Incannex Healthcare — An encouraging start to the new financial year

Incannex Healthcare (NASDAQ: IXHL)

Last close As at 03/12/2024

USD0.97

−0.11 (−10.19%)

Market capitalisation

62m

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Research: Healthcare

Incannex Healthcare — An encouraging start to the new financial year

Incannex Healthcare’s Q123 cash flow report highlighted two key developments in the company’s drug pipeline, including positive preliminary safety data from the Phase 1 clinical trial of IHL-675A (an anti-inflammatory drug) and a constructive pre-investigational new drug (IND) meeting with the FDA for IHL-216A, an inhaled drug product for the treatment of traumatic brain injury (TBI). With the APIRx acquisition adding 22 drug development projects (both pre-clinical and clinical) to its portfolio, the company now boasts a broad pipeline, with discussions ongoing with the Monash University to strengthen its pipeline further. With a cash balance of A$33.4m (US$21.4m) at end-Q123, Incannex is well placed to fund its operations into FY24 and its recent inclusion in Standard and Poor’s ASX 300 Index should further enhance visibility. Our valuation remains unchanged at US$714.7m or US$11.74 per ADR.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Incannex Healthcare

An encouraging start to the new financial year

Q123 trading update

Pharma and biotech

31 October 2022

Price

US$4.2

Market cap

US$211m

ADR/Ord conversion ratio 1:25

Net cash (US$m) at end Q123

21.4

ADRs in issue

60.9m

ADR code

IXHL

ADR exchange

NASDAQ-GM

Underlying exchange

ASX

Depositary

DBK

Share price performance

Business description

Incannex Healthcare is an Australian dual-listed biotech company focused on developing medicinal cannabis pharmaceutical products and psychedelic medicine therapies. These therapies are being designed to target indications with unmet need, including obstructive sleep apnea, generalized anxiety disorder, trauma and inflammatory conditions.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Incannex Healthcare is a research client of Edison Investment Research Limited

Incannex Healthcare’s Q123 cash flow report highlighted two key developments in the company’s drug pipeline, including positive preliminary safety data from the Phase 1 clinical trial of IHL-675A (an anti-inflammatory drug) and a constructive pre-investigational new drug (IND) meeting with the FDA for IHL-216A, an inhaled drug product for the treatment of traumatic brain injury (TBI). With the APIRx acquisition adding 22 drug development projects (both pre-clinical and clinical) to its portfolio, the company now boasts a broad pipeline, with discussions ongoing with the Monash University to strengthen its pipeline further. With a cash balance of A$33.4m (US$21.4m) at end-Q123, Incannex is well placed to fund its operations into FY24 and its recent inclusion in Standard and Poor’s ASX 300 Index should further enhance visibility. Our valuation remains unchanged at US$714.7m or US$11.74 per ADR.

Year end

Revenue (A$m)

PBT*

(A$m)

EPS*
(c)

DPS
(A$)

P/E
(x)

Yield
(%)

06/21

2.0

(8.2)

(0.83)

0.0

N/A

N/A

06/22

0.8

(14.9)

(1.25)

0.0

N/A

N/A

06/23e

0.0

(20.6)

(1.38)

0.0

N/A

N/A

06/24e

0.0

(33.4)

(2.24)

0.0

N/A

N/A

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

During the quarter, Incannex made encouraging progress towards clinical advancement of its drug assets. Following approval from the Bellberry Human Research Ethics Committee for the Phase I study of its anti-inflammatory drug IHL-675A, the company reported encouraging preliminary safety data (healthy volunteers; n=36) from the trial (refer to our note for more details) and has commenced preparation for Phase II clinical trials, which will initially target patients with rheumatoid arthritis, followed by inflammatory bowel disease and lung inflammation. Final data from the Phase I study will be released in Q1 CY23.

In addition, Incannex reported a constructive IND meeting with the US FDA for its proprietary inhaled drug product IHL-216A for the treatment of concussion and TBI, with the FDA providing detailed feedback and guidance on the most efficient clinical trial development plan to effect successful commercialisation, in particular related to developing an inhaled drug. As the next step, Incannex is preparing a follow-up request seeking additional information on the FDA’s recommendations. The company also partnered with Curia Global, a US-based contract research and manufacturing organisation (CDMO) in August 2022 to develop and manufacture GMP-grade IHL-216A.

Moreover, IHL-42X, Incannex’s most advanced program for the treatment of obstructive sleep apnoea, has completed a Phase II study and is preparing for an IND to initiate FDA regulated trials, which management expects in CY23 (update expected in December 2022).

In a separate development, we see the appointment of Mr Robert B Clark, a regulatory affairs expert, to the board of directors as a positive step as the company gears up for regulatory trials in the near future.

General disclaimer and copyright

This report has been commissioned by Incannex Healthcare and prepared and issued by Edison, in consideration of a fee payable by Incannex Healthcare. 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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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.

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Frankfurt +49 (0)69 78 8076 960

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60325 Frankfurt

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London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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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

General disclaimer and copyright

This report has been commissioned by Incannex Healthcare and prepared and issued by Edison, in consideration of a fee payable by Incannex Healthcare. 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 2022 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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