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Research: Healthcare
InMed recently reported results for the first quarter of FY19 and continues to make solid progress in bringing INM-750 for epidermolysis bullosa (EB) into the clinic by H219. So far, its selected formulation has demonstrated good drug penetration as a topical formulation, a clean safety profile and that each of the two cannabinoid components plays an important and independent role in combating EB, which is an especially important finding from a regulatory point of view for any combination product. Additionally, the company’s biosynthesis program is tracking on schedule.
Written by
InMed Pharmaceuticals |
Biosynthesis and INM-750 Progress on Track |
Financial update |
Pharma & biotech |
20 November 2018 |
Share price performance
Business description
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InMed Pharmaceuticals is a research client of Edison Investment Research Limited |
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InMed recently reported results for the first quarter of FY19 and continues to make solid progress in bringing INM-750 for epidermolysis bullosa (EB) into the clinic by H219. So far, its selected formulation has demonstrated good drug penetration as a topical formulation, a clean safety profile and that each of the two cannabinoid components plays an important and independent role in combating EB, which is an especially important finding from a regulatory point of view for any combination product. Additionally, the company’s biosynthesis program is tracking on schedule.
Year end |
Revenue (C$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/17 |
0.0 |
(3.2) |
(0.03) |
0.00 |
N/A |
N/A |
06/18 |
0.0 |
(5.3) |
(0.04) |
0.00 |
N/A |
N/A |
06/19e |
0.0 |
(7.1) |
(0.04) |
0.00 |
N/A |
N/A |
06/20e |
0.0 |
(11.4) |
(0.06) |
0.00 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Positive preclinical results for INM-750
The company has conducted a plethora of preclinical studies for INM-750 for EB. Importantly, InMed has selected a topical formulation that has been able to show good permeability, clean safety/toxicology results and evidence that the two cannabinoid components of INM-750 play important and independent roles including anti-inflammation and keratin up-regulation.
INM-750 CTA/IND filing on track for H219
Given the positive results for the various drug permeation, toxicology and pharmacology studies InMed has conducted to date, the company believes it is on track to meet with regulators in H119 and for a Clinical Trial Application (CTA) and/or an Investigational New Drug application (IND) filing in H219. InMed is working on both in parallel, but believes it will complete the CTA filing first, hence human clinical studies for INM-750 may begin in Canada.
Biosynthesis development agreement with the NRC
InMed announced in October that it had entered into a development agreement with the National Research Council of Canada (NRC), the primary research and technology organization of the Canadian government, for biofermentation development and scale-up processes. Also, the company has signed a master service agreement with another party for downstream purification processing, with target manufacturing of a commercial-scale batch by the end of 2019.
Valuation: C$232m or C$1.36 per basic share
We have adjusted our valuation to C$232m or C$1.36 per basic share (C$1.05 per diluted share) from C$234m or C$1.37 per basic share (C$1.05 per diluted share) solely due to lower net cash, otherwise our valuation estimates are the same. The company had C$24.8m in cash at 30 September and we believe this provides runway into FY21.
Q119 results and R&D update
InMed recently reported its Q119 results and provided a development update. The company continues to run a series of preclinical studies for INM-750 for the treatment of EB. So far, its selected topical formulation has been able to show good permeability of the epidermis, clean safety/toxicology results (from two genotoxicity studies, as well as two seven-day dose-ranging and pharmacokinetic studies to assess systemic toxicity), and demonstrated that the two cannabinoid components of INM-750 play important and independent roles including anti-inflammation and keratin up-regulation. InMed continues to run toxicity studies, work on the manufacturing component and is in the process of selecting a clinical research organization (CRO) to run the human clinical trials. The company believes it is on track to meet with regulators in H119, and for a CTA and/or IND filing in H219. InMed is working on both in parallel, but believes it will complete the CTA filing first, hence human clinical studies for INM-750 may begin in Canada, followed by the US.
With regards to biosynthesis, the company announced in October that it had entered into a development agreement with the National Research Council of Canada (NRC), the primary research and technology organization of the Canadian government, for biofermentation development and scale-up processes at the NRC’s dedicated facility in Montreal. Additionally, the Company confirmed the signing of a master service agreement with another party for the downstream purification processing, with target manufacturing of a commercial-scale batch before year-end 2019.
