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Research: Healthcare
InMed Pharmaceuticals has announced the launch of tetrahydrocannabivarin (d9-THCV) into B2B sales for the health and wellness industry. This marks the latest addition to its growing commercial footprint in high-value rare cannabinoids. Unlike tetrahydrocannabinol (THC), THCV is non-psychoactive and has shown indications of potential activity in combating obesity, diabetes, anxiety, Alzheimer’s disease and epilepsy. The launch and commercialization will be supported by InMed’s recently announced private placement, raising gross proceeds of $5m, potentially extending its cash runway into CY23. We adjust our valuation to account for the recent share offering and cash received to $85m (base, $4.1/share) versus our prior $80m (base, $5.6/share).
Written by
InMed Pharmaceuticals |
THCV launch expands rare cannabinoids portfolio |
New product launch |
Pharma & biotech |
17 June 2022 |
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Business description
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InMed Pharmaceuticals is a research client of Edison Investment Research Limited |
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InMed Pharmaceuticals has announced the launch of tetrahydrocannabivarin (d9-THCV) into B2B sales for the health and wellness industry. This marks the latest addition to its growing commercial footprint in high-value rare cannabinoids. Unlike tetrahydrocannabinol (THC), THCV is non-psychoactive and has shown indications of potential activity in combating obesity, diabetes, anxiety, Alzheimer’s disease and epilepsy. The launch and commercialization will be supported by InMed’s recently announced private placement, raising gross proceeds of $5m, potentially extending its cash runway into CY23. We adjust our valuation to account for the recent share offering and cash received to $85m (base, $4.1/share) versus our prior $80m (base, $5.6/share).
Year end |
Revenue |
EBITDA* |
PBT* |
EPS* |
P/revenue |
Net cash/(debt) |
06/20 |
0.0 |
(9.0) |
(9.0) |
(1.73) |
N/A |
5.5 |
06/21 |
0.0 |
(9.8) |
(10.3) |
(1.53) |
N/A |
7.1 |
06/22e |
1.8 |
(14.6) |
(14.8) |
(0.98) |
6.7 |
6.5 |
06/23e |
10.2 |
(13.2) |
(13.8) |
(0.64) |
1.2 |
(6.1) |
Note: *EBITDA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
THCV: Latest health and wellness product launch
The launch of THCV is the latest in the steady stream of high-value, rare cannabinoid launches undertaken by InMed’s wholly owned subsidiary BayMedica in recent months (cannabichromene in Q1 CY22 and cannabidivarin in October 2021). The focus on rare cannabinoids also provides differentiation in the market while de-risking the remaining pharma side of the business, which typically requires a longer clinical and regulatory review commitment. THCV, in particular, has shown potential activity as an appetite suppressant and anti-seizure therapy and is being actively tested as a treatment for obesity and diabetes. We note that InMed is manufacturing d9-THCV, believed to be bioidentical to the naturally occurring plant variant (versus d8-THCV, which is not bioidentical) and the variant utilized in the majority of studies on THCV undertaken to date, according to management. InMed has also indicated that it plans to launch further rare cannabinoids in CY22.
Valuation: Adjusted forecast, $4.1/share (base)
We adjust our base-case valuation to account for the recent private placement and projected cash received to $85m ($4.1/share) versus our prior $80m ($5.6/share). We expect the $5m gross proceeds raised to be utilized for pipeline development, commercialization of InMed’s rare cannabinoid portfolio and to fund operating working capital. The proceeds were raised against the issue of 5,827,506 common shares (c 40% of the c 14.6m shares outstanding at the end of May 2022). This has led to shareholder dilution, but a strong uptake of the launched products could potentially strengthen the company’s longer-term business prospects. Based on the company’s quarterly cash burn of c $3–4m, this fund-raise could potentially fund operations into CY23. The company would likely need to raise further capital in FY23–24 but we expect the recent launches of high-value rare cannabinoids to provide significant revenue growth in the coming years.
