DALLAS, TX -- February 18th, 2025 -- Incannex Healthcare Inc. (NasdaqGM:IXHL): Stonegate Capital Partners updates their coverage on Incannex Healthcare Inc. (NasdaqGM:IXHL). During the second quarter of fiscal year 2025, Incannex Healthcare Inc. reported R&D costs of $1.4M, a decrease from $2.6M in the same period of the previous year. This reduction was primarily due to the completion of the IHL-42X safety and pharmacokinetics clinical trial and the reallocation of resources from the Phase 2 IHL-675A Australia study to a larger U.S. Phase 2 study. The Company recovered 68.3% of these costs with an R&D tax incentive of $0.956 million. The net loss for the quarter was $5.9M, compared to $5.2M in the same period of the previous year.
Company Summary:
Clinical Advisory Board: To support the development of IHL-42X, IXHL has formed an Obstructive Sleep Apnea Clinical Advisory Board (OSA CAB). This board includes Dr. Alison Wimms, who represents ResMed. Dr. Wimms brings over two decades of experience in the sleep medicine industry and research, making her a valuable addition to the advisory board. Her expertise will provide insights and guidance as Incannex progresses through clinical trials.
Equity Line of Credit: Last quarter, IXHL secured a strategic financing agreement with Arena Investors, which includes a $50M ELOC with Arena Business Solutions. The Company has already accessed an initial funding tranche of $3.33M and has the option to draw on two additional tranches totaling up to $6.67M. This financing arrangement strengthens Incannex's ability to advance its clinical programs through key late-stage milestones.
IHL-42X Update: In 2Q25, The Company has made significant progress with this drug candidate, reporting positive top-line results from a pharmacokinetics (PK) and safety study. The study demonstrated the bioavailability of IHL-42X, confirming the delivery of both drug components. The ongoing global Phase 2/3 RePOSA clinical trial is progressing well, with strong recruitment and enrollment at U.S. sites. The trial design includes expansion to both U.K. and U.S. sites for the Phase 3 trial. Additionally, the Company has completed the manufacturing of the IHL-42X clinical supply needed to initiate Phase 3. Top-line readout from the U.S. Phase 2 is expected in calendar 1H25.
PSX-001 and IHL-675A Update: PSX-001, Incannexโs psilocybin drug product for Generalized Anxiety Disorder (GAD), has shown positive top-line results from the Phase 2 TGA proof-of-concept trial, significantly reducing anxiety scores in patients. The Company has received IND clearance from the FDA and Clinical Trial Authorization from the UK Medicines and Healthcare Products Regulatory Agency, with the PsiGAD2 Phase 2 trial expected to recruit 94 patients in the U.S. and U.K. Meanwhile, IHL-675A, designed to treat inflammation related to rheumatoid arthritis, has completed dosing in a TGA Phase 2 clinical trial involving approximately 128 subjects, with top-line data expected in the second half of 2025. Moving forward, resources will be focused on a larger U.S. Phase 2 study, potentially benefiting from an expedited regulatory pathway.
Valuation: We use a probability-adjusted Discounted Cash Flow Model when valuing IXHL. Our valuation model returns a valuation range of $5.08 to $5.96 with a midpoint of $5.50 based on a discount rate range of 12.25% to 12.75% and a current risk adjustment range of 14% to 16%. Further details on our model can be found on page 5 of this report. We note that this model is highly levered to the out years due to the long term nature of IXHL's industry, leading to the potential for dramatic re-ratings as new information becomes available.
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