An October 30 deal with Clare Clinic, Inc., doing business as Florida Mind Health Center, which includes three clinics in Gainesville, Tallahassee and Panama City, Florida.
- Ketamine Infusions of Idaho, PLLC, which operates a clinic in Idaho Falls, on September 30.
- Happier You, LLC, which operates a ketamine clinic in central Ohio, on September 6.
- Hobie Fuerstman D O PLC, doing business as Preventive Medicine, a clinic in Colchester, Vermont, on June 17.
- Two ketamine clinics in Georgia through an asset purchase of Invictus Clinics, LLC on June 21. The clinics are in Atlanta and Woodstock, Georgia.
- New England Ketamine, which is in Salem, New Hampshire, on May 16.
- KHC Capital Group, LLC and related entities (Ketamine Health Centers), which owns a chain of five ketamine treatment clinics in Florida with an additional partnership contract with an affiliate clinic in Mexico, on April 17.
- Midwest Ketafusion in Iowa City, Iowa, on February 9 for $2,111,949.
“We believe that mental health in general has shown to be not only recession-proof, but pandemic-proof as well, which is one of the reasons that we’ve seen such demand from investors over the last several years,” Taggart said.
According to a Jan. 4 report by NBC News, ketamine is a hallucinogen approved for decades by the Food and Drug Administration as an anesthetic, but is also used illegally as a party drug. In recent years, research has found that it also works for treatment-resistant depression in some people, which led the FDA to approve a version called esketamine, or Spravato, in 2019. Ketamine clinics offer the drug off-label as either an infusion or an injection for numerous mental health problems, with “off-label” meaning the drug hasn’t been approved for those conditions.
The report quoted one patient who described ketamine as “a lifeline.” For almost four decades she tried antidepressants and other treatments for her severe depression, but nothing worked
Taggart was asked about average EBITDA multiples and valuations in the mental health market.
“This is very deal- and size-specific, but we’ve seen [mental health] multiples from the mid-single digits to the teens,” Taggart said. “Valuations are still holding steady on the sub-$100 million in enterprise value [for] deals relative to 2022 numbers.”
Data found on ketamineclinicsdirectory.com revealed that ketamine infusion for depression usually costs $400 to $800 per treatment. Most ketamine clinics perform a series of six treatments over two to three weeks. Some providers offer four treatments over one to two weeks. Ketamine infusion for pain usually costs between $700 and $2,000 per treatment as more ketamine is used per infusion and the infusions last longer. For other conditions such as PTSD and OCD, the cost of ketamine therapy is usually between $400 and $800 per treatment.
Fortune Business Insights reports that the U.S. behavioral health market is projected to grow from $79.69 billion in 2022 to $105.14 billion by 2029.
Taggart agreed with the idea that this is a seller’s market.
“We generally get a very strong response to any mental health company that we take to market, especially the larger ones, although that is somewhat of a relative term in this space because there are so many small providers,” Taggart said.
Taggart was asked if ketamine clinics are a comparably secure investment?
“I think if they provide other mental health services, my answer would be yes,” Taggart said. “The mental health space is a highly fragmented market and ketamine even more so, with very few large players. We believe that there is still a lot of room for many other players that want to do a roll up strategy, and expect consolidation to continue over the foreseeable future.”
According to a March 14, 2022, story by Capital 10X, ketamine therapy clinics have opened in large North American cities. The market size is estimated at $900 million. From 2015 to 2018, the number of clinics increased from 60 to 300.
An August 8 press release from Irwin Naturals Inc. stated that “over the past several months, Irwin Naturals Emergence has vetted the more than 600 independent ketamine clinics currently operating in the U.S., seeking to identify profitable clinics. The company has invited those clinics into the family … by joining Irwin Naturals Emergence in the national roll-up that is now underway.”
In other transactions from 2022, Revitalist Lifestyle and Wellness Ltd. acquired Richmond, Virginia-based Alchemy Wellness, which was founded in 2019 and provides ketamine infusion treatments for mood disorders, including depression, postpartum depression, bipolar depression, PTSD, OCD and anxiety, on March 29 for $800,000. Revitalist also acquired a Jacksonville, Florida, ketamine clinic on January 12 for $100,000.
With the growth in clinic locations and a projection that the country’s behavioral health market will continue to expand through the end of the decade, investments in ketamine clinics appear to represent an attractive deployment of capital in 2023.
“The need for mental health services and newer treatments that are showing promising results continue to garner investor interest,” Taggart said. “I believe that COVID and social media are continuing to add to the strength [and] demand for the need for these services.
“Ketamine is riding the mental health wave in M&A.”
