InMed Pharmaceuticals |
INM-755 Phase I complete, on to Phase II |
Development update |
Pharma & biotech |
11 January 2021 |
Share price performance
Business description
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Analysts
InMed Pharmaceuticals is a research client of Edison Investment Research Limited |
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InMed Pharmaceuticals has now announced top-line results from both the 755-101-HV and 755-102-HV Phase I trials. Trial 755-101-HV was conducted in 22 healthy adult volunteers with intact skin, while 755-102-HV was conducted in eight healthy volunteers with small wounds. Both trials indicated that INM-755 was safe and well tolerated. There were no systemic or serious adverse effects, nor were there any adverse event-related withdrawals. Additionally, systemic drug concentrations were very low, which is desirable in a topical therapy.
Year end |
Revenue (C$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/19 |
0.0 |
(9.1) |
(1.76) |
0.00 |
N/A |
N/A |
06/20 |
0.0 |
(10.7) |
(2.05) |
0.00 |
N/A |
N/A |
06/21e |
0.0 |
(11.0) |
(1.66) |
0.00 |
N/A |
N/A |
06/22e |
0.0 |
(13.2) |
(1.77) |
0.00 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
INM-755 progressing into Phase II
Following the safety and tolerability data from the Phase I program, INM-755 will be moving forward into a Phase II (755-201-EB) trial in up to 20 epidermolysis bullosa (EB) patients with an anticipated treatment duration of 28 days. Regulatory applications are expected to be filed in several countries in H1 CY21.
BayMedica collaboration
InMed announced a research collaboration with BayMedica, which specializes in the design and manufacture of rare natural cannabinoids and analogs. As part of the agreement, BayMedica will receive access to aspects of InMed’s IntegraSyn biosynthesis platform, while InMed will explore the therapeutic potential of some of BayMedica’s cannabinoid analogs in neuroprotection. Following the initial research phase, the companies may decide to license each other’s technology.
INM-088 formulation finalized
A formulation of INM-088 for glaucoma has been finalized and has demonstrated the ability to deliver sustained levels of cannabinol (CBN) to the eye in an animal model through a stable and comfortable eyedrop formulation. InMed licensed the delivery technology in December from EyeCRO, a contract research organization, for milestones, low single-digit royalties and a nominal amount of equity. IND-enabling studies are expected to begin in 2021.
Valuation: US$233m or US$33.34 per basic share
We have adjusted our valuation to US$233m (C$296m) or US$33.34 (C$42.35) per basic share from C$256m or C$1.49 per basic share. The total valuation rose due to increasing the probability of success for INM-755 to 10% from 7.5% following the positive Phase I data, rolling forward our NPVs and higher net cash following a Nasdaq offering. The per-share value increased following a one-for-33 share consolidation completed on 30 June.
Clinical update
InMed Pharmaceuticals recently announced the results of both its Phase I trials, 755-101-HV and 755-102-HV. In trial 755-101-HV, which studied the systemic and local safety, tolerability and pharmacokinetics (PK) of two dosage strengths of INM-755 cream in 22 healthy adult volunteers. Importantly, there were no systemic or serious side effects. There was a slightly higher incidence and intensity of redness, swelling, scaling and burning in the treatment group, but none of these was serious and no subjects dropped out of the trial because of them. Additionally, this incidence did not occur in a dose dependent manner, which may indicate it was due to chance as the trial was small. Also, after application the cream was covered with a film dressing, which may have added to any skin irritation. Systemic exposure of the drug was very low and no systemic adverse effects were caused by exposure to INM-755, which is important in a topical therapy, especially a cannabinoid.
Similar results were seen in trial 755-102-HV, which studied the impact of INM-755 in eight healthy volunteers with small wounds. The small blister wounds were created at the clinical site to largely mimic the types of wounds typically seen in EB simplex patients. The study compared two dosage strengths of INM-755 cream versus vehicle alone as well as no treatment (in other words, four treatment conditions). Erythema and scaling were seen across all treatment groups, including those receiving vehicle or no treatment. There were a few mild cases of stinging/burning but these were only seen in the vehicle and low-concentration cream treated wounds and not the high-concentration treated or untreated wounds. As with 755-101-HV, no systemic adverse events were reported. Importantly, the INM-755 creams did not introduce any delay in wound healing.
