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Research: Healthcare
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.
Written by
Maxim Jacobs
InMed Pharmaceuticals |
INM-755 Phase II about to begin |
Financial update |
Pharma & biotech |
29 September 2021 |
Share price performance
Business description
Next events
Analysts
InMed Pharmaceuticals is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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 |
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
|
|
Research: Healthcare
Efmody (also called Chronocort), an oral long-acting formulation of hydrocortisone, has been approved in the EU and UK to treat congenital adrenal hyperplasia (CAH) in individuals aged 12 years and older. The company has started the commercial launch of the product with a rollout in Germany, Austria and the UK at the beginning of September. CAH is an orphan disease caused by deficiency of adrenal enzymes, most commonly 21-hydroxylase. The total addressable EU market is worth $268m based on the price of Plenadren, a long-acting hydrocortisone.
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