InMed Pharmaceuticals Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2021, compared with fiscal year ended June 30, 2020. The request metadata references “2020 Q4,” but the supplied filing is an annual report for fiscal 2021. Amounts are in U.S. dollars unless otherwise noted.
Business Context
InMed is a clinical-stage pharmaceutical company developing synthetic, cannabinoid-based therapies and the IntegraSyn™ manufacturing platform for pharmaceutical-grade rare cannabinoids. The lead candidates are INM-755, a topical cannabinol cream for epidermolysis bullosa, and INM-088, a cannabinol eye drop candidate for glaucoma. The company has no approved products, commercial product revenue, or internal manufacturing capabilities.
As of June 30, 2021, InMed had 12 full-time employees. Its common stock trades on the Nasdaq Capital Market under the symbol INM.
Financial Performance and Position
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development and patent expense | $5.338 million | $5.811 million | Down 8% |
| General and administrative expense | $4.479 million | $3.227 million | Up 39% |
| Total operating expenses | $9.938 million | $9.151 million | Up 9% |
| Net loss | $10.203 million | $8.939 million | Loss increased 14% |
| Comprehensive loss | $9.773 million | $9.359 million | Loss increased 4% |
| Basic and diluted loss per share | $1.52 loss | $1.71 loss | Improved per share despite higher total loss |
| Net cash used in operating activities | $9.791 million | $7.375 million | Use increased 33% |
| Cash and cash equivalents | $7.363 million | $5.806 million | Up $1.557 million |
| Working capital surplus | $6.163 million | $4.636 million | Up $1.527 million |
| Accumulated deficit | $74.852 million | $64.649 million | Increased $10.203 million |
Interest income declined to $16,017 from $129,526. FY2021 included $360,350 of financing expense, a $242,628 unrealized gain on derivative warrant liabilities, and a $163,101 foreign-exchange loss. The company had no borrowings at June 30, 2021; reported liabilities primarily consisted of accounts payable, accrued liabilities, and lease obligations.
Liquidity included $7.410 million of cash, cash equivalents, and short-term investments against $2.215 million of current liabilities. The company reported no credit facility or committed source of capital.
Material Changes Versus the Prior Period
- Research and development and patent expense decreased by $473,000, primarily due to lower purchases of active pharmaceutical ingredients for INM-755 trials, partly offset by higher CRO spending.
- General and administrative expense increased by $1.252 million, driven principally by higher insurance and personnel costs.
- Operating cash burn increased by $2.416 million, reflecting higher losses and working-capital requirements.
- InMed raised gross proceeds of $8.010 million in a November 2020 public offering and $4.463 million in a February 2021 private placement. Net financing cash inflow for FY2021 was $10.855 million after transaction costs.
- The functional currency changed prospectively from the Canadian dollar to the U.S. dollar effective January 1, 2021. The change resulted in reclassification of the derivative warrant liability to additional paid-in capital.
- IntegraSyn™ yield increased from a reported 2 g/L milestone in April 2021 to 5 g/L in June 2021. Management targeted a one-kilogram cannabinoid batch using a GMP-ready process in the second half of calendar 2021.
- INM-755 Phase I studies in 22 healthy volunteers with intact skin and eight healthy volunteers with induced wounds were completed and reported as well tolerated, with no serious or systemic adverse effects reported. Regulatory submissions for the Phase II EB study were filed in several countries.
Guidance, Outlook, Risks and Unusual Items
- Management expected INM-755 patient enrollment in the Phase II EB study to begin in the second half of calendar 2021, subject to regulatory approvals and COVID-19-related delays.
- For INM-088, planned activities included formulation scale-up, additional preclinical work, toxicology studies, and preparation of IND/CTA submissions. The program remained preclinical.
- Management expected operating expenses and losses to increase as clinical development, manufacturing scale-up, regulatory work, personnel, and public-company costs expand.
- The company concluded that substantial doubt exists regarding its ability to continue as a going concern within one year after issuance of the financial statements. Cash of $7.4 million at June 30, 2021 plus approximately $11.0 million of net proceeds from a July 2, 2021 private placement was expected to fund operations into the second quarter of fiscal 2023. Additional capital will be required thereafter and may be unavailable or dilutive.
- The July 2, 2021 private placement generated $12.0 million of gross proceeds, or approximately $11.0 million net, through the issuance of 4,036,327 common shares or share equivalents and warrants for up to 4,036,327 shares.
- InMed entered into a definitive agreement in September 2021 to acquire BayMedica. Consideration was expected to include 1.78 million InMed common shares and warrants, subject to closing conditions and potential adjustments. The acquisition had not closed as of the filing date.
- BayMedica was described as a revenue-stage rare-cannabinoid manufacturer, but the transaction remained subject to execution, integration, financing, and commercial risks.
- The company disclosed a contingent liability related to inadvertent investor communications in July 2020 that may have exceeded the permissible securities-offering safe harbor. The potential liability was not quantifiable.
- Management reported material weaknesses in internal control over financial reporting related to insufficient finance resources and an overstatement of warrant valuation. Disclosure controls and internal control over financial reporting were not effective as of June 30, 2021; remediation was ongoing.
- InMed relies on contract research and manufacturing organizations, has no approved products, and faces substantial clinical, regulatory, manufacturing, intellectual-property, controlled-substance, competitive, and financing risks.
Important Facts for Investors to Verify
- Confirm the actual closing, consideration, share issuance, warrant terms, liabilities, and integration results of the BayMedica acquisition.
- Verify the amount and remaining runway from the July 2021 financing, including cash burn, clinical spending, and any subsequent financings or dilution.
- Track regulatory approvals, enrollment, design, endpoints, and results for the INM-755 Phase II EB study.
- Verify whether INM-088 advanced from preclinical development to IND/CTA-enabling studies or human clinical testing.
- Assess whether IntegraSyn™ achieved GMP readiness, commercial-scale production, targeted yields, and economically competitive cost of goods.
- Review remediation of the material weaknesses in internal controls and any subsequent restatements, audit findings, or control deficiencies.
- Monitor the potential securities-law contingent liability arising from the July 2020 communications.
- Review the pending patent applications, as the filing stated that none of the described patent applications had been granted as of August 30, 2021.
- Confirm future funding requirements, including approximately $3.990 million of committed contract research services and materials as of June 30, 2021.