InMed Pharmaceuticals Inc (INM) 2021 Q3 法說會逐字稿

Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to InMed's third-quarter 2021 financial results and business update conference call for the fiscal quarter ended March 31, 2021. (Operator Instructions)

Mr. Colwill, you may begin your conference.

Thank you, Sarah. Good day, everyone. My name is Bruce Colwill, and I am InMed's Chief Financial Officer. Welcome to InMed's third-quarter 2021 financial results and business update conference call. Please note that we are once again all joining today from remote locations, so we appreciate your patience if we happen to encounter any unexpected technical challenges today.

But before we begin, we would like to go over our disclosure statements followed by a review of the progress of our therapeutic development in cannabinoid manufacturing programs, which will be led by our President and CEO, Eric Adams. After which, I will review the financial results of operations. Following that, we will be available for a question-and-answer session.

Also joining us today to address your questions Eric Hsu, Senior Vice President of Preclinical Research and Development; Alexandra Mancini, Senior Vice President, Clinical and Regulatory Affairs; and Michael Woudenberg, Vice President of Chemistry, Manufacturing and Control.

Please be advised that certain statements in the following conference call regarding expectations for InMed's business operations, clinical development, key personnel, contractual arrangements, regulatory approvals, revenue opportunities, 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 and recent press releases. Should there be any discrepancy between any statements made during this teleconference and our filed financial statements, the listeners are instructed to rely on the filed financial statements for accuracy. InMed does not undertake any obligation to update any forward-looking statements made during this call.

And with that, I would now like to turn the call over to InMed's President and CEO, Eric Adams. Eric?

Thank you, Bruce, and thank you, everyone, for joining us today.

Since our last earnings call with investors, InMed's efforts have been focused on our core R&D programs where we made measurable strides and hit important milestones in the last few months. We believe these important milestones bring us a step closer to delivering new therapeutic alternatives to patients who may benefit from cannabinoid-based pharmaceutical drugs. We are pleased with the progress, and I'd like to go through the specifics of our programs with you.

I'm going to start with INM-755 for epidermolysis bullosa or EB. During the last few months, our clinical team has invested a tremendous amount of effort in preparation and coordination of the necessary components to file and initiate our first Phase 2 trial designated 755-201-EB, or I'll refer to it also as the 201 trial, to test the safety and efficacy of INM-755 cannabinol cream in persons with EB. On April 28, we announced that clinical trial applications were filed in Austria, Israel, and Serbia.

Since then, additional submissions for our 201 trial were made in France and Germany. We also expect to file clinical trial applications with the National Competent Authorities and Ethics Committees in Greece and Italy over the next few weeks. Responses from these authorities are expected throughout July and August with timing to vary slightly country to country due to differences in local procedures.

Filing clinical trial applications in these countries to the National Competent Authorities or NCAs serve the same purpose as filing an investigational new drug application or IND to the US FDA. The NCAs review the dossier that summarizes all non-clinical and clinical studies conducted to date as well as quality data regarding the manufacturing of the sterile INM-755 cream in the context of the proposed study.

The Ethics Committees fulfill the same role as Institutional Review Boards or IRBs in the US, focusing primarily on the study protocol, the investigators brochure, and report consent documents to assess the ethical and safety aspects of the proposed study.

The 201 trial is designed to enroll up to 20 patients conservatively within 10 to 12 months and will take place at 10 pre-qualified clinical sites in the aforementioned countries. All four types of inherited EB, including EB Simplex, Dystrophic EB, Junctional EB, and Kindler Syndrome are eligible for the study in which InMed will evaluate the safety of INM-755 cannabinol cream and its preliminary efficacy in treating symptoms and wound healing over a 28-day period. The study will use a within-patient, double-blind design, where matched index areas will be randomized to INM-755 cannabinol cream or vehicle cream as a control.

With these submissions in place and the expected subsequent approvals, our Phase 2 trial is on track to begin in the third quarter of calendar 2021. To start with, 201 trial will mark an important milestone as the first time a cannabinol product will be entering a Phase 2 efficacy clinical trial for potential therapeutic use. This was a significant step for the use of a rare cannabinoid and may offer hope to patients who are seeking alternative treatment options for their disease.

I'd now like to discuss our advances with the IntegraSyn platform. IntegraSyn is a manufacturing approach that utilizes an enzymatic biotransformation process as part of an overall integrated manufacturing approach to overcome certain natural yield limitations of traditional biosynthesis for full cannabinoid assembly.

