InMed Pharmaceuticals Inc (INM) 2021 Q2 法說會逐字稿

My name is [Annes], and I will be your conference operator today. At this time, I would like to welcome everyone to InMed's second-quarter 2021 financial results and business update conference call for the fiscal quarter ended December 30, 2020. (Operator Instructions) Thank you.

Mr. Payne, you may begin your conference. All lines have been placed on mute to prevent any background noise.

Thank you, Annes. Good day, ladies and gentlemen. My name is Brendan Payne; I'm InMed's Director of Investor Relations. Welcome to InMed's second-quarter 2021 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 review of the progress on our therapeutic development and cannabinoid manufacturing programs, which will be led by our President and CEO, Eric Adams. Bruce Colwill, our Chief Financial Officer, will then 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 will be Eric Hsu, Senior Vice President of preclinical research and development; Alexandra Mancini, Senior Vice President of 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 arrangement, 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 discrepancies between any statements made during this teleconference and statements made in the audited financial statements, the listener is instructed to rely on the audited financial statements for accuracy. InMed does not undertake any obligation to update any forward-looking statements made during this call.

I'd now like to turn the call over to InMed President and CEO Eric Adams. Eric?

Thank you, Brendan. And thank you, everyone, for joining us today. Before we dive into the many key events and milestones that InMed achieved in the final calendar quarter of 2020, I would be remiss if I didn't acknowledge the tragedy and challenges that everyone worldwide is facing with the COVID-19 pandemic and the changes we are all making to limit the spread of the virus. We thank all of the dedicated frontline workers and health professionals that share our values and priorities in improving people's health and wellness.

In the early days of the pandemic nearly a full year ago, we were fortunate to have experienced minimal impact on our operations. With the second wave of infections in the fall of 2020, a few of our third-party service providers experienced restrictions and/or temporary shutdowns in an effort to restrict the spread of the virus, which has had both direct and indirect effects, excuse me, on some of our timelines.

While we continue to make every effort to minimize delays across all of our programs, it is important to note that none of the delays we have encountered are reflective of our own R&D efforts. Rather, they are simply the result of having to adapt to the regulations and limitations that we are all facing.

Despite -- excuse me. Despite these minor delays, we achieved several key clinical formulation and business development milestones across our therapeutic drug and manufacturing programs in the last three months of calendar 2020, which represents InMed's second quarter of fiscal year of 2021. This included the successful closing of an $8 million financing that coincided with the new listing on the NASDAQ exchange under the symbol INM.

We've since added additional funds to our capital reserves with the recently announced $4.5 million private placement. The terms of the second financing were very similar to those of the November financing. This level of funding extends our cash runway and allows us to fully pursue our current R&D initiatives in 2021.

It's worth noting that the significant opportunity and value for cannabinoid-based prescription pharmaceuticals is being increasingly recognized as evidenced by last week's acquisition of GW Pharma by Jazz Pharmaceuticals for $7.2 billion. GW markets an FDA-approved cannabinoid drug for epilepsy using CBD. This acquisition demonstrates the underlying potential for any novel therapeutic product with meaningful patient benefit as it advances through human clinical trials and into commercialization.

I'm happy now to highlight some of our achievements beginning with our therapeutic development programs starting with INM-755 for epidermolysis bullosa or EB. The last calendar quarter of 2020 saw the reporting of results from our first Phase 1 clinical study called Study 101, examining the safety and tolerability of INM-755 topical cream on intact skin in healthy volunteers.

Subjects in the 101 study have either INM-755 cream or a vehicle comparator applied daily for 14 days to 5% of their skin surface, a generally large area, which was then covered with an occlusive dressing that is typical of those used by EB patients. The results from Study 101 demonstrated INM-755 cream to be safe and well tolerated on intact skin, causing no systemic or serious adverse effects and with no subject withdrawals due to adverse events.

Drug concentrations in the blood were found to be very low as was expected with topical administration. Basically, we designed the cream to enable drug penetration into the dermis while minimizing exposure to the bloodstream, and this is what we observed from the trial data. INM-755 cream was well tolerated when applied to intact skin for 14 days under treatment procedures designed to create intense conditions for assessing skin irritation potential.

