Incannex Healthcare — Spotlight on Incannex’s progress in psychedelics

Incannex Healthcare (NASDAQ: IXHL)

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Research: Healthcare

Incannex Healthcare — Spotlight on Incannex’s progress in psychedelics

Incannex, an Australian-based biotech, has several active studies investigating cannabinoid combinations for a range of conditions, but is also focused on assessing psilocybin for the treatment of generalized anxiety disorder (GAD). In the psychedelics space, Incannex’s ongoing Phase II trial (Psi-GAD) received an encouraging interim review in March 2023, and we see the completion of the study in Q4 CY23 as a significant catalyst. Incannex has also recently announced developments in its psychedelic clinics business through its subsidiary Clarion Clinics Group. In this note, we provide an overview of psychedelics as therapeutics, the GAD market, and Incannex’s position in the emerging field of psychedelic-based therapies. Our valuation for Incannex stands at US$750.7m or US$11.83 per ADR (vs US$745.8m or US$11.75 per ADR previously).

Written by

Arron Aatkar

Associate analyst

Healthcare

Incannex Healthcare

Spotlight on Incannex’s progress in psychedelics

Company update

Pharma and biotech

1 June 2023

Price

US$1.9

Market cap

US$121m

ADR/Ord conversion ratio 1:25

A$1.5/US$

Estimated net cash (A$m) at 31 March 2023

24.1

ADRs in issue

63.5m

ADR code

IHXL

ADR exchange

NASDAQ-GM

Underlying exchange

ASX

Depository

DBK

Share price performance

%

1m

3m

12m

Abs

(12.0)

(25.5)

(74.0)

Rel (local)

(12.2)

(29.2)

(74.3)

52-week high/low

US$37.0

US$1.85

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.

Next events

Psi-GAD study top-line results

Q4 CY23

Psychedelic clinics business update

FY23

Analysts

Dr Arron Aatkar

44 (0)20 3077 5700

Dr Adam McCarter

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Incannex Healthcare is a research client of Edison Investment Research Limited

Incannex, an Australian-based biotech, has several active studies investigating cannabinoid combinations for a range of conditions, but is also focused on assessing psilocybin for the treatment of generalized anxiety disorder (GAD). In the psychedelics space, Incannex’s ongoing Phase II trial (Psi-GAD) received an encouraging interim review in March 2023, and we see the completion of the study in Q4 CY23 as a significant catalyst. Incannex has also recently announced developments in its psychedelic clinics business through its subsidiary Clarion Clinics Group. In this note, we provide an overview of psychedelics as therapeutics, the GAD market, and Incannex’s position in the emerging field of psychedelic-based therapies. Our valuation for Incannex stands at US$750.7m or US$11.83 per ADR (vs US$745.8m or US$11.75 per ADR previously).

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 normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Psi-GAD trial a significant catalyst for Incannex

Incannex’s Phase II Psi-GAD trial is investigating the use of psilocybin for the treatment of GAD, a condition that affects c 6.8 million adults in the US each year. The trial has enrolled 55 patients so far (expected n=72), and in Q1 CY23 an independent data safety monitoring board (DSMB) reviewed the study and recommended no changes to the design. The company also projected a >85% probability that the psilocybin treatment arm will provide a statistically significant benefit versus placebo. While we advise caution in interpreting such projections, we believe this is encouraging for the clinical program, and see trial completion (expected by Q4 CY23) as a key upcoming catalyst for the company.

Australian ruling enables psychedelic clinics

Incannex is making headway with the development of its psychedelic-assisted psychotherapy business through its subsidiary, Clarion Clinics Group. This has followed the announcement from the Australian regulatory authority that it will permit the prescription of specific psychedelics for certain mental health conditions. This represents a significant opportunity for the company to generate additional revenues, in our view, provided sound operations are observed following commercialisation, and we believe that real-world patient data from Australia may support regulatory decision-making in other regions, such as the US.

