InMed Pharmaceuticals — THCV launch expands rare cannabinoids portfolio

InMed Pharmaceuticals (US: INM)

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Research: Healthcare

InMed Pharmaceuticals — THCV launch expands rare cannabinoids portfolio

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).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

InMed Pharmaceuticals

THCV launch expands rare cannabinoids portfolio

New product launch

Pharma & biotech

17 June 2022

Price

$0.58

Market cap

$12m

Net cash ($m) at 31 March 2022, pro forma adjusted to include proceeds from June 2022 private placement

10.0

Shares in issue, including 5.8m June 2022 share issuance

20.5m

Free float

80%

Code

INM

Primary exchange

NASDAQ

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(33.7)

(24.2)

(81.1)

Rel (local)

(27.5)

(9.9)

(78.2)

52-week high/low

US$3.2

US$0.5

Business description

InMed Pharmaceuticals is a biopharmaceutical company focused on manufacturing, developing and commercializing cannabinoids. It commercializes rare cannabinoids to the health and wellness industry with flexibility across several manufacturing approaches. It is also a clinical-stage pharma company developing rare cannabinoid therapeutics.

Next events

FY22 results

TBD

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Ken Mestemacher, CFA

+44 (0)20 3077 5700

InMed Pharmaceuticals is a research client of Edison Investment Research Limited

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
(US$m)

EBITDA*
(US$m)

PBT*
(US$m)

EPS*
(US$)

P/revenue
(x)

Net cash/(debt)
(US$m)

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


General disclaimer and copyright

This report has been commissioned by InMed Pharmaceuticals prepared and issued by Edison, in consideration of a fee payable by InMed Pharmaceuticals. 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 2022 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by InMed Pharmaceuticals prepared and issued by Edison, in consideration of a fee payable by InMed Pharmaceuticals. 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 2022 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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