We also completed our second Phase 1 clinical trial examining the safety and tolerability of INM-755 cream on the skin of healthy volunteers where epidermal wounds were induced to mimic those commonly found on patients with EB. Specifically, each subject in the Study 102 had four small blister wounds introduced on the skin of their backs under controlled conditions using a suction device. The outer layer of skin, the epidermis, was excised from the blister, exposing the dermis below, to which we could then directly apply INM-755.

Two of these wounds were treated with different concentrations of 755 to observe its safety and tolerability, as compared to the two wounds left either completely untreated or treated with a vehicle cream alone that had no drug in it. Results from the second trial were reported in January of this year and likewise demonstrated that 755 cream could be safe and well tolerated on open wounds treated daily for 14 days without interfering in the normal course of wound healing.

Taken together, these data from these two trials inform and enable us to file clinical trial applications or CTAs for our Phase 2 study looking at the safety and efficacy in EB patients with 755 cream in calendar 2021. Data from the two trials supports the treatment of both wounded and unwounded or intact skin across all types of EB patients in this planned Phase 2 trial. Our current plans are to file these clinical trial applications in the second quarter of calendar 2021 and to initiate patient enrollment in multiple international centers in the second half of the year.

Now turning to INM-088 for ocular disease. In the final quarter of 2020, following the filing of PCT patent applications for our underlying research findings, we publicly announced the extent of our preclinical research results demonstrating both intraocular pressure or IOP relief and proactive neuroprotection effects of cannabinol or CBN.

These studies, covering both in vitro and in vivo [in-testments] in multiple models, demonstrated that CBN has a relatively strong effect in both reducing IOP and preventing retinal ganglion cell damage at the back of the eye under both normal and elevated pressure conditions. This damage is the characteristic hallmark of glaucoma and leads to irreversible blindness.

As previously presented, we conducted extensive screening to determine which cannabinoids might be preferable for treatment of ocular diseases such as glaucoma. In this testing, we screened several cannabinoids including both CBD and THC. In terms of IOP reduction, several cannabinoids including CBN performed similarly and adequately when compared to previously published results for currently approved drugs.

However, when examining the ability of various cannabinoids to provide protection to the neurons at the back of the eye, independent of any IOP-lowering effect, CBN was clearly the cannabinoid of choice, significantly outperforming all others tested including THC and CBD. We are currently preparing the manuscript for publication in a peer-reviewed journal to detail these important findings.

With this compelling data, we then actively investigated a series of topical delivery technologies combined with CBN as being suitable for ocular treatment. In early December, we selected a final delivery technology based on the extensive data collected from these assessments that included solubility, drug delivery localization, sustained effect, and other parameters. This resulted in a licensing agreement with EyeCRO LLC for its proprietary MiDROPS technology. Through this agreement, InMed has secured exclusive global commercial rights for the utilization of MiDROPS for all cannabinoids, cannabinoid analogs, and their variants.

One key benefit for our INM-088 program by working with EyeCRO is that their product development and testing with MiDROPS is already well-advanced having been previously reviewed by the US FDA during a pre-IND meeting. With the MiDROPS delivery technology rights now secured, we are actively scaling up the manufacturing process for the final INM-088 drug product in anticipation of initiating IND-enabling toxicology studies in 2021.

Since we have already conducted extensive toxicology and pharmacology testing of CBN to support the dermatology program, many of those studies will be applicable in our ocular program, thus saving us meaningful time and expense. Our current estimates are to file applications in the first half of 2022 seeking to initiate human clinical testing with INM-088.

Now, I'd like to discuss advances with our IntegraSyn platform. IntegraSyn, InMed's integrated manufacturing approach to produce a wide range of pharmaceutical-grade cannabinoids continues to advance in terms of increasing production yields, cannabinoid diversification, and how it might benefit third-party manufacturers in driving the economics behind cannabinoid production.

On November 18, we announced a reciprocal research collaboration with BayMedica. BayMedica is a revenue-stage biotechnology company leading the way in applying synthetic biology and pharmaceutical chemistry to develop an efficient, scalable, and proprietary platform for the production of high-quality rare cannabinoids for consumer applications. As well, BayMedica is developing a proprietary library of cannabinoid analogs as new chemical entities for pharmaceutical applications.

