InMed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended March 31, 2024, compared with the corresponding periods ended March 31, 2023. The request identifies “2023 Q3,” but the filing is for InMed’s fiscal third quarter of 2024. Financial statements are unaudited and presented in U.S. dollars.
Business Context
InMed is a clinical-stage pharmaceutical company developing small-molecule drug candidates for Alzheimer’s disease, dry age-related macular degeneration and epidermolysis bullosa. Through BayMedica, it also manufactures and sells bulk rare cannabinoids for the health and wellness sector. BayMedica generated all reported sales during the periods presented; InMed’s pharmaceutical candidates have not been commercialized.
Financial Highlights
| Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 |
|---|---|---|---|---|
| Sales | $1.173 million | $1.034 million | $3.315 million | $1.824 million |
| Gross profit | $0.289 million | $0.193 million | $0.635 million | $(0.167) million |
| Gross margin | 24.7% | 18.6% | 19.1% | (9.2)% |
| Operating expenses | $2.134 million | $2.344 million | $6.797 million | $7.774 million |
| Net loss | $(1.723) million | $(1.998) million | $(5.738) million | $(7.609) million |
| Net loss per share | $(0.18) | $(0.60) | $(0.82) | $(3.53) |
| Cash flow from operations | Not separately reported for the quarter | $(5.957) million | $(6.625) million |
- Third-quarter sales increased 13%, while nine-month sales increased 82%, primarily from higher BayMedica sales volume and distributor orders.
- Nine-month gross profit improved by $0.802 million versus the prior year, despite a $0.263 million inventory write-down in 2024 compared with $0.577 million in 2023.
- Research and development expense declined 18% for the nine-month period to $2.559 million, largely because the Company was no longer conducting clinical trials and incurred lower external contractor and research supply costs.
- General and administrative expense declined 9% for the nine-month period to $4.037 million.
- Interest and other income was $0.424 million for the nine months, compared with $0.344 million in the prior-year period.
Liquidity, Capital Resources and Debt
- Cash and cash equivalents were $7.601 million at March 31, 2024, compared with $8.913 million at June 30, 2023. Short-term investments were $0.043 million.
- Management expects available cash and short-term investments to fund operating and capital requirements into the fourth quarter of calendar 2024, depending on BayMedica revenue and spending levels.
- The Company reported substantial doubt about its ability to continue as a going concern within one year after issuance of the financial statements and expects to seek additional equity, debt, collaboration or strategic financing.
- Nine-month financing cash flow was $4.654 million, consisting of proceeds from the 2023 private placement net of transaction costs. The Company had no credit facility or committed sources of capital.
- Lease obligations totaled $1.071 million at March 31, 2024, including $0.346 million current and $0.725 million non-current. The filing does not report conventional borrowings or funded debt.
- Common shares issued and outstanding increased to 6.345 million at March 31, 2024 from 3.328 million at June 30, 2023. The filing also reported 13.204 million outstanding and exercisable warrants and 0.678 million options, creating significant potential dilution.
Material Changes Versus the Prior Comparable Period
- BayMedica revenue rose from $1.034 million to $1.173 million in the quarter and from $1.824 million to $3.315 million for the nine-month period. Management cautioned that distributor ordering patterns may cause significant quarter-to-quarter revenue fluctuations.
- Quarterly gross margin improved to 24.7% from 18.6%; nine-month gross margin turned positive at 19.1% from negative 9.2%.
- Net loss narrowed by $0.275 million in the quarter and by $1.871 million for the nine-month period, primarily because of improved gross profit and lower operating expenses.
- Cash used in operations improved modestly to $5.957 million from $6.625 million, but operating cash flow remained substantially negative.
- The Company completed a private placement that generated approximately $5.2 million of gross proceeds and issued pre-funded warrants, preferred investment options and placement-agent warrants.
- Research activity shifted toward preclinical development. The Company prioritized INM-089 for dry AMD over INM-088 for glaucoma and expects research and development spending to increase as programs advance.
Guidance, Outlook, Risks and Unusual Items
- Management expects continuing operating losses and negative operating cash flow for the foreseeable future. No revenue or profitability guidance was provided.
- The principal near-term risk is the need to raise additional capital before the projected cash runway ends. Financing may dilute existing shareholders or impose restrictive terms, and may not be available on acceptable terms.
- BayMedica revenue is concentrated among a limited number of customers and is dependent on distributor purchasing patterns, demand, pricing and commercial viability of rare cannabinoid products.
- The Company had commitments of approximately $1.5 million for contract research services and materials and approximately $1.0 million for contract materials and equipment expected during the twelve months following March 31, 2024.
- BayMedica disclosed a contract dispute with a patent licensor. Arbitration could be required, but the potential loss cannot currently be reasonably estimated.
- Nasdaq granted an extension through September 16, 2024 to regain compliance with the $1.00 minimum bid-price requirement. Failure to regain compliance could result in delisting proceedings; management may consider a reverse stock split if necessary.
- As of March 31, 2024, disclosure controls were not effective because of a material weakness in internal control over financial reporting related primarily to insufficient accounting personnel and segregation-of-duties deficiencies. Management expects remediation efforts to be completed by the end of the fiscal fourth quarter, but provides no assurance that remediation will be timely or successful.
- Subsequent events included the exercise of 1.757 million preferred investment options, issuance of remaining abeyance shares, the planned retirement of the Senior Vice President of Clinical and Regulatory Affairs, and notice terminating the EyeCRO technology licensing agreement effective August 8, 2024.
Investor Verification Checklist
- Verify the timing and terms of additional financing needed to address the going-concern uncertainty and projected cash runway.
- Assess the fully diluted share count, including 13.204 million warrants, 0.678 million options and subsequent exercises or share issuances.
- Track BayMedica’s recurring revenue, gross margins, customer concentration and distributor order volatility.
- Review progress, funding requirements and partnering prospects for INM-901, INM-089 and INM-755, including the absence of current pharmaceutical product revenue.
- Monitor Nasdaq minimum bid-price compliance and any reverse-split or delisting developments.
- Evaluate remediation of the material weakness in internal controls and any effect on future financial reporting.
- Review the BayMedica patent-license dispute, contract commitments and the termination of the EyeCRO agreement for potential operational or financial consequences.