Our IntegraSyn program achieved an important milestone over the last few weeks. On April 26, we announced that the InMed's IntegraSyn manufacturing approach was able to achieve a level of 2 grams per liter cannabinoid yield, a milestone that signals commercial viability and supports advancement to large-scale production in the coming months. Our goal with IntegraSyn is to bring a cost-effective solution to pharmaceutical-grade, rare cannabinoid production.

We have set two main objectives in our development process that was to achieve a commercially viable yield higher than current industry standards and to lower overall manufacturing costs through process optimization. Thus far, we were able to achieve both objectives.

Having achieved a 2-gram-per-liter yield level, InMed will now focus on manufacturing scale-up to larger batch sizes while continuing process and enzyme optimization, targeted to increase cannabinoid yield and further reduce the overall cost of goods. In parallel, the company continues to prepare the manufacturing process to be GMP-ready for pharmaceutical-grade production.

As we scale up, we believe there is additional opportunity to reach higher yield and further optimize the process to reduce overall costs. The next stage of large-scale production is to produce a batch with a target output of 1 kilogram of the selected cannabinoid in the second half of 2021 using the GMP-ready process. Achieving the 1-kilogram batch size is important. The process parameters used at this scale are applicable to all subsequent scale-up activities.

Now, I'd like to turn to our INM-088 program in glaucoma. INM-088 is a topical eye drop formulation under development for the treatment of glaucoma. The active pharmaceutical ingredient in 088 is cannabinol or CBN, the same active ingredient as the 755 program. Current glaucoma treatments work to reduce the intraocular pressure in the eye. Our preclinical studies have indicated that 088 may provide neural protection as well as reducing intraocular pressure.

In our 088 program over the last few months, we have engaged a leading ocular clinical research organization to develop our clinical trial program. And we've also started to scale up the 088 drug product using the MiDROPS eye drop delivery technology, which we licensed from the company, EyeCRO, late last year. We have submitted our key preclinical data on the 088 program to a peer-reviewed journal and look forward to sharing our data with everyone in the not-too-distant future.

The editorial process is unique to each journal, and it's difficult for us to predict when the publication will occur. Over the next several months, we expect to conduct non-GLP dose-ranging studies followed by the GLP toxicology studies to enable human clinical trials. Our current estimates are to file applications in the first half of 2022 to initiate human clinical testing with INM-088.

In terms of other activities, I'd like to provide an update on our BayMedica collaboration. BayMedica is continuing its experimentation using one of InMed's enzyme gene sequences in their yeast-based biosynthesis system. Early data indicate that the enzyme is active in the system, but further optimization is required. With regards to InMed's testing of BayMedica's cannabinoid analog compounds, we have recently received the permit from Health Canada to import these analogs.

The process was expected to take six weeks but was significantly delayed as we awaited for Health Canada's approval. We will import these compounds and initiate our preclinical testing ASAP.

We believe the synergy of this collaboration will give us important knowledge in furthering the development of our IntegraSyn approach and the compounds that may be able to cost effectively produce. It also provides us with a know-how for production of cannabinoids we intend to use for our own therapeutic programs.

Over the last quarter, we increased our business development activities. We believe business development is an important avenue to help accelerate our company and R&D programs. We will continue to explore options that will add value to InMed and will extend our lead into the clinical development of cannabinol and our cannabinoid manufacturing.

Finally, on April 27, we announced that we would be voluntarily delisting from the Toronto Stock Exchange. In that, approximately 86% of our trading volume occurred on the NASDAQ. The lower trading volume on the TSX no longer justified the expense and administrative efforts associated with maintaining a dual listing. As planned, the voluntary delisting occurred on May 7. Our shares continue to be listed and traded on the NASDAQ under the symbol INM. The substantial savings in exchange fees, legal fees, and managerial time and effort can now be redirected into our scientific programs further advancing the business of the company.

With that, I would like to turn the call over to Bruce to discuss our financials. Bruce?

Thanks, Eric. As a way of reminder, with our November 2020 NASDAQ listing and concurrently becoming a US registrant, we began reporting all of our financial figures and performance in US dollars in accordance with US GAAP. Also, as noted at the beginning of this call, we do have a fiscal year that ends on June 30. Therefore, these figures today are dated March 31, 2021, which represents the third quarter of our fiscal 2021 year. Please also note that our 10-Q is also now available on our website on SEDAR and at sec.gov.

As we noted on our last earnings call, we were able to follow up our NASDAQ IPO with a private placement. The private placement, which was announced before that last earnings call but closed shortly after it, was facilitated in part by demand from institutional investors in our November NASDAQ IPO, and we were able to raise another $4.5 million on fairly similar terms to those of the November NASDAQ IPO, bringing the total fundraising between the two deals to $12.5 million.