Valuation
We have adjusted our valuation to C$232m or C$1.36 per basic share (C$1.05 per diluted share) from C$234m or C$1.37 per basic share (C$1.05 per diluted share) solely due to lower net cash, otherwise there is no change to our rNPV valuation assumptions.
Exhibit 1: InMed valuation table
Program |
Stage |
Probability of success |
Launch year |
Peak sales (C$m) |
rNPV (C$m) |
Biosynthesis (manufacturing) |
Development |
23% |
2020 |
1,574 |
$196 |
INM-750 |
Preclinical |
5.0% |
2026 |
345 |
$11 |
Total |
$207.0 |
||||
Net cash and equivalents (as of 30 September 2018) (C$m) |
$24.8 |
||||
Total firm value (C$m) |
$231.8 |
||||
Total basic shares (as of September 2018, m) |
170.9 |
||||
Value per basic share (C$) |
$1.36 |
||||
Options and warrants (as of September 2018, m) |
50.4 |
||||
Total diluted shares (m) |
221.3 |
||||
Value per diluted share (C$) |
$1.05 |
||||
Source: Edison Investment Research
Financials
InMed reported an operating loss of C$2.8m in Q119 (quarter ending 30 September 2018) up from C$1.8m for the same period a year ago. R&D expenses were C$0.6m in Q119, up from C$0.4m in the same quarter last year. InMed had C$24.8m in cash at 30 September and we believe this provides runway into FY21.
Exhibit 2: Financial summary
C$'000s |
2017 |
2018 |
2019e |
2020e |
||
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 |
(746) |
(1,927) |
(3,854) |
(7,709) |
||
Selling, general & administrative |
(2,321) |
(3,367) |
(3,502) |
(3,642) |
||
EBITDA |
|
|
(3,263) |
(5,530) |
(7,512) |
(11,506) |
Operating Profit (before amort. and except.) |
(3,165) |
(5,412) |
(7,434) |
(11,429) |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals/Other |
(1,309) |
(3,197) |
(3,881) |
(4,036) |
||
Operating Profit |
(4,474) |
(8,609) |
(11,315) |
(15,464) |
||
Net Interest |
0 |
88 |
358 |
0 |
||
Other (change in fair value of warrants) |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(3,165) |
(5,324) |
(7,076) |
(11,429) |
Profit Before Tax (IFRS) |
|
|
(4,474) |
(8,521) |
(10,957) |
(15,464) |
Tax |
0 |
0 |
0 |
0 |
||
Deferred tax |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(3,165) |
(5,324) |
(7,076) |
(11,429) |
||
Profit After Tax (IFRS) |
(4,474) |
(8,521) |
(10,957) |
(15,464) |
||
Average Number of Shares Outstanding (m) |
96.8 |
142.5 |
173.4 |
180.4 |
||
EPS - normalised (c) |
|
|
(3.27) |
(3.74) |
(4.08) |
(6.34) |
EPS - IFRS ($) |
|
|
(0.05) |
(0.06) |
(0.06) |
(0.09) |
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 |
|
|
1,392 |
1,329 |
1,286 |
1,312 |
Intangible Assets |
1,365 |
1,274 |
1,251 |
1,251 |
||
Tangible Assets |
27 |
56 |
36 |
61 |
||
Other |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
6,945 |
26,734 |
19,175 |
7,585 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
0 |
0 |
0 |
0 |
||
Cash |
6,708 |
26,477 |
18,943 |
7,354 |
||
Other |
237 |
257 |
231 |
231 |
||
Current Liabilities |
|
|
(370) |
(938) |
(590) |
(590) |
Creditors |
(370) |
(938) |
(590) |
(590) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
7,966 |
27,125 |
19,870 |
8,307 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(3,076) |
(4,672) |
(7,484) |
(11,507) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(25) |
(56) |
(75) |
(82) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
9,755 |
24,483 |
11 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
6,654 |
19,756 |
(7,547) |
(11,589) |
||
Opening net debt/(cash) |
|
|
(54) |
(6,708) |
(26,477) |
(18,943) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
||
Other |
0 |
14 |
13 |
0 |
||
Closing net debt/(cash) |
|
|
(6,708) |
(26,477) |
(18,943) |
(7,354) |
Source: Company reports, Edison Investment Research
|
|
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