Valuation: US$750.7m or US$11.83 per ADR

While we recognise that Incannex’s psychedelic clinics business may generate recurring revenues in medium term, our current valuation does not incorporate it due to low visibility on prospects. Our valuation stands at US$750.7m or US$11.83 per ADR (US$745.8m or US$11.75 per ADR previously) due to roll forward of model and fx update, partially offset by lower net cash of US$24.1 by end-FY23.

The potential for psychedelics as therapeutics

While there has been significant progression in the acceptance of cannabinoid-based therapies in recent years, we believe that it is important to differentiate from psychedelic therapies, and highlight here an overview of this emerging field. Much like the use of cannabis-derived compounds, and perhaps exacerbated by the COVID-19 pandemic, interest in the use of psychedelics to treat mental illnesses is gaining significant momentum in psychiatry. However, we note that the field is still very much in its infancy and the clinical utility of these compounds is not yet concrete.

The most widely recognized psychedelics include lysergic acid diethylamide (LSD) and 3,4-methylenedioxymethamphetamine (MDMA or ecstasy). Further to these, one of the most popular psychedelics in clinical research is psilocybin, a naturally occurring psychoactive compound that, in combination with psychotherapy (such as cognitive behavioural therapy, CBT, or acceptance and commitment therapy, ACT), is becoming increasingly understood as a potential treatment for mental health conditions. This family of drugs works by stimulating the formation of new neural pathways and down-regulating serotonergic 5-HT2A receptors in the brain, which are believed to be overactive in patients with mental health conditions such as depression. According to an analysis conducted in 2022, based on a systematic search of the clinicaltrials.gov database, psilocybin was found to be the most prevalent psychedelic drug being investigated in current clinical trials, with c 2x more trials than MDMA, and c 7x more trials than LSD. However, we note that the search results from this analysis were dominated by cannabinoids (Exhibit 1).

Exhibit 1: Prevalence of cannabinoids and psychedelics in current clinical trials

Source: Edison Investment Research; Cureus Journal of Medical Science

As an example, in previous clinical trials sponsored by various academic groups (NCT00465595, NCT00957359), psilocybin has been investigated for the treatment of cancer patients suffering from anxiety. In these trials, psilocybin was shown to have a positive effect on patients, with low toxicity and no serious adverse events reported. We believe that this has provided a positive foundation for ongoing clinical trials in this field, such as Incannex’s Psi-GAD study, based in Australia, which is discussed in more detail below. We also wish to highlight that in the largest psilocybin trial to date, the drug has been found to have a significant impact in reducing symptoms of depression when used alongside psychological support, providing further evidence for the potential of such therapies.

With Incannex being an Australian-based biotech company, we wish to highlight some recent news that reflects a shift in Australia’s view of psychedelic drugs. In February 2023, the Australian regulatory authority (the Therapeutic Goods Administration, TGA), announced that it will permit psychiatrists to prescribe medicines containing psilocybin for treatment-resistant depression (TRD), and medicines containing MDMA for post-traumatic stress disorder (PTSD). These new regulations will be effective as of 1 July 2023. We view this step as softening the stigma attached to the use of psychedelics, which is a critical milestone in the path to broader acceptance from both providers and patients. We note that the FDA has already granted the ‘breakthrough therapy’ designation to two ongoing psilocybin clinical programs in the US and believe that real-world patient data may further support regulatory decision-making. With this ruling, Australia has become the first country to formally recognise psilocybin and MDMA as potentially clinically efficacious therapeutics. Psilocybin and MDMA will now transition from ‘Schedule 9 drugs’ (prohibited for patient use) to ‘Schedule 8’ or ‘controlled drugs’ in these indications, enabling them to be prescribed under strict conditions by qualified psychiatrists for patients suffering from these mental health conditions.

