InMed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Three and six months ended December 31, 2023, filed February 13, 2024. Amounts are in U.S. dollars unless otherwise stated. The filing represents InMed’s fiscal second quarter. InMed is a clinical-stage pharmaceutical company developing rare-cannabinoid and cannabinoid-analog therapies, with BayMedica generating bulk rare-cannabinoid sales for the health and wellness sector.
Financial Highlights
| Metric | Three months ended Dec. 31, 2023 | Three months ended Dec. 31, 2022 | Six months ended Dec. 31, 2023 | Six months ended Dec. 31, 2022 |
|---|---|---|---|---|
| Sales | $1.240 million | $0.470 million | $2.142 million | $0.791 million |
| Gross profit | $0.324 million | $0.131 million | $0.345 million | $(0.360) million |
| Gross margin | 26.1% | 27.9% | 16.1% | (45.5)% |
| Operating expenses | $1.969 million | $2.345 million | $4.663 million | $5.430 million |
| Net loss | $(1.478) million | $(2.101) million | $(4.015) million | $(5.611) million |
| Basic and diluted loss per share | $(0.19) | $(0.91) | $(0.71) | $(3.54) |
| Cash used in operating activities | Not separately provided for the quarter | $(4.022) million | $(4.969) million |
- BayMedica generated all reported sales: $1.240 million in the quarter and $2.142 million year to date. InMed’s pharmaceutical segment had no sales.
- Quarterly sales increased 164% year over year, while six-month sales increased 171%, primarily due to higher BayMedica sales volumes and distributor order patterns.
- Gross profit improved year over year, but the quarter included a $170,474 inventory write-down. The six-month period included a $263,404 write-down, compared with $576,772 in the prior-year period.
- Research and development and patent expense declined 28% year over year in the quarter to $609,791 and declined 15% for the six-month period to $1.902 million, largely because the Company was no longer engaged in clinical trials and incurred lower related start-up costs.
- General and administrative expense declined 7% in the quarter and 12% year to date, while interest and other income increased to $166,760 for the quarter and $302,803 year to date.
- Cash and cash equivalents were $9.535 million at December 31, 2023, compared with $8.913 million at June 30, 2023. Cash, cash equivalents and short-term investments totaled approximately $9.6 million.
- Total assets were $15.255 million and total liabilities were $2.483 million at December 31, 2023. Lease obligations totaled $1.167 million, including $364,190 current and $802,784 non-current. The filing identifies no credit facility or other committed debt financing.
- Accumulated deficit was $105.415 million. The Company had 5,667,970 common shares issued and outstanding at December 31, 2023 and reported 6,056,970 shares outstanding as of February 13, 2024.
Material Changes Versus the Prior Comparable Period
- Revenue growth substantially improved BayMedica’s gross profit and reduced the consolidated quarterly net loss by $622,902 and the six-month net loss by $1.596 million.
- Operating cash use declined by $946,293 year to date, from $4.969 million to $4.022 million, but operations remained cash-flow negative.
- Financing provided $4.654 million during the six months ended December 31, 2023, compared with $10.744 million in the prior-year period.
- On October 26, 2023, InMed completed a private placement generating approximately $5.2 million in gross proceeds and $4.654 million net proceeds after issuance costs. The transaction included pre-funded warrants, preferred investment options and placement-agent warrants.
- Warrants outstanding increased to 13.204 million at December 31, 2023, with a weighted-average exercise price of $0.87, creating substantial potential dilution.
- The Company recognized a $3.5 million non-cash warrant-modification charge as an equity issuance cost and issued 530,400 stock options during the six-month period.
- BayMedica extended a lease through May 14, 2027, recognizing a $968,376 right-of-use asset and corresponding lease liability.
Outlook, Liquidity, Risks and Unusual Items
- Going concern: Management concluded that substantial doubt exists regarding the Company’s ability to continue as a going concern within one year after issuance of the financial statements. Based on December 31 liquidity, management expects funding to support operations and capital expenditures into the third quarter of calendar 2024, depending on BayMedica revenue and spending levels.
- The Company expects continued operating losses and negative operating cash flows and plans to seek additional equity, debt, collaboration, government-contract or strategic financing. Additional financing may be unavailable or dilutive and could require the Company to delay, reduce or discontinue programs.
- BayMedica revenue is subject to quarter-to-quarter fluctuations driven primarily by distributor ordering patterns. Management expects fluctuations to continue and is evaluating structured supply arrangements and collaborations.
- Inventory valuation remains a concern: the valuation allowance increased to $357,224 at December 31, 2023 from $93,820 at June 30, 2023, reflecting lower demand, pricing pressure and manufacturing changes.
- The Company has approximately $1.9 million of committed contract research services and materials and approximately $0.9 million of committed contract materials and equipment expected during the following twelve months.
- BayMedica received a notice alleging breach of a patent license agreement. The counterparty has not filed a lawsuit, and any dispute would be subject to binding arbitration under Ontario law. The potential loss cannot currently be reasonably estimated.
- Nasdaq notified the Company in September 2023 that its average closing bid price was below the $1.00 minimum requirement. The Company had a 180-day cure period and may face delisting proceedings if compliance is not restored, subject to potential appeal.
- Disclosure controls and procedures were not effective as of December 31, 2023 because of a material weakness in internal control over financial reporting related primarily to limited accounting personnel, employee turnover and inadequate segregation of duties. Remediation was underway, with completion anticipated by the end of the fiscal year.
- The filing states that no Product Candidates have been commercialized and that future revenue depends on BayMedica sales, successful clinical and regulatory development, manufacturing scale-up, partnerships and additional financing.
Investor Verification Checklist
- Verify the pace of cash burn, BayMedica order concentration and whether the projected cash runway remains valid after December 31, 2023.
- Track additional equity, debt or strategic financing, including dilution from the 13.204 million outstanding warrants, preferred investment options and stock options.
- Assess whether BayMedica can sustain positive gross margins despite inventory write-downs, pricing pressure and distributor concentration.
- Monitor progress, funding requirements and regulatory milestones for INM-755, INM-088, INM-901 and INM-089.
- Confirm resolution of the Nasdaq minimum-bid-price deficiency and the status of any appeal or delisting risk.
- Review remediation of the material weakness in internal controls and subsequent auditor or management disclosures.
- Follow developments in the BayMedica patent-license dispute, including any arbitration, settlement or financial exposure.