Message by Chairman & CEO of Singapore-listed iX Biopharma, Eddy Lee, in the company's just-released annual report for FY2019.
|Dear Shareholders, our exciting journey to develop pharmaceutical products turned a corner in financial year 2019 (FY2019) as we leveraged further on our patented sublingual drug delivery technology, WaferiX. We have progressed various pharmaceutical products and nutraceuticals further along the road to commercialisation — and created new ones.
Notably, for the first time, we have formulated a cannabinoid (CBD) product and it uses our much-touted WaferiX delivery technology to address various health issues such as uncontrollable hand tremor, chronic inflammation and anxiety.
Looking back on FY2019, I am proud to say that it was a year where the foundation for our future growth has been further strengthened. On all fronts, the Group has made much headway and shown dynamism — in operations, in research & development of new products, and in our push into revenue generating avenues for our nutraceuticals. What particularly cheers us is the expansion of our therapeutic platforms to include medicinal cannabis products using WaferiX.
Taken together, these steps will increase our ability to develop breakthrough therapies and improve patient outcomes. For our shareholders, all this means sales and profit growth to create sustainable and significant value.
We were fortunate to receive an attractive, unsolicited A$12.5 million offer for our chemical laboratory testing business. It came at the most opportune time as the Group shifted its emphasis in a major way from research and development to manufacturing products for sale — and initiating efforts to outlicense our WaferiX technology.
The divestment of the chemical laboratory testing subsidiary was completed in March 2019, resulting in a net gain on disposal of $10.3 million and enabling the Group to focus more sharply on its core business as a specialty pharmaceutical company.
Another highlight of FY2019 was the release of results of our Phase 2b clinical trial for Wafermine, which demonstrated strong analgesic efficacy, safety and tolerability in patients experiencing moderate to severe acute, postoperative pain after undergoing either abdominoplasty or bunionectomy surgery.
As a next step towards the all-important Phase 3 clinical trials, we have worked with our scientific advisors to develop clinical protocols for submission to the United States Food and Drug Administration (US FDA). I cannot overemphasise the significance of the End-of-Phase-2 (EOP2) meeting with the US FDA that has been scheduled for late 1Q FY2020.
Separately, we have engaged a financial and strategic adviser to guide us on the out-licensing of Wafermine and our favoured arrangement of a strong partner to support our Phase 3 programme. With Wafermine advancing smoothly into the final phase of development, we are pleased to report that we continue to meet the milestones established during the IPO stage four years ago.
As I mentioned earlier, we have formulated a sublingual CBD product called Xativa using WaferiX. This is our astute and quick response to the surge in the recognition of medicinal cannabis in many parts of the world in just the past, say, 12 months. The trajectory for medicinal cannabis research and commercialisation is by far the most impressive trend in the pharmaceutical industry I have ever seen. Just not too long ago, I would not have been able to tell you what the acronym CBD stands for, let alone what the product can be used for.
It’s a no-brainer to us that when it comes to CBD products also, our WaferiX technology has vital advantages over other forms of delivery in offering superior patient outcomes. It comes as no surprise to us that already, there are initial expressions of interest in WaferiX from various potential business partners. In this regard, let me stress that it’s early days, of course, but WaferiX will be increasingly central to our business value — our crown jewel, no less, with patents covering Australia, China, Japan, South Korea and the European Union, among others.
It has become evident that cannabinoids, which are plant extracts, can be effective and safe for treating a vast spectrum of human health issues including arthritis, depression, amenorrhea, inflammation, pain, lack of appetite and asthma.
In a stunning case that has been widely cited in the media as well as noted by doctors and scientists, a girl, Charlotte Figi, miraculously recovered from Dravet Syndrome, which is a rare, severe form of intractable epilepsy (see “Marijuana stops child’s severe seizures” published by CNN, 2013) through the use of CBD oil. Charlotte went from having 300 grand mal seizures a week to 1 or 2 mild seizures per month. Importantly, no side effects were reported after her use of CBD oil for three years.
Cannabis Market Size
The legal cannabis industry has witnessed explosive growth in the last two years. More than US$10 billion was invested into the North American marijuana industry in 2018, twice the total amount invested in the previous three years, and it is projected to increase to US$16 billion in 2019.
• Market size in 2018 was estimated at US$13.8 billion and is projected to reach US$66.3 billion by the end of 2025, expanding at a compound annual growth rate (CAGR) of 23.9% between 2018-2025.
