Stonegate Capital Partners has updated its coverage on Incannex Healthcare Inc. (NasdaqGM:IXHL), highlighting the company's significant progress with its IHL-42X asset following very positive topline results from the Phase 2 study. Both the low and high dose groups achieved a statistically significant reduction in percentage change in Apnoea-Hypopnoea Index (AHI) from baseline compared to placebo, with maximum AHI reductions of up to 83% for the high-dose group and up to 79% for the low-dose group.
In addition to effectiveness, IHL-42X was well-tolerated across both cohorts with no serious adverse events reported during the treatment period. Patient-reported outcomes were equally impressive, with 57.6% of participants reporting perceived improvement in their obstructive sleep apnea (OSA), and 89.5% of those reporting improvement described the change as meaningful to their lives. This positions IXHL favorably as it begins the next steps of bringing IHL-42X to market.
The company is in an extremely favorable position due to its vastly improved capital structure and balance sheet. IXHL has sufficient liquidity to bring IHL-42X to commercial readiness, with more clinical data expected to become available as analysis continues with the help of the expanded advisory board. The company is also expected to meet with the FDA prior to beginning Phase 3 trials.
IXHL has significantly strengthened its financial position through strategic financing arrangements designed to optimize capital structure and minimize dilution related to its Series A Warrants. Utilizing proceeds from the company's ATM, IXHL has issued approximately $24.7 million worth of shares to repurchase all outstanding Series A Warrants representing 347.2 million shares that could be dilutive.
Beyond IHL-42X, IXHL's PSX-001, a psilocybin-based candidate for Generalized Anxiety Disorder (GAD), successfully achieved positive results from a Phase 2 proof-of-concept study. The company has secured IND clearance from the FDA and Clinical Trial Authorization from UK regulatory authorities for the PsiGAD2 Phase 2 trial, which will recruit 94 patients across the U.S. and U.K. Meanwhile, IHL-675A, targeting inflammation associated with rheumatoid arthritis, completed patient dosing in its Phase 2 trial with approximately 128 participants, with data expected in the second half of 2025.
Stonegate Capital Partners uses a probability-adjusted Discounted Cash Flow Model when valuing IXHL, returning a valuation range of $1.05 to $2.86 with a midpoint of $1.70 based on a discount rate range of 12.50% to 17.25% and a current risk adjustment range of 13% to 18%. Further details on the valuation model can be found at https://www.stonegateinc.com. The model is highly levered to future years due to the long-term nature of IXHL's industry, leading to potential for dramatic re-ratings as new information becomes available.
