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4QFY23 Review; Progress on All Fronts

4QFY23 Review BayMedica continues impressive growth. As had already been signaled in an early disclosure filing in July, InMed’s BayMedica subsidiary delivered $2.3 million of revenue for the final quarter of its fiscal year ended June 30, 2023. This represents 124% sequential revenue growth over the preceding quarter following sequential revenue growth of 46% and 120% recorded for 2QFY23 and 3QFY23, respectively. The full fiscal year 2023 revenue total exceeded $4.1 million. This growth profile is the outcome of BayMedica’s successful scaling up of its manufacturing processes over the past 12 months to meet the increasing demand from its customers in the health & wellness sector for its non-intoxicating rare cannabinoid products led by cannabichromene (CBC). This has been aided by its ability to secure more raw material sources and add downstream purification partners to its network, enabling to supply high-purity rare cannabinoid products with minimal batch-to-batch variations in conjunction with sharply rising volumes. Sharp bounce in gross margin for the BayMedica commercial business. Another positive aspect of the 4QFY23 results was the sharp bounce in gross margin from 19% in 3QFY23 to 56% (excluding the impact of inventory adjustments). The preceding quarter’s margin had been affected by the work through of inventory of ex-CBC rare cannabinoid products that had been written down by ~$577K in 1QFY23 because of lower demand and downward pricing pressure for those products. However, almost half of that write-down (~$268 million) was written back in 4Q. BayMedica recorded a gross margin of 41% for the full fiscal year. Quarterly revenue fluctuations can be expected as BayMedica’s growth trajectory continues. Although BayMedica’s growth trajectory over the past three quarters has been impressive, some caution is warranted as historically revenues have been lower during the summer months. While there is strong evidence that select rare cannabinoids are starting to make their mark as critical and desired ingredients leading to an encouraging prognosis for the long-term growth trajectory, the market is still very much in its infancy. Consequently, quarterly distributor order patterns will be subject to fluctuation, which can affect BayMedica’s revenue profile on a quarter-by-quarter basis. We discuss further in the context of our updated financial projections below.