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1QFY24 Review: Pharmaceutical Advances Continue

1QFY24 Review BayMedica registers strong Y/Y growth. Although BayMedica reported a 61% decline in sequential revenue in the opening quarter of its new fiscal year ending June 30, 2024, the $902K in sales reported for 1QFY24 was nevertheless almost triple the $321K generated in the year-ago quarter. The immaturity of rare cannabinoids ingredients market for health & wellness products makes it difficult to determine definitively any seasonality in the business. However, it should not go unnoticed that the sequential sales drop in the latest summer quarter does repeat the pattern reported in 1QFY23 when sequential sales at BayMedica declined by almost 40%. In any event, it will not be unusual for distributor order patterns and product mix to experience some fluctuation on a Q/Q basis at this early stage of the market’s life cycle. Meanwhile, the long-term trajectory of the market remains positive as reflected by the continuing strength in Y/Y growth. Moreover, the anticipation is for sustained expansion of the market as consumers continue to incorporate new rare cannabinoid ingredients in their brands. Product mix shift contributes to dampening of gross margin. Accompanying the first-quarter sales decline, gross margin dropped to 13% from 56% in the preceding quarter after excluding the impact of inventory write-down adjustments. This gross margin decline largely reflects the impact of operating leverage from reduced sales and the change in product mix toward lower-margin products led by THCV in the quarter. There was also a write-down of inventory of $92K to reduce weighted average cost to net realizable value. We have updated our financial projections in the wake of the latest results, which we discuss further below. Pharmaceutical Development Updates Promising advancements in Alzheimer’s program. As we reported in our update last month, InMed took a significant step forward in its INM-900 series program by making its final selection of a lead Alzheimer’s disease drug candidate. The company has now advanced its final selected candidate for further preclinical studies under nomenclature INM-901 which are now underway. These studies will include drug distribution, metabolism (elimination of the drug from the body), pharmacokinetics (how the body interacts with the administered drug) and continuation of pharmaceutical drug development activities such as manufacturing and formulation. Looking at options on advancing INM-755. As we reported in our update on July 6, 2023, top-line results from InMed’s dermatological cannabinol (CBN)-based INM-755 Phase II trial produced sufficient clinically important chronic itch relief data to support a pathway to further development and potentially a much larger commercial opportunity than the program’s original target indication of the rare genetic condition epidermolysis bullosa (EB). Full data and results of the Phase II clinical trial will be published shortly in Itch, the official journal of the International Forum for the Study of Itch (IFSI). While InMed is open to the potential sale or out-licensing of the program that would provide it with an early monetization opportunity, the company continues to assess potential partnership opportunities for the advancement of INM-755.