Following the safety and tolerability data from the Phase I program, INM-755 will be moving forward into a Phase II (755-201-EB) trial in up to 20 EB patients with an anticipated treatment duration of 28 days. Regulatory applications are expected to be filed in several countries in H1 CY21.
Exhibit 1: Expected clinical trial program
Trial |
Type of patients |
Expected size |
Treatment protocol |
Purpose |
Timing |
Phase I |
Adult healthy volunteers with normal, intact skin |
22 |
14 days on intact skin; two dosage strengths |
Systemic and local safety/PK |
Completed. Data indicated INM-755 cream was safe and well tolerated on intact skin. |
Phase I |
Adult healthy volunteers with small wounds |
8 |
14 days on small wounds; two dosage strengths |
Local safety |
Completed. Data indicated that INM-755 cream was safe and well tolerated on small wounds and the cream had no negative impact on wound healing. |
Phase II (755-201-EB) |
EB patients (first adults, then children) |
Up to 20 |
28 days on intact skin and possibly wounds; two dosage strengths |
Systemic and local safety and efficacy |
IND/CTA filings in countries globally in H1 CY21. We currently expect a year for completion of the trial. |
Source: InMed Pharmaceuticals
For INM-088 for glaucoma, the company is moving forward with a final formulation, one that has demonstrated the ability to deliver sustained levels of CBN to the eye in an animal model through a stable and comfortable eyedrop formulation. InMed licensed the delivery technology in December 2020 from EyeCRO, a contract research organization, for milestones, low single-digit royalties and a nominal amount of equity. IND-enabling studies are expected to begin in 2021. Preclinical data so far have indicated a neuroprotective effect in ocular disease and INM-088 may also have the potential to reduce intraocular pressure (IOP) through improvement in the aqueous humor outflow. Importantly, some of the safety studies for INM-755 can be used for INM-088 for glaucoma as both products have the same active ingredient (CBN).
Biosynthesis platform
In June 2020, the company announced a change in approach to biosynthesis, the IntegraSyn manufacturing system. It will continue to focus on bacterial-based fermentation but with a goal of it being used in combination with other methods to increase yields and flexibility while reducing costs. InMed expects its process to be good manufacturing practice batch ready in Q1 CY21.
InMed also recently announced a research collaboration with BayMedica, which specializes in the design and manufacture of rare natural cannabinoids and analogs through biosynthesis and pharmaceutical chemistry. As part of the reciprocal agreement, BayMedica will receive access to one or more of InMed’s high-efficiency enzyme gene sequences to assess their ability to improve on the manufacturing process for cannabinoids in BayMedica’s library. In return, BayMedica will provide InMed with access to BayMedica’s library of proprietary cannabinoid analogs (as these are novel, they have the potential to be protected by composition of matter patents unlike naturally occurring cannabinoids). InMed will conduct preclinical research on numerous therapeutic compounds to explore their potential in selected disease models related to neuroprotection. Following the initial research phase, the companies may license each other’s technology if desired.
Valuation
We have adjusted our valuation to US$233m (C$296m) or US$33.34 (C$42.35) per basic share from C$256m or C$1.49 per basic share and from this point forward will be using US dollars as the base currency for the valuation of the company due to the listing on Nasdaq. The total valuation rose due to increasing the probability of success for INM-755 to 10% from 7.5% following the positive Phase I data, rolling forward our NPVs and higher net cash following a Nasdaq offering. The per-share value increased following a one-for-33 share consolidation completed on 30 June 2020.
Exhibit 2: InMed valuation table
Program |
Stage |
Probability of success |
Launch year |
Peak sales (C$m) |
rNPV (C$m) |
Biosynthesis (manufacturing) |
Development |
23% |
2022 |
1,574 |
$251 |
INM-755 |
Phase I |
10% |
2026 |
345 |
$30 |
Total |
$280.8 |
||||
Net cash and equivalents (As of 30 September plus offering) (C$m) |
$15.6 |
||||
Total firm value (C$m) |
$296.46 |
||||
Total firm value (US$m) |
$233.38 |
||||
Total basic shares (as of 30 September 2020 + offering, m) |
7.00 |
||||
Value per basic share (US$) |
$33.34 |
||||
Options and warrants (as of 30 June 2020, m) |
2.3 |
||||
Total diluted shares (as of 30 June 2020, m) |
9.3 |
||||
Value per diluted share (US$) |
$24.99 |
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Source: Edison Investment Research
Financials
InMed reported a net loss of C$2.1m in Q121 (the period ending 30 September 2020), down from C$3.4m in the same period in the prior year due to lower operating expenses. R&D expenses were C$1.2m in the quarter compared to C$2.3m a year ago due to lower costs associated with external contractors and research supplies. G&A was $0.7m, down from $1.0m in Q120 due to lower accounting and legal expenses as well as decreased salaries and benefits. We have reduced FY21 R&D expenditure estimates from C$10.6m to C$5.9m but increased our SG&A estimates by C$1m as we expect greater legal and compliance costs due to being a Nasdaq-listed company. We are also introducing our FY22 estimates, which include C$6.8m in R&D spending and C$5.1m in SG&A.