Psychedelics for generalised anxiety disorder

GAD: Difficulty in the control of worrying

GAD is characterised by a persistent feeling of anxiety or dread that interferes with how an individual lives their life. Occasional anxiety is normal, and to a certain extent, a healthy part of life, especially in the face of stressful events. However, people who suffer from GAD tend to feel extremely nervous more frequently about things for months or years, even when there is little or no rational reason to be worried. We highlight here a list (not comprehensive) of common characteristics that people with GAD may possess, as outlined by the US National Institute Of Mental Health:

worry excessively about everyday things

have trouble controlling their worries or feelings of nervousness

know that they worry much more than they should

feel restless and have trouble relaxing

have a hard time concentrating

startle easily

have trouble falling asleep or staying asleep

tire easily or feel tired all the time

have headaches, muscle aches, stomach aches, or unexplained pains

have a hard time swallowing

tremble or twitch

feel irritable or ‘on edge’

sweat a lot, feel lightheaded, or feel out of breath

have to go to the bathroom frequently

Sizeable opportunity in GAD for improved treatments

Global spending on medicines for anxiety-related disorders is expected to reach c $5bn by 2026 (according to IQVIA). Furthermore, it is estimated that c 6.8 million adults suffer from GAD in the US (c 3% of the population), representing a significant potential patient population. First-line treatment for GAD typically involves psychotherapy followed by medications, including anti-depressants (such as pregabalin, an anxiolytic) or benzodiazepines (a type of sedative). However, approximately 50% of patients treated for GAD do not respond to first-line treatment, and long-term use (>3 years) of existing medications such as benzodiazepines has been associated with serious adverse side effects, including dependence, withdrawal symptoms and suicidality.

In our view, there is a significant opportunity for new and improved treatment options for patients suffering from GAD. While the current market is dominated by generic drugs that show unsatisfactory efficacy in a considerable proportion of patients, the use of psychedelics to treat GAD represents a promising prospect. We recognise that there may still be some stigma surrounding the use of such drugs, though we believe that psychedelics are on the road to mainstream acceptance, especially given the limitations associated with current treatments for GAD.

Measuring GAD with the Hamilton Anxiety Rating Scale

There are a range of ongoing clinical trials seeking to develop medicines for the treatment of GAD, and these range from more traditional small molecule drugs through to less traditional psychedelic treatment options. However, since GAD is a mental health condition, it can be challenging to take objective measurements to assess the progression of the condition, unlike in oncology programmes where objective measures of tumour size can be taken. Instead, one of the most widely used approaches to measure the severity of GAD symptoms is the Hamilton Anxiety Rating Scale (HAM-A), which uses a clinician-rated scoring system.

The HAM-A was one of the first rating scales developed to measure anxiety symptoms, and is still frequently used as a clinically recognised method for such assessments. The scale has 14 items, defined by a range of psychic anxiety (ie mental agitation and psychological distress) and somatic anxiety (ie physical complaints relating to anxiety). We note that, while the HAM-A does not provided any standardised probe questions, the reported levels of inter-rater reliability for the scale have been deemed acceptable for research and clinical applications; the HAM-A has been used to support FDA approvals of treatments for GAD.

For each of the 14 items on the scale, the subject is scored on a scale of 0 (not present) to 4 (severe), giving a final total score ranging from 0–56, where <17 indicates mild severity, 18–24 indicates mild to moderate severity, and 25–30 is indicative of a subject with moderate to severe anxiety. An overview of the list of phrases that describe certain feelings that people may have, used in the HAM-A, is shown here:

Anxious mood – Worries, anticipation of the worst, fearful anticipation, irritability.

Tension – Feelings of tension, fatigability, startle response, moved to tears easily, trembling, feelings of restlessness, inability to relax.

Fears – Of dark, of strangers, of being left alone, of animals, of traffic, of crowds.

Insomnia – Difficulty in falling asleep, broken sleep, unsatisfying sleep and fatigue on waking, dreams, nightmares, night terrors.

Intellectual – Difficulty in concentration, poor memory.

Depressed mood – Loss of interest, lack of pleasure in hobbies, depression, early waking, diurnal swing.

Somatic (muscular) – Pains and aches, twitching, stiffness, myoclonic jerks, grinding of teeth, unsteady voice, increased muscular tone.

Somatic (sensory) – Tinnitus, blurring of vision, hot and cold flushes, feelings of weakness, pricking sensation.