Under the terms of this collaboration, InMed is granting BayMedica access to explore specific elements of IntegraSyn, specifically the potential of one or more of InMed's high-efficiency enzyme gene sequences for production of cannabinoids and cannabinoid analogs. The proprietary enzymes that InMed is engineering may be beneficial in driving higher yields in several different manufacturing approaches. In exchange, InMed has identified a select number of cannabinoid analogs from BayMedica's extensive proprietary library, which we will screen in our preclinical models of neuroprotection to determine if there are molecules of interest or further drug development.

This collaboration with BayMedica exemplifies one option InMed has in terms of potential monetization of our IntegraSyn manufacturing approach. Since we continue to own all commercial rights to IntegraSyn, we have several potential commercial options for this key asset. First, we have the ability to utilize this know-how for production of cannabinoids we intend to use in our own therapeutic drug candidates.

Second, we have the ability to implement this technology for both cannabinoid manufacturing and sales, be it for either the health and wellness space or for the pharmaceutical space via contract manufacturing with any of several manufacturing companies with capacity and know-how. And third, we have the ability to license or even sell this know-how to one or several third parties under a standard licensing agreement that may include technology access fees, milestones, and royalties for cannabinoid production.

Beyond the InMed proprietary enzymes BayMedica has begun investigating, InMed continues to explore additional enzymes for cannabinoid differentiation and continuous improvement in terms of system efficiency under our various ongoing projects with Almac in the UK. All the while, our scale-up activities towards GMP batch production readiness with IntegraSyn continue, along with the optimization of development processes and supply chain management of the substrates for starting materials and reagents needed for cannabinoid assembly.

We are taking every measure to ensure we can meet the rigorous quality and regulatory requirements associated with pharmaceutical-grade manufacturing. We anticipate having a pharma GMP-ready IntegraSyn process in place this summer, and we will continue to update shareholders as we progress.

Now I'd like to turn the call over to Bruce to discuss our financials. Bruce?

Thanks, Eric. As was mentioned at the top of the call, in November 2020, we successfully closed a public offering of our shares, and we began trading on NASDAQ under the trading symbol INM. We also became a US registrant at this point, so that's -- we are now reporting, including on today's call, in US dollars and in accordance with US GAAP.

In that November 2020 public offering, InMed issued approximately 1.8 million common shares together with the company warrants at a public offering price of $4.50 per share for total gross proceeds of approximately $8 million. We have been pleased with the impacts of this listing including an increase in overall volume as well as more capital markets flexibility.

This was evidenced last week when, facilitated in part by demand from institutional investors that participated in our November NASDAQ IPO, we were able to raise another $4.5 million of similar terms as the funds raised in November, bringing our total fundraising to $12.5 million over the last four months. InMed intends to use the proceeds from the offering or offerings together with our existing cash resources, for general corporate purposes, funding our preclinical -- clinical developments, advancing our IntegraSyn program, and for working capital purposes.

As a reminder and as Brendan noted at the beginning of the call, we have a June 30 fiscal year-end. Therefore, these figures are as at December 31, 2020, and represent our second quarter of our fiscal 2021 year. Please also note that our 10-Q is now available on our website and at sec.gov.

Looking first at our research and development expenditures, our R&D expenses came in a little over $900,000 for this quarter, which is largely unchanged relative to the most recent quarter and a decrease of approximately $700,000 compared to the equivalent three-month period last year. The large decrease relative to the equivalent period last year was largely the result of the decreased spending this quarter on both external research consultants such as CDMOs and CROs and on clinical research supplies.

Looking now at general and administrative expenses, the company incurred G&A expenses of approximately $960,000 during the second quarter of our fiscal 2021 year, which is an approximately $90,000 increase over the same period in the prior year. This year-on-year change, while not significant, was the result of many factors, including certain expenditures going down such as legal and accounting and IR and marketing, but it was offset by some costs that increased in the current year such as salaries and benefits, certain office-related expenses, as well as financing expenses related to our November public offering.

Overall, for the three months ended December 31, 2020, the company recorded a net loss of approximately $2.2 million or $0.37 per share, which compares with a net loss of $3.8 million or $0.68 per share for the three months ended December 31, 2019.

Turning now to our balance sheet, at December 31, 2020, the company's cash, cash and equivalents, and short-term investments were approximately $10 million, which compares to approximately $4.5 million as at the end of the last quarter, so September 30. The increase in cash reserves during the three months to December 31, 2020, was primarily due to the proceeds from that November 2020 public offering, offset of course by our cash outflows from operating activities.