Exhibit 1: Financial summary
US$'000s |
2020 |
2021 |
2022e |
2023e |
2024e |
||
Year end 30 June |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
||
PROFIT & LOSS |
|
||||||
Revenue |
|
|
0 |
0 |
1,766 |
10,191 |
12,078 |
Cost of Sales |
- |
- |
(1,244) |
(7,814) |
(8,826) |
||
Gross Profit |
0 |
0 |
523 |
2,377 |
3,252 |
||
Research and development |
(5,811) |
(5,338) |
(8,007) |
(8,327) |
(8,661) |
||
Selling, general & administrative |
(3,227) |
(4,479) |
(7,116) |
(7,201) |
(7,397) |
||
EBITDA |
|
|
(9,038) |
(9,817) |
(14,601) |
(13,151) |
(12,805) |
Operating Profit (before amort. and excepts.) |
|
(9,151) |
(9,938) |
(14,786) |
(13,342) |
(13,000) |
|
Intangible Amortisation |
- |
- |
- |
- |
- |
||
Exceptionals/Other |
82 |
(163) |
(26) |
(26) |
(26) |
||
Operating Profit/(Loss) |
|
|
(9,069) |
(10,101) |
(14,812) |
(13,368) |
(13,026) |
Net Interest and financial expense |
130 |
(344) |
17 |
(474) |
(1,504) |
||
Other (change in fair value of warrants) |
- |
243 |
- |
- |
- |
||
Profit Before Tax (norm) |
|
|
(9,021) |
(10,283) |
(14,769) |
(13,816) |
(14,504) |
Profit Before Tax (GAAP) |
|
|
(8,939) |
(10,203) |
(14,795) |
(13,842) |
(14,530) |
Tax |
- |
- |
- |
- |
- |
||
Deferred tax |
- |
- |
- |
- |
- |
||
Profit After Tax (norm) |
(9,021) |
(10,283) |
(14,769) |
(13,816) |
(14,504) |
||
Profit After Tax (GAAP) |
|
|
(8,939) |
(10,203) |
(14,795) |
(13,842) |
(14,530) |
Average Number of Shares Outstanding (m) |
5.2 |
6.7 |
15.1 |
21.7 |
22.6 |
||
EPS - normalised (c) |
|
|
(172.80) |
(153.02) |
(97.62) |
(63.67) |
(64.28) |
EPS - GAAP (US$) |
|
|
(1.71) |
(1.52) |
(0.98) |
(0.64) |
(0.64) |
Dividend per share (c) |
- |
- |
- |
- |
- |
||
Gross Margin (%) |
NA |
NA |
29.6% |
23.3% |
26.9% |
||
EBITDA Margin (%) |
NA |
NA |
NA |
NA |
NA |
||
Operating Margin (before GW and except.) (%) |
NA |
NA |
NA |
NA |
NA |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
1,490 |
1,403 |
6,721 |
6,721 |
6,721 |
Intangible Assets |
1,087 |
1,062 |
4,378 |
4,378 |
4,378 |
||
Tangible Assets |
403 |
327 |
985 |
985 |
985 |
||
In Process R&D |
0 |
0 |
1,249 |
1,249 |
1,249 |
||
Other |
0 |
15 |
109 |
109 |
109 |
||
Current Assets |
|
|
6,312 |
8,378 |
10,529 |
9,824 |
8,330 |
Stocks |
0 |
0 |
1,420 |
1,000 |
1,000 |
||
Debtors |
45 |
12 |
400 |
650 |
900 |
||
Cash |
5,848 |
7,410 |
7,397 |
6,863 |
5,118 |
||
Other |
419 |
957 |
1,312 |
1,312 |
1,312 |
||
Current Liabilities |
|
|
(1,676) |
(2,215) |
(4,738) |
(5,128) |
(5,387) |
Creditors |
(1,607) |
(2,135) |
(3,500) |
(3,850) |
(4,100) |
||
Short term borrowings |
0 |
0 |
(29) |
(29) |
(29) |
||
Finance lease obligations |
(69) |
(80) |
(400) |
(400) |
(400) |
||
Other |
0 |
0 |
(809) |
(849) |
(858) |
||
Long Term Liabilities |
|
|
(248) |
(189) |
(494) |
(12,494) |
(24,494) |
Long term borrowings |
0 |
0 |
0 |
(12,000) |
(24,000) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
||
Finance lease obligations |
(248) |
(189) |
(494) |
(494) |
(494) |
||
Net Assets |
|
|
5,878 |
7,377 |
12,019 |
(1,076) |
(14,830) |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(7,375) |
(10,151) |
(14,890) |
(12,457) |
(14,682) |
Net Interest |
0 |
360 |
1 |
512 |
1,532 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(43) |
(2) |
(175) |
(590) |
(595) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Equity Financing |
(31) |
10,855 |
15,706 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
1 |
0 |
92 |
0 |
0 |
||
Net Cash Flow |
(7,448) |
1,062 |
733 |
(12,535) |
(13,745) |
||
Opening net debt/(cash), not incl. leases |
|
|
(13,784) |
(5,848) |
(7,409) |
(7,368) |
5,167 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
416 |
(495) |
0 |
0 |
0 |
||
Other |
(905) |
994 |
(775) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(5,848) |
(7,409) |
(7,368) |
5,167 |
18,911 |
Closing net debt/(cash), incl. leases |
|
|
(5,531) |
(7,140) |
(6,474) |
6,060 |
19,805 |
Source: InMed Pharmaceuticals, Edison Investment Research
|
|
Research: Healthcare
Overcoming COVID-19 headwinds, AFT Pharmaceuticals reported strong FY22 year results, largely driven by management’s ability to leverage its broad infrastructure to launch new products and push through price increases. Revenues increased 15.2% y-o-y to NZ$130.3m, aided by double-digit growth across all regions. Margins benefited from price increases and scale economies. Management has guided for the FY23 operating profit to be in the range of NZ$27–32m (NZ$20.4m reported in FY22) driven by domestic market traction and ramp up in global roll-out of Maxigesic variants. Following this improved operating performance, the company has announced the initiation of a dividend policy (anticipated to be 20–30% of normalised profit after tax starting FY23). We have increased our valuation slightly to NZ$681m or NZ$6.50/share, from NZ$671m.