LEXX: 1Q:22 Results & Other Things that Came Up

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By John Vandermosten, CFA

NASDAQ:LEXX

READ THE FULL LEXX RESEARCH REPORT

Over the last two months, Lexaria Bioscience Corporation LEXX has advanced several new initiatives, reported first quarter earnings and outlined a bold plan for 2022 which includes the launch of multiple new studies. The most important effort is in hypertension where we expect the HYPER-H21-4 study to start in April, anticipated to enroll 60 patients in a six-week study. Two other studies for nicotine and pediatric seizures will also start. Investors were presented new information related to cannabinoids' impact on SARS-CoV-2 and the use of DehydraTECH (DHT) in sildenafil. Lexaria plans for 2022 also include investigational new drug (IND) work to prepare DHT-CBD for more advanced clinical work in hypertension.

1Q:22 Results

Lexaria filed its first quarter fiscal year 2022 10-Q on January 14, 2022. The company reported first quarter fiscal year 2022 revenues of $14,000, and total operating expense of $2.0 million resulting in net loss of ($2.0) million1 or ($0.35) per basic and diluted common share.

For the first quarter ending November 30, 2021 and versus the same ending November 30, 2020:

➢ Revenue totaled $14,000, down 95% from $296,000. Lexaria's primary customer in the B2B product revenue stream has been delayed in chain-store rollouts resulting in overstocked inventory and no manufacturing and sales of new inventory for this licensee for the quarter;

➢ Research and development expenses totaled $459,000, increasing 139% from $192,000 as Lexaria undertook several studies within its 2022 applied research and development program focusing on DHT-CBD to treat hypertension;

➢ Office and administrative expenses totaled $1.6 million, up 107% from $752,000 primarily comprising an unrealized loss on marketable securities of $340,000 and non-cashed stock-based compensation on options granted and vested of $121,000;

➢ Net loss including contributions from non-controlling interests was ($2.0) million, or ($0.35) per share, compared to ($710,000) or ($0.24) per share.

As of November 30, 2021, cash and marketable securities on the balance sheet totaled $10.2 million. Cash burn for the quarter was approximately ($1.2) million. Lexaria carries a $7,800 in loan payable on its balance sheet.

Forward Looking Clinical and Operational Highlights

2022 anticipated material events:

➢ Hypertension study (HYPER-H21-4) dosing – April 2022

➢ Animal study for pediatric seizures using CBD – Spring 2022

➢ Human sublingual (buccal) tissue study in nicotine – Spring 2022

➢ Hypertension study (HYPER-H21-4) results – 3Q:22

➢ Commercial client partners introducing DHT skin products – 3Q:22

➢ Pre-IND meeting with the FDA for CBD in hypertension – 2022

➢ Agreement with industry partner – 2022

Lexaria preclinical trials planned for 2022:

➢ HOR-A22-1

◦ Estrogen delivery characteristics

◦ Estrogen

◦ PK study

◦ April 2022

➢ DEM-A22-1

◦ Dementia/Alzheimer's disease

◦ July 2022

➢ RHEUM-A22-1

◦ Rheumatoid disease

◦ CBD

◦ October 2022

➢ DIAB-A22-1

◦ Diabetes

◦ CBD

◦ November 2022

SRAX Media Outreach Agreement

To increase investor visibility, Lexaria announced in December that it had entered into an agreement with SRAX, Inc. for advertising and media. Many material events are planned for 2022 including in-human trials for hypertension, oral nicotine, animal studies for seizure relief, as well as a number of early-stage pharmacokinetic work in potential indications. On behalf of Lexaria, SRAX will engage and manage media companies to create advertising materials and distribute them on internet platforms employing leading-edge analytical algorithms to maximize engagement.

Cannabinoids and SARS-CoV-2

On January 18, 2022, Lexaria announced and responded to an independent study that had been published in the Journal of Natural Products on January 10th, "Cannabinoids Block Cellular Entry of SARS-CoV-2 and the Emerging Variants | Journal of Natural Products (acs.org)", that found cannabinoid acids to be allosteric as well as orthosteric ligands with micromolar affinity for spike protein. Among the compounds with the highest affinity for spike protein were CBGA2, THCA-A3, and CBDA4. CBDA and CBGA were found to prevent infection of human epithelial cells by a pseudovirus expressing the SARS-CoV-2 spike protein and prevent entry of live SARS-CoV-2 into cells. CBDA and CBGA were also found to be equally effective against alpha variant B.1.1.7 and beta variant B.1.351. In an interview with vice.com, lead author, Dr. Richard van Breeman, commented that oral delivery was effective, and that smoking or vaping cannabis was likely not effective. Lexaria CEO, Chris Bunka, commented that, "Lexaria has led the conversation for years related to oral delivery of cannabinoids and is a world-leader through its pioneering drug delivery technology, DehydraTECH." Lexaria is currently conducting research with DHT-cannabinoid formulations across a range of indications, including an advanced oral DHT-CBD formulation that in manufacturing leaves the cannabinoids unaltered by high temperatures.

