Medical cannabis company Impression Healthcare (ASX: IHL) has announced it will discontinue sales of its oral devices by the end of the month to focus its resources exclusively on cannabinoid sales and development activities.
The move comes as the company’s Incannex branded cannabinoid products continue to gain market share with Impression revealing it expects June quarter revenue to be “significantly higher” than the previous corresponding period last year due to “markedly increasing” sales of these products, despite a drop in oral device sales – partly due to the cessation of contact sport seasons as a result of COVID-19.
Cash sales for the previous corresponding period was $340,000 (June 2019).
Impression chief executive officer Joel Latham said the move will enable the company to focus on the part of the business that drives value for its shareholders.
“The opportunities in the medicinal cannabis sector are significant and [Impression] has assembled a world-class team in this space, with four clinical assets undergoing assessment,” he said.
In addition, Impression said it expects its industry classification code to change and is proposing a new name to reflect its cannabinoid focus.
Today’s news follows the company’s announcement in February that it has expanded its cannabinoid oil sales program that runs alongside its clinical trial projects.
Mouthguard sales decline
According to Impression, COVID-19 restrictions have been a major factor in the declining sales of declining oral devices, particularly its sports mouthguards sales which have “severely diminished” due to the cancellation of sports seasons.
The company said it “does not expect any normal continuation of the sports season or recovery in mouthguard sales in the medium term that justifies continued financial commitment to the oral devices business segment”.
Importantly, Impression believes the decision will allow it to save expenditure on oral devices and focus management time and resources on cannabinoid sales and development, which it regards as its dominant business value drivers.
“In the current climate, continuing with oral devices would consume vital management time and take capital away from Incannex, which is an outcome we do not want for our shareholders,” Mr Latham said.
Classification code and proposed name change
All ASX listed entities are classified according to the Global Industry Classification Standard (GICS), an industry taxonomy jointly developed by S&P and Morgan Stanley Capital International.
Impression said its GICS code is now expected to be changed from Health Care Equipment and Services to Pharmaceuticals, Biotechnology and Life Sciences. GICS code designations are an important criterion for the global investment community to discover its investment universe.
Additionally, the investment community often prefers “pure play” companies.
To reflect this change, the company is looking to change its name to that of its medicinal cannabis brand, Incannex Healthcare Limited.
It plans to retain the same ASX ticker code of ‘IHL’.
The company began its medical cannabis development program in late 2018 and has rapidly expanded since with a range of cannabinoid oils and a cannabidiol inhaler now for sale under the Special Access Scheme through its distribution partner and major shareholder, Cannvalate.
Impression also has four cannabinoid clinical trial programs covering indications including traumatic brain injury, obstructive sleep apnoea, temporomandibular joint dysfunction and sepsis-associated acute respiratory distress syndrome (SAARDS).
FDA registration is being sought for some of their products and should it be received, it would place IHL in a coveted group of medicinal cannabis companies.
Earlier this week, the company announced the start of animal studies evaluating its CBD and hydroxychloroquine combination drug IHL-675A against SAARDS, which is considered the leading cause of death associated with COVID-19 infections.