At December 31, 2020, the company's total issued and outstanding shares were approximately 7 million. In addition, at December 31, there were approximately 1.8 million outstanding warrants, which were issued in conjunction with our November financing. This is a good point to give a brief explanation of the new balance sheet item this quarter called derivative warrants liability.

Given the nature of our operations, our underlying functional currency for accounting purposes is currently the Canadian dollar. However, as I mentioned, we are now reporting our financial results in US dollars. Because the warrants I just mentioned were issued in US dollars, but our underlying functional currency is the Canadian dollars, under US GAAP, the warrants are considered to be, quote-unquote, a derivative liability, and that's they sit in the liability section of our balance sheet rather than as part of our common shares under shareholders' equity.

Normally, meaning without a derivative liability classification, all of the financing would be presented in the shareholders' equity portion of our balance sheet. Instead, we have now bifurcated or split this between our long-term liabilities and shareholders' equity. We have thus allocated a portion of the November 2020 financing to equity and a portion approximately 25% to the new balance sheet item called derivative warrants liability.

To be clear, despite the long-term liability classification, there are no cash flow implications arising from this. We also then allocated the financing costs along the same proportion, so approximately 75% of the costs to the equity component and 25% to the warrant component, with that 25% proportion flowing through our statement of operations as finance expensed rather than as an offset to equity as most will be used to.

So long as our functional currency remains the Canadian dollar, we will revalue this warrant liability each quarter. The change of value, which is a noncash item, will be reflected as well in our statement of operations each quarter as unrealized gain or loss on derivative warrants liability.

Finally, we have previously provided guidance that we had a cash runway at least into the third quarter of calendar 2021. Absent the private placement announced last week, our guidance would have remained unchanged. Following the closing of the private placement, we will be in a position to update our cash runway guidance, and we look forward to updating you on that during our next earnings call.

With that, I'll now turn it back to you, Eric. Eric?

Sorry. Technical glitch. Thanks for that, Bruce. So while considerable global uncertainty remains around COVID-19 and other events, the company continues to navigate a steady and exciting path of progress in the therapeutic arenas, which is cannabinoid medicines that has a growing value recognition. I would like to thank our shareholders for their support as we continue to advance our programs. We are making significant measurable progress across all of our business lines and are actively advancing towards later-stage studies with our therapeutic candidates while making key refinements and novel innovations in our cannabinoid manufacturing program.

With that in mind, we are confident in the value we are creating for shareholders through the events from this last quarter and the weeks since as described on today's call and in today's press release and those that we see on the near-term horizon. The fundamentals remain strong for the company and are getting stronger. 2021 promises to be a very eventful time for the company, and we are excited by the possibilities that lie ahead.

With that, I'll turn the call back over to the operator for a Q&A session.

(Operator Instructions) Scott Henry, ROTH Capital.

Thank you, and good morning. Just a couple questions. First, on the INM-755 program, what geographical area do you expect to conduct that Phase 2 trial in?

Alex, would you like to grab that one?

Yes, certainly. Yes, we have been looking, of course, at different parts of the world to decide where it would be most appropriate to run the study. And we looked at a number of factors including costs, of course, and we have selected the European area as going to be the most cost-effective and most efficient area for us to run the study.

Okay. And do you have to have a meeting prior to that study beginning, or is it just filing the CTA?

Good question. We do not require a meeting before filing if we believe that we have all the information that we are going to need, and we do believe we have all that information. We do need to put applications into each country that we choose where we will have a clinical site, so there will be multiple applications going in. They will have the same core content for the main documents, but some slight regional differences as required by country.

Okay. Great. Thank you for that color. And then on the IntegraSyn program, would you expect to have additional partnerships in calendar year 2021? Or would that be more of a 2022 calendar year event?

Yeah, that's a good question. So with this BayMedica collaboration, what we're doing is just trying to let other people test it in their own hands to see if they're seeing the same kind of increased yields that we've experienced and that we've seen in our tests with Almac. So we think that just as an underlying approach using this new either gene sequence or the enzyme itself that we can manufacture is a way to increase yields regardless of the type of system that's being used, whether it's E-coli biosynthesis or yeast biosynthesis or even some chemical approaches.

So we're interested in discussing this with other manufacturers. Whether they're interested or not, that's always a different matter. So we will be engaging other cannabinoid manufacturers to initiate discussions, but whether that actually results in any kind of collaboration or licensing agreement remains to be seen.

