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NeonMind Biosciences : Annual MD&A for year ended November 30, 2021


MANAGEMENT DISCUSSION AND ANALYSIS

For the Years Ended November 30, 2021 and 2020

March 30, 2022

This Management’s Discussion and Analysis (“MD&A”) relates to the financial position and financial performance of NeonMind Biosciences Inc. (“NeonMind”) for the years ended November 30, 2021 and 2020. All references to “us” “we” and “our” refer to NeonMind.

Except where otherwise indicated, the financial information contained in this MD&A was prepared in accordance with International Financial Reporting Standards (“IFRS”). This MD&A should be read in conjunction with our audited financial statements for the years ended November 30, 2021 and 2020 (referred to as the “Financial Statements”).

Financial information contained in this MD&A has been prepared on the basis that we will continue as a going concern, which assumes that we will be able to realize our assets and satisfy our liabilities in the normal course of business for the foreseeable future. Management is aware, in making its going concern assessment, of material uncertainties related to events and conditions that may cast significant doubt upon our ability to continue as a going concern.

We incurred a net loss from continuing operations of $6,684,440 and used $5,205,151 of cash for operating activities from continuing operations during the year ended November 30, 2021. As at November 30, 2021, we had working capital of $680,111 and an accumulated deficit of $13,088,891. Our continued operations are dependent on future profitable operations, management’s ability to manage costs, and the future availability of equity or debt financing. Whether and when we can generate sufficient operating cash flows to pay for our expenditures and settle our obligations as they fall due is uncertain. These condensed interim financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption be inappropriate. The impact of these adjustments could be material.

The outbreak of the coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the Canadian and global economies, disruptions of financial markets, and created uncertainty regarding potential impacts to our supply chain and operations. The COVID-19 pandemic has impacted and could further impact our operations and the operations of our suppliers and vendors as a result of quarantines, facility closures, and travel and logistics restrictions. As a result of the pandemic, we experienced delays in our planned product launches. The extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on our suppliers and vendors and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume. The management team is closely following the progression of COVID-19 and its potential impact on us, and is working on alternative measures and resources to minimize such impact. Even after the COVID-19 pandemic has subsided, we may experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. Therefore, we can not reasonably estimate the impact at this time on our business, liquidity, capital resources and financial results.

Except where otherwise indicated, all financial information is expressed in Canadian dollars.

CORPORATE OVERVIEW

We were incorporated under the laws of the province of British Columbia, Canada on September 18, 2019 and are extra provincially registered in Ontario. We operate two divisions, (i) a pharmaceutical division engaged in drug development of psychedelic compounds, and (ii) a medical services division, which is in the setup stage, building out clinic locations and healthcare teams to offer interventional psychiatry treatments and other mental health treatments.

In our pharmaceutical division, we have two distinct psilocybin drug development programs targeting obesity. Psilocybin is a complex organic compound found naturally in a wide range of different species ofmushrooms, known as psychedelic mushrooms (“psilocybin”). Psychedelics are a hallucinogenic class of psychoactive drugs whose primary action is to trigger psychedelic experiences via serotonin 2A receptor agonism, causing specific psychological, visual and auditory changes, and altered states of consciousness. Our first drug candidate aims to use synthetic psilocybin to enhance a patient’s ability to adopt behaviours that cause weight loss and maintain that loss through psychedelic-assisted cognitive therapy. The second drug candidate proposes low dose synthetic psilocybin as a treatment to suppress appetite.

Our medical services division is currently setting up clinic locations and healthcare teams to offer interventional psychiatry treatments and other mental health treatments. We have assembled a team of medical experts to plan and launch a chain of clinics throughout Canada. We are planning to open our inaugural NeonMind specialty mental health clinic, located at the Queensway Professional Medical Centre in Mississauga, Ontario in the second half of 2022.

A more detailed description of our two divisions is found below.

