CTA filed on schedule

InMed Pharmaceuticals 18 November 2019 Update
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InMed Pharmaceuticals

CTA filed on schedule

Financial update

Pharma & biotech

18 November 2019

Price

C$0.25

Market cap

C$43m

C$0.75/US$

Net cash (C$m) at 30 September 2019

14.8

Shares in issue

172.3m

Free float

99.3%

Code

IN

Primary exchange

TSX

Secondary exchange

OTC markets

Share price performance

%

1m

3m

12m

Abs

(2.0)

(10.9)

(55.5)

Rel (local)

(5.2)

(15.8)

(60.3)

52-week high/low

C$0.79

C$0.25

Business description

InMed Pharmaceuticals is a Canada-based biopharmaceutical company focused on manufacturing and developing cannabinoids. Its biosynthesis platform may be able to produce cannabinoids for less cost and with improved purity compared to currently used methods. The company is also developing a proprietary pipeline, including INM-755 for epidermolysis bullosa, a serious, debilitating orphan indication.

Next events

INM-755 Phase I initiation

Year-end 2019

Analysts

Maxim Jacobs

+1 646 653 7027

Wiktoria O’Hare

+44 (0)20 3077 5700

InMed Pharmaceuticals is a research client of Edison Investment Research Limited

InMed Pharmaceuticals recently announced that it filed a Clinical Trial Application (CTA) in the Netherlands for INM-755, which is being developed for epidermolysis bullosa (EB). Approval of the CTA is expected around the end of November with the first trial (755-101-HV) expected to begin in December. This trial will test two strengths of INM-755 cream on the intact skin of 22 healthy volunteers. Following the completion of this trial, the company expects to initiate trial 755-102-HV, which would test INM-755 on eight healthy volunteers with small wounds.

Year end

Revenue (C$m)

PBT*
(C$m)

EPS*
(C$)

DPS
(C$)

P/E
(x)

Yield
(%)

06/18

0.0

(5.3)

(0.04)

0.00

N/A

N/A

06/19

0.0

(9.1)

(0.05)

0.00

N/A

N/A

06/20e

0.0

(15.6)

(0.09)

0.00

N/A

N/A

06/21e

0.0

(17.3)

(0.10)

0.00

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

On the way to human clinical trials

With the submission of its CTA, InMed is on track for initiating the Phase I programme for INM-755 in healthy volunteers by the end of 2019. There will be two separate trials (755-101-HV and 755-102-HV) that will be carried out serially as data from the trial in subjects with normal, intact skin are necessary for the trial in subjects with small wounds. We expect trial 755-101-HV to complete enrolment in Q120 with enrolment for 755-102-HV beginning in H220.

INM-088 development progressing

INM-088 for glaucoma is advancing as the company completed in vitro testing of the compound and initiated multiple formulation and pharmacology studies. These studies are expected to be completed in early 2020. Key IND-enabling studies are expected to begin after these are completed and after discussions with regulators (if needed).

Biosynthesis on track

InMed’s E. coli-based biosynthesis process continues to move forward. The company is optimising fermentation parameters to maximise yield and continue to work on downstream purification (DSP). The company is on track to complete these activities by year-end. InMed is also investigating an alternative process (the exact nature of which is undisclosed) that may have advantages in terms of cost and yield, and will decide which approach to advance in H120.

Valuation: C$259m or C$1.50 per basic share

We have increased our valuation to C$259m or C$1.50 per basic share (C$1.24 per diluted share), from C$256m or C$1.48 per basic share (C$1.22 per diluted share). The valuation increase is mainly due to increasing the probability of success for INM-755 (from 5% to 7.5%) following product advancement into the clinic. This was partially offset by a lower cash balance. InMed had C$14.8m in cash and marketable securities at 30 September and we believe this provides a runway into FY21.

Quarterly update

InMed continues to be on track for initiation of the Phase I programme in healthy volunteers by the end of the year following the submission of a CTA in the Netherlands, where it will conduct the initial clinical trials. The programme will consist of two separate trials (see Exhibit 1). Trial 755-101-HV will enrol 22 healthy volunteers with normal, intact skin and evaluate the systemic and local safety, tolerability and pharmacokinetics (PK) of two dosage strengths of INM-755 cream. Trial 755-102-HV will have around eight healthy volunteers with small wounds to evaluate the local safety of the product. The small blister wounds will be created at the clinical site and will largely mimic the types of wounds typically seen in EB simplex patients. A Phase I/II in approximately 12–15 EB patients is expected to begin in early 2021 following additional IND/CTA filings globally. Note that all these trials will be double blind and vehicle controlled. Importantly, the safety studies can be used as the basis for a clinical trial programme in other indications as INM-755 may have applications in other dermatologic indications involving inflammation, pain and itch.

Exhibit 1: Expected clinical trial programme

Trial

Type of patients

Expected size

Treatment protocol

Purpose

Timing

Phase I
(755-101-HV)

Adult healthy volunteers with normal, intact skin

22

14 days on intact skin; two dosage strengths

Systemic and local safety/PK

Initiate by year-end 2019, complete enrolment by end of Q120.

Phase I
(755-102-HV)

Adult healthy volunteers with small wounds

Around 8

Seven days on small wounds; two dosage strengths

Local safety

Initiate after 755-101-HV data are available. Enrolment expected to begin and complete in H220.

Phase I/II

EB patients (first adults, then children)

12–15

30 days on intact skin and possibly wounds; two dosage strengths

Systemic and local safety and efficacy

Initiate in Q121, following IND/CTA filings in additional countries globally.

Source: InMed Pharmaceuticals

The glaucoma programme is advancing. INM-088 has completed in vitro testing and the company has initiated multiple formulation and pharmacology studies. These studies are expected to be completed in early 2020. Key IND-enabling studies are expected to begin after these are completed and after discussions with regulators (if such discussions are necessary). As with INM-755, we believe INM-088 is a ‘minor’ cannabinoid, which will allow InMed to differentiate its clinical programs in the cannabinoid pharmaceutical sector dominated by cannabidiol (CBD) and tetrahydrocannabinol (THC) trials.

Valuation

We have increased our valuation to C$259m or C$1.50 per basic share (C$1.24 per diluted share), from C$256m or C$1.48 per basic share (C$1.22 per diluted share). The valuation increase is mainly due to increasing the probability of success for INM-755 (from 5% to 7.5%) due to product advancement into the clinic. Phase I products typically have a 10% probability of success, so it seems appropriate to increase the probability of success from 5% as the initiation of a Phase I trial is coming very soon. We will raise the probability of success beyond 7.5% as the product advances further. The valuation increase was partially offset by a lower cash balance.

Exhibit 2: InMed valuation

Program

Stage

Probability of success

Launch year

Peak sales (C$m)

rNPV
(C$m)

Biosynthesis (manufacturing)

Development

23%

2022

1,574

224

INM-755

Phase I

7.5%

2026

345

20

Total

244.4

Net cash and equivalents (As of 30 September) (C$m)

14.8

Total firm value (C$m)

259.1

Total basic shares (as of 30 September 2019, m)

172.3

Value per basic share (C$)

1.50

Options and warrants (as of September 2019, m)

37.4

Total diluted shares (as of September 2019, m)

209.7

Value per diluted share (C$)

1.24

Source: Edison Investment Research

Financials

InMed reported an operating loss of C$3.3m in its fiscal first quarter (the quarter ending 30 September 2019), up from C$1.5m in the same quarter in the previous year due to the progression of its pipeline. R&D expenses were C$2.3m for the quarter, up from C$0.6m in the same quarter in the previous year. We have lowered our expectations for R&D spending by C$0.3m for both FY20 and FY21 as the run rate was a little lower than we expected. Otherwise our estimates are largely the same.

InMed had C$14.8m in cash and marketable securities at 30 September and we believe this provides a runway into FY21. We continue to forecast the company will raise C$20m over the next two years to fund operations, which we model as illustrative long-term debt.

Exhibit 3: Financial summary

C$000s

2018

2019

2020e

2021e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

0

0

0

Cost of Sales

0

0

0

0

Gross Profit

0

0

0

0

Research and development

(1,927)

(5,639)

(10,950)

(11,388)

Selling, general & administrative

(3,367)

(3,798)

(3,862)

(4,017)

EBITDA

 

 

(5,530)

(9,685)

(15,159)

(15,751)

Operating Profit (before amort. and except.)

 

 

(5,412)

(9,561)

(14,985)

(15,578)

Intangible Amortisation

0

0

0

0

Exceptionals/Other

(3,197)

(4,128)

(2,560)

(2,663)

Operating Profit

(8,609)

(13,689)

(17,546)

(18,240)

Net Interest

88

434

(626)

(1,708)

Other (change in fair value of warrants)

0

0

0

0

Profit Before Tax (norm)

 

 

(5,324)

(9,127)

(15,612)

(17,286)

Profit Before Tax (IFRS)

 

 

(8,521)

(13,255)

(18,172)

(19,948)

Tax

0

0

0

0

Deferred tax

0

0

0

0

Profit After Tax (norm)

(5,324)

(9,127)

(15,612)

(17,286)

Profit After Tax (IFRS)

(8,521)

(13,255)

(18,172)

(19,948)

Average Number of Shares Outstanding (m)

142.5

171.3

174.9

181.9

EPS - normalised (c)

 

 

(3.74)

(5.33)

(8.93)

(9.50)

EPS - IFRS (C$)

 

 

(0.06)

(0.08)

(0.10)

(0.11)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

1,329

1,241

1,807

1,242

Intangible Assets

1,274

1,185

1,160

1,160

Tangible Assets

56

56

647

83

Other

0

0

0

0

Current Assets

 

 

26,734

18,548

12,763

5,547

Stocks

0

0

0

0

Debtors

0

0

0

0

Cash

26,477

18,039

12,474

5,258

Other

257

509

288

288

Current Liabilities

 

 

(938)

(1,563)

(1,462)

(1,462)

Creditors

(938)

(1,563)

(1,462)

(1,462)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

0

0

(10,410)

(20,410)

Long term borrowings

0

0

(10,000)

(20,000)

Other long term liabilities

0

0

(410)

(410)

Net Assets

 

 

27,125

18,226

2,698

(15,083)

CASH FLOW

Operating Cash Flow

 

 

(4,672)

(8,769)

(15,284)

(17,024)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(56)

(35)

(174)

(192)

Acquisitions/disposals

0

0

0

0

Financing

24,483

273

0

0

Dividends

0

0

0

0

Other

0

0

1

0

Net Cash Flow

19,756

(8,532)

(15,458)

(17,216)

Opening net debt/(cash)

 

 

(6,708)

(26,477)

(18,039)

(2,474)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

14

94

(107)

0

Closing net debt/(cash)

 

 

(26,477)

(18,039)

(2,474)

14,742

Source: InMed Pharmaceuticals accounts, Edison Investment Research


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This report has been commissioned by InMed Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by InMed Pharmaceuticals. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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New Zealand

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by InMed Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by InMed Pharmaceuticals. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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