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InMed Pharmaceuticals recently announced that it filed a Clinical Trial Application (CTA) in the Netherlands for INM-755, which is being developed for epidermolysis bullosa (EB). Approval of the CTA is expected around the end of November with the first trial (755-101-HV) expected to begin in December. This trial will test two strengths of INM-755 cream on the intact skin of 22 healthy volunteers. Following the completion of this trial, the company expects to initiate trial 755-102-HV, which would test INM-755 on eight healthy volunteers with small wounds.
Written by
InMed Pharmaceuticals |
CTA filed on schedule |
Financial update |
Pharma & biotech |
18 November 2019 |
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 Pharmaceuticals recently announced that it filed a Clinical Trial Application (CTA) in the Netherlands for INM-755, which is being developed for epidermolysis bullosa (EB). Approval of the CTA is expected around the end of November with the first trial (755-101-HV) expected to begin in December. This trial will test two strengths of INM-755 cream on the intact skin of 22 healthy volunteers. Following the completion of this trial, the company expects to initiate trial 755-102-HV, which would test INM-755 on eight healthy volunteers with small wounds.
Year end |
Revenue (C$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/18 |
0.0 |
(5.3) |
(0.04) |
0.00 |
N/A |
N/A |
06/19 |
0.0 |
(9.1) |
(0.05) |
0.00 |
N/A |
N/A |
06/20e |
0.0 |
(15.6) |
(0.09) |
0.00 |
N/A |
N/A |
06/21e |
0.0 |
(17.3) |
(0.10) |
0.00 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
On the way to human clinical trials
With the submission of its CTA, InMed is on track for initiating the Phase I programme for INM-755 in healthy volunteers by the end of 2019. There will be two separate trials (755-101-HV and 755-102-HV) that will be carried out serially as data from the trial in subjects with normal, intact skin are necessary for the trial in subjects with small wounds. We expect trial 755-101-HV to complete enrolment in Q120 with enrolment for 755-102-HV beginning in H220.
INM-088 development progressing
INM-088 for glaucoma is advancing as the company completed in vitro testing of the compound and initiated multiple formulation and pharmacology studies. These studies are expected to be completed in early 2020. Key IND-enabling studies are expected to begin after these are completed and after discussions with regulators (if needed).
Biosynthesis on track
InMed’s E. coli-based biosynthesis process continues to move forward. The company is optimising fermentation parameters to maximise yield and continue to work on downstream purification (DSP). The company is on track to complete these activities by year-end. InMed is also investigating an alternative process (the exact nature of which is undisclosed) that may have advantages in terms of cost and yield, and will decide which approach to advance in H120.
Valuation: C$259m or C$1.50 per basic share
We have increased our valuation to C$259m or C$1.50 per basic share (C$1.24 per diluted share), from C$256m or C$1.48 per basic share (C$1.22 per diluted share). The valuation increase is mainly due to increasing the probability of success for INM-755 (from 5% to 7.5%) following product advancement into the clinic. This was partially offset by a lower cash balance. InMed had C$14.8m in cash and marketable securities at 30 September and we believe this provides a runway into FY21.
Quarterly update
InMed continues to be on track for initiation of the Phase I programme in healthy volunteers by the end of the year following the submission of a CTA in the Netherlands, where it will conduct the initial clinical trials. The programme will consist of two separate trials (see Exhibit 1). Trial 755-101-HV will enrol 22 healthy volunteers with normal, intact skin and evaluate the systemic and local safety, tolerability and pharmacokinetics (PK) of two dosage strengths of INM-755 cream. Trial 755-102-HV will have around eight healthy volunteers with small wounds to evaluate the local safety of the product. The small blister wounds will be created at the clinical site and will largely mimic the types of wounds typically seen in EB simplex patients. A Phase I/II in approximately 12–15 EB patients is expected to begin in early 2021 following additional IND/CTA filings globally. Note that all these trials will be double blind and vehicle controlled. Importantly, the safety studies can be used as the basis for a clinical trial programme in other indications as INM-755 may have applications in other dermatologic indications involving inflammation, pain and itch.
Exhibit 1: Expected clinical trial programme
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 |
Initiate by year-end 2019, complete enrolment by end of Q120. |
Phase I |
Adult healthy volunteers with small wounds |
Around 8 |
Seven days on small wounds; two dosage strengths |
Local safety |
Initiate after 755-101-HV data are available. Enrolment expected to begin and complete in H220. |
Phase I/II |
EB patients (first adults, then children) |
12–15 |
30 days on intact skin and possibly wounds; two dosage strengths |
Systemic and local safety and efficacy |
Initiate in Q121, following IND/CTA filings in additional countries globally. |
Source: InMed Pharmaceuticals
The glaucoma programme is advancing. INM-088 has completed in vitro testing and the company has initiated multiple formulation and pharmacology studies. These studies are expected to be completed in early 2020. Key IND-enabling studies are expected to begin after these are completed and after discussions with regulators (if such discussions are necessary). As with INM-755, we believe INM-088 is a ‘minor’ cannabinoid, which will allow InMed to differentiate its clinical programs in the cannabinoid pharmaceutical sector dominated by cannabidiol (CBD) and tetrahydrocannabinol (THC) trials.
Valuation
We have increased our valuation to C$259m or C$1.50 per basic share (C$1.24 per diluted share), from C$256m or C$1.48 per basic share (C$1.22 per diluted share). The valuation increase is mainly due to increasing the probability of success for INM-755 (from 5% to 7.5%) due to product advancement into the clinic. Phase I products typically have a 10% probability of success, so it seems appropriate to increase the probability of success from 5% as the initiation of a Phase I trial is coming very soon. We will raise the probability of success beyond 7.5% as the product advances further. The valuation increase was partially offset by a lower cash balance.
Exhibit 2: InMed valuation
Program |
Stage |
Probability of success |
Launch year |
Peak sales (C$m) |
rNPV |
||||
Biosynthesis (manufacturing) |
Development |
23% |
2022 |
1,574 |
224 |
||||
INM-755 |
Phase I |
7.5% |
2026 |
345 |
20 |
||||
Total |
244.4 |
||||||||
Net cash and equivalents (As of 30 September) (C$m) |
14.8 |
||||||||
Total firm value (C$m) |
259.1 |
||||||||
Total basic shares (as of 30 September 2019, m) |
172.3 |
||||||||
Value per basic share (C$) |
1.50 |
||||||||
Options and warrants (as of September 2019, m) |
37.4 |
||||||||
Total diluted shares (as of September 2019, m) |
209.7 |
||||||||
Value per diluted share (C$) |
1.24 |
||||||||
Source: Edison Investment Research
Financials
InMed reported an operating loss of C$3.3m in its fiscal first quarter (the quarter ending 30 September 2019), up from C$1.5m in the same quarter in the previous year due to the progression of its pipeline. R&D expenses were C$2.3m for the quarter, up from C$0.6m in the same quarter in the previous year. We have lowered our expectations for R&D spending by C$0.3m for both FY20 and FY21 as the run rate was a little lower than we expected. Otherwise our estimates are largely the same.
InMed had C$14.8m in cash and marketable securities at 30 September and we believe this provides a runway into FY21. We continue to forecast the company will raise C$20m over the next two years to fund operations, which we model as illustrative long-term debt.
Exhibit 3: Financial summary
C$000s |
2018 |
2019 |
2020e |
2021e |
||
Year end 30 June |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
||
Research and development |
(1,927) |
(5,639) |
(10,950) |
(11,388) |
||
Selling, general & administrative |
(3,367) |
(3,798) |
(3,862) |
(4,017) |
||
EBITDA |
|
|
(5,530) |
(9,685) |
(15,159) |
(15,751) |
Operating Profit (before amort. and except.) |
|
|
(5,412) |
(9,561) |
(14,985) |
(15,578) |
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals/Other |
(3,197) |
(4,128) |
(2,560) |
(2,663) |
||
Operating Profit |
(8,609) |
(13,689) |
(17,546) |
(18,240) |
||
Net Interest |
88 |
434 |
(626) |
(1,708) |
||
Other (change in fair value of warrants) |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(5,324) |
(9,127) |
(15,612) |
(17,286) |
Profit Before Tax (IFRS) |
|
|
(8,521) |
(13,255) |
(18,172) |
(19,948) |
Tax |
0 |
0 |
0 |
0 |
||
Deferred tax |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(5,324) |
(9,127) |
(15,612) |
(17,286) |
||
Profit After Tax (IFRS) |
(8,521) |
(13,255) |
(18,172) |
(19,948) |
||
Average Number of Shares Outstanding (m) |
142.5 |
171.3 |
174.9 |
181.9 |
||
EPS - normalised (c) |
|
|
(3.74) |
(5.33) |
(8.93) |
(9.50) |
EPS - IFRS (C$) |
|
|
(0.06) |
(0.08) |
(0.10) |
(0.11) |
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 |
|
|
1,329 |
1,241 |
1,807 |
1,242 |
Intangible Assets |
1,274 |
1,185 |
1,160 |
1,160 |
||
Tangible Assets |
56 |
56 |
647 |
83 |
||
Other |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
26,734 |
18,548 |
12,763 |
5,547 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
0 |
0 |
0 |
0 |
||
Cash |
26,477 |
18,039 |
12,474 |
5,258 |
||
Other |
257 |
509 |
288 |
288 |
||
Current Liabilities |
|
|
(938) |
(1,563) |
(1,462) |
(1,462) |
Creditors |
(938) |
(1,563) |
(1,462) |
(1,462) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
0 |
(10,410) |
(20,410) |
Long term borrowings |
0 |
0 |
(10,000) |
(20,000) |
||
Other long term liabilities |
0 |
0 |
(410) |
(410) |
||
Net Assets |
|
|
27,125 |
18,226 |
2,698 |
(15,083) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(4,672) |
(8,769) |
(15,284) |
(17,024) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(56) |
(35) |
(174) |
(192) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
24,483 |
273 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
1 |
0 |
||
Net Cash Flow |
19,756 |
(8,532) |
(15,458) |
(17,216) |
||
Opening net debt/(cash) |
|
|
(6,708) |
(26,477) |
(18,039) |
(2,474) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
||
Other |
14 |
94 |
(107) |
0 |
||
Closing net debt/(cash) |
|
|
(26,477) |
(18,039) |
(2,474) |
14,742 |
Source: InMed Pharmaceuticals accounts, Edison Investment Research
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