Progress across the business

InMed Pharmaceuticals 17 November 2021 Update
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InMed Pharmaceuticals

Progress across the business

Financial update

Pharma & biotech

17 November 2021

Price

US$1.4

Market cap

US$20m

Net cash (US$m) at 30 September 2021

15.4

Shares in issue

14.1m

Free float

60.6%

Code

INM

Primary exchange

Nasdaq

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.0)

(40.4)

(58.8)

Rel (local)

(4.9)

(43.2)

(68.2)

52-week high/low

US$5.35

US$1.34

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

Commercialisation update

2022

CTA filings for INM-088

H222

Analysts

Maxim Jacobs

+1 646 653 7027

Jyoti Prakash

+91 981 880 393

InMed Pharmaceuticals is a research client of Edison Investment Research Limited

With the recent closing of the BayMedica acquisition, InMed now has a substantially different profile than just a few months ago. The company is now in its commercial stage as BayMedica has been selling cannabichromene (CBC) in bulk. InMed has also advanced past the healthy volunteer stage in the INM-755 clinical program through the initiation of the INM-755 Phase II trial (755-201-EB) in up to 20 epidermolysis bullosa (EB) patients.

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

(13.7)

(1.00)

0.00

N/A

N/A

06/23e

0.0

(12.1)

(0.83)

0.00

N/A

N/A

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

BayMedica acquisition closed

Following InMed’s acquisition of BayMedica, the combined company has multiple manufacturing approaches to produce rare cannabinoids at meaningful yields and at attractive costs and has a growing commercial product pipeline. It is currently the global leader in large batch (currently 200kg but with the ability to scale up to metric tonnes) supply of CBC, a rare non-intoxicating cannabinoid. It is currently being marketed to consumer health and wellness companies for the nutraceuticals, cosmetics, functional food/beverages and animal health markets.

755-201-EB trial initiated

The company announced in late September it has initiated the 755-201-EB trial, which will test INM-755 in up to 20 EB patients with an anticipated treatment duration of 28 days. The study is currently expected to take place across 11 sites in seven countries, with patient screening underway at the first site.

INM-088 regulatory filings expected H222

With regards to INM-088 for glaucoma, the company has continued to set up a larger-scale drug manufacturing process, and has completed dose-ranging studies and conducted topline clinical study design work. Regulatory applications to initiate human clinical testing are expected to be filed in the second half of CY22.

Valuation: US$290m or US$20.53 per basic share

We have adjusted our valuation to US$290m or US$20.53 per basic share, from US$293m or US$24.24 per basic share. This is mainly due to a higher number of shares outstanding following the share issuance as a result of the closure of the BayMedica acquisition. In addition, there was a decline in net cash. InMed had US$15.4m in cash and marketable securities at 30 September 2021. We currently model an additional US$11m being raised in FY23, though the exact funding requirement will depend on the expense level for the combined companies. We will update our financial model once BayMedica financials are included in regulatory filings, which is likely to occur with the next quarterly report.

Transforming InMed

Following the closure of the BayMedica acquisition, the combined company will have multiple approaches to produce rare cannabinoids at meaningful yields and at attractive margins. BayMedica provides expertise in the use of chemical synthesis and yeast biosynthesis to manufacture cannabinoids, while InMed provides expertise in using E. coli (bacteria) for cannabinoid manufacturing through its IntegraSyn platform. This acquisition puts InMed in an attractive position to take advantage of the health and wellness market. As mentioned in the recent Edison report on biosynthesis (Biosynthesis: Taking the cannabinoid market to new heights), the global market for consumer packaged goods (CPG) and pharma cannabinoid biosynthesis products is predicted to reach C$10bn in 2025 (~US$8bn) and C$115bn (~US$90bn) by 2040 according to Raymond James.

The need to find alternative methods to manufacture cannabinoids, especially rare cannabinoids, is clear. Plant-based extraction of cannabinoids is time consuming (it takes three to 10 months just to cultivate the plant), which also requires a high degree of purification as otherwise the product would likely have unwanted pesticides, molds, fungi or bacteria, residual solvents, and non-target cannabinoids. For example, it was noted during the FDA advisory committee meeting to discuss the potential approval of GW Pharmaceuticals’ Epidiolex (CBD) for pediatric epilepsies that there was as much tetrahydrocannabinol (THC) in its pharmaceutical grade compound as some of the lower doses of dronabinol, an FDA-approved THC product. Additionally, only a few cannabinoids, such as THC and cannabidiol (CBD), are plentiful enough in the plant to be extracted in an economically viable fashion.

BayMedica has already demonstrated an ability to manufacture rare cannabinoids at scale. BayMedica is currently the global leader in large batch (currently 200kg but with the ability to scale up to metric tonnes) supply of CBC, a rare non-intoxicating cannabinoid. Preclinical studies have shown its ability to inhibit the growth of cancer cells,1 block pain,2 potentially promote brain health,3 combat depression4 and inhibit acne.5 It is currently being marketed to consumer health and wellness companies focused on nutraceuticals, cosmetics, functional food/beverages and animal health. The company has indicated that cumulative revenue since the December 2019 launch was US$2.5m. However, we do not have information on the burn rate or cash needs of BayMedica. We will update our financial model once more financial information on BayMedica is released.

  Ligresti et al., Antitumor Activity of Plant Cannabinoids with Emphasis on the Effect of Cannabidiol on Human Breast Carcinoma. Journal of Pharmacology and Experimental Therapeutics, 2006 318(3), 1375–1387.

  Maione et al., Non-psychoactive cannabinoids modulate the descending pathway of antinociception in anaesthetized rats through several mechanisms of action. British Journal of Pharmacology, 2011 Feb;162(3):584-96.

  Shinjyo et al., The effect of cannabichromene on adult neural stem/progenitor cells. Neurochemistry International. 2013 Nov;63(5):432-7.

  El-Alfy et al., Antidepressant-like effect of delta9-tetrahydrocannabinol and other cannabinoids isolated from Cannabis sativa L. Pharmacology, Biochemistry and Behavior. 2010 Jun;95(4):434-42.

  Olah et al., Differential effectiveness of selected non-psychotropic phytocannabinoids on human sebocyte functions implicates their introduction in dry/seborrhoeic skin and acne treatment. Experimental Dermatology 2016 Sep;25(9):701-7.

In addition to CBC, which is already at commercial scale, BayMedica is currently scaling up on tetrahydrocannabivarin (THCV), cannabidivarin (CBDV) and cannabinol (CBN) at food grade and expects to launch additional products in the next six to 12 months. THCV has been shown in preclinical studies to have an impact on obesity,6 epilepsy7 and Parkinson’s disease.8 Additionally, human clinical data demonstrated the potential for THCV to improve glycemic control in Type 2 diabetics.9 CBDV is being investigated by GW Pharmaceuticals (acquired by Jazz Pharmaceuticals in May 2021) in a number of indications. A Phase IIa study in adults with focal seizures did not meet its primary endpoint but trials are ongoing in autism and Prader-Willi Syndrome. GW/Jazz has also indicated interest in the treatment of Rett syndrome.

  Riedel et al., Synthetic and plant-derived cannabinoid receptor antagonists show hypophagic properties in fasted and non-fasted mice. British Journal of Pharmacology (2009), 156, 1154–1166

  Dos Santos et al., Phytocannabinoids and epilepsy. Journal of Clinical Pharmacy and Therapeutics 2015, 40, 135–143

  Garcia et al., Symptom-relieving and neuroprotective effects of the phytocannabinoid Δ⁹-THCV in animal models of Parkinson's disease. British Journal of Pharmacology 2011 Aug;163(7):1495-506.

  Jadoon et al., Efficacy and Safety of Cannabidiol and Tetrahydrocannabivarin on Glycemic and Lipid Parameters in Patients With Type 2 Diabetes: A Randomized, Double-Blind, Placebo-Controlled, Parallel Group Pilot Study. Diabetes Care 2016 Oct;39(10):1777-86.

With regards to CBN, it has been the focus of InMed’s pharmaceutical pipeline with INM-755, which has entered Phase II for EB, and INM-088, which is in preclinical development for glaucoma. Broadly, there is evidence of efficacy across a plethora of indications. Key for the treatment of EB (a rare debilitating genetic dermatologic disorder characterized by skin fragility where just wearing normal clothing can lead to wound formation), CBN has been shown in a variety of published preclinical studies to have an effect on pain,10 inflammation (due to the inhibition of the expression of cytokines)11 and bacterial infection.12 In addition, and presented at the 2020 EB World Congress in London, InMed has demonstrated in its own preclinical studies an effect on both pain and inflammation. In pain, InMed’s research has demonstrated a positive impact in nerve growth factor (NGF) induced pain models in rats. With regards to inflammation, CBN was tested on IL-8 and MMP-9, markers of inflammation suspected of having links with blister formation in EB simplex (both IL-8 and MMP-9 are upregulated in blisters) and in chronic cutaneous inflammation. Depending on dose, IL-8 was reduced by 35–54% and MMP-9 was reduced by 22–40%.

  Zygmunt et al., Δ9-Tetrahydrocannabinol and Cannabinol Activate Capsaicin-Sensitive Sensory Nerves via a CB1 and CB2 Cannabinoid Receptor-Independent Mechanism. Journal of Neuroscience. 1 June 2002, 22 (11) 4720-4727

  Jan et al., Attenuation of the ovalbumin-induced allergic airway response by cannabinoid treatment in A/J mice. Toxicology and Applied Pharmacology, 188 (2003), 24–35.

  Appendino et al., Antibacterial Cannabinoids from Cannabis sativa: A Structure−Activity Study. Journal of Natural Products, 2008 71(8), 1427–1430.

CBN has previously been shown to have efficacy in glaucoma. In cats, CBN has previously been shown to significantly reduce intraocular pressure (IOP) by around 27% after nine days.13 Also, InMed recently disclosed in vivo animal data for INM-088 at the H.C. Wainwright Ophthalmology Virtual Conference, which indicated a significant lowering of IOP at days 7 and 17 compared to the vehicle treated group.

