IBB - Anebulo: Interesting Drug For Cannabis Intoxication But The Market Potential Remains Unclear

Summary

• Anebulo pharmaceutical is a US small-cap ($80M market cap) biotech company that is developing a phase 2 asset for cannabis-related intoxication.
• ANEB-001 targets a cannabinoid intoxication; we do not believe the market potential for "acute intoxication" to be as lucrative as the management suggests.
• ANEB-001 is a CB1 receptor antagonist similar to Rimonabant that got pulled out of the market due to safety concerns; we believe safety risk remains on the target.
• The short cash runway remains a key overhang. Therefore, we initiate with a hold rating.

Background

Anebulo pharmaceuticals (ANEB) is an interesting small-cap biotech developing a novel antidote for acute cannabinoid intoxication and other indications related to abuse and addiction. The company's lead product, ANEB-001, is a CB1 antagonist that blocks the effect of THC, which leads to the negative effect of cannabis overdose. The phase 2 trial published in 2022 has shown the potential to reverse the negative effects of acute cannabinoid intoxication within one hour of drug administration. On May 6, 2021, the company went public on NASDAQ and raised gross proceeds of $21 million. The company is currently trading at a market cap of around $80M and holding around $19M cash, and making the enterprise value ~$62M.

Our biggest concern would be the potential side effects (psychiatric side-effects) that caused the demise of Rimonabant from Sanofi to repeat in ANEB-001, considering the similarities in the mechanism of action.

Rimonabant (also known as SR141716; trade names Acomplia, Zimulti) is an anorectic antiobesity drug that was first approved in Europe in 2006 but was withdrawn worldwide in 2008 due to serious psychiatric side effects; it was never approved in the United States. Source: Wikipedia

2007 FDA report:

• ... report by the Advisory Committee of the US Food and Drug Administration (FDA) scrutinized the data from the RIO-Studies and raised even more concerns over this drug. This report indicated that rimonabant significantly increased risk of suicide attempts or ideation and that 26% of participants taking 20mg had some psychiatric side-effects compared to 14% taking placebo. In addition to depression and anxiety, there were more cases of irritability, insomnia, stress and panic attacks. Accordingly, rimonabant has not been approved in the USA.

On the bright side, as the drug is only indicated for use for a very short period, we believe the same side effects may not take place (which explains why the company is targeting acute intoxication, not targeting the drug to be used as an anti-addiction agent). We believe the short duration of treatment limits its usage for the drug to be used as an "anti-addiction" treatment like Pfizer's ( PFE ) blockbuster Champix, where patients take the drug for many months repeatedly to reduce cigarette-related craving and as a tool for smoking cessation. The anti-addiction market would offer a significantly bigger market opportunity as patients take it chronically, and more patients would be eligible to receive it; compared to this, we believe ANEB-001 only addresses "emergency setting' where the patients get admitted to ER due to cannabis overdose which is a very small market. Furthermore, we expect market access and reimbursement to be a concern as cannabis intoxication usually resolves by itself if the patient remains in a dark room for a while, and pricing could be an unexpected hurdle event after the drug gets approval.

The symptoms of cannabis intoxication are: source

• Physiological effects include decreased systemic vascular resistance, elevated heart rate, decreased intraocular pressure, nystagmus, conjunctival injection, lethargy, decreased concentration, and generalized psychomotor impairment.
• Synthetic cannabinoid toxicity symptoms include sympathomimetic toxicity, psychosis, and agitation, as well as seizures and sedation.
• Severe cases have experienced hyperthermia, rhabdomyolysis, and renal failure
• In children can lead to decreased muscle coordination, lethargy, seizures, dulled senses, and death

The clinical trial showed some compelling results in the healthcare volunteer patient population.

The phase 2 trial showed positive topline (Part A) and interim (Part B) data when ANEB-001 was compared to a placebo in healthy volunteer patients. The results can be summarized as a) significant improvement in symptoms related to THC intoxication (VAS feeling high, body sway, alertness, and heart rate), b) ANEB-001 was rapidly absorbed (fast onset of action), and c) well tolerated amongst patients who were treated. On the safety of the candidate, so far, more than 140 patients have been dosed with oral ANEB-001, i) 80+ in Phase 1 and ii) 50+ in Phase 2. As of today, patients were well tolerated for dosing up to 4 weeks in phase 1 with no serious adverse event. During phase 2 Part A, adverse events were mild and transient except for one case of moderate nausea and vomiting. No concerning safety signal seems to have emerged so far, but we remain cautious as long-term safety signals are hard to capture during phase 2.

Risks

Clinical and regulatory risk remains as several trials are ongoing, and any serious side-effect can lead to the demise of the whole platform. The company is not cashflow positive yet, and we believe the company may need to raise more capital in the near future, which can lead to a dilution of the stock price for existing shareholders.

Conclusions

We believe there is a big market for cannabis addiction, and emergency room admission related to cannabis-related intoxication is growing at 15% CAGR with the rapidly growing usage of recreational cannabis products. The lack of an approved therapeutic offers an excellent untapped market for drug developers. However, we are unsure if the market for drugs that treats a narrow indication, "acute cannabis toxication," would be meaningful due to uncertainty in reimbursement and as the condition usually resolves if patients stay in a dark room for a while, even without a treatment. Furthermore, we are cautious about the potential side effects of Rimonabant showing up on ANEB-001. The additional financial concern would be the short cash runway, as the company seems only to have ~19M cash on hand. We believe the company may need to raise more cash which can lead to dilution. Hence, we are initiating ANEB with a hold rating.

For further details see: