InMed Pharmaceuticals Inc. (INM) Q4 2022 Earnings Report, Transcript and Summary

Good day. And thank you for standing by. Welcome to InMed Pharmaceuticals Fourth Quarter Fiscal 2022 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Colin Clancy, Vice President of Investor Relations. Please go ahead.

Thank you, Norma, and good day, ladies and gentlemen. My name is Colin Clancy, InMed's Vice President of Investor Relations. Welcome to InMed's fiscal year-end 2022 financial results and business update conference call. Please note, our speakers are joining us today from remote locations, so we appreciate your patience if we encounter any unexpected technical challenges. Before we begin, we would like to go over our disclosure statements, followed by a progress report on our pharmaceutical drug development program, led by our President and CEO, Eric Adams, together with update on our health and wellness commercial activities which will be provided by Michael Woudenberg, our Chief Operating Officer. Ms. Brenda Edwards, our interim Chief Financial Officer will then review the financial results of operations. Following that, we will be available for question-and-answer session. Also joining us today to address your questions is Dr. Eric Hsu, Senior Vice President of Preclinical Research and Development. Please be advised that certain statements in the following conference call including expectations for InMed's business operations, clinical development, key personnel, contractual arrangements, regulatory approvals, revenue opportunities, financing, and cash runway all constitute forward-looking statements. Such statements are not historical facts, but rather predictions about the future, which inherently involve assumptions, risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements. A description of these risks can be found in our latest disclosure documents. InMed does not undertake any obligation to update any forward-looking statements made during this call. I would now like to turn over to InMed's President and CEO, Eric Adams. Eric?

Thanks, Colin, and thank you to everyone for joining us today. Since our last earnings call, there have been several significant and eventful changes, both in relation to operations and on the corporate level. We have seen several macro socioeconomic issues in 2022, including increasing recessionary pressures, the largest inflation growth in decades, the ongoing war in Ukraine, as well as the slow emergence from the COVID pandemic, all of which have had a direct and considerable impact on many businesses as well as the global stock market. Specifically, in 2022 we've seen the worst stock market performance for biotech companies in decades, causing significant challenges in the capital markets, especially for small cap, pharmaceutical R&D companies that rely on investment to advance clinical developments and other programs. InMed has not been immune to these overarching influences. That said, InMed has managed to navigate these headwinds and gain positive momentum across our operations and continued to advance our preclinical and clinical programs, especially our Phase 2 clinical trial in the treatment of EB. On a corporate level, we have had several capital market related events, including two recent financings to bolster our balance sheet to ensure we have sufficient capital to execute on our programs. Let me start with discussing our pharmaceutical drug development programs, beginning with INM-755 or epidermolysis bullosa or EB. For those of you who are new to the study, InMed is evaluating the safety of INM-755 cannabinol cream and its preliminary efficacy in treating symptoms and wound healing over a 28-day treatment period in individuals diagnosed with EB. The study is designed to enroll up to 20 patients that marks the first time that cannabinol, also known as CBN, has advanced into a Phase 2 clinical trial to be investigated as a therapeutic option to treat this specific disease. InMed’s Phase 2 clinical trial now has nine clinical trial sites fully activated to screen and enroll patients, two more sites are expected to be fully activated soon. The clinical trial is taking place in seven countries, including Austria, Germany, Greece, France, Italy, Israel and Spain. This Phase 2 clinical trial continues to progress. Since our last call, patient screening and enrollment continued, and nine patients have been enrolled and completed the study. Following a period of downtime during the summer month, patient screening enrollment has now recommenced. In the fourth fiscal quarter, based on safety data of the first five adult patients who completed treatment, an independent data monitoring committee agreed it was safe to enroll adolescent patients, defined as persons aged 12 to 17 into our trial. The first adolescent patient with EB has been enrolled into the clinical trial and has completed treatment at the clinical site in Greece during the summer. The Company anticipates that the inclusion of adolescents will have a positive impact on the enrollment rate for the remainder of the clinical trial. As a result, we expect enrollment into the trial to complete during the calendar year 2022 and a data readout expected in the first quarter of calendar 2023. Now turning to INM-088. The Company continues to advance its preclinical research on CBN as a treatment for glaucoma. In the fourth fiscal quarter, the Company completed pre-Investigational New Drug application discussions with the U.S. Food and Drug Administration regarding manufacturing, preclinical studies, and early clinical development plans for INM-088. We gained alignment on the design of the initial Phase 1/2 clinical trial to gather preliminary data on the safety and efficacy of INM-088 treatment in glaucoma. We continue to work towards completing the necessary preclinical studies in anticipation of an investigational new drug application filing in the first half of calendar year 2024, seeking regulatory permission to initiate a human clinical trial. I'd now like to speak to our work on neurodegenerative disease. As a pharma company, it’s imperative that we continue to add to our pipeline. Therefore, I think it's important to point out that our pharmaceutical drug development program also includes exploring other rare cannabinoids and cannabinoid analogs for the therapeutic effects. Last November, we filed an international patent application seeking commercial exclusivity for the potential treatment of important neurodegenerative diseases, such as Alzheimer's disease, Parkinson's disease, Huntington's disease, and others by demonstrating the neuroprotection and promotion of neurite growth in a population of affected neuronal cells using different record cannabinoids. Since then, screening for this indication has yielded some meaningful analog candidates and we will continue with our plans to find an appropriate compound for continuing preclinical development. Let's move over to our analog strategy. Advancing the research and development of cannabinoid analogs remains a high priority for the Company. In April, we announced the publication of a patent application in North America for several cannabinoid analogs. This patent application has brought claims directly to their molecular structure, uses and methods of manufacturing. Such patent protection on the underlying molecule itself is an important component to ensure long-term commercial exclusivity as we continue to invest in R&D. At the same time, we initiated an important research collaboration with Dr. Mauro Maccarrone at the University of L'Aquila in Italy. Dr. Maccarrone is an international expert in cannabinoid research and a founding member of the European Cannabinoid Research Alliance. He is investigating the potential utility of a group of cannabinoid analogs in the treatment of ocular disease. Considering the enhanced commercial protection afforded with a proprietary patented analog, this is an area where we intend to place additional focus in the coming years. Now, I'd like to hand over to our COO, Michael Woudenberg, who will provide an update on BayMedica and commercial activities. Mike?

