NM-755 Phase II about to begin

InMed Pharmaceuticals 29 September 2021 Update
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InMed Pharmaceuticals

INM-755 Phase II about to begin

Financial update

Pharma & biotech

29 September 2021

Price

US$1.8

Market cap

US$22m

Net cash (US$m) at 30 June 2021 + offering

18.4

Shares in issue (includes 3.1m shares subject to pre-funded warrant exercises)

12.1m

Free float

82.9%

Code

INM

Primary exchange

Nasdaq

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(25.4)

(38.5)

(49.3)

Rel (local)

(22.7)

(39.4)

(61)

52-week high/low

US$7

US$2

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 II initiation

Q3/Q4 CY21

Analysts

Maxim Jacobs

+1 646 653 7027

Jyoti Prakash

+91 981 880 393

InMed Pharmaceuticals is a research client of Edison Investment Research Limited

In the coming weeks, InMed expects to begin patient enrolment in a Phase II (755-201-EB) trial for INM-755 in up to 20 epidermolysis bullosa (EB) patients with an anticipated treatment duration of 28 days. Clinical Trial Applications have been filed in all seven participating countries. Patients with all four subtypes of inherited EB, EB Simplex, Dystrophic EB, Junctional EB and Kindler syndrome, will be eligible for the trial. Current expectations are for the trial to enroll in approximately a year.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(US$)

DPS
(US$)

P/E
(x)

Yield
(%)

06/20

0.0

(9.0)

(1.73)

0.00

N/A

N/A

06/21

0.0

(10.3)

(1.53)

0.00

N/A

N/A

06/22e

0.0

(12.8)

(1.06)

0.00

N/A

N/A

06/23e

0.0

(11.2)

(0.89)

0.00

N/A

N/A

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

BayMedica merger expected to close within weeks

InMed has recently announced that it has entered into a definitive agreement to acquire BayMedica, a private US-based company that is focusing on the manufacture and commercialization of rare cannabinoids. The combined company will have multiple tools to produce rare cannabinoids at meaningful yields and at attractive costs and will have a growing commercial product. The acquisition is expected to close in the coming weeks.

INM-088 progressing

With regards to INM-088 for glaucoma, the company has continued to set up a larger scale drug manufacturing process. The product produced from the larger scale will be used to support the upcoming good laboratory process (GLP) studies. which are expected to commence mid-CY22. An IND filing may occur in H2 CY22.

755-201-EB trial to enroll patients in seven countries

The company expects to begin the 755-201-EB trial in the coming weeks. Clinical Trial Applications have been filed in all seven participating countries: Germany, France, Italy, Austria, Greece, Israel and Serbia.

Valuation: US$293m or US$24.24 per basic share

We have increased our valuation from US$242m or US$20.03 per basic share to US$293m or US$24.24 per basic share. With INM-755 set to move into Phase II shortly, we have increased its probability of success from 10% to 20%, our standard rate for a drug at this stage of development. InMed had US$7.4m in cash and marketable securities at 30 June 2021 and subsequently (in July 2021) raised approximately US$12m in gross proceeds (US$11m net) from a private placement. We currently model an additional US$11m being raised in FY23, though the exact level of funding requirement will depend on the expense level for the combined companies. We will update our financial model once the acquisition closes and we have some clarity on cash needs.

Clinical update

As expected, InMed anticipates commencing enrolment in its Phase II for INM-755 in EB patients in the coming weeks. The trial will enroll up to 20 EB patients and have a treatment duration of 28 days. Patients with all four subtypes of inherited EB, EB Simplex, Dystrophic EB, Junctional EB and Kindler syndrome, will be eligible for the trial. The study will use a within-patient, double-blind design whereby matched index areas will be randomized to be treated with either INM-755 or a vehicle cream. Current expectations are for the trial to complete enrollment in approximately a year. Clinical Trial Applications have been filed in all seven participating countries: Germany, France, Italy, Austria, Greece, Israel and Serbia.

InMed previously announced the results of both its Phase I trials, 755-101-HV and 755-102-HV. Trial 755-101-HV 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. 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. No systemic adverse events were reported. Importantly, the INM-755 creams did not introduce any delay in wound healing.

With regards to INM-088 for glaucoma, the company has continued to set up a larger-scale drug manufacturing process (combining cannabinol (CBN) and the MiDrops delivery technology from EyeCRO). The product produced from the larger scale will be used to support the upcoming good laboratory process (GLP) studies, which are expected to commence mid-CY22. An IND may be filed in H2 of CY22 though the company will update this estimate as it progresses through the remaining preclinical program. Of note, the company recently disclosed in vivo animal data for INM-088 at the H.C. Wainwright Ophthalmology Virtual Conference, which indicated a significant lowering of intraocular pressure (IOP) at days 7 and 17 compared to the vehicle treated group. These data have been submitted to a peer-reviewed journal.

Valuation

We have increased our valuation from US$242m or US$20.03 per basic share to US$293m or US$24.24 per basic share. With INM-755 set to move into Phase II shortly, we have increased its probability of success from 10% to 20%, our standard rate for a drug at this stage of development.