Division I: Pharmaceutical Drug Development Division

Our Psilocybin Research Plan

While psilocybin has extensive research data and supportive literature, moving it towards an approved pharmaceutical product is an essential path to commercialization which requires a robust drug development plan.

The typical development roadmap to making a regulatory application for approval involves having completed a complex interconnected sequence of evaluations on the product’s quality (CMC – chemistry, manufacture, and controls), preclinical efficacy, safety pharmacology and toxicology, preclinical and clinical pharmacological characterization and clinical dosing, safety and efficacy.

We are exploring psilocybin as a treatment for weight loss and have completed preclinical studies at the University of British Columbia (“UBC”) to evaluate psilocybin’s effectiveness on weight management in the animal model. We engaged Translational Life Sciences Inc. (“TLS”), which is a contract research organization, to design our preclinical trials to examine psilocybin as a potential treatment for obesity and weight management and we engaged UBC to conduct these preclinical trials.

Our initial preclinical trial was completed in Q1 2021 and demonstrated psilocybin’s effect in reducing weight gain in normal rodents; we conducted a second preclinical trial in Q2 2021 and have reported positive results in Q1 2022 demonstrating psilocybin’s effect in reducing weight gain in obese rodents.

We have two distinct psilocybin drug development programs targeting obesity. Our first drug candidate (NEO-001) aims to use synthetic psilocybin to enhance a patient’s ability to adopt behaviours that cause weight loss and maintain that loss through psychedelic-assisted cognitive therapy. The drug candidate employs psilocybin as an agonist to the serotonin receptor 5-HT2A, which is involved in the hallucinogenic effect of psychedelics.

The second drug candidate (NEO-002) proposes low dose synthetic psilocybin as a treatment to suppress appetite and employs low-dose psilocybin as an agonist to the 5-HT2C receptor, which controls appetite.

In March 2021 we engaged Certara to provide us with an integrated development plan and for strategic clinical pharmacology, toxicology, CMC, preclinical pharmacology, regulatory strategy and integrated drug development support, including expert leaders in therapeutics development with significant tenures in biotech, pharma research and development and the United States Food and Drug Administration (the “FDA”) and the European Medicines Agency (“EMA”). Certara provides bio simulation software to transform traditional biopharmaceutical research and development with a scientific team that has more than 3,500 years of collective drug discovery and development experience. Certara has agreed to provide us withaccess to their experts in drug development strategy, due diligence, clinical pharmacology, regulatory science (including ex-FDA and EMA experts) and the full spectra of drug development subject matter experts across Certara.

In July 2021, our Research and Development Working Group completed an integrated drug development plan for our lead drug candidate targeting obesity, NEO-001, a high-dose psilocybin treatment coupled with behavior therapy and lifestyle intervention, which aims to improve the efficacy of chronic weight management in adults. We have identified a regulatory strategy, including a target indication and product profile that we believe will best position NeonMind as we advance our first lead candidate through development.

In September 2021, we submitted a request for a Type B, pre-Investigational New Drug (pre-IND) consultation with the U.S. FDA to discuss the development of NEO-001 for the treatment of obesity in preparation for an IND submission in 2022.

In October 2021, the FDA confirmed consultation had been granted and NeonMind Biosciences agreed that written responses would be provided in lieu of a meeting and subsequently, NeonMind submitted a comprehensive Briefing Document to the Division of Diabetes, Lipid Disorders, and Obesity (DDLO).

In November 2021, we completed our pre-IND consultation with the FDA, regarding proposed clinical trials for NeonMind’s lead obesity drug candidate, NEO-001. The pre-IND consultation offered feedback for NeonMind to execute on measurable clinical development milestones for its NEO-001 clinical program. The FDA acknowledged the study rationale and potential therapeutic opportunity of NEO-001 for the treatment of obesity, and the justification to advance into human clinical trials.

