InMed Pharmaceuticals Inc. — Form 10-Q Summary
Business context and reporting period
InMed is a clinical-stage pharmaceutical company developing cannabinoid-based therapies and the IntegraSyn™ manufacturing technology for pharmaceutical-grade cannabinoids. Its lead programs include INM-755 for epidermolysis bullosa and INM-088 for glaucoma. The filing covers the three months ended September 30, 2021, InMed’s first fiscal quarter of fiscal 2022. The unaudited interim financial statements are presented in U.S. dollars under U.S. GAAP.
Financial performance and position
| Metric | Three months ended September 30, 2021 | Three months ended September 30, 2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development and patent expense | $1.491 million | $0.911 million |
| General and administrative expense | $1.373 million | $0.625 million |
| Total operating expenses | $2.893 million | $1.564 million |
| Net loss | $2.972 million | $1.599 million |
| Basic and diluted loss per share | $0.25 loss | $0.31 loss |
| Cash used in operating activities | $2.654 million | $1.372 million |
| Cash and cash equivalents at period end | $15.344 million | $4.497 million |
Profit margins are not meaningful because the company has no revenue and remains loss-making. The accumulated deficit was $77.824 million at September 30, 2021. Total assets were $17.327 million, while total liabilities were $2.106 million. Current liabilities were $1.927 million, and working capital was $14.049 million. Lease obligations totaled $260,823, consisting of current and non-current obligations; the filing does not identify any conventional debt or credit facility.
Financing activities provided $10.885 million of cash, primarily from a July 2, 2021 private placement that generated $12.0 million of gross proceeds and approximately $11.0 million net proceeds after costs. Investing activities used $250,000 for a short-term loan to BayMedica.
Material changes versus the prior comparable period
- Research and development and patent expense increased 64% to $1.491 million, primarily because of increased INM-755 clinical-trial activity.
- General and administrative expense increased 120% to $1.373 million, driven primarily by higher Nasdaq-related insurance, personnel, legal and investor-relations costs.
- Total operating expenses increased 85%, and net loss increased 86% year over year.
- Operating cash burn increased from $1.372 million to $2.654 million.
- Cash increased by $7.981 million during the quarter because the private placement more than offset operating and investing cash uses.
- Shares issued and outstanding increased to 10.327 million at September 30, 2021 from 8.051 million at June 30, 2021. The company also had 6.509 million share purchase warrants outstanding and 302,725 agents’ warrants, creating potential dilution.
Guidance, outlook, risks and unusual items
- Management expects continued substantial operating losses and negative operating cash flows while it advances clinical programs, develops IntegraSyn™, expands infrastructure and integrates BayMedica.
- Management estimated that the $15.3 million of cash at September 30, 2021 would fund operating expenses and capital expenditures into the first quarter of fiscal 2023. It also concluded that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the financial statements, because additional capital will be required thereafter.
- The company expects to seek additional equity, debt, collaboration, government-contract or strategic financing. Financing may be unavailable or may dilute existing shareholders or impose restrictive terms.
- Contract research commitments were approximately $3.071 million, expected to occur within the twelve months following September 30, 2021.
- On October 13, 2021, after quarter-end, InMed acquired 100% of BayMedica for 2.05 million common shares. $1.0 million is subject to escrow and potential cancellation for specified post-closing claims. The company also provided BayMedica an additional $175,000 short-term loan after quarter-end.
- The company recorded an $84,112 foreign-exchange loss for the quarter, primarily related to Canadian-dollar exposure.
- COVID-19 had no material impact on the reported quarter, but management stated that future effects remain uncertain.
- Disclosure controls were not effective as of September 30, 2021 because of a previously reported material weakness arising from insufficient finance-function resources. Remediation was in progress, with completion expected before the end of fiscal 2022.
- A potential contingent liability relates to two inadvertent disclosures connected with the July 2020 IPO. The likelihood and magnitude of any rescission or damages claims are not determinable.
Important facts for investors to verify
- Whether cash runway remains consistent with management’s estimate after incorporating BayMedica’s operations, acquisition-related costs and increased research spending.
- The terms, integration progress and financial contribution of the BayMedica acquisition.
- Clinical and regulatory progress for INM-755 and INM-088, including timing and costs of planned studies.
- The company’s ability to raise additional capital before its projected cash runway ends, and the resulting dilution or financing restrictions.
- Progress toward remediating the material weakness in internal control over financial reporting.
- The exercise, expiration and dilution impact of the company’s outstanding warrants, options and other equity awards.
- The status and potential exposure associated with the contingent IPO disclosure matter and the company’s contract research commitments.