Operationally, I will first review our research and development expenditures. This quarter, our R&D expenses include increased cost associated with our Phase 2 trial. As a consequence, R&D expenses were approximately $1.8 million this quarter, which is up from $1.3 million for the three months ended March 31, 2020, so the equivalent period last year, and is a fairly large increase from our last quarter when R&D expenses were approximately $900,000 or about half of what we incurred this quarter. These increases were largely related to payments to the Contract Research Organization or CRO that is helping us with our Phase 2 trial.

Turning now to general and administration expenses. These expenses at $1.3 million for this quarter were up compared to both the equivalent three-month period last year as well as compared to the most recent quarter. While there were various expenses that drove this increase including non-cash stock-based comp, in both cases though, it was largely due to increased cost associated with having become a US registrant. Over the three months ended March 31, 2021, the company recorded a net loss of approximately $3.1 million or $0.41 per share compared with a net loss of $2 million or $0.39 per share for the three months ended March 31, 2020.

Turning now to our balance sheet. As of March 31, 2021, the company's cash, cash equivalents, and short-term investments were approximately $9.5 million, which compares to $5.8 million at the end of the last fiscal year, which was June 30, 2020. This increase over the nine months to March 31, 2021, was primarily due to the proceeds from the November 2020 public offering and the February 2021 private placement offset by increases in our non-cash current assets and by cash outflows from our operating activities.

Last earnings call, I took some time to explain a new balance sheet item called derivative warrants liability. And as I explained then, because the warrants issued in our November 2020 IPO were issued in US dollars, the straight price being US dollars, but our underlying functional currency at that time was the Canadian dollar. Under US GAAP, the warrants are considered a, quote-unquote, derivative liability, and we allocated a portion of the November 2020 financing to equity and a portion to the new line derivative warrants liability.

I noticed on that call -- on the last call that so long as our functional currency remained Canadian dollar, we would be revaluing this liability each quarter, the effect of what would be reflected in our statement of operations. However, this quarter, following an assessment of our underlying functional currency, we concluded that our functional currency had switched from being the Canadian dollar to the US dollar.

So what does this mean? Well, most significantly that the derivative warrants liability included in long-term liabilities on our balance sheet last quarter was reclassified to equity, where transactions like the November 2020 financing we undertook would normally reside.

Secondarily, it means that unlike last quarter, financing-related expenses are also now fully allocated to the shareholders' equity section. Thus, the finance expense line item in our statement of operations is nil this quarter despite raising capital.

Lastly, the other impacts stemming from the change in functional currency, which is also related to our statement of operations, is that the line item under other comprehensive loss just called foreign currency translation gain or loss is nil this quarter, and it will be going forward as well as that foreign currency gain or loss resulted from the process of translating our underlying Canadian dollar functional currency statements to US dollar. But now, with the change of functional currency to US dollar, we would no longer need to do that.

As at March 31, 2021, the company's total issued and outstanding shares were approximately 8 million. In addition, as at March 31, 2021, there were approximately 1.8 million outstanding warrants issued in conjunction with our November financing and approximately 700,000 warrants outstanding which are issued in conjunction with the February financing.

We have maintained our guidance. There was cash at least into the third quarter of calendar 2021 or the second quarter of our fiscal year 2022. As we wrap up this current fiscal year, which ends in approximately six weeks and following the closing of our private placement this quarter, we will be updating our planned program spending. And thus, we will be providing updated cash run-rate guidance on the next earnings call.

With that, I would now like to turn the call back over to Sarah for a Q&A session. Sarah?

Thank you. (Operator Instructions) Scott Henry, ROTH Capital Markets.

Thank you and good morning. First, just for clarity, Bruce, I believe you just told us how long you felt the cash extended to. Could you just repeat that? I'm not sure I got it correct.

So our previous -- thanks, Scott. Thanks for the question. So our previous guidance basically said we had cash at least into the third quarter of calendar 2021 or which is if you look into our fiscal year is the second quarter of our -- is fiscal 2022. But the point, Scott, we are making on the call though is that we need to update that guidance. We are kind of -- we are working through the numbers now.

As you have seen from our press release and as Eric talked about, the Phase 2 trial is ramping up now. And as we have been filing our CTA applications, we are getting a better sense of timing around that program and the implications of these spending that's going to come out of that. So we -- basically we just haven't updated the cash flow timing, but we will be doing so shortly, and we will be able to update that on the next call.

Okay. Thank you for that clarity. And then since I got you right now, obviously the expense items were elevated in the third quarter of '21, and I know you discussed why that was. The question is, how should we think about the next couple quarters? Should they still -- stay elevated or just how will those -- do you expect those levers going forward to react?

