Overview

Incannex Healthcare Limited is a clinical-stage biopharmaceutical development company dedicated to developing combination medicines that target the underlying biological pathways associated with chronic conditions, including obstructive sleep apnea (OSA), rheumatoid arthritis, and generalized anxiety disorder. The company is advancing novel oral fixed-dosed treatments and therapeutic regimens based on evidence-based innovation.

Recent Developments

Topline Results from Pharmacokinetics (PK) Study of IHL-42X In January 2024, Incannex released positive topline results from a completed PK and safety study of IHL-42X, a novel, oral fixed-dose combination of acetazolamide and dronabinol for the treatment of OSA. The study confirmed the bioavailability of IHL-42X, demonstrating delivery of both dronabinol and acetazolamide. The PK profile of IHL-42X was observed to be similar to those established for the respective reference listed drugs, including equivalent total exposure levels. No serious adverse events were reported during the study.

Update on Australian IHL-675A clinical trial in patients with rheumatoid arthritis In November 2024, Incannex decided to pause the Australian Phase 2 clinical trial investigating IHL-675A in rheumatoid arthritis patients due to slower than anticipated patient recruitment. The company intends to re-allocate resources to a larger U.S. Phase 2 IHL-675A clinical study.

Equity-Line of Credit Purchase Agreement On September 6, 2024, Incannex entered into an equity line of credit Purchase Agreement with Arena Business Solutions Global SPC II, Ltd, which provides for the purchase of up to $50 million of the company’s common stock.

Convertible Debenture Financing On September 6, 2024, Incannex entered into a Securities Purchase Agreement with Arena Investors, LP, which provides for the issuance of convertible debentures in an aggregate principal amount of up to $10 million. The company completed the closing of the first tranche under this agreement on October 17, 2024, issuing a $3.3 million convertible debenture.

Facility Agreement On October 9, 2024, Incannex entered into a Facility Agreement with FC Credit Pty Ltd, under which FC Credit will provide a term loan facility for up to $4.7 million. The company received approximately $4.6 million in an initial drawdown on October 10, 2024.

Results of Operations

Comparison of the Three and Six Months Ended December 31, 2024 and 2023

Revenue from Customers Incannex has generated revenue from Clarion Clinics for patient services for the three and six months ended December 31, 2024. However, the company does not expect to generate material revenues unless and until its drug candidates are approved.

Operating Expenses Research and development expenses decreased by $1.2 million and $1.1 million for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The decreases were primarily due to the completion of the IHL-42X safety and pharmacokinetics clinical trial and the pausing of patient recruitment in the Australian Phase 2 clinical trial for IHL-675A in rheumatoid arthritis.

General and administrative expenses decreased by $1.7 million and $0.3 million for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The decreases were primarily attributable to a reduction in the amount of restricted stock issued to directors and officers.

Other Income (Expense) Benefit from R&D tax incentive decreased by $2.0 million and $5.1 million for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023, due to a lower estimate of the company’s R&D tax incentive receivable.

Foreign exchange losses increased by $0.3 million for both the three and six months ended December 31, 2024, compared to the same periods in 2023, due to unfavorable currency exchange rates.

Currency translation adjustment, net of tax, decreased by $1.3 million and $0.5 million for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023, due to the depreciation of the Australian dollar against the U.S. dollar.

Liquidity and Capital Resources As of December 31, 2024, Incannex had cash and cash equivalents of $2.1 million. The company has determined that the losses, negative cash flows from operations, and uncertainty in generating sufficient cash to meet its obligations and sustain operations raise substantial doubt about its ability to continue as a going concern for at least one year from the issuance date of the financial statements.

The company has taken several actions to improve its liquidity, including entering into an equity line of credit agreement, a convertible debenture financing, and a facility agreement. However, Incannex will need to raise additional capital through equity or debt financings or other strategic transactions to fund its operations and continue its research and development activities.