Cardiovascular symptoms – Tachycardia, palpitations, pain in chest, throbbing of vessels, fainting feelings, missing beat.

Respiratory symptoms – Pressure or constriction in chest, choking feelings, sighing, dyspnoea.

Gastrointestinal symptoms – Difficulty in swallowing, wind abdominal pain, burning sensations, abdominal fullness, nausea, vomiting, borborygmi, looseness of bowels, loss of weight, constipation.

Genitourinary symptoms – Frequency of micturition, urgency of micturition, amenorrhea, menorrhagia, development of frigidity, premature ejaculation, loss of libido, impotence.

Autonomic symptoms – Dry mouth, flushing, pallor, tendency to sweat, giddiness, tension headache, raising of hair.

Behaviour at interview – Fidgeting, restlessness or pacing, tremor of hands, furrowed brow, strained face, sighing or rapid respiration, facial pallor, swallowing, etc.

Promising signs from Incannex’s Phase II Psi-GAD trial

While Incannex has several ongoing clinical trials focused on cannabinoid combinations for a range of chronic conditions (IHL-675A for inflammatory lung disease, rheumatoid arthritis, inflammatory bowel disease; IHL-42X for obstructive sleep apnoea), the company is also engaged in a program investigating the use of psilocybin to treat GAD patients (Psi-GAD). The treatment entails two administrations of psilocybin in combination with psychotherapy in a controlled clinical setting as part of a 10-week course. The Psi-GAD study is a triple-blind (treatment unknown to the patient, individual(s) administering the treatment, and individual(s) assessing the outcomes), active placebo-controlled Phase II clinical trial (ACTRN12621001358831) aiming to recruit 72 patients. The primary endpoint of the trial is a reduction in HAM-A score at 11 weeks relative to baseline.

Patient recruitment for the Psi-GAD study commenced in Q1 CY22 and, to date, at least 55 participants have been enrolled. In Q1 CY23, Incannex reported that a review (of the first 37 patients enrolled) by an independent DSMB identified no safety concerns, and recommended that the trial could continue without any changes to the design of the study. Additionally, Incannex conducted an interim analysis (of the first 29 patients to complete the 10-week treatment protocol) and projected a more than 85% probability that the psilocybin arm will provide a statistically significant benefit versus placebo. This projection assumes that the effect size observed for 29 participants is representative of the effect size for the remaining 43 participants. While we advise caution in the interpretation of modelling projections to predict trial outcomes, these early observations of safety and potential efficacy, in our view, support the continuation of Incannex’s Psi-GAD program. This trial is expected to be completed by Q4 CY23, and we see the top-line results from the study as a key upcoming catalyst for Incannex.

Psychotherapy clinics on the horizon for Incannex

Outside of Incannex’s ongoing clinical trials, the company has also recently communicated several advancements in the development of its psychedelic clinics. In March 2023, Incannex revealed plans to commercialise this psychedelic-assisted psychotherapy business. Shortly after, in May 2023, the company announced that it has entered into a lease for riverfront premises in Abbottsford, Melbourne, which will form the first ‘model’ clinic. Fitting out and commissioning of the premises is underway, due to be complete in August 2023, and it plans to open and facilitate patient treatments in September 2023.

According to a company update from Psychennex (a division of Incannex Healthcare which holds all of its psychedelic-related assets), the psychedelic clinics business will be delivered through Clarion Clinics Group, a subsidiary of Incannex. Clarion Clinics Group is 84.5% owned by Psychennex, and 15.5% owned by a group of Australian psychedelic clinical experts, who have extensive experience in clinical psychedelic research, treatment and training (Exhibit 2).

Exhibit 2: Psychennex group structure

Source: Psychennex company update

In line with Australia’s change to the classification of psilocybin and MDMA, Incannex has ordered initial supplies of the drugs through its arrangement with PharmAla Biotech. This will enable the prescription of psilocybin for patients suffering from TRD, and MDMA for the treatment of PTSD. Incannex also plans to treat alternative depression- and anxiety-related disorders through ketamine-assisted psychotherapy, and provide psilocybin-assisted psychotherapy for GAD patients, provided regulatory approval is received.

