Incannex Healthcare — Constructive pre-IND FDA meeting for IHL-216A

Incannex Healthcare (NASDAQ: IXHL)

Last close As at 04/11/2024

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−0.11 (−10.19%)

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Research: Healthcare

Incannex Healthcare — Constructive pre-IND FDA meeting for IHL-216A

Incannex has announced the completion of a pre-investigational new drug (IND) meeting with the US FDA for its proprietary inhaled drug product IHL-216A for the treatment of concussion and traumatic brain injury (TBI), following submission of the data package in August 2022. According to the company, the FDA has provided detailed feedback and guidance on the most efficient clinical trial development plan to effect successful commercialisation, in particular related to the complexities and specific requirements of developing an inhaled drug. As the next step, Incannex is preparing a follow-up request seeking additional information on the FDA’s recommendations. We see the current development as a positive step towards clinical development for IHL-216A. Our valuation remains unchanged at US$714.7m or US$11.74 per ADR, but we note the upside potential on successful clinical transition.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Incannex mother and child

Healthcare

Incannex Healthcare

Constructive pre-IND FDA meeting for IHL-216A

Regulatory update

Pharma and biotech

12 October 2022

Price

US$4.48

Market cap

US$234m

ADR/Ord conversion ratio 1:25

Net cash (US$m) at end Q422

26.1

ADRs in issue

60.9m

ADR code

IXHL

ADR exchange

NASDAQ-GM

Underlying exchange

ASX

Depository

DBK

Share price performance

Business description

Incannex Healthcare is an Australian dual-listed biotech company focused on developing medicinal cannabis pharmaceutical products and psychedelic medicine therapies. These therapies are being designed to target indications with unmet need, including obstructive sleep apnea, generalized anxiety disorder, trauma and inflammatory conditions.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Incannex Healthcare is a research client of Edison Investment Research Limited

Incannex has announced the completion of a pre-investigational new drug (IND) meeting with the US FDA for its proprietary inhaled drug product IHL-216A for the treatment of concussion and traumatic brain injury (TBI), following submission of the data package in August 2022. According to the company, the FDA has provided detailed feedback and guidance on the most efficient clinical trial development plan to effect successful commercialisation, in particular related to the complexities and specific requirements of developing an inhaled drug. As the next step, Incannex is preparing a follow-up request seeking additional information on the FDA’s recommendations. We see the current development as a positive step towards clinical development for IHL-216A. Our valuation remains unchanged at US$714.7m or US$11.74 per ADR, but we note the upside potential on successful clinical transition.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/21

2.0

(8.2)

(0.83)

0.0

N/A

N/A

06/22

0.8

(14.9)

(1.25)

0.0

N/A

N/A

06/23e

0.0

(20.6)

(1.38)

0.0

N/A

N/A

06/24e

0.0

(33.4)

(2.24)

0.0

N/A

N/A

Note: *PBT and EPS are normalized, excluding amortization of acquired intangibles, exceptional items and share-based payments.

IHL-216A is a combination of cannabidiol (CBD) and the anaesthetic agent isoflurane (ISO) designed to be administered soon after head trauma to reduce secondary brain injuries and related neurological deficits. The combination has been shown to deliver superior neuroprotective capabilities compared to CBD alone in animal models of concussion and brain trauma. IHL-216A has been assessed in two separate animal models representing both mild and severe TBI. In a 2020 animal study, it outperformed CBD alone by 53% for cornu ammonis (CA) 1 and 60% for CA2 parts of the brain, demonstrating less neuronal damage relative to CBD alone. In a 2022 study, the combination treatment demonstrated reduced neuroinflammation and better spatial memory restoration than CBD or ISO.

Globally, it is estimated that approximately 27–69 million people are diagnosed with TBI annually and Energias Market Research estimates that the global TBI treatment market will reach US$156.8bn by 2024 (CAGR of 4.8% between 2018 and 2024). Notably, there are currently no pharmaceutical drugs approved for the treatment of TBI, highlighting the sizable market potential for any approved treatments.

In August, Incannex submitted a pre-IND meeting package to the FDA, which included details of the formulation, an overview of the clinical development plan and queries related to filing an IND application. The FDA has confirmed FDA505(b)2 as the relevant regulatory pathway for IHL-216A and provided guidance on the necessary data requirements for IND submission. The 505(b)2 pathway will allow Incannex to leverage pre-existing data for marketed compounds and may expedite future clinical development. Incannex will now seek additional information on the FDA’s recommendations, which will be followed by the IND submission, with the target of commencing clinical trials in CY23.

General disclaimer and copyright

This report has been commissioned by Incannex Healthcare and prepared and issued by Edison, in consideration of a fee payable by Incannex Healthcare. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

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London, WC1V 7EE

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New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Incannex Healthcare and prepared and issued by Edison, in consideration of a fee payable by Incannex Healthcare. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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