• US market size in 2018 was estimated at US$1.9 billion and is projected to grow at a CAGR of 49% to US$20 billion between 2018 and 2024; and
• Canadian market size in 2018 was estimated at US$569 million and is projected to grow at a CAGR of 44% to US$5.2 billion between 2018 and 2024.
• Market value of medicinal cannabis is projected to reach US$2.13 billion by 2028.
As previously reported, we have continued our focus on building our Entity nutraceuticals brand first and foremost in Australia. Entity nutraceuticals are uniquely positioned between nutrition and therapy. Each product is tailored to a specific need and for a targeted purpose, is based on the latest scientific research, and is designed to bring visible and perceptible change to improve people’s quality of life.
Our range of products has been well received by the Australian consumer market; wherein this year saw the pharmacy and health food stores selling Entity products grow steadily from 25 to 178 stockists. Our product range has also expanded from five to eight products in this market.
To remain at the forefront of innovation in the health supplement category, we plan to have three to five new Entity products launched every year. We will continue to review the global supplements market and identify unmet needs in this area.
Some of the therapeutic areas and products we are currently working on include:
• Anxiety for people who lead hectic lifestyles
• Sleep supplement for insomnia
• WaferiX product for symptomatic relief of eczema and psoriasis
Our strategy is to build a well-balanced, diversified, and high-growth specialty pharmaceutical company. As part of our corporate growth strategy, we look to explore opportunities to license products and/or collaborate with suitable, likeminded partners to promote and market our products.
For example, we have recently engaged a professional financial advisor to assist in prospecting suitable partners for the out-licensing of Wafermine. There is a surge in demand for a more superior administration of CBD products via sublingual delivery and we are in the prime position to license our WaferiX technology for such products to third parties.
Entity’s growing presence in Australia has provided exposure to the Chinese market, giving us the confidence to explore partnership opportunities for crossborder e-commerce into China for the Entity range.
During the financial year, we expended some $15.6 million in cash consisting of $7.1 million in R&D (of which some $5.0 million were associated with our Wafermine clinical trial programme), $1.7 million in capital expenditure and $6.8 million in other operating activities including manufacturing, sales & marketing and general & administration.
In the same reporting period, we received $11.4 million in cash from the divestment of our chemical laboratory testing business.
In FY2019, we continued to invest in our product pipeline and incurred $3.8 million in our R&D programmes. The Group successfully formulated our new CBD sublingual wafer and four nutraceutical products to extend the Entity range of products.
We increased sales personnel and stepped up our advertising & marketing activities for Entity Health. At the same time, we grew our manufacturing resources and invested in additional equipment to support expected future growth of demand for our products.
Even as we expanded our manufacturing resources and marketing efforts, general and administrative expenses remained comparable to the previous financial year through our continuous vigilance in cost control.
We closed the year with a cash balance of $15.9 million. With the total liabilities to total assets ratio of around 23% and working capital ratio more than seven times, the balance sheet of the Group remains strong.
Expanding the Pie with WaferiX
As mentioned earlier, there is an explosion of consumer-driven demand for medicinal cannabis globally for various health conditions. iX Biopharma has a unique opportunity to exploit this fast-growing market with our WaferiX technology, by offering a faster onset of action and a more predictable outcome.
WaferiX is additionally recognised as a game changer by drug makers, not just as a superior delivery system, but also for its ability to protect the market share of generic drugs and drugs coming offpatent.
Pharmaceutical companies are able to gain an invaluable marketing advantage by transforming drugs which are declining in profitability into premium, novel sublingual wafers, thereby extending the life cycles of these drugs.
For the reasons above, we will continue to expand our product range, increase our brand building programmes and invest in business development to accelerate sales growth and acquire market share.
On behalf of our Board of Directors, I would like to thank our staff and management team in Singapore, Australia, USA, Hong Kong and China for their hard work in executing the Company’s mission to produce best-in-class products that offer a better outcome than current market equivalents. It is their zeal and zest that allow us to deliver on our vision and strategy.
I would also like to express my gratitude for my fellow Board members, who have lent the Group their experience, network and skill. The Group has smoothly transitioned and set impactful trajectories for growth due to their support and guidance. Finally, I would like to thank all our shareholders for their continued support and faith in us.