By John Vandermosten, CFA

NASDAQ:LEXX

READ THE FULL LEXX RESEARCH REPORT

Lexaria Bioscience Corporation (NASDAQ:LEXX) reported fiscal third 2024 results along with program updates, progress in its GLP-1 trials, a capital raise and final preparations for the Phase Ib trial evaluating DehydraTECH in obese patients. Several new patents were granted bringing the total to 43. Lexaria’s primary focus for fiscal 2024 was to demonstrate that DehydraTECH (DHT) can be an effective delivery system serving the burgeoning GLP-1 agonist space. Oral options for GLP-1s are limited and initial data for DHT-GLP-1s promising leading to the development of a series of studies that seek to find the best approach for a more convenient delivery method. At the end of August, Lexaria completed its 2024 fiscal year and reported these results at the end of November. We summarize the results below. 

Fiscal Year 2024 Results

Lexaria filed its 2024 Form 10-K on November 26^th, 2024. The company reported FY 2024 revenues of $464,000, and total operating expense of $6.2 million resulting in net loss of ($5.8) million or ($0.47) per diluted common share.

For the fiscal year ending August 31^st, 2024 and versus the comparable prior year period:¹

• Revenue totaled $464,000, up 105% from $226,000 as increases in licensing revenues which more than offset the 92% decline in business to business and other revenues which together totaled $6,300. The rise in licensing revenues was due to an increase in minimum fees earned from the licensing agreement with Premier;
• Research and development expenses totaled $2.4 million, down 36% from $3.7 million as a result of completing the manufacturing of DHT CBD drug for the company’s clinical studies, and the completion of other studies for hypertension and antiviral drugs which were present in the prior period. Reported spending is tied to the hypertension study and DHT investigational research programs underway in GLP-1 agonists and CBD;
• General and administrative expenses totaled $3.9 million up 26% from $3.1 million due primarily to an increase in legal and professional fees due to patent filings, financing and other miscellaneous legal advisory work as well as higher advertising and promotion expenses. Higher consulting expense also contributed to the increase and was related to separation payments to the former CEO who resigned as of August 31^st. This was partially offset by the recognition of an impairment loss related to abandoned patent applications;
• Interest income was $14,300 vs. $43,200;
• Other loss of ($69,800) represented unrealized loss on marketable securities related to decreases in fair value of the company’s investment in Hill Inc.;
• Net loss was ($5.8) million, or ($0.47) per share, compared to net loss of ($6.7) million or ($1.01) per share.

As of August 31^st, 2024, cash and marketable securities totaled $6.6 million which compares to $1.5 million at the end of fiscal year 2023. Cash burn for FY:24 was approximately ($5.1) million. Cash from financing totaled $10.3 million over the fiscal year due to the exercise of warrants and warrant issue and equity sales. After the end of the reporting period, Lexaria raised an additional $4.5 million in net proceeds in a registered direct offering. Management estimates that the company holds sufficient cash to meet its financial obligations until at least November of 2025.

Phase Ib DehydraTECH GLP-1 Agonist Study

Following investigational new drug (IND) submission and clearance early in the year, Lexaria’s Phase Ib DHT GLP-1 study in diabetes and weight loss received ethics board approval in November. A press release detailed the milestone that is required before the trial can dose the first subject. In addition to the nod by the board, clinical test article manufacturing for all planned study arms has been completed including the production of the four planned DehydraTECH formulation study arms and clinical repackaging of the commercially available Rybelsus comparator tablets for the control arms.

Arms of the trial include:

• Arm 1 – DehydraTECH-CBD capsules
• Arm 2 – DehydraTECH-semaglutide capsules
• Arm 3 – DehydraTECH-semaglutide combined with DehydraTECH-CBD capsules
• Arm 4 – Rybelsus tablets (positive control)
• Arm 5 – DehydraTECH-tirzepatide capsules (optional arm with offset start date)

Based on the anticipated timeline, the first patient may be dosed in December or January. The Phase Ib is expected to enroll subjects at seven clinical investigational sites in Australia within Australian clinical regulatory authority regulations. Human Research Ethics Committee (HREC) approval has been received for the primary clinical site, while clinical trial notification acknowledgement by the Australian Therapeutic Goods Administration and HREC approvals for the remaining clinical sites remain to be completed. Quality control release testing of the clinical test articles also remains to be done. Upon completion, the Phase Ib study is expected to be recognized by the FDA.

Listed under NCT06648031 on the NIH’s clinical trials website, the Phase Ib DehydraTECH GLP-1 agonist study plans to enroll 20 overweight, obese, pre- or type 2 diabetic patients for each of Study arms 1-4, with the DehydraTECH-tirzepatide Study arm 5 to be added at a later date if supported by positive results from Lexaria’s separate ongoing study GLP-1-H24-3. All drugs will be administered daily by oral tablet or capsule. No drug injections will be administered. Seven sites in Australia have been identified for the study.

Lexaria’s goals for the trial are to answer several questions regarding the safety, relative performance of the different arms of the trial, whether or not DHT processing enhances the goals of weight reduction and blood sugar control and do DHT formulations administered daily reduce side effects over the trial observation period.

Summary

Lexaria has continued to work on its portfolio of GLP-1 agonist studies in vitro, in animal models and in human pilot studies. Evidence so far has shown that DehydraTECH-formulated products outperform non-DHT-formulated products in terms of producing weight loss and reducing blood sugar over the observed periods. Lexaria is now set up for its Phase Ib trial which will be conducted in Australia at seven sites. The clinical trial will evaluate DehydraTECH-processed GLP-1 agonist and CBD alone and in combination with different formulations in obese volunteers and patients with pre- or Type 2 diabetes. From 80 to 100 subjects will be enrolled. Along with the other studies that have been completed or are underway, sufficient data should be available to attract the attention of one or more established pharmaceutical companies such as Novo Nordisk who wish to improve convenience for patients and extend the product life of their GLP-1 agonist franchise.

GLP-1 agonists have shown safety and effectiveness in treating diabetes and weight loss, with the latter one of the most difficult indications to address over the last decades. This class of drug is now almost exclusively infused in patients which is costly, inconvenient and can result in wide variations in systemic drug concentration between administrations. While there is one oral formulation of a GLP-1 available, it offers limited bioavailability. If DehydraTECH is able to improve delivery systemically including the CNS, recognition by one or more the numerous commercial and in-development sponsors of products in this class could lead to a substantial revaluation in Lexaria’s share price. Furthermore, success in the ongoing studies could provide the ammunition necessary to negotiate with multiple large biopharmaceutical companies who can benefit from this technology to effectively deliver GLP-1s and other classes of drug orally.

As Lexaria evolves into its next iteration focused on execution of the programs it has incubated over the last several years, Chris Bunka lays the CEO mantle upon industry executive Richard Christopher. Christopher has a wealth of experience in leadership roles at life sciences companies, most recently as Chief Financial Officer at InVivo Therapeutics. His operational experience and network in the Boston life sciences community provide Lexaria a firm base to advance the many programs that have demonstrated DehydraTECH’s safety and efficacy with a number compounds and in a number of indications. The recent MTA signed with a pharmaceutical company is further evidence of the commercial potential of the DehydraTECH platform. We expect to hear news on next steps for this partnership in the first half of 2025. If the partner elects to move forward, this could provide upfront, milestone and royalty cash flows to Lexaria which can further support internal research and development efforts.

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