The model clinic will serve as a prototype for Incannex’s planned rapid roll-out of additional sites, provided sound operations are observed; the company is targeting multiple further sites from 2024–28 (Exhibit 3). At each step, the company will assess whether to own or license/franchise the clinics, based on speed to market, financial returns and management capability. The subsequent stage of the expansion plan is to open international sites, though the company has stated that this will be dictated by the regulatory and competitive environment of the target geographies.

Exhibit 3: Clarion Clinics Group’s domestic expansion plans

Source: Psychennex company update

The market for psychedelic-assisted psychotherapy is estimated to be worth over A$2bn annually in Australia within three years (according to management). In our view, even if these psychedelic clinics take only a modest portion of the total market, this could be lucrative for the company, based on licensing fees, product sales, clinic operations, psychotherapist training and franchising. With the down-scheduling of psilocybin and MDMA in Australia, we anticipate that a number of providers will enter the psychedelic-assisted psychotherapy space. However, Clarion Clinics Group believes that it will have a strong advantage over competitors due to the extensive experience within the group.

Valuation

Post Q323 results, our valuation for Incannex adjusts to US$750.7m or US$11.83 per ADR from US$745.8m or US$11.75 per ADR previously. The upside in valuation comes from rolling forward the model and FX update (AUD$0.65/US$ from AUD$0.67/US$), which was partially offset by lower pro-forma net cash position of US$24.1m (A$37.1m) by end Q3FY23 from US$27.8m at 31 December 2022. With a cash balance of A$37.1m at end-March 2023, management has guided for operating cash runway into CY25 at the current quarterly burn rate (A$4.3m),

While we recognise that Incannex’s psychedelic clinics business has the potential to provide an incremental stream of multiple revenues, based on licensing fees, product sales, clinic operations, psychotherapist training and franchising, we await further details from management before updating our valuation. Our valuation is currently based on a risk-adjusted NPV for IHL-42X (a novel cannabinoid combination product) for the treatment of obstructive sleep apnoea (OSA), and psilocybin in GAD, Our model applies a discount rate of 12.5%. We have currently excluded IHL-675A from our valuation until we obtain further context on the drug candidate’s development and commercialisation strategy; however, this has potential to offer further upside. Our underlying assumptions and long-term outlook remain unchanged. A breakdown of our rNPV valuation is shown in Exhibit 4.

Exhibit 4: Incannex Healthcare rNPV valuation

Product

Launch

Peak

Peak sales (US$m)

Value
(US$m)

Probability

rNPV
(US$m)

rNPV/ADR (US$)

Obstructive sleep apnoea – IHL-42X

2026

2030

3,065.8

3,606.9

20%

718.0

11.31

Psilocybin (Psi-GAD) in generalised anxiety disorder

2027

2031

186.6

132.9

10%

8.5

0.14

Estimated net cash at 31 March 2023

24.1

100%

24.1

0.38

Valuation

3,763.9

750.7

11.83

Source: Edison Investment Research


Exhibit 5: Financial summary

Accounts: IFRS, Yr end: June 30, AUD$:000s

 

 

2021

2022

2023e

2024e

PROFIT & LOSS

 

 

 

 

 

 

Total revenues

 

 

1,973

789

77

79

Cost of sales

 

 

(912)

(6)

0

0

Gross profit

 

 

1,061

782

77

79

Total operating expenses

 

 

(9,225)

(15,686)

(20,729)

(33,482)

Research and development expenses

 

 

(4,750)

(5,372)

(9,848)

(21,600)

SG&A

 

 

(1,236)

(3,027)

(3,399)

(4,157)

Operating income (reported)

 

 

(8,164)

(14,904)

(20,652)

(33,403)

Finance income/(expense)

 

 

0

0

0

0

Exceptionals and adjustments

 

 

0

0

0

0

Net loss from discontinued operations

 

 

0

0

0

0

Profit before tax (reported)

 

 

(8,164)

(14,904)

(20,652)

(33,403)

Profit before tax (normalised)