We are targeting the submission of an IND application in H1 2022 to confirm potential to expedite development via the appropriate regulatory pathway and NeonMind anticipates initiating a Phase 1/2 proof-of-concept study in obese patients in 2022.

Division II: Medical Services Division

Our medical services division is in the setup stage, building out clinic locations and healthcare teams to offer interventional psychiatry treatments and other mental health treatments. We have assembled a team of experts to plan and launch a chain of NeonMind-branded specialty clinics in Canada. Working with health care communities and tailoring the services to local market needs, these clinics will offer evidence-backed innovative treatments for a variety of mental health needs including psychedelic modalities and other newer treatments for mood and anxiety disorders such as depression.

Our go-to-market strategy may include partnerships with existing health clinics to offer NeonMind mental health services as well as standalone NeonMind clinics. The NeonMind clinic team will build an integrated services platform and comprehensive set of programs aimed at delivering specialized treatments combined with traditional modalities for a variety of mental health conditions and right-sized for local needs.

In Canada, ketamine and esketamine are currently the only psychedelic substances that may legally be prescribed and administered in medical clinics, but there is a large and growing pipeline of psychedelic drug development programs with clinical trials underway evaluating other substances including psilocybin. Importantly, recent clinical trial results with psilocybin treatment are showing promise.

The platform will be designed to expand to increase offerings of drug-enhanced psychotherapies using psychedelics over time as they are approved. NeonMind aims to gain an early-mover advantage, establish a strategic footprint, and have operations ready to accommodate a future surge from potential psychedelic drug approvals.

We are planning to open our inaugural NeonMind specialty mental health clinic, located at the Queensway Professional Medical Centre in Mississauga, Ontario in the second half of 2022. The Mississauga location is the first in our initiative to establish a national network of NeonMind-branded specialty clinics. These clinics will focus on delivering high-demand mental health treatments to underserved areas of Canada. The specialty services to be offered will incorporate innovative, evidence-based interventional psychiatric treatments for a variety of mood and anxiety disorders.

Discontinued Operations

We operated a Consumer Products Division which manufactured and distributed functional mushroom infused coffee products. Following a strategic review of the long-term strategy for NeonMind, in September 2021, we entered into an asset purchase agreement with Better Plant Sciences Inc. (“Better Plant”) for the sale of our functional food assets, including our NeonMind branded coffee products and their related intellectual property and marketing assets, as well as a non-exclusive license to use the NeonMind brand name. The consideration received for the sale was $645,000, plus a 3% royalty of net product sales for a term of 25 years after cumulative net product sales of over $1,000,000 are reached by Better Plant.

STRATEGIES AND ANTICIPATED MILESTONES

We are focused on bringing innovative, psychedelic-based treatment modalities to people suffering from obesity and mental health disorders. Utilizing biopharma strategies proven to create shareholder value we are advancing NEO-001 our differentiated drug development program focused on neuropharmacological change for sustainable weight loss in obese patients and establishing a nationwide chain of NeonMind branded specialty mental health clinics incorporating evidence-backed interventional treatments to address a variety of mental health needs.

Our Pharmaceutical Drug Development Program will transition to clinical phase with the planned submission of an IND application for NEO-001 to enable the initiation of the world’s first psychedelic proof-of-concept study of psilocybin in obese patients.

Our Specialty Mental Health Clinic Strategy will leverage the existing clinic infrastructure and best-in-class operations of strategic partners SRx Health Solutions and BioScript Solutions to bring NeonMind’s unique treatment protocols, leveraging ketamine, esketamine, and neurostimulation, to underserved populations across Canada; these collaborations provide a low capital commitment path to scale our services.

We have two core objectives for the near future:

  • 1. Open and Scale Specialty Clinics – complete professional licensing and marketing launch for inaugural clinic, identify opening plan and replicate launch process.

  • 2. De-Risk Program and Ready Clinical Operations – submit NEO-001 IND to FDA and establish clinical operations plan to execute world’s first proof of concept study.



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