Business Context and Reporting Period
InMed Pharmaceuticals Inc. is a Canadian clinical-stage pharmaceutical company developing rare-cannabinoid medicines and manufacturing technologies. Lead programs are INM-755, a topical cannabinol cream for epidermolysis bullosa (EB), and INM-088, a cannabinol eye-drop candidate for glaucoma. Through its October 13, 2021 acquisition of BayMedica, the Company also sells rare cannabinoids to the health and wellness industry.
The provided filing is a Form 10-K for the fiscal year ended June 30, 2022, filed September 23, 2022. It is not a 2021 Q4 filing. Financial statements are presented in U.S. dollars under U.S. GAAP.
Key Financial Metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $1.089 million | $0 |
| Gross profit | $0.544 million | $0 |
| Gross margin | Approximately 50% | Not meaningful |
| Net loss | $18.600 million | $10.203 million |
| Basic and diluted loss per share | $33.17 loss | $37.96 loss |
| Cash used in operating activities | $15.584 million | $9.791 million |
| Cash and cash equivalents | $6.177 million | $7.363 million |
| Cash, cash equivalents and short-term investments | $6.222 million | $7.410 million |
| Total assets | $12.788 million | $9.781 million |
| Total liabilities | $3.709 million | $2.405 million |
| Accumulated deficit | $93.453 million | $74.852 million |
Revenue was generated entirely by BayMedica following the acquisition. BayMedica reported $1.089 million of sales, $0.546 million of cost of sales and a $0.544 million gross profit, but incurred a $5.189 million net loss after operating expenses and a $3.473 million impairment charge.
There was no conventional funded debt reported at June 30, 2022. Liabilities primarily comprised accounts payable and accrued liabilities of $2.415 million, lease obligations totaling $0.794 million, and $0.500 million of acquisition consideration payable.
Material Changes Versus the Prior Comparable Period
- BayMedica was acquired in October 2021 and contributed approximately $1.1 million of revenue during the post-acquisition period; no comparable revenue existed in FY2021.
- Net loss increased by approximately $8.4 million, or 82%, from $10.2 million to $18.6 million.
- Research and development and patent expense increased to $7.283 million from $5.338 million, primarily due to the INM-755 Phase 2 program and BayMedica activities.
- General and administrative expense increased to $6.867 million from $4.479 million, reflecting higher investor relations, accounting, legal, insurance and acquisition-related costs.
- Cash used in operations increased to $15.584 million from $9.791 million, while year-end cash declined by $1.186 million.
- The Company recorded a $3.473 million impairment of BayMedica goodwill and intangible assets because health and wellness demand, pricing and revenue performance were below expectations.
- The Company recorded $1.314 million of warrant modification expense following warrant repricing transactions.
- Shares outstanding increased materially through financings, the BayMedica acquisition and other issuances. The filing reports 650,667 shares issued and outstanding at June 30, 2022, before the subsequent one-for-25 reverse stock split on September 7, 2022.
Guidance, Outlook, Commentary and Risks
- INM-755 Phase 2 enrollment and treatment began in December 2021, with up to 20 EB patients across multiple countries. Based on safety data from the first five adult patients, an independent Data Monitoring Committee allowed enrollment of adolescents. Completion was expected during calendar 2022.
- Following FDA pre-IND discussions, management expected to file regulatory applications for INM-088 in the first half of calendar 2023 and initiate human clinical testing, subject to completion of additional manufacturing and toxicology work.
- Management is refocusing BayMedica on reducing inventory and limiting commercial manufacturing research and development because market demand, pricing and revenue timing were uncertain. Strategic alternatives and structured supply arrangements may be considered.
- Management expects operating losses and negative operating cash flow to continue as clinical, preclinical, manufacturing, regulatory and intellectual-property activities advance. No pharmaceutical Product Candidate has received marketing approval.
- As of the financial statement issuance date, $6.2 million of June 30, 2022 cash plus approximately $5.4 million of net proceeds from a September 2022 private placement was expected to fund operations into the second half of fiscal 2023 and possibly the first quarter of fiscal 2024, depending on expenses and BayMedica inventory sales. The Company concluded that substantial doubt exists regarding its ability to continue as a going concern within one year.
- The Company relies on additional equity financing, strategic collaborations, licensing and other capital sources. It had no credit facility or committed source of capital, and future financing could dilute existing shareholders or require the Company to relinquish rights.
- Material risks include clinical failure, regulatory delays, controlled-substance restrictions, dependence on contract manufacturers, inability to scale the IntegraSyn process, competition, intellectual-property challenges, uncertain BayMedica demand, COVID-19-related disruptions and foreign-exchange exposure.
- Management reported ineffective disclosure controls and internal control over financial reporting as of June 30, 2022. A material weakness related to limited finance resources and accounting for complex, non-routine transactions had not been remediated; management expected remediation before the end of fiscal 2023.
Important Facts for Investors to Verify
- Confirm the filing period: fiscal year ended June 30, 2022, rather than 2021 Q4.
- Review the audited financial statements and going-concern disclosure, particularly the $15.584 million operating cash burn, $6.222 million of cash and short-term investments, and substantial doubt about continuity.
- Assess the timing, enrollment, safety and efficacy data from the INM-755 Phase 2 EB trial and the regulatory path for INM-088.
- Evaluate BayMedica inventory levels, realizable value, customer concentration and the likelihood of additional impairment or continued commercial losses.
- Review post-year-end financing terms, warrant and option dilution, the September 7, 2022 reverse stock split, and the September 2022 private placement.
- Track remediation of the material weakness and whether subsequent filings report effective disclosure controls and internal control over financial reporting.
- Verify the status and enforceability of the Company’s pending patent applications; the filing states that none had been granted as of the report date.