By John Vandermosten, CFA

NASDAQ:LEXX

READ THE FULL LEXX RESEARCH REPORT

Lexaria Bioscience Corporation LEXX has provided several updates related to the hypertension and nicotine programs since our last update in February along with the filing of its 2Q:22 Form 10-Q. Results were reported for the HYPER-H21-3 trial and enrollment has started for HYPER-H21-4. In the nicotine realm, the company announced another collaboration with Altria using DehydraTECH formulations, provided details related to the upcoming NIC-H22-1 study and highlighted a new patent. A study evaluating the impact of DehydraTECH (DHT)-CBD on epilepsy was also announced. Lexaria’s plans for 2022 include investigational new drug (IND) work to prepare DHT-CBD for more advanced clinical work in hypertension.

2Q:22 Results

Lexaria filed its second quarter fiscal year 2022 Form 10-Q on April 11, 2022. The company reported 2Q:22 revenues of $31,000, and total operating expense of $1.5 million resulting in net loss of ($1.4) million or ($0.25) per basic and diluted common share.

For the second quarter ending February 28, 2022 and versus the same ending February 30, 2021:

➢ Revenue totaled $31,000, down 84% from $192,000 with product revenues of $10,500 down 84% and licensing revenues of $16,200 falling 87%. Lexaria’s primary customer in the B2B product revenue stream has been delayed in chain-store rollouts resulting in overstocked inventory and no manufacturing and sales of new inventory for this licensee for the quarter. The decline in licensing fees is attributable to customer difficulties related to the impact of COVID.

➢ Research and development expenses totaled $366,000, increasing 56% from $176,000 as Lexaria undertook several studies within its 2022 applied research and development program focusing on DHT-CBD to treat hypertension;

➢ General and administrative expenses totaled $1.2 million, up 14% from $1.0 million due primarily to increased spending on investor relations and advertising;

➢ Net loss including contributions from non-controlling interests was ($1.4) million, or ($0.25) per share, compared to net income of $418,000 or $0.10 per share.

As of February 28, 2022, cash and marketable securities totaled $8.9 million – a sequential $1.3 million decline. Cash burn for the first six months of FY:22 was approximately ($2.5) million. Lexaria carries $8,000 in loan payable on its balance sheet.

Hypertension Study HYPER-H21-3 Results

Lexaria has launched four human hypertension studies that are evaluating the use of DHT-CBD in reducing blood pressure. The first human study enrolled 24 and examined diastolic pressure over a three hour period and found that the pressure was lower in DHT-CBD subjects. The second study was conducted in 16 volunteers and confirmed that DHT can reduce arterial stiffness. The fourth study began in early April 2022 and will enroll 60 volunteers with updated details presented below.

The third study evaluating DHT-CBT in hypertension began in November 2022. It was designed to measure acute pulmonary hypertension and cardiovascular effects under severe stress. Patients were exposed to lower levels of oxygen during their treatment to measure the effect on hypoxic pulmonary vasoconstriction. It was designed to evaluate the effect of DHT-CBD on pulmonary vascular function in normotensive individuals exposed to hypoxia. On April 14, 2022, Lexaria issued a press release announcing that the HYPER-H21-3 study had generated positive results with positive safety and efficacy findings.

Third study findings indicated a tendency (p=0.1) during 15 minutes of simulated low levels of oxygen (hypoxia) for reduced pulmonary artery systolic pressure (PASP) with DHT-CBD treatment versus placebo. Most notably, PASP was reduced by ~5 mmHg or 41% overall (p=0.045) in male participants specifically suggesting differences by sex in responsiveness to CBD treatment under hypoxic stress conditions. Males made up eight of the 16 subjects enrolled. Results for female participants was not provided.

Results from the study will be used to direct future research of DHT-CBD for management of pulmonary arterial pressure under hypoxic conditions (altitude exposure), related hypoxemic pathologies (severe lung disease) and pulmonary hypertension. The data will also support efforts to seek FDA approval via an investigational new drug (IND) application to begin formal, registered clinical testing in the treatment of hypertension.

Study design included eight female and eight male subjects aged from 18 to 35 years. Participants were given 30 minutes of rest following dosing where they breathed normal 21% oxygen air followed by a 40-minute period of simulated hypoxia (12% oxygen) in order to simulate hypoxic pulmonary vasoconstriction and pulmonary hypertension. The results were intended to simulate conditions at high altitude or activities with diminished oxygen availability that could lead to hypoxic pulmonary vasoconstriction.

Hypertension Study HYPER-H21-4

Lexaria announced that the HYPER-H21-4 trial had begun enrolling in an April 19 press release. The 60-subject study is of a randomized, double blinded, placebo-controlled, cross-over design with elevated, mild or moderate hypertension. The primary endpoint is 24-hour ambulatory blood pressure. Secondary endpoints include vascular health including arterial stiffness and autonomic balance, electrocardiogram analysis, brain structure and function through MRI testing, blood biomarkers, renal and hepatic analysis, sleep quality, geriatric depression scale, perceived stress and Beck anxiety inventory.

Dosing began ahead of schedule and now over half of the targeted volunteers have been dosed. Treatment visits are expected to be complete by July 2022 and baseline brain magnetic resonance image scanning has started. No serious adverse events have been reported and DHT-CBD has been well tolerated. We expect to see results in 2H:22 with data used to support an Investigational New Drug (IND) application with the FDA. Results from the trial will also aid in the design of the registered trial.

Nicotine Program Updates

Over the last couple months, Lexaria has enjoyed several pieces of good news for its nicotine program. As we mentioned in our initiation, Lexaria had worked with Altria in the past to develop new methods of nicotine delivery and had even received $1 million in upfront payments to support development efforts. While the elements of this agreement have largely expired, Lexaria has forged ahead in the nicotine space encouraging Altria to come back for another agreement. While details were sparse, on April 11, Lexaria announced a new agreements with Altria Client Services, LLC where it will provide DHT powder-based nicotine formulations to Altria. Lexaria will receive a fee for the formulations, which will be evaluated by Altria. The arrangement will be in effect for one year.

Last October, Lexaria shared results from its NIC-A21-1 study finding that DHT nicotine was able to achieve a higher peak and sustained levels of nicotine in blood compared with the control pouch in an animal study which we discuss in a previous report. Since then other studies have been advanced NIC-H22-1 which is expected to begin dosing this summer. The 36-subject human study is a pharmacokinetic, randomized, double blinded, cross-over design intended to compare Lexaria’s DHT-nicotine pouch performance to competing brands currently sold in the US such as ON! and Zyn. Data collection will include time to maximum concentration (T_MAX), the peak concentration of nicotine (C_MAX) and total nicotine in blood serum as represented by the area under the curve (AUC). The study will also examine throat burn, user experience and other secondary endpoints. Dosing is expected to begin this summer.

Lexaria has also made progress in intellectual property protection for its nicotine programs and was recently awarded an oral nicotine patent in Australia. The protected claim is entitled “Compositions Infused with Nicotine Compounds and Methods of Use Thereof.” Protection is extended to most oral forms of nicotine including pills, tablets, lozenges, capsules, pouches, gums and sprays. It also covers multiple forms of nicotine including free base nicotine, nicotine salts, polymer resins of nicotine and other forms of nicotine complexes. The patent is expected to expire in April 2039.

Epilepsy

One of Lexaria’s closest comparisons for DHT-CBD is Jazz Pharmaceutical’s JAZZ Epidiolex, a CBD product which was approved in August 2021 for a certain types of epilepsy. We think that Jazