Edesa Biotech, Inc. is a clinical-stage biopharmaceutical company focused on developing innovative host-directed therapeutics to treat inflammatory and immune-related diseases with clear unmet medical needs. The company's diverse pipeline includes drug candidates targeting conditions such as vitiligo, acute respiratory distress syndrome (ARDS), and chronic allergic contact dermatitis.

Edesa was founded in 2016 and is headquartered in Markham, Ontario, Canada. The company operates through its wholly-owned subsidiaries, Edesa Biotech Research, Inc. and Edesa Biotech USA, Inc. Edesa's common shares trade on the Nasdaq Capital Market under the ticker symbol EDSA. The company was incorporated under the laws of British Columbia, Canada.

In 2020, Edesa entered into a license agreement to obtain exclusive worldwide rights to certain monoclonal antibodies, including sublicensing rights. This acquisition provided the company with an intangible asset that has been amortized over an estimated useful life of 25 years. Additionally, in fiscal year 2020, Edesa entered into another license agreement to obtain exclusive rights to certain know-how, patents, and data relating to a pharmaceutical product.

During fiscal year 2021, Edesa entered into a license agreement to acquire global rights for all fields of use beyond those named under the 2016 license agreement. These licensing agreements have provided Edesa with the intellectual property necessary to advance its drug development pipeline.

The company has faced financial challenges over the years. In fiscal year 2022, Edesa incurred a net loss of $17.5 million and had an accumulated deficit of $44.0 million as of September 30, 2022. The company's research and development expenses have fluctuated substantially based on the level of activity in its clinical programs.

To fund its operations, Edesa has raised capital through various means. In fiscal year 2021, the company raised $12.7 million through the issuance of common stock. In fiscal year 2022, Edesa raised an additional $12.0 million through the sale of common shares. The company has also received funding through exercises of common share purchase warrants and government grants.

Financial Overview

For the fiscal year ended September 30, 2024, Edesa reported no revenue as it remains in the clinical development stage. The company's net loss for the year was $6.17 million, or $1.93 per diluted share, compared to a net loss of $8.37 million, or $0.42 per diluted share, in the prior fiscal year.

Financials

Edesa's cash and cash equivalents totaled $1.04 million as of September 30, 2024, compared to $5.36 million at the end of the prior fiscal year. The decrease in cash was primarily due to $4.89 million in net cash used in operating activities, partially offset by $0.73 million in net proceeds from the issuance of common shares.

The company's working capital position at the end of fiscal 2024 was negative $0.16 million, compared to positive $4.61 million a year earlier. Edesa's current ratio, a measure of liquidity, was 0.92 at the close of fiscal 2024, down from 3.54 the prior year.

Edesa's research and development expenses for fiscal 2024 were $2.88 million, down from $4.79 million in the prior year. General and administrative expenses increased to $4.13 million from $4.43 million in the same period.

For the first quarter of fiscal 2025 (ended December 31, 2024), Edesa reported total operating expenses of $1.90 million, with research and development expenses of $1.02 million and general and administrative expenses of $0.88 million. The company's net loss for the quarter was $1.62 million, or $0.48 per common share. As of December 31, 2024, Edesa had $1.56 million in cash and cash equivalents and a working capital of $0.20 million.

Liquidity

In October 2024, Edesa entered into a $10 million revolving credit agreement with an entity controlled by the company's CEO, providing an unsecured credit facility with a $3.5 million limit. The line of credit bore interest at the Canadian Imperial Bank of Commerce US Base-Interest Rate plus 3% per annum and had a maturity date of March 31, 2026, unless terminated earlier. Prior to its termination in October 2024, Edesa had not drawn any funds under this facility.

As of December 31, 2024, Edesa's debt-to-equity ratio was 0, indicating no long-term debt on its balance sheet. The company's current ratio and quick ratio were both 1.09, suggesting a relatively stable short-term liquidity position.

Pipeline Overview and Key Developments

Edesa's pipeline is focused on developing innovative therapies for inflammatory and immune-related diseases. The company operates through two main product segments: Medical Dermatology and Respiratory.

Medical Dermatology

• EB06 (anti-CXCL10 mAb) for Vitiligo: Edesa is preparing to initiate a Phase 2 proof-of-concept study of EB06 in patients with moderate-to-severe non-segmental vitiligo. The company has received regulatory approval from Health Canada and is in discussions with the U.S. FDA for the same study. Preparation for the manufacturing campaign is underway, with data anticipated to be submitted to the FDA during mid-2025.

• EB01 (daniluromer cream) for Chronic Allergic Contact Dermatitis (ACD): This Phase 3-ready asset is currently at the partnering stage. EB01 is being developed as a potential therapy for moderate-to-severe chronic ACD, a common occupational skin condition.

Respiratory

• EB05 (paridiprubart) for ARDS: In June 2024, EB05 was selected by the Biomedical Advanced Research and Development Authority (BARDA) for evaluation in a U.S. government-funded Phase 2 platform trial investigating novel threat-agnostic host-directed therapeutics in hospitalized adult patients with ARDS due to a variety of causes. Edesa plans to provide the drug product and technical support for this study, which will complement the company's ongoing EB05 development activities. Certain development expenses, including manufacturing scale-up, for the EB05 program are eligible for reimbursement from the Government of Canada under a 2023 grant and funding award.

• EB07 (paridiprubart) for Pulmonary Fibrosis: Edesa is preparing an investigational new drug (IND) application in the U.S. to conduct a future Phase 2 study of EB07 in patients with pulmonary fibrosis.

Strategic Transactions and Financing Activities

In October 2024, Edesa entered into a Securities Purchase Agreement with an entity controlled by the company's CEO, Pardeep Nijhawan, pursuant to which the company sold up to $5 million of its newly designated Series A-1 Convertible Preferred Shares and Warrants in a private placement. Under the agreement, the entity has purchased 150 Series A-1 Preferred Shares, initially convertible into an aggregate of 435,410 common shares, and Warrants to purchase up to 326,560 common shares, for a total purchase price of $1.54 million.

Subsequent to the fiscal year end, in February 2025, Edesa entered into a $15 million private placement with a group of investors, including new and existing healthcare-focused institutional investors and insiders. The company sold 834 Series B-1 Convertible Preferred Shares, each initially convertible into approximately 5,210 common shares, as well as 3.47 million common shares. The proceeds from this financing are expected to fund Edesa's CXCL10 antibody program through the end of fiscal 2026.

Additionally, in October 2024, Edesa entered into an at-the-market equity offering agreement with H.C. Wainwright & Co., LLC, under which the company may offer and sell, from time to time, up to $3.87 million in common shares. During the three months ended December 31, 2024, the company sold 220,270 common shares under this program for net proceeds of $0.60 million.

Outlook and Risks

Edesa's cash position, including the recent $15 million private placement, is expected to fund its operations, including the advancement of the vitiligo program, through the end of fiscal 2026. The additional funding, along with the company's existing cash resources, the proceeds from the Series A-1 Preferred Shares offering, the at-the-market equity program, and reimbursements under the 2023 SIF Agreement, will be used to support the company's operating expenses and clinical development activities.

Key risks facing Edesa include the inherent uncertainties of clinical development, the ability to raise sufficient capital to fund operations, regulatory approvals, competitive pressures, and the potential impact of macroeconomic conditions and geopolitical tensions on the company's business.

Conclusion

Edesa Biotech is a clinical-stage biopharmaceutical company leveraging its expertise in host-directed therapeutics to develop innovative treatments for inflammatory and immune-related diseases. With a diversified pipeline spanning medical dermatology and respiratory indications, the company is well-positioned to address significant unmet medical needs. While Edesa's near-term financial position requires careful management, the recent $15 million financing and progress in its lead programs suggest the company is taking proactive steps to advance its strategic initiatives and create long-term value for shareholders.

As Edesa continues to advance its clinical programs, particularly in vitiligo and ARDS, the company's ability to achieve key milestones and potentially secure strategic partnerships will be crucial for its long-term success. The management team's focus on capital efficiency and strategic financing options demonstrates a commitment to maximizing shareholder value while pursuing innovative therapies in areas of high unmet medical need.