Thanks, Eric. I'd like to take a few minutes to address our recent announcement on our commercial operations. Since completing the acquisition of BayMedica in October 2021, our focus is launching new products and building our product portfolio of rare cannabinoids as well as developing cannabinoid analogs to support pharmaceutical drug development. However, as we pointed out in the last quarterly update, rare cannabinoids in the health and wellness sector is still a nascent industry. For a variety of reasons, demand for rare cannabinoids unfortunately not materialized as quickly as we anticipated, resulting in slower than expected revenue growth. In our assessment, some of the reasons include: recent overarching recessionary pressures and economic uncertainty has led to hesitation within the health and wellness sector to invest in and launch new rare cannabinoid products; the immature market is not ready for premium rare cannabinoids; BayMedica's competitive advantage of certified high-purity and reliable and consistent supply is not resonating with the industry product manufacturers; and additional downward pricing pressure for cannabinoids in the health and wellness sector in general. We do continue to believe there's a significant opportunity in this market segment. However, the timing of demand and product sales is currently highly uncertain. As a result, we will be reducing our efforts in BayMedica's commercial activities. Currently, we continue to reduce inventory through existing sales and new business opportunities as well as continuing to convert existing work-in-progress inventory into commercial product. The Company will continue to pursue strategic discussions for structured supply agreements and commercial collaborations that make economic sense for BayMedica's high-end differentiators of quality, purity and scalability. In addition, the BayMedica scientific team will continue to support pharmaceutical drug development by advancing their work on the generation of proprietary cannabinoid analogs, which was a major part of the rationale for the acquisition of BayMedica in October of 2021. That concludes the commercial update. I'll now hand back the call to Eric.

Thanks, Mike. Finally, I'd like to speak to recent capital markets and financing activities as well as cost saving initiatives. As mentioned earlier, 2022 has seen significant challenges in the capital markets, especially in the biotech space, where we have seen many companies either close their doors or offer suboptimal strategic alternatives merely to survive. As a result, to ensure the Company has sufficient capital to maintain operations, we implemented significant cost-saving measures across all divisions. These initiatives included a reduction in total headcount and voluntary salary reductions for several members of management, resulting in a reduction of approximately 25% of our current workforce. This reduction in headcount, along with other expense reduction initiatives are expected to result in human resource expense savings of approximately 30% on an annualized basis. As part of these reductions and as the leader of this organization, I have undertaken a voluntary 28% reduction in salary as compared to the previous year. Also, as part of these initiatives, no employee received an annual performance bonus for the fiscal year 2022. The Company also successfully executed a series of financing events to support our ongoing development programs. In June 2022, the Company closed a registered direct offering and concurrent private placement for total proceeds of approximately $5 million. In August, the Company announced a share consolidation of 1:25 in order to regain compliance with Nasdaq's continued listing requirements and subsequently received a notification of compliance from the exchange on September 21. Also recently, on September 13, 2022, the Company closed an additional $6 million private placement with two healthcare-focused institutional investors that further bolster our balance sheet. In terms of the outlook, in summary, despite many challenges and difficult decisions, we have continued to make considerable progress on our core business in pharmaceutical drug development. Over the next several months, shareholders should expect to see the following catalysts: completion of the Phase 2 clinical trial with the data readout expected in the first quarter of calendar 2023; complete the IND-enabling toxicology program and the INM-088 program for glaucoma by end of calendar year 2023; candidate selection for the neurodegenerative disease category in the second quarter of 2023; further execution on our preclinical R&D and patent strategies for proprietary cannabinoid analogs; and we will remain opportunistic to business development in the pharmaceutical drug R&D arena to build shareholder wealth. On that note, I'd like to turn the call over to our Interim CFO, Brenda Edwards, to provide more information on our fourth quarter fiscal 2022 financial results. Brenda?

