Since the early November ballots in the US changed the recreational cannabis landscape, and essentially sparked a brand-new billion-dollar industry, a number of companies have found themselves on the receiving end of positive sentiment and – in turn – some upside momentum. For a couple of weeks after the votes, any and every entity with even the most tenuous link to the space was a runner.
Come late November, however, things started to settle down, and many companies gave back almost their entire reevaluation. Some, however, held on to a portion of their gains (although corrections were seen pretty much across the board) and these are the companies that – for the most part – will likely pick up strength throughout 2017 on the back of a solid potential in this growing market.
One company that managed to hold onto most of its upside run, and has since broken through November highs, is INMED PHARMACEUTIC COM NPV (OTCMKTS:IMLFF).
The company is currently trading around for a 50% premium on its November peak, and registering record volume in the process. Here’s a look at what’s behind the move, and our opinion as to whether it looks set to continue, or whether we are going to see a near-term correction.
The company is a development stage biotechnology company working to bring cannabis related therapies to market. It’s very early stage, and we can’t really stress that enough. This makes it risky – especially given the recent gains in the cannabis space – and however optimistic management is that the company can bring a treatment to market, there is still a considerable chance that nothing will materialize.
Having said that, the company’s science is intriguing. It revolves around the less prominent cannabinoids present in the cannabis plant. Most people are aware of the two most prominent – THC and CBD. There is a large number of companies working on developing these into therapies as we speak. However, there are around 90 other cannabinoids that – due to their low volume in the plants – are very difficult to cultivate. This doesn’t mean they don’t have any use; it’s just not cost effective to bring treatments to market that require them as an active ingredient.
InMed is trying to change this.
It is using an approach similar to that used in the mass production of insulin. The company isolates genes that are responsible for producing the cannabinoids, and injects them into bacteria. The bacteria act as a sort of factory, producing the cannabinoids at scale. This dramatically reduces the cost associated with cultivation, and could pave the way for bringing as yet unrecognized cannabinoids to the biotech and healthcare space.
Right now, and what will serve as the near-term catalysts for the company, InMed’s pipeline is focused on two treatments – Epidermolysis Bullosa (EB) and Glaucoma. Both are high unmet needs, and the former is eligible for Orphan Designation, if the company can bring a treatment in to the clinic.
So what’s next?
This is the kind of company that needs to maintain a positive news flow in order to keep investors interested. The technology that underpins what will likely be its lead candidates is very young, and we probably won’t see a drug in the clinic until the latter half of this year at the earliest. As such, some degree of investor relations activity is going to be necessary to maintain positive sentiment. Once the treatments start to develop, however, this one could really run. The technology that underpins this sort of cultivation will be valuable, and could be a target for big Pharma once it is established.
Standard risks apply. There’s practically nothing on the balance sheet from cash perspective, but debt is nonexistent as well, so that softens the blow a little bit. With that in mind, however, dilution is probably likely, with the company needing to raise in order to fund growth. An early stage mover, but one to keep an eye on nonetheless.
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Disclosure: We have no position in IMLFF and have not been compensated for this article.