HYPER-H21-4

Lexaria announced this autumn that it would evaluate DHT-CBD in humans in 2022 with its HYPER-H21-4 study. HYPER-H21-4 will target 60 volunteers between the ages of 45-70 using three 150 mg doses of DHT-CBD every day for the 6-week duration of the study. The study will employ a double blinded, randomized cross-over design and utilize a placebo control. A subset of subjects will already be using standard of care hypertension drugs such as ACE inhibitors and diuretics. This will yield data relating to the efficacy of DHT-CBD in combination with hypertension treatments. Furthermore, the longer duration of the study compared with Lexaria's previous work will support acquisition of critical data regarding the extended use of DHT-CBD and capture any potential for longer term health benefits. Study protocols are being readied for submission to the Independent Review Board (IRB) and approval is anticipated by January 2022. HYPER-H21-4 will build on the findings of HYPER-H21-2. Results for HYPER-H21-2 were announced in December 2021 and only tracked the effects of dosing over a 24 hour period yet achieved statistically significant results. Success with HYPER-H21-2 is expected to provide the data necessary to enter regulatory pathways for DHT CBD to treat hypertension and other forms of cardiovascular disease. On December 29th, Lexaria announced that the Independent Review Board (IRB) had approved HYPER-H21-4 ahead of schedule, with dosing tentatively scheduled to begin by April 2022.

Sildenafil Results

Lexaria conducted animal studies evaluating the leading phosphodiesterase inhibitor (PDE5 inhibitor), sildenafil, for erectile dysfunction. The February 2nd release identified a trend of higher overall delivery of sildenafil into the blood stream. Within four minutes of administration, the DHT formulation delivered materially higher levels of the drug in the plasma compared with the generic formulation of the same concentration. One of the shortcomings of current formulations of erectile dysfunction drugs is the extended time period between administration and response, which can make a difference depending on how fast you are. Below is the comparison of DHT sildenafil vs. control over a three hour period. It shows that the DHT-sildenafil formulation achieved a maximum concentration (CMAX) in the blood plasma that was ~70% higher as compared to the control formulation. The time to CMAX was achieved 25% faster (15.1 ± 5.9 minutes with the DehydraTECH-sildenafil versus 21 ± 7.74 minutes with the Control-sildenafil).

Upcoming Milestones (YTD)

Uplisting to Nasdaq Capital Market - January 2021

Pricing and closing of $11M public offer - January 2021

➢ Al Reese, Jr. appointed to Board of Directors - January 2021

➢ CBD beverage shelf stability results - March 2021

➢ Gregory Downey appointed CFO - April 2021

Issuance of warrants for 300,000 common shares - April 2021

➢ HYPER-H21-1 launched - April 2021

➢ First DHT patent granted in India - May 2021

➢ HYPER-H21-2 starts - June 2021

➢ 2021 Annual Meeting results - June 2021

➢ Voluntary delisting from CSE - July 2021

First and second patents granted in Japan - July 2021

➢ HYPER-H21-2 dosing complete - July 2021

➢ Ibuprofen study results - 3Q:21

➢ Topline results from HYPER-H21-2 study - September 2021

➢ Oral nicotine study NIC-A21-1 results - October 2021

➢ Oral THC study THC-A21-1 results - October 2021

➢ EPIL-A21-1 commenced - November 2021

➢ HYPER-H21-4 announced - November 2021

➢ 2022 R&D program plans announced - November 2021

➢ HYPER-H21-3 completion of dosing & sample collection - December 2021

➢ Interviews (one, two, three) with Zacks' analyst John Vandermosten - December 2021

➢ HYPER-H21-2 results - December 2021

➢ HYPER-H21-3 nears completion - December 2021

➢ One-year media outreach agreement with SRAX, Inc - December 2021

➢ IRB approval for HYPER-H21-4 - December 2021

➢ Study examining cannabinoids and SARS-CoV-2 - January 2022

Summary

Lexaria has started 2022 with a full slate of programs from in-human studies for hypertension and nicotine, to preclinical efforts in pediatric seizures, hormones, dementia, rheumatoid disease and diabetes. The most advanced effort the company is undertaking is the IND preparatory work for clinical hypertension studies which could open up a massive market if successful. We recently initiated on Lexaria, explaining its DHT technology platform and its wide applicability to enabling oral administration of products and therapies. DHT enhances bioavailability of active compounds via the digestive tract and topical administration and appears to be superior to other forms of administration including alternative types of oral delivery as supported by its studies.

In this report, we update Lexaria's progress on multiple fronts over the last two months and include an updated timeline. New information includes independent review board (IRB) approval for the fourth hypertension study, results from the in-human HYPER-H21-2 trial of DHT-CBD in hypertension, additional details on the relationship between cannabinoids and SARS-CoV-2 and sildenafil results.

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1. Including non-controlling interest contributions of ($159,000)

2. Cannabigerolic acid

3. Tetrahydrocannabinolic acid

4. Cannabidiolic acid

5. Source: Lexaria February 2, 2022 Press Release

6. Source: Lexaria January 2022 Corporate Presentation

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