InMed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended March 31, 2021, compared with March 31, 2020; balance-sheet comparisons are to June 30, 2020. The filing is dated May 13, 2021. Although the request metadata references “2020 Q3,” the filing text identifies this as fiscal 2021 third quarter.
Business Context
InMed is a clinical-stage pharmaceutical company developing cannabinoid-based therapies and the IntegraSyn manufacturing platform for pharmaceutical-grade cannabinoids. Its lead candidates include INM-755 for epidermolysis bullosa and INM-088 for glaucoma. The company has not commercialized any products and has generated no product revenue.
Key Financial Metrics
| Metric | Three months ended March 31, 2021 | Nine months ended March 31, 2021 |
|---|---|---|
| Revenue | None | None |
| Research and development and patents | $1.773 million | $3.622 million |
| General and administrative | $1.334 million | $2.918 million |
| Total operating expenses | $3.134 million | $6.632 million |
| Net loss | $3.101 million | $6.944 million |
| Basic and diluted loss per share | $0.41 loss | $1.11 loss |
| Operating cash flow | Not separately provided | $7.785 million used |
Liquidity and capital structure: Cash and cash equivalents were $9.454 million, short-term investments were $45,765, and working capital was $9.182 million at March 31, 2021. Total liabilities were $1.931 million, consisting primarily of accounts payable, accrued liabilities, and lease obligations. The company reported no borrowings or credit facility.
Shares outstanding increased to 8,050,707 from 5,220,707 at June 30, 2020. Shareholders’ equity was $10.414 million, while accumulated deficit was $71.594 million.
Material Changes Versus Prior Comparable Period
- Third-quarter operating expenses increased 42% to $3.134 million. Research and development expense rose 39%, primarily due to increased INM-755 spending and preparation for a planned Phase 2 trial. General and administrative expense rose 48%, reflecting higher insurance, salaries, benefits, and share-based compensation.
- Third-quarter net loss increased 53% from $2.024 million to $3.101 million, while loss per share increased from $0.39 to $0.41 despite a higher weighted-average share count.
- For the nine-month period, operating expenses decreased 13% to $6.632 million, primarily because of lower spending on the IntegraSyn manufacturing program and INM-755, partially offset by higher general and administrative costs.
- Nine-month net loss improved 5% from $7.323 million to $6.944 million. The comparison includes a $360,350 financing expense, a $242,628 unrealized gain on derivative warrant liabilities, and a $205,824 foreign-exchange loss in 2021.
- Cash increased by $3.648 million during the nine months, primarily due to $10.938 million of net financing proceeds, offset by $7.785 million of operating cash use.
- The company completed a $8.010 million public offering in November 2020 and a $4.463 million private placement in February 2021, before issuance costs. These transactions increased shares outstanding and introduced additional warrants.
- Effective January 1, 2021, the functional currency changed from the Canadian dollar to the U.S. dollar. Prior-period financial statements were not restated. The change resulted in reclassification of a $1.764 million derivative warrant liability to additional paid-in capital.
Guidance, Outlook, Risks, and Unusual Items
- Management expects continued operating losses and negative operating cash flows for the foreseeable future and does not expect product revenue for several years, if ever.
- Management expects the March 31, 2021 cash balance to fund operating expenses and capital expenditures into the second quarter of fiscal 2022. The filing nevertheless concludes that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance.
- Additional funding is expected through equity or debt financing, collaborations, government contracts, or strategic transactions. Financing may be unavailable or may dilute existing shareholders or impose unfavorable terms.
- Contract research commitments totaled approximately $4.231 million at March 31, 2021, with approximately $4.209 million expected within the following twelve months.
- The company expects research and development and general and administrative expenses to increase as it advances clinical programs, scales IntegraSyn, expands personnel and infrastructure, and operates as a U.S.-listed public company.
- Key development risks include clinical-trial timing and outcomes, regulatory approval, manufacturing scale-up and supply, intellectual-property protection, financing availability, competition, market acceptance, and reimbursement.
- A potential securities-law contingent liability relates to two inadvertent disclosures associated with a prior offering. Potential rescission or damages claims are described as indeterminable in likelihood and magnitude.
- Management reported a material weakness in internal control over financial reporting caused by insufficient finance-function resources, which resulted in an overstatement of warrant valuation. Remediation was in progress and expected to be completed before the end of fiscal 2021; the weakness had not yet been remediated as of the filing.
- The filing states that COVID-19 had no significant operational impact during the nine months ended March 31, 2021, but future financing and asset-impairment effects remain uncertain.
Important Facts for Investors to Verify
- Whether additional capital is secured before the projected cash runway ends in the second quarter of fiscal 2022.
- Progress, design, timing, and results of the planned INM-755 Phase 2 trial and development of INM-088.
- Clinical, regulatory, manufacturing, and intellectual-property milestones for the product candidates and IntegraSyn platform.
- Whether the material weakness in financial reporting controls is remediated and whether additional control deficiencies are identified.
- The impact of future equity financings, warrant exercises, option grants, and related dilution.
- The status and potential financial exposure of the securities-law contingent liability and the company’s $4.231 million contract research commitments.
- The company’s ability to generate product, licensing, collaboration, or other revenue, since the filing reports no product revenue and continuing substantial losses.