Incannex Healthcare seeks exclusive NASDAQ listing in bid to expand horizons

Australian pharmaceutical cannabinoid product developer Incannex Healthcare (ASX: IHL) (NASDAQ: IXHL) has unveiled its intentions to relocate to the United States, with plans to eventually delist from the ASX.

The company has elected to switch to the NASDAQ board as it believes the US market is more receptive to pharmaceutical programs.

Incannex managing director and chief executive officer, Joel Latham, said comparison companies on the NASDAQ are trading at far greater market valuations with the change providing the company with an ability to expand to a much broader investor base.

“It is a decision made with the intention to maximise shareholder value,” Mr Latham said.

“Incannex has matured on the ASX to the point that it has a large and diversified drug portfolio with two exciting drug candidates imminently entering pivotal clinical trials. By committing our presence to the United States, we believe that our company’s visibility to international investors will increase markedly, partly due to our value proposition compared to similar emerging biotech companies with a presence in North America.”

The company also believes re-domiciliation may deliver improved access to lower-cost equity capital in the much larger and diverse US markets.

Change of location plans

The change in location will be completed under proposed schemes of arrangement between Incannex and its shareholders and optionholders.

The go-ahead for the schemes will require the approval of the company’s share and option holders and other regulatory and court approvals.

Incannex has already achieved registration from the US Securities and Exchange Commission (SEC) and has gained Nasdaq Global market listing status.

The anticipated shareholder and optionholder vote is expected to occur in October.

Growing US investor demand

Incannex has American Depository Receipts (ADRs) trading in the US, however, they are packaged securities and not fully fledged US shares. Only a fraction of Incannex’s shares are currently trading as ADRs in the US, however, recent trading volumes have been elevated.

“After 18 months of engaging with the US investor community, Incannex has witnessed investor demand increase, which was demonstrated on the 6th of July when IXHL ADRs traded the equivalent of 160m IHL shares in one day of trade,” Mr Latham said.

Redomiciling to provide liquidity to US investors

“Incannex has less than 1.5% of its securities trading as ADRs in the US, and it has presented a limitation for investors to aggregate investment positions in our company. Very few Australian brokers can trade ADRs, however post the redomicile, most online trading platforms facilitate direct market access to trading US shares.”

“Having all Incannex shares in the company trading on Nasdaq will facilitate a cohesive single market with the appropriate level of liquidity expected by the US investment banks, some of which have commenced the process to initiate independent research coverage on Incannex.”

In the lead-up to re-domiciliation, Incannex has entered into a Scheme Implementation Deed (SID) with Incannex Healthcare Inc. (Incannex US), a new US company incorporated in Delaware.

Incannex US will eventually become the ultimate parent company of the Incannex group of companies, with IHL becoming a wholly-owned subsidiary of Incannex US.

Under the proposed share scheme holders of fully paid ordinary shares in Incannex will be entitled to receive one share of common stock in Incannex US for every 100 Incannex Shares held on the record date for the Share Scheme.

Significant US market growth tipped

Expert Market Research (EMR) has estimated the US medical cannabis industry attained a value of around $9.2 billion in 2020. The market is forecast to grow at a CAGR of 46.5% to reach a value of about $24.3 billion by 2026.

The market analysts said the ageing population in the region has played a major role in raising the market for medical cannabis, as geriatric patients are more prone to developing chronic diseases and need more doctor visits. Clinical trials, R&D, and the commercialisation of indications based on cannabis are also anticipated to be a catalyst for market growth.

EMR said that although spending on health products is less likely to fluctuate, medical marijuana use is subject to unusual shifts in disposable incomes. As a result, higher disposable incomes will have a positive effect on medical cannabis demand.