Quick Take

InMed Pharmaceuticals (INM) intends to raise $10 million from the sale of common stock and warrants in an uplisting / Nasdaq IPO, according to an amended registration statement.

The company is developing cannabis-derived treatments for skin and eye conditions.

INM is still at a preclinical stage of development and is thinly capitalized; the IPO may be more suited to long-term hold institutional investors, so I’ll watch the IPO from the sidelines.

Company & Technology

Vancouver, Canada-based InMed was founded to advance drug programs for epidermolysis bullosa [EB], a skin condition that results in layers of skin not sticking to each other and for glaucoma, an eye condition that damages the optic nerve.

Management is headed by president and Chief Executive Officer Eric Adams, who has been with the firm since 2016 and was previously CEO at EnGene and held senior roles at QLT.

Below is a brief overview video of InMed’s recent announcement for treating EB:

Source: Business Television

The firm’s lead candidate is INM-755, a cannabinoid-based treatment candidate for epidermolysis bullosa.

The drug is current in Phase 1 safety trials and management expects it to advance to Phase 1/2 efficacy trials in 2021.

The company’s second candidate is INM-088, a cannabinoid treatment for glaucoma and management expects it to enter Phase 1 safety trials in 2021.

Below is the current status of the company’s drug development pipeline:

Source: Company S-1 Filing

Investors in the firm have invested at least $70 million.

Market & Competition

According to a 2019 market research report by Technavio, the global market for epidermolysis bullosa is expected to grow by nearly $305 million from 2019 to 2023.

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This represents a forecast CAGR (Compound Annual Growth Rate) of almost 5% from 2019 to 2023, as shown in the chart below:

Key elements driving this expected growth are increasing development of treatment options by pharmaceutical firms such as diacerein ointment.

Also, North America accounted for the highest demand in 2018, although higher growth rates can be found in other global regions.

Major competitive vendors that provide or are developing treatments include:

  • Amyrt Pharma

  • Fresenius

  • Johnson & Johnson (JNJ)

  • Novartis (NVS)

  • Pfizer (PFE)

Financial Status

InMed’s recent financial results are typical of a development-stage biopharma in that they feature no revenue and significant R&D and G&A costs associated with advancing its pipeline of drug treatment candidates.

Below are the company’s financial results for the past two years:

Source: Company registration statement

As of June 30, 2020, the company had $5.8 million in cash and $1.9 million in total liabilities. (Unaudited, interim)

IPO Details

INM intends to sell 2.4 million shares of common stock along with one warrant at a reference price of $4.13 per share for gross proceeds of approximately $10 million, not including the sale of customary underwriter options.

The company’s stock is currently quoted on the OTCQX market and as of 10:39 am EST on October 9, 2020 it was $3.35. It also trades on the Toronto Stock Exchange under the symbol of “IN”.

Assuming a successful IPO at the proposed price, the company’s enterprise value at IPO would approximate $25.8 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 31.68%.

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Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

approximately $6 million in the aggregate to fund our development efforts of INM-755 including a Phase I/II clinical trial;

approximately $2 million in the aggregate to fund our ongoing development efforts of INM-088;

approximately $1 million in the aggregate to fund the general development efforts of our IntegraSyn™ program; and

We intend to fund working capital and general corporate expenditures out of our existing cash reserves. We may also use a portion of the out of our existing cash reserves to in-license, acquire, or invest in complementary businesses, intellectual property, products or assets. However, we have no current commitments or obligations to do so.

Management’s presentation of the company roadshow is not available.

Listed underwriters of the IPO are Roth Capital Partners and Brookline Capital Markets.

Commentary

InMed is seeking additional capital in its uplisting/Nasdaq IPO to fund its lead candidate’s entrance into Phase 1/2 trials and to advance its other development programs.

For its lead candidate, management doesn’t expect to begin Phase 1 trials until ‘2021/2022’ at the earliest.

The market opportunity for treating epidermolysis bullosa is likely on the small side and is expected to produce moderate growth in the near future.

Management has disclosed no pharma firm collaborations and faces significant competition in the epidermolysis bullosa market.

As to valuation, the IPO uplisting is priced at well below the typical range for a biopharma firm.

InMed is still at a preclinical stage of development and is thinly capitalized.

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The IPO uplisting may be more suited to institutional investors with a long-term hold time frame, so I’ll pass on the IPO.

Expected IPO Pricing Date: October, 2020.

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