Incannex Healthcare Ltd (ASX:IHL, NASDAQ:IXHL)’s estimated pro forma net cash position of A$45 million in December 2022 provides a cash runway into CY25, based on the company’s burn rate and Edison Investment Research projections.
Edison has valued Incannex at US$736.6 million or US$11.7 per ADR (US$714.7m or US$11.74 per ADR previously) following the A$13 million fund-raise via a private placement to a healthcare-focused group of institutional investors.
Incannex ADRs were last trading at US$2.98.
The following is an extract from Edison’s financing update on Incannex:
Incannex Healthcare has announced a fund-raise of A$13m (US$8.7m) in gross proceeds through a private placement to a healthcare-focused group of institutional investors. It will issue 63.4m new shares of common stock at A$0.205/share (a c 10.9% discount to the 2 December closing price). Proceeds of the raise will primarily be used to develop Incannex’s clinical pipeline (including assets acquired as part of APIRx acquisition). After the private placement, Incannex is expected to have a pro-forma cash position of around A$45m (US$30.6m) that, according to management, should be adequate to fund its operations into CY25. As a result of rolling our model forward, including newly issued shares and updating the cash position, we value Incannex at US$736.6m or US$11.7 per ADR.
Attached options may extend cash runway
As part of the placement, subscribers will also be offered an equivalent number (63.4m) of new options, exercisable at A$0.285 per option. If fully exercised, these options may raise a further A$18.1m in proceeds. With the A$13.0m in gross proceeds from the current financing, excluding the effect of the attached options, we now expect Incannex will require A$55m in additional funding (from A$70m previously) before reaching profitability in FY26 with the launch of IHL-42X.
Busy clinical pipeline continues momentum
Although we had not anticipated any immediate financing requirements, Incannex’s raise comes at a crucial stage for the company with the upcoming investigational new drug (IND) application filing with the FDA in Q1 CY23 to initiate a pivotal Phase II/III study of its lead asset, IHL-42X. Incannex is looking to progress development of the assets from the APIRx pharmaceuticals acquisition, having recently announced it will start manufacturing its addiction treatments (CannQuit-N and CannQuit-O) and skin therapeutics (ReneCann) for use in upcoming clinical trials.
Valuation: US$736.6m or US$11.7 per ADR
We value Incannex at US$736.6m or US$11.7 per ADR (US$714.7m or US$11.74 per ADR previously). Our valuation has been affected by rolling our model forward three months and including the newly issued shares; however, our underlying longterm assumptions remain unchanged. Based on the company’s burn rate and our projections, we estimate the pro forma net cash position of A$45.0m at December 2022 provides a cash runway into CY25.