Thank you, Eric, and thank you all for joining the call. By way of a reminder, and as Colin noted at the beginning of the call, we have a fiscal year-end of June 30th. So as a consequence, these figures represent our fiscal year-end 2022 results. Please also note that our 10-K is available on our website as well as on sec.gov.com. Overall, for the year ended June 30, 2022, the Company recorded a net loss of $18.6 million or $33.17 a share compared with a net loss of $10.2 million or $37.96 per share for the previous year. R&D and patent expenses were approximately $7.3 million for the year compared with $5.3 million for the same period last year. The increase was primarily due to the inclusion of the BayMedica operating results following the acquisition date and due to increased activities related to the 755 Phase 2 clinical trial. Turning now to general and admin expenses. G&A expenses were $6.9 million for the year, representing a 54% increase on the previous year. The increase is due to the inclusion of BayMedica operating results following the acquisition date from the combination of changes, including investor relations, expenses, accounting fees and legal fees, and substantially higher insurance fees resulting from our listing on the Nasdaq capital market. I would now like to comment on BayMedica revenue. The Company realized sales of $1.1 million in our BayMedica segment for the year, the result of the manufacturing and distribution sales of bulk rare cannabinoid product. It is important to note the acquisition only closed in October 2021. As a result of management's decision to refocus on our core business in pharmaceutical drug development area and reduced efforts in BayMedica's commercial business, the Company incurred a non-cash impairment of intangible assets and goodwill of $3.5 million in the BayMedica segment for the year ended June 30, 2022. Turning now to our balance sheet. The Company had cash and cash equivalents of $6.2 million as of June 30, 2022, combined with the approximate $5.4 million of net proceeds from a private placement which closed on September 13. We forecast we will be sufficient to fund its operating expenses and capital expenditure requirements into the second half of fiscal 2023 and possibly into the first quarter of fiscal 2024, being the third quarter of calendar year 2023, depending on the level and timing of realized revenues from the sale of BayMedica inventory as well as the level and timing of company operating expenses. This runway, which will continue -- we will continue to monitor closely, could be reduced or extended by delays in any of our programs, exceeding our revenue expectations or scaling back on selected third-party research programs. With that, I'd like to now turn it back to Colin for question-and-answer session. As a reminder, Eric Hsu is available for questions.

[Operator Instructions] And our first question comes from the line of Scott Henry with ROTH Capital Partners. Your line is open.

Thank you. And good afternoon. Just a couple of questions. First, on the INM-755 safety data. Was there any efficacy data gleaned from that readout by the DSMB?

Hi Scott. Thanks for the question. There may have been, but those results would not have been reported to the Company. So, it was blinded to us. They simply reviewed the data from the study and provided the decision to move ahead with enrollment of adolescents. But, we certainly didn't have any insight into any of the data.

Okay, fair enough. And then, with the readout of that trial in -- it sounds like calendar year first quarter ‘23. At this point, what do you anticipate as the next step? Do you think you can file on that trial, or do you think another trial would be necessary?

I think another trial is going to be necessary. I don't think we'll be in a position to file exclusively on a 20-patient database. So yes, there's definitely, in our opinion, going to be additional trials required. The timing of those and the design of those are still TBD, pending the outcome of this first Phase 2 trial.

Okay. Great. And then final question. Could you speak to what the current burn or the burn rate was in the last fiscal quarter, and where you would expect it to be two quarters down the road? Just trying to get a sense of where the burn was and where it is currently. Thank you.

Yes. Brenda, would you like to field that one?

