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Letter to Shareholders

Annual Letter to Shareholders 2022

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InMed Pharmaceuticals Acquires BayMedica

What is the strategy behind the acquisition and how will investors benefit?

InMed and BayMedica started working together in a research collaboration in November 2020. Through this partnership, we quickly recognized the power of our combined technologies and extensive cannabinoid know-how. It was also very evident how well our teams worked together. This collaboration was the catalyst for the acquisition.

The strategy behind the acquisition is the drive to accelerate our combined programs. The acquisition significantly expands our cannanbinoid manufacturing capabilities and expertise and positions our company as a global leader in the manufacturing and development of rare cannabinoids. 
The acquisition of BayMedica provides us with immediate access to an initial yet growing revenue stream and it balances InMed’s longer-term pharma product opportunities with short term commercial opportunities within the health & wellness sector. It also offers complete manufacturing flexibility to serve all segments of the rare cannabinoid market and brings with it an extensive suite of new proprietary cannabinoid analogs for pharmaceutical development.

Investors can expect to benefit from the growing revenue streams of CBC (cannabichromene) and new product launches expected over the next 12 months, reducing the risk of research and development. Investors can also expect expanded opportunities and acceleration of our pharmaceutical development programs. In addition, the new cannabinoid analogs offer the potential of further revenue through pharmaceutical licensing opportunities.

What synergies come with the acquisition?

There are some very clear synergies between both companies with opportunity to leverage skillsets in both directions. The combined company has significant expertise in several methods of cannabinoid manufacturing giving us complete flexibility to select the most appropriate and cost-effective method based on the selected cannabinoid and its intended use. InMed gains access to extensive expertise in both yeast and chemical manufacturing, while BayMedica gains access to InMed’s proprietary enzyme and process optimization.

From a personnel perspective, BayMedica offers complementary expertise in both manufacturing and rare cannabinoids with minimal overlap.

Your combined company now has three cannabinoid manufacturing methods? Will you select one manufacturing method to use?
The acquisition of BayMedica enhances and broadens our manufacturing capabilities. InMed has always had the opinion that no one manufacturing approach fits all cannabinoids. We now have multiple methods to select from – giving us complete manufacturing flexibility. Depending on the selected cannabinoid and the quality desired, IntegraSyn or the BayMedica processes can provide highly pure cannabinoids for the pharmaceutical or health and wellness space.
Will InMed shift its focus from clinical development to manufacturing?

The acquisition of BayMedica greatly expands our manufacturing capabilities and expertise and also benefits our pharmaceutical development programs. A library of new cannabinoid analogs from BayMedica provides new therapeutic opportunities for our pharmaceutical program.

InMed is continuing its research and clinical development of rare cannabinoid CBN in skin and ocular disease and will investigate other rare cannabinoids for therapeutic development. 

What is the benefit of BayMedica’s new cannabinoid analogs?

BayMedica has established proprietary compounds that are based upon the structures of naturally occurring cannabinoids and are designed to either augment the potential therapeutic effect against specific diseases or enhance product safety, or both.

Unlike natural forming cannabinoid compounds, which are not patentable, commercial patents can be filed for these new cannabinoid analogs. Any new drug candidates using these cannabinoid analogs will be patentable which provides real value for our pharmaceutical program and prospective partnerships. 

What are the next products to be launched?

BayMedica has several rare cannabinoids in the final stages of development with two high-value compounds near commercialization. InMed and the BayMedica teams are currently completing market research to accelerate the launch of these compounds in the consumer health and wellness marketplace.

We are assessing new customers and distributors to ensure current supply/demand can be met with new products launching this year. The pipeline of products includes many different rare cannabinoids including CBCv, THCv, CBGv, CBT and CBN as well as certain novel and proprietary analogs.

Are there plans to produce common cannabinoids such as THC and CBD?

Our business strategy is to focus on attractive margin products rather than mainstream products that are easily commoditized.

Rare cannabinoids are starting to gain traction in the market with their potential value / benefit for customers. We are looking to commercializing lesser known and rare cannabinoids, beyond CBG, that could have a significant impact in the consumer health and wellness space. Products and formulations using rarer compounds, including those in the variant families, none of which are intoxicating, have shown some potentially interesting health effects.

What are the revenues from BayMedica’s CBC product?
Sales of BM’s initial product, Prodiol® CBC have grown considerably, with cumulative revenues in excess of US$2.5M since sales commenced in December 2019 experiencing an average of 35% quarter-on-quarter growth during the year ended June 30, 2021. We intend to accelerate commercial activities and we expect to grow revenues considerably in the short-to-medium term. 
Who are the CBC (cannabichromene) competitors?

There are very few competitors manufacturing and commercializing CBC. 

BayMedica leads the industry in manufacturing scale of CBC with current batch sizes in excess of 200 kg and an ability to increase to metric ton quantities as market demand increases. 

What is the significance of BayMedica’s 200kg batch size?
At 200 kg, BayMedica leads the industry in large batch production of CBC. The 200 kg large batch size allows us to deliver wholesale, high-quality CBC cost-effectively, like no other competitor. As the market continues to grow, we are confident we can meet demand with larger batch production and compete effectively in the marketplace. As we increase scale, the product margin increases with reduced cost of goods which translates into improved economics.
What is your current market for CBC?

Currently BayMedica has a very diversified wholesale customer base operating in various consumer health and wellness segments including nutraceuticals, pharmaceutical, cosmetic and functional food and beverage, as well as in animal health markets.

The advantage of BayMedica’s manufacturing processes is that it can be tailored for a variety of industries. As we increase scale and expand our cannabinoid portfolio, we expect the size and scope of our customer base to grow significantly.

What are the terms of the deal?
InMed acquired 100% of BayMedica in exchange for 2.05 million InMed common shares issued to BayMedica’s equity and convertible debt holders, subject to a six-month contractual hold period. The previously announced issuance of warrants to acquire up to 1.6 million common shares to BayMedica’s equity and debt holders has been amended and replaced with a cash component of $1 milllion. The entirety of this cash consideration will be held in escrow, subject to cancellation, to satisfy certain potential post-closing indemnification and other claims that InMed may have under the definitive agreement in the six- and twelve-month periods following the closing.
How does this acquisition affect my shares in the company?
There is no affect on previously issued InMed common shares. The only affect is on the issued and outstanding common shares of InMed which has increased by an additional 2.05 million shares.
What is the corporate structure of the new company?

Through this acquisition, BayMedica becomes a division of InMed Pharmaceuticals. Headquarters will be located in Vancouver, BC, with locations in California and Nevada.

The BayMedica and InMed teams will integrate to bring together a wealth of experience across multiple disciplines including synthetic biology, chemical synthesis, enzyme production, molecular biology and pharmaceutical drug design and development.