Okay. Thank you. And then final question on the spending side. The G&A bounces around a little more, particularly from Q1 to Q2. The $960,000 for 2Q, is that representative, or perhaps there are some offering costs in there? How should I think about that line item going forward?

There are definitely some operating -- there are definitely some costs in there from the financing. Our G&A have been pretty stable quarter to quarter historically. We are seeing now with the financing, and we are going to have some increased costs on the, for example, increased insurance costs, these increased compliance costs with the consequence of being dual listed. So that number that we're seeing is going to be more indicative on a go-forward basis than what we have seen in the past. So it definitely will be a little higher go forward than it was historically.

Okay. Great. Thank you for taking the questions.

Thank you, Scott.

(Operator Instructions) Max Jacobs, Edison Group.

Hi, guys. Thanks for taking my questions. I'm just wondering, with regards to the -- for the Phase 2, do you anticipate any changes to the trial design just based on your learnings from the Phase 1 data?

I'll take that. Well, we have completed our trial design. And as we were developing the trial design for the Phase 2 efficacy and safety study in patients with EB, we were building off the data we had from our Phase 1 healthy volunteer studies and what we learned with respect to the study design in particular with respect to the second study we did with open wounds. So I wouldn't say there's any big changes from what we had envisioned before, but we've definitely factored in what we learned.

Okay. Wonderful. And then just a quick question on BayMedica. You might not be able to answer this, but just when would you expect any like feedback on the ability doing -- of IntegraSyn to help improve yields, lower costs, et cetera?

Yeah. Thanks for that. Those efforts are ongoing right now. We don't have a specific timeline under which they are obligated to conduct and report back to us. I would suppose that that's going to take place over the first half of this year. And likewise, as we investigate their cannabinoid analogs, we'll be structuring and conducting studies on our end over the first half of the year. So I think that's a good timeframe, and maybe sometime by midyear, we'll be able to report back on the findings.

Okay. Wonderful. That's everything from me. Thanks for taking my questions.

Thank you.

Thank you. There are no future (sic - further) questions at this time. Mr. Payne, you may proceed.

Thank you. We actually have two questions that were submitted independently. One of them is in regards to the GW Pharmaceuticals acquisition and if the team could potentially explain a little bit more how that relates to InMed and its therapeutic development programs.

Yeah. Glad to take that one. It's really interesting to see a company that really led the way in cannabinoid drug research all those years ago and paved the path for a lot of us to follow. I think, really, what that reflects is if you look at the values that have been created, it's all been through a pharmaceutical drug approach.

And it's no surprise to those of us who've been around the industry for a long time. But things like manufacturing, like IntegraSyn that we're looking at, those are nice to haves, but really the true value of any company like ours and as demonstrated by GW Pharma comes from the pharmaceutical research.

So if you have the ability to create a drug that's very meaningful for patients and brings significant benefit, that's really where the value is built. And we've all known this. This is again -- our group has been doing this for 20, 30 years in other ventures.

So I think it's just reflective of the fact that they've built a really nice product. I know they have another product, but really all the focus has been on the CBD oil. They've built a nice revenue stream, and they were able to sell the company for 15 times what their revenue stream is.

You're not going to see that huge return on manufacturing operations, but certainly from pharmaceutical drug development and commercialization, that's really where the homeruns come from. So I think it's really encouraging, and I think that's the path that we're on. And I think it just really bodes well for our future.

Perfect. And the next question that we have that was submitted independently is in regards to the BayMedica collaboration. Can you discuss prospectively what we could see come out of that?

Yeah. So at this point, it's a research collaboration. So as I mentioned, we are looking at their cannabinoid analogs. They have a very extensive library of new chemical entities, and we think there may be some potential for some of those to be developed as pharmaceutical products. In return, as I mentioned, they are looking at our IntegraSyn enzymes for a way to boost their manufacturing.

So at this point, there's no licensing agreements in place. It's more just of a collaboration for us to test and see if there's interest and the same from their side. And we'll be able to work together to sort through the results that each of us find. And should we be interested in pursuing either us licensing their analogs or them licensing the IntegraSyn system, that opportunity is open. As I mentioned earlier, it's probably going to take the first half of this year to get any meaningful results on either side, upon which we could base future potential licensing deals.

Great. Thank you. Operator, that's the end of the questions that were submitted independently.

Thank you very much. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.