  Colasanti et al., Intraocular pressure, ocular toxicity and neurotoxicity after administration of cannabinol or cannabigerol. Experimental Eye Research, 1984 39(3), 251–259.

BayMedica also has an extensive suite of new naturally occurring rare cannabinoids and cannabinoid analogs that can be developed as pharmaceutical products. These analogs are patentable as new chemical entities. This may potentially strengthen InMed’s pipeline.

INM-755 Phase II initiation

InMed has initiated its Phase II for INM-755 in EB patients. 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. The study is expected to take place at 11 sites across seven countries, including Austria, Germany, Greece, France, Italy, Israel and Serbia. Clinical Trial Agreements are fully executed with five sites and patient screening is underway at the first site. The company is seeking to expand the study into Spain, which would add an eighth country and two more sites to the list.

Valuation

We have adjusted our valuation to US$290m or US$20.53 per basic share, from US$293m or US$24.24 per basic share. This is mainly due to a higher number of shares outstanding following the share issuance as a result of the closure of the BayMedica acquisition. Also, there was a decline in net cash. We expect to add BayMedica’s commercial product, CBC, to the valuation once we have additional clarity of the economics of that business, which will likely occur at the next earnings release.

Exhibit 1: InMed valuation

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 September) (US$m)

$15.4

Total firm value (US$m)

$290.29

Total basic shares (m)

14.14

Value per basic share (US$)

$20.53

Options and warrants (m)

7.7

Total diluted shares (m)

21.9

Value per diluted share (US$)

$13.28

Source: Edison Investment Research

Financials

InMed reported a net loss of US$3.0m in Q1 of FY22 (the period ending 30 September 2021), up from US$1.6m in the same period a year ago due to higher SG&A and R&D spending. We have kept our R&D estimates the same but have increased SG&A forecasts by US$0.9m and US$1.0m in FY22 and FY23, respectively. Note that these estimates do not include BayMedica. We will update our model once we have a better understanding of the details of the BayMedica business.

InMed had US$15.4m in cash and marketable securities at 30 September 2021. We continue to forecast US$11m being raised (modelled as illustrative debt) in FY23, though the exact funding requirement will depend on the overall expense level for the combined company.

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)

(5,574)

(5,797)

EBITDA

 

 

(9,038)

(9,817)

(13,582)

(11,082)

Operating Profit (before amort. and except.)

 

 

(9,151)

(9,938)

(13,696)

(11,196)

Intangible Amortisation

0

0

0

0

Exceptionals/Other

82

(163)

(84)

(87)

Operating Profit

(9,069)

(10,101)

(13,780)

(11,284)

Net Interest and financial expense

130

(344)

5

(939)

Other (change in fair value of warrants)

0

243

0

0

Profit Before Tax (norm)

 

 

(9,021)

(10,283)

(13,690)

(12,136)

Profit Before Tax (IFRS)

 

 

(8,939)

(10,203)

(13,775)

(12,223)

Tax

0

0

0

0

Deferred tax

0

0

0

0

Profit After Tax (norm)

(9,021)

(10,283)

(13,690)

(12,136)

Profit After Tax (IFRS)

(8,939)

(10,203)

(13,775)

(12,223)

Average Number of Shares Outstanding (m)

5.2

6.7

13.7

14.5

EPS - normalised (c)

 

 

(172.80)

(153.02)

(99.78)

(83.44)

EPS - GAAP (US$)

 

 

(1.71)

(1.52)

(1.00)

(0.84)

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

1,267

1,163

Intangible Assets

1,087

1,062

1,037

1,037

Tangible Assets

403

327

221

117

Other

0

15

9

9

Current Assets

 

 

6,312

8,378

5,597

4,948

Stocks

0

0

0

0

Debtors

45

12

15

15

Cash

5,848

7,410

5,010

4,360

Other

419

957

572

572

Current Liabilities

 

 

(1,676)

(2,215)

(1,927)

(1,927)

Creditors

(1,676)

(2,215)

(1,927)

(1,927)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(248)

(189)

(179)

(11,179)

Long term borrowings

0

0

0

(11,000)

Other long term liabilities

(248)

(189)

(179)

(179)

Net Assets

 

 

5,878

7,377

4,759

(6,995)

CASH FLOW

Operating Cash Flow

 

 

(7,375)

(10,151)

(13,031)

(11,640)

Net Interest

0

360

0

0

Tax

0

0

0

0

Capex

(43)

(2)

(2)

(10)

Acquisitions/disposals

0

0

0

0

Financing

(31)

10,855

10,885

0

Dividends

0

0

0

0

Other

1

0

(250)

0

Net Cash Flow

(7,448)

1,062

(2,398)

(11,650)

Opening net debt/(cash)

 

 

(13,784)

(5,848)

(7,409)

(5,010)

HP finance leases initiated

0

0

0

0

Exchange rate movements

416

(495)

0

0

Other

(905)

994

(1)

0

Closing net debt/(cash)

 

 

(5,848)

(7,409)

(5,010)

6,640

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 £60,000 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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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 £60,000 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).

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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.

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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

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