Yeah, I would -- as the Phase 2 trial takes off here and assuming that the approvals related to those clinical trial applications do come in in the manner that we are expecting, I think it's reasonable to expect that the cash flow, the cash burn that we saw last quarter is going to be indicative of what you'll see on a go-forward basis the next couple of quarters, potentially slightly lower, but something along those lines.

Okay. And then shifting gears, on the 201 trial, should we -- I mean, you have given us some clarity on how long it should take to enroll. Should we be looking for data in the second half of calendar year 2022 or perhaps 4Q 2022? Just trying to get a sense of how to bracket that expectation.

Yeah. Maybe, Alex, you can address the timing of the 201 trial?

Yes, certainly. Yes, I think that your thoughts on the timing are good, certainly in the second half of 2022 and closer to the fourth quarter, if not, in the fourth quarter. It's around that time. If enrollment goes as we are planning and predicting, then that's the timing for it.

Okay.

If we can just expand on that a little bit, Alex, maybe you could talk about the clinical trial design and why the enrollment is taking as long as we project?

Why the enrollment -- okay.

Yeah.

All right. Well, the trial design is what Eric has covered in his first comments that it's a within-patient study design. So that's very important for this small study in up to 20 patients, so that we can get as much data as we can from any one individual patient, and we get to compare the active and the vehicle within the same patient.

It's a really rare disease. We are going with 10 clinical sites in 7 countries, so that we can try to complete the enrollment within a year, 10 to 12 months is the prediction. And the start-up of the study, the actual start to enrolling, screening and enrolling, is a long process. We have started those activities this year. We started the screening for sites, for example, in January, and then there's many steps we go through to get ready to actually start.

You've heard -- you've seen in our press release and heard again today that we have filed regulatory applications in most of the countries now, five out of the seven countries, and those are under review by the National Competent Authorities and the Ethics Committees, and there's two more countries still to file. The process is different in every country, and it's protracted in some, but we expect to get all the different sites up and started in the months that range from August through to later in the year.

And then we have to get the patients in. And so yeah, we are expecting to complete the last enrollment by around May or June of 2022, and it's a one-month treatment for any one patient.

Eric, is there further information you were wanting?

Yeah. I think additionally just the fact that we're starting out in adults. We are testing them prior to moving into the adolescents.

Yes. So the first -- so in this study, we do believe we have sufficient preclinical information to support us going into adolescent patients. However, we must start the trial in adults. We have healthy volunteers, adults who have been treated, but now this will be the first trial in which patients with EB will be treated. So we will -- we are setting up an independent data monitoring committee, which will look at the data from the first four, at least first four adult subjects who have completed treatment, at least two weeks of treatment.

And they will review the safety data and determine if they believe it is acceptable to move into adolescents, so ages 12 to 17. And, yeah, some of the centers we have chosen are focused a lot on pediatric patients. And so their enrollment will pick up at that time. We are hopeful that everything will go forward, and we will be able to include adolescents in this trial. We will not be able to go to younger children in this trial. However, we need much more data to be able to go to younger ages.

Yes. I think the safety data that we had from the Phase 1 is very sound. Nevertheless, given the severity of this disease, we really need to proceed cautiously. There's no fast-track approach to enrollment and treatment here. We've got to be careful and take it stepwise. So that adds to the perceived slow enrollment rate. It's really not slow. It's just being very cautious.

Yes. And I mean, this is an orphan indication. And so the time -- what we are expecting in terms of enrollment per site, we have been -- as part of the pre-qualification of each site, we examined the number of patients they think they have available, who would be qualified to participate, then of course, the patients have to agree to participate. And then, we know estimates from sites are always overestimates. So we are looking at the enrollment that has been achieved in prior trials with topical agents in EB.

So we have the best guidance we can for predicting what the sites can enroll. But basically, we're looking at a one-year interval, and we're saying 10 sites to enroll 20 patients. So on average, that's two per site per year.

Yeah, great. Thanks. Scott, we'll turn it back over to you. It sounds like you had some additional questions.

Well, thank you for that color. That's very helpful. Final question just on IntegraSyn. Let's say, you get this key level batch at the end of second half '21, what do you do once you get to that step? Is it something you want to develop yourself? Is it something that you'll market to a partner or do you already have someone interested in it? Just trying to get a sense of what you are going to do once you get to that point.

Yeah. And as I mentioned, getting to the 1-kilogram batch size is important because it really defines a lot of the parameters that are going to be useful and locked in, if you will, as we go to larger and larger scale. So that's the criticality of getting to that size. And again, we will do it under a GMP-ready process.