Sure. Thanks for the question. And yes, in the last quarter, we were an all-in run rate of around $900,000 a month, and we expect to be moving down to about $700,000 a month. But if you're just looking for operating expenses, then we're looking at probably around $500,000 a month.

Okay. Great. Thank you for taking the questions.

Thank you.

Thank you. One moment for our next question. And our next question comes from Raghuram Selvaraju with H.C. Wainwright. Your line is open.

Hi. Thanks very much for taking my questions. These are primarily related to your various clinical development initiatives. Sort of in order of timing of release, I think. Can you just give us a sense of what you expect to be the most important efficacy takeaways from the October '22 envisaged data set? Also, if you could give us a sense of what you expect to be the most important efficacy readout coming from the INM-755 proof-of-concept study? And lastly, specific efficacy measures or visual acuity measures you expect to utilize in the context of the glaucoma candidates development? That would be helpful. Thank you.

Great. Thank you. So just for clarification, you referred to October '22 readout. We don't have any readout, I believe, in October '22. Could you clarify that question?

This is with specific regard to the Trokie collaboration?

Okay. Yes. Thank you. Yes. So, the Trokie collaboration, we were providing -- BayMedica was providing a high-purity delta-9 THCV, which is a non-intoxicating cannabinoid for a study. This is with a company called Radicle. Radicle conducts a number of consumer-driven investigations, looking at different cannabinoids and what their effects are in the real world, at the consumer level. So, they supply a certain cannabinoid in different formulations, different delivery formats. And then they track through an app what the patient's experience is with these different cannabinoids. So, for THCV, some of the readouts that they're looking for are whether they feel like they have an increase in mental acuity and their overall energy, and whether they feel there's any change to their appetite. I may be missing one readout there. But, this is a pretty -- I wouldn't call it a clinical trial, but it's certainly an investigation into the consumers' experience with these different cannabinoids. And they've done this with other cannabinoids in the past. These are several into the thousands of patients who report on this, and they did complete a very interesting CBD study about a year ago that gave a lot of feedback to the market in terms of where you may see these cannabinoids play the role in the health and wellness marketplace. Trokie is a company that we work with. They put our THCV into a lozenge format, and that's how that's being delivered then to the consumers. So, there's nothing earth-shattering in terms of any statistically-powered clinical trials. This is more an experiential consumer-based study. I think your second question was on the 755, and the kinds of things that we're looking for in terms of readouts. We are looking at different measurements. Some of these are patient-reported. So, we are looking at itch that's related to both wound and non-wound areas. We're looking at inflammation, and this is a chronic inflammation, not an acute inflammation. We're looking at the impact on wound healing, and we're looking at pain. So, in order to get into -- to enroll in the clinical trials, you have to have one or more of these different symptoms. So, not every patient is going to be the same. We're going to get a large range of what the patients are experiencing and which areas are getting treated. It's a really good protocol design in that it's a matched area inpatient design. So, the patient has to have two areas that have the similar symptomology, one of which will be treated with the active ingredient, one of which will be treated with placebo. So, the design is very robust. It also makes it a little bit difficult to get in the trial because you have to have 2 areas, not just one. But we're very optimistic that we can finish enrollment and we will finish enrollment in this calendar year. And then after a database lock and analysis, we'll have a readout sometime in kind of the February, March time frame, so by the end of the first quarter. Did you have any other questions related to that?

No, with respect to 755, no. Thank you for that color. The last question was just pertaining to the visual acuity or other ocular function readouts that are likely to be most pertinent in the context of glaucoma project development?

Sure. Let me turn that over to Dr. Eric Hsu, who is in charge of that program.

Thanks, Eric. Hi. So, in the earlier this year, we had pre-IND meeting with FDA, and the communication we have with the FDA is to move the glaucoma program into clinical trials. And the first trial -- in-human trial will be a Phase 1/2 trial. The primary readout for Phase 1/2 will be, of course, safety being the first, and IOP reduction in the secondary readout for that 1/2 trial. And the other discussion we had was the possibility moving to another Phase 2 after that trial to have neuroprotection readout. So, those are what we're planning right now.

Thank you. And at this time, I'm showing no further questions. I'd like to hand the conference back over to Mr. Adams for any closing remarks.

Great. Thank you very much. So, in closing, I just want to thank our shareholders for their continued support over the last year. We understand it's been a very difficult year for everyone involved in the industry, including investors and shareholders. We believe we've taken all the necessary steps to ensure that we have a positive 2023, and we are excited to execute on our plans. And I look forward to updating everyone on our continued progress and future milestones over the coming months. Thanks again, and wish you a good weekend.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a wonderful day.