Incannex (ASX:IHL) share price backtracks on FDA update

The Incannex Healthcare Ltd (ASX: IHL) share price is in reverse today despite announcing a positive update. We take a closer look.

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The Incannex Healthcare Ltd (ASX: IHL) share price is in reverse during late-afternoon trade. This comes despite the company's positive pre-investigational new drug application (pre-IND) meeting with the United States Food and Drug Administration (FDA).

At the time of writing, the healthcare company's shares are trading at 28.5 cents, down 1.7%. In comparison, the All Ordinaries Index (ASX: XAO) is 0.4% higher to 7,288 points.

FDA update

According to its release, Incannex announced it received positive feedback from the FDA Pre-IND meeting regarding the regulatory pathway for IHL-675A.

Incannex's IHL-675A is a novel therapy that comprises hydroxychloroquine (HCQ) and cannabidiol (CBD). The medical therapy is being targeted for the potential treatment of Acute Respiratory Distress Syndrome (ARDS) and sepsis-associated Adult Respiratory Distress Syndrome (SAARDS).

ARDS is a type of respiratory failure which collects fluid into the air sacs of the lungs. This is often caused by infection or trauma and can result in death if not treated. It is estimated that 10% to 15% of patients admitted to intensive care suffering from ARDS.

SAARDS, caused by infection, is associated with lung, urinary tract, stomach, skin infections and COVID-19 viral infections.

Following guidance from the FDA, Incannex will expand its development program to see whether IHL-675A can become a multi-purpose drug. Pre-clinical results indicated a positive correlation between the IHL-675A therapy and various disorders. This includes pulmonary neutrophilia (lung disease), inflammatory bowel disease (IBD), and rheumatoid arthritis.

The company will combine its ARDS/SAARDS and pulmonary neutrophilia development activities into a common project titled 'lung inflammation program'.

Moving ahead, Incannex has begun designing a phase 1 clinical study to assess the effects of IHL-675A in patients. The trial will form part of 3 distinct investigational new drug applications (NDA) and the associated studies needed for registration and marketing authority.

The FDA agreed that marketing applications for the multi-purpose drug should consist of 505(b)(2) applications. The 505(b)(2) NDA contains safety and effectiveness reports and allows to revert back to historical studies not conducted by Incannex for information needed.

The FDA stated that this is a less-costly alternative to registration and marketing approval as opposed to the 505(b)(1) pathway.

What did management say?

Incannex CEO and managing director, Joel Latham welcomed the feedback, saying:

The directors of Incannex are delighted with the positive feedback and encouragement from the FDA at the PIND meeting and will now move forward with conviction on our clinical programs to develop IHL-675A as a multi-use pharmaceutical.

The combined annual global market size of the indications being targeted by Incannex with IHL-675A is over US$125B so we consider the economic potential, as well as the benefit to patients over incumbent treatments, to be enormous.

Incannex share price snapshot

Over the past 12 months, the Incannex share price has surged close to 450%, with year-to-date gains sitting at 80%. The company's shares reached a multi-year high of 30 cents this week and are currently a whisker away from breaking that feat again.

On valuation metrics, Incannex has a market capitalisation of around $296 million.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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