 

 

(8,164)

(14,904)

(20,652)

(33,403)

Income tax expense (includes exceptionals)

 

 

0

0

0

0

Net income (reported)

 

 

(8,164)

(14,904)

(20,652)

(33,403)

Net income (normalised)

 

 

(8,164)

(14,904)

(20,652)

(33,403)

Basic average number of shares, m

 

 

978.0

1,191.2

1,439.7

1,587.0

Basic EPS (cents per share)

 

 

(0.83)

(1.25)

(1.43)

(2.10)

Adjusted EPS (cents per share)

 

 

(0.83)

(1.25)

(1.43)

(2.10)

Dividend per share (cents per share)

 

 

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

Tangible assets

 

 

0

0

147

96

Intangible assets

 

 

0

0

52,717

52,717

Right-of-use assets

 

 

0

0

224

224

Other non-current assets

 

 

0

0

0

0

Total non-current assets

 

 

0

0

53,088

53,037

Cash and equivalents

 

 

9,124

37,501

29,635

21,330

Current tax receivables

 

 

0

0

0

0

Trade and other receivables

 

 

169

295

292

307

Inventory

 

 

0

0

0

0

Other current assets

 

 

36

84

259

259

Total current assets

 

 

9,329

37,880

30,186

21,896

Non-current loans and borrowings

 

 

0

0

0

25,000

Non-current lease liabilities

 

 

0

0

182

182

Other non-current liabilities

 

 

0

0

0

0

Total non-current liabilities

 

 

0

0

182

25,182

Accounts payable

 

 

755

2,011

1,240

1,302

Illustrative debt

 

 

0

0

0

0

Current lease obligations

 

 

0

0

50

50

Other current liabilities

 

 

0

0

0

0

Total current liabilities

 

 

755

2,011

1,291

1,353

Equity attributable to company

 

 

8,574

35,869

81,802

48,399

 

 

 

0

0

0

0

CASH FLOW STATEMENT

 

 

 

 

 

 

Operating income

 

 

(8,164)

(14,904)

(20,652)

(33,403)

Depreciation and amortisation

 

 

0

0

51

51

Share based payments

 

 

1,172

1,465

1,640

0

Other adjustments

 

 

91

(594)

0

0

Movements in working capital

 

 

(10)

1,226

(943)

47

Cash from operations (CFO)

 

 

(6,910)

(12,807)

(19,904)

(33,305)

Capex

 

 

0

0

(166)

0

Acquisitions & disposals net

 

 

29

0

0

0

Other investing activities

 

 

0

0

0

0

Cash used in investing activities (CFIA)

 

 

29

0

(166)

0

Capital changes

 

 

12,401

41,185

12,222

0

Debt Changes

 

 

0

0

0

25,000

Other financing activities

 

 

0

0

(23)

0

Cash from financing activities (CFF)

 

 

12,401

41,185

12,199

25,000

Cash and equivalents at beginning of period

 

 

3,603

9,124

37,501

29,635

Increase/(decrease) in cash and equivalents

 

 

5,520

28,377

(7,871)

(8,305)

Effect of FX on cash and equivalents

 

 

0

0

5

0

Cash and equivalents at end of period

 

 

9,124

37,501

29,635

21,330

Net (debt)/cash

 

 

9,124

37,501

29,635

21,330

Source: Company reports, Edison Investment Research

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Australia

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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.

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London │ New York │ Frankfurt

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London, WC1R 4PS

United Kingdom

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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.

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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AVAX has been awarded a major €674m contract by Mass Group Holding (MGH) for the engineering, construction and commissioning of a 1,750MW combined-cycle power plant in Romania. The construction phase is anticipated to be 38 months. The project further cements AVAX’s standing in the international industrial energy market and is the third consecutive project awarded by MGH, validating AVAX’s trusted partnership credentials. AVAX’s burgeoning work-in-hand portfolio now stands at a record level of €3bn, demonstrating the company’s sustained growth strategy with a robust pipeline of projects. In addition, AVAX will propose a share buyback programme at its upcoming AGM.

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