Exhibit 1: InMed valuation table

Program

Stage

Probability of success

Launch year

Peak sales (US$m)

rNPV
(US$m)

Biosynthesis (manufacturing)

Development

23%

2022

1,243

$224

INM-755

Phase II

20%

2026

313

$51

Total

$274.9

Net cash and equivalents (as of 30 June plus offering) (US$m)

$18.4

Total firm value (US$m)

$293.31

Total basic shares (as of 7 September 2021, m)

12.10

Value per basic share (US$)

$24.24

Options and warrants (m)

7.4

Total diluted shares (as of 7 September 2021, m)

19.5

Value per diluted share (US$)

$15.04

Source: Edison Investment Research

Financials

InMed reported a net loss of US$10.2m in FY21 (the period ending 30 June 2021), up from US$8.9m in FY20 mainly due to higher SG&A expenses (US$4.5m in FY21 vs US$3.2m in FY20). We have made some changes to our financial model for FY22, increasing R&D expenses by US$1.7m and increasing SG&A by US$0.2m. We have also introduced FY23 estimates, which feature slightly higher SG&A spending and somewhat lower R&D spending (as the Phase II is expected to conclude in FY22), as well as higher net financial expense, resulting in an expected net loss of US$11.4m in FY23 compared to our expected net loss of $13.0m in FY22. Note that these estimates do not include BayMedica. We will update our model once the acquisition closes and we have a better sense of revenue and expenses going forward.

InMed had US$7.4m in cash and marketable securities at 30 June 2021 and subsequently (in July 2021) raised approximately US$12m in gross proceeds (US$11m net) from a private placement. We currently model an additional US$11m being raised in FY23, though the exact level of funding requirement will depend on the expense level for the combined companies (InMed plus BayMedica).

As a reminder, InMed is acquiring BayMedica in an all-stock transaction in which InMed will issue 1.78m shares to BayMedica’s equity and convertible debt holders. At the current stock price, this values BayMedica at approximately US$3m. This may be reduced in the event that BayMedica’s net liabilities exceed a certain negotiated threshold at the closing of the transaction. BayMedica’s equity and debt holders will also receive Series A warrants to purchase up to 800,000 shares with an exercise price equal to 125% of the 20-day volume-weighted average closing price of InMed shares prior to the third business day before the closing of the proposed transaction (the ‘Deal Price’) and Series B warrants to acquire up to 800,000 common shares of InMed priced at 200% of the ‘Deal Price’.

Exhibit 2: Financial summary

US$'000s

2020

2021

2022e

2023e

Year end 30 June

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

0

0

0

0

Cost of Sales

0

0

0

0

Gross Profit

0

0

0

0

Research and development

(5,811)

(5,338)

(8,007)

(5,285)

Selling, general & administrative

(3,227)

(4,479)

(4,659)

(4,845)

EBITDA

 

 

(9,038)

(9,817)

(12,666)

(10,130)

Operating Profit (before amort. and except.)

 

 

(9,151)

(9,938)

(12,786)

(10,250)

Intangible Amortisation

0

0

0

0

Exceptionals/Other

82

(163)

(170)

(176)

Operating Profit

(9,069)

(10,101)

(12,956)

(10,427)

Net Interest and financial expense

130

(344)

0

(939)

Other (change in fair value of warrants)

0

243

0

0

Profit Before Tax (norm)

 

 

(9,021)

(10,283)

(12,786)

(11,190)

Profit Before Tax (IFRS)

 

 

(8,939)

(10,203)

(12,956)

(11,366)

Tax

0

0

0

0

Deferred tax

0

0

0

0

Profit After Tax (norm)

(9,021)

(10,283)

(12,786)

(11,190)

Profit After Tax (IFRS)

(8,939)

(10,203)

(12,956)

(11,366)

Average Number of Shares Outstanding (m)

5.2

6.7

12.1

12.6

EPS - normalised (US$)

 

 

(1.73)

(1.53)

(1.06)

(0.89)

EPS - GAAP (US$)

 

 

(1.71)

(1.52)

(1.07)

(0.90)

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

 

 

1,490

1,403

1,284

1,165

Intangible Assets

1,087

1,062

1,062

1,062

Tangible Assets

403

327

208

89

Other

0

15

15

15

Current Assets

 

 

6,312

8,378

7,176

7,588

Stocks

0

0

0

0

Debtors

45

12

12

12

Cash

5,848

7,410

6,207

6,620

Other

419

957

957

957

Current Liabilities

 

 

(1,676)

(2,215)

(2,215)

(2,215)

Creditors

(1,676)

(2,215)

(2,215)

(2,215)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(248)

(189)

(189)

(11,189)

Long term borrowings

0

0

0

(11,000)

Other long term liabilities

(248)

(189)

(189)

(189)

Net Assets

 

 

5,878

7,377

6,055

(4,651)

CASH FLOW

Operating Cash Flow

 

 

(7,375)

(10,151)

(12,201)

(10,585)

Net Interest

0

360

0

0

Tax

0

0

0

0

Capex

(43)

(2)

(2)

(2)

Acquisitions/disposals

0

0

0

0

Financing

(31)

10,855

11,000

0

Dividends

0

0

0

0

Other

1

0

0

0

Net Cash Flow

(7,448)

1,062

(1,203)

(10,587)

Opening net debt/(cash)

 

 

(13,784)

(5,848)

(7,409)

(6,207)

HP finance leases initiated

0

0

0

0

Exchange rate movements

416

(495)

0

0

Other

(905)

994

0

0

Closing net debt/(cash)

 

 

(5,848)

(7,409)

(6,207)

4,381

Source: company reports, 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.

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.

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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 2021 Edison Investment Research Limited (Edison).

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United Kingdom

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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.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

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New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

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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

1185 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 2021 Edison Investment Research Limited (Edison).

Australia

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

1185 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

1185 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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