What's going to happen once we get there? We already have manufacturing arrangements. I mean, we're working with Almac. They are capable of doing manufacturing for us. We are looking at other options with different manufacturers around the world.

So at this point, we still retain all the rights to it. And we're looking into whether we want to continue and provide this ourselves to the market, or whether we want to license to someone who specializes in this area. So we have a lot of optionality at this point. We'll give better guidance once we venture down one of the paths that are open to us.

Okay, great. Thank you for the call. Thank you for taking the questions.

Thank you, Scott. Bruce, maybe we could take one of the questions that were submitted online?

Yeah. Thanks, Eric. Yes, as usual, we've had people in advance send some questions. A couple have been asked already by Scott here. So one of them was, you recently announced achieving 2 grams per liter yield of IntegraSyn. What is the relevance or importance of achieving 2 grams per liter?

Yeah. What's important is that, number one, it's kind of an industry-leading benchmark. We haven't seen anyone else who has been able to achieve this level of yield at smaller scale. Number two, it kind of says that this process is commercial ready. And number three, as we move into larger and larger production, there's additional opportunities to increase the yield through a number of different things.

One is we're going to continue to work on optimizing the enzyme component of the IntegraSyn process but also the different processes that we use at larger scale, going to larger reaction vessels, and having a larger batch to put through the purification processes. We have opportunities to increase overall yield and find ways to decrease costs. So we have a very firm foundation upon which to build. And that's how we're going to take that forward.

Eric, am I missing anything?

No, I think you've covered all the important components. And I just want to add, it's important, looking at what -- traditionally what you hear about biosynthesis, people always talk about 1 gram per liter being the benchmark. And we're very happy that we achieved 2 grams per liter. And we'll continue to improve on that during our scale up.

And also, you touched upon the importance of that amount because when you think about the batch size going from 1,000 to 10,000 to 30,000 liters, going from 1 gram to 2 grams meaning you're dealing with half the volume, and that's going to have impact on downstream process and reduces the cost for sure.

Yeah, and one of the other cost components that you've pointed out, you and Michael pointed out in the past was that, the biotransformation process that we are utilizing takes a day, whereas a biosynthesis process can take 5 to 10 days. So it's a much faster process, and that again leads to additional cost savings in the overall process.

So we think we've designed this thing really well. We think there's a lot of benefits for using the approach that we have taken. We intentionally didn't want to scale up a bad process. We wanted to make sure that we had a very solid process under our feet. And that's worthy of the further investment. And we think we have hit that milestone, and we are marching forward.

Bruce, were there any other questions?

Yeah. I think there's one more question here related to the 201 study. So basically it asks, having seen your recent press release announcing CTA filings, I note that they are primarily in Europe, why are you not conducting trials in the US? Are you not able to?

Alex, do you want to take that?

Yes, sure. So when we tried to decide where we would be wanting to run the trial, we looked at different options. We -- most important was selecting sites that have access to eligible patients, and secondarily, looking at the ability to study a cannabinoid product in those jurisdictions. And then we also had to factor in the cost of running the program in the different areas. So we started getting quotes that did include North America.

However, we determined that it was going to be too costly to keep parallel organizations going for the CRO in both the European area as well as in North America. And we were impressed from the performance of the European sites from a previous EB trial. So all in all, we basically felt this would be more cost effective for us to do it in Europe.

It's a 20-patient trial. It's not 200 patients. So we needed to try to keep the other costs down. It's already adding expense to be in seven countries. So yeah, those are the rationale. We felt comfortable with the countries we chose with the sites, experienced sites. And it's not to say North American sites aren't good, but we didn't want to go there. Keep it simple.

Yeah. But going forward, as we advance into later clinical trials, we of course will be in North America.

Yes. And in other parts too of the world, for sure, when you get to bigger trials. But for 20 patients, we felt Europe was just the right size.

Great. Okay.

All right. I think we can probably, Eric, at this point start wrapping up the call.

Okay, great. Well, in closing, the past few months since our last financial update with investors, we've reached important milestones that continue to add value to InMed and have further strengthened our position as a leader in the therapeutic development of cannabinol as well as cannabinoid manufacturing. And we look forward to building on these achievements over the next several months.

I'd like to thank our shareholders for their support as we continue to advance our programs. We are making measurable progress across all of our business lines. We are confident in the value that we are creating for shareholders through the events from this past quarter in the weak sense and, as described on this call, as we see in the months ahead.

So thank you very much for participating today. We think it's a very exciting 6 months and 12 months ahead of us, and we look forward to reporting on that progress as we go.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.