InMed had C$6.1m in cash and marketable securities at 30 September and subsequently raised approximately US$8.0m in gross proceeds from a Nasdaq public offering through the issuance of 1.78m common shares at US$4.50 per share. Additionally, 1.78m warrants with a strike price of US$5.11 per share were issued. The warrants are immediately exercisable and expire in six years.
Based on the cash level following the offering, we believe InMed has funding into FY22. We forecast the company will raise C$12.5m in additional capital in FY22, which we model as illustrative long-term debt.
Exhibit 3: Financial summary
C$'000s |
2019 |
2020 |
2021e |
2022e |
||
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 |
(5,639) |
(7,105) |
(5,886) |
(6,769) |
||
Selling, general & administrative |
(3,798) |
(3,533) |
(4,904) |
(5,100) |
||
EBITDA |
|
|
(9,436) |
(10,638) |
(10,790) |
(11,869) |
Operating Profit (before amort. and except.) |
|
|
(9,561) |
(10,859) |
(11,029) |
(12,108) |
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals/Other |
(4,128) |
(1,144) |
(732) |
(761) |
||
Operating Profit |
(13,689) |
(12,003) |
(11,760) |
(12,869) |
||
Net Interest |
434 |
147 |
26 |
(1,068) |
||
Other (change in fair value of warrants) |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(9,127) |
(10,713) |
(11,002) |
(13,175) |
Profit Before Tax (IFRS) |
|
|
(13,255) |
(11,857) |
(11,734) |
(13,936) |
Tax |
0 |
0 |
0 |
0 |
||
Deferred tax |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(9,127) |
(10,713) |
(11,002) |
(13,175) |
||
Profit After Tax (IFRS) |
(13,255) |
(11,857) |
(11,734) |
(13,936) |
||
Average Number of Shares Outstanding (m) |
5.2 |
5.2 |
6.6 |
7.4 |
||
EPS - normalised (C$) |
|
|
(1.76) |
(2.05) |
(1.66) |
(1.77) |
EPS - IFRS (C$) |
|
|
(2.56) |
(2.27) |
(1.77) |
(1.87) |
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 |
|
|
1,241 |
1,642 |
1,485 |
1,316 |
Intangible Assets |
1,185 |
1,092 |
1,069 |
1,069 |
||
Tangible Assets |
56 |
550 |
397 |
228 |
||
Other |
0 |
0 |
19 |
19 |
||
Current Assets |
|
|
18,548 |
8,603 |
7,318 |
6,593 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
0 |
0 |
0 |
0 |
||
Cash |
18,039 |
7,970 |
6,550 |
5,825 |
||
Other |
509 |
633 |
768 |
768 |
||
Current Liabilities |
|
|
(1,563) |
(2,284) |
(2,500) |
(2,500) |
Creditors |
(1,563) |
(2,284) |
(2,500) |
(2,500) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
(338) |
(314) |
(12,814) |
Long term borrowings |
0 |
0 |
0 |
(12,500) |
||
Other long term liabilities |
0 |
(338) |
(314) |
(314) |
||
Net Assets |
|
|
18,226 |
7,622 |
5,989 |
(7,405) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(8,769) |
(9,767) |
(10,829) |
(13,156) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(35) |
(57) |
(63) |
(69) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
273 |
(138) |
9,472 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
1 |
0 |
0 |
||
Net Cash Flow |
(8,532) |
(9,962) |
(1,420) |
(13,225) |
||
Opening net debt/(cash) |
|
|
(26,477) |
(18,039) |
(7,970) |
(6,550) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
||
Other |
94 |
(107) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(18,039) |
(7,970) |
(6,550) |
6,675 |
Source: Company accounts, Edison Investment Research
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