Incannex Healthcare — On to Phase II for IHL-675A

Incannex Healthcare (NASDAQ: IXHL)

Last close As at 23/05/2024

USD0.97

−0.11 (−10.19%)

Market capitalisation

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Research: Healthcare

Incannex Healthcare — On to Phase II for IHL-675A

Incannex has reported final results from its Phase I trial assessing the safety and pharmacokinetics (PK) of IHL-675A, a cannabidiol (CBD) and hydroxychloroquine (HCQ) fixed-dose combination drug, for the treatment of rheumatoid arthritis (RA). IHL-675A was generally well-tolerated and showed a comparable adverse event profile to reference drugs Epidiolex and Plaquenil. PK analyses revealed that CBD uptake was faster, and HCQ uptake was slower, for IHL-675A versus reference drugs. This could be advantageous for the combination drug, as CBD provides immediate relief for inflammation and pain in RA patients, and HCQ provides extended relief. In February 2023, Incannex initiated a blinded, placebo-controlled Phase II study for IHL-675A in RA. The company has also filed a pre- Investigational New Drug (IND) request with the FDA, intending to conduct parallel Phase II studies in the US. We view these results as encouraging for the clinical development of IHL-675A, provided data from Phase II studies continue to be supportive.

Written by

Arron Aatkar

Associate analyst

Healthcare

Incannex Healthcare

On to Phase II for IHL-675A

Clinical development update

Pharma and biotech

3 May 2023

Price

US$1.9

Market cap

US$121m

ADR/Ord conversion ratio 1:25

A$1.5/US$

Net cash (A$m) at 31 March 2023

37.1

ADRs in issue

63.5m

ADR code

IXHL

ADR exchange

NASDAQ-GM

Underlying exchange

ASX

Depository

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, generalised anxiety disorder, trauma and inflammatory conditions.

Analysts

Dr Arron Aatkar

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Incannex Healthcare is a research client of Edison Investment Research Limited

Incannex has reported final results from its Phase I trial assessing the safety and pharmacokinetics (PK) of IHL-675A, a cannabidiol (CBD) and hydroxychloroquine (HCQ) fixed-dose combination drug, for the treatment of rheumatoid arthritis (RA). IHL-675A was generally well-tolerated and showed a comparable adverse event profile to reference drugs Epidiolex and Plaquenil. PK analyses revealed that CBD uptake was faster, and HCQ uptake was slower, for IHL-675A versus reference drugs. This could be advantageous for the combination drug, as CBD provides immediate relief for inflammation and pain in RA patients, and HCQ provides extended relief. In February 2023, Incannex initiated a blinded, placebo-controlled Phase II study for IHL-675A in RA. The company has also filed a pre- Investigational New Drug (IND) request with the FDA, intending to conduct parallel Phase II studies in the US. We view these results as encouraging for the clinical development of IHL-675A, provided data from Phase II studies continue to be supportive.

Year
end

Revenue
(A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

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

0.1

(20.7)

(1.43)

0.0

N/A

N/A

06/24e

0.1

(33.4)

(2.10)

0.0

N/A

N/A

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

Incannex reported final results from its Phase I trial assessing IHL-675A as a potential treatment for RA. In this study, three cohorts of 12 participants (n=36) received either IHL-675A, Epidiolex (CBD) or Plaquenil (HCQ). Measures of safety, tolerability and PK profiles were taken in the form of adverse event monitoring, and through blood samples for PK analysis, over a period of four weeks.

IHL-675A was found to be generally well-tolerated. The same number of treatment emergent adverse events (TEAEs) were reported for IHL-675A as with Epidiolex (33%). TEAEs included abdominal pain, dizziness, fatigue, frequent bowel movements, headache and somnolence. These were all reported as minor except for one case of moderately severe abdominal cramps, but this was resolved soon after onset. We note that the TEAE prevalence was lower with Plaquenil (13%) but acknowledge that the results were acceptable for the initiation of Phase II studies.

PK analysis showed the average maximum concentration (Cmax) of CBD from IHL675A was 1.57 times higher versus Epidiolex, and time to reach maximum concentration (Tmax) was 26% faster for IHL-675A versus Epidiolex. Further, the half-life (t1/2) of CBD from IHL-675A was 13% faster versus Epidiolex. Contrastingly, the Tmax for HCQ administered as IHL-675A was 46% slower versus Plaquenil, and HCQ clearance and total exposure was similar for the two drugs. These PK profiles may be considered favourable for IHL-675A, as CBD provides immediate relief for inflammation and pain, while HCQ is slower-acting and provides extended relief.

In our view, these results represent a key milestone for Incannex. We believe that the next catalysts for IHL-675A will be results from the ongoing Phase II trial, which involves a larger patient population (n=120), and the pre-IND request outcome from the FDA, which would enable Incannex to conduct parallel Phase II trials in the US.

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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Copyright: Copyright 2023 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.

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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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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.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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