InMed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended March 31, 2023, filed May 15, 2023. The filing does not correspond to “2022 Q3” in the request metadata. Amounts are in U.S. dollars unless otherwise stated.
Business context
InMed is a clinical-stage pharmaceutical company developing rare-cannabinoid and cannabinoid-analog therapies, including INM-755 for epidermolysis bullosa and INM-088 for glaucoma. Its BayMedica subsidiary sells bulk rare cannabinoids to health and wellness customers. The company has not commercialized its pharmaceutical candidates and has historically funded operations primarily through equity financing.
Key financial metrics
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Sales | $1.034 million, versus $0.310 million | $1.824 million, versus $0.575 million |
| Gross profit (loss) | $0.193 million, versus $0.182 million | $(0.167) million, versus $0.294 million |
| Gross margin | 18.6%, versus 58.9% | (9.2)%, versus 51.1% |
| Operating expenses | $2.342 million, versus $3.722 million | $7.695 million, versus $11.038 million |
| Net loss | $(1.998) million, versus $(3.476) million | $(7.609) million, versus $(10.730) million |
| Loss per share | $(0.60), versus $(6.14) | $(3.53), versus $(20.13) |
| Cash flow from operating activities | Not separately provided for the quarter | $(6.625) million, versus $(11.537) million |
Liquidity and capital structure: Cash and cash equivalents were $9.604 million at March 31, 2023, compared with $6.177 million at June 30, 2022. Cash, cash equivalents and short-term investments totaled $9.647 million. Working capital was $9.573 million. Total liabilities were $2.342 million, including $0.496 million of lease obligations; the company reported no debt facility or committed source of capital. The accumulated deficit was $101.062 million.
Financing activities provided $10.681 million during the nine months, including $12.000 million of gross private-placement proceeds, partially offset by $1.320 million of issuance costs. Shares outstanding increased to 3,328,191 at March 31, 2023 from 650,667 at June 30, 2022, reflecting private placements and exercises of pre-funded warrants, as adjusted for a one-for-25 reverse stock split.
Material changes versus the prior comparable periods
- BayMedica sales increased 234% year over year in the quarter and 217% for the nine-month period, driven by expanded marketing and demand for certain cannabinoid products.
- Despite higher sales, quarterly gross margin declined to 18.6% from 58.9% because of pricing pressure and reduced-price inventory sell-through.
- The nine-month period included a $576,772 inventory write-down, attributed to lower demand and downward pricing pressure, resulting in a gross loss.
- Research and development expense decreased 46% for the quarter and 46% for the nine-month period, primarily because of lower INM-755 clinical-trial start-up costs and lower personnel, legal and patent costs.
- General and administrative expense decreased 26% for the quarter and 13% for the nine-month period, while BayMedica general and administrative expense increased following the acquisition and expansion of its operations.
- Net loss and operating cash burn improved versus the prior year, but the company remained substantially loss-making and dependent on financing.
Guidance, outlook, risks and unusual items
- Management expects the $9.6 million of cash at March 31, 2023 to fund operating and capital requirements into the first quarter of calendar 2024, and possibly the second quarter, depending on BayMedica revenue and expense levels.
- The company concluded that substantial doubt exists about its ability to continue as a going concern within one year after issuance of the financial statements. Additional equity, debt, collaboration, government-contract or strategic financing may be required, and may be unavailable or dilutive.
- Management expects operating losses and negative operating cash flow to continue. Research and development spending is expected to increase as INM-755, INM-088, manufacturing technologies and other programs advance.
- BayMedica received a licensor demand for $950,209 after an alleged breach of a patent license agreement. BayMedica disputes the interpretation and intends to defend its position. The potential loss could not reasonably be estimated as of the filing date; any dispute is subject to binding arbitration if proceedings are initiated.
- The company had commitments of approximately $2.169 million for contract research services and materials and $0.445 million for contract materials and equipment expected during the twelve months following March 31, 2023.
- Customer concentration remained significant: four customers represented approximately 72% of quarterly sales, three customers represented approximately 46% of nine-month sales, and three customers represented 61% of gross accounts receivable.
- Management reported a material weakness in internal control over financial reporting caused primarily by insufficient resources for non-routine financial reporting matters. Remediation was underway, with completion expected before the end of fiscal 2023, but the weakness had not yet been remediated.
Most important facts for investors to verify
- Whether BayMedica’s recent sales growth is sustainable and whether product mix changes can restore gross margins.
- The timing and terms of required additional financing, including potential dilution or restrictive debt terms.
- Cash burn, operating expenses and the actual runway relative to management’s first- or second-quarter 2024 estimate.
- The status and potential financial impact of the $950,209 licensor demand and any related arbitration.
- Progress, funding requirements and regulatory milestones for INM-755, INM-088 and other clinical programs.
- Whether the reported material weakness in internal controls is remediated and independently validated.
- Customer concentration, inventory valuation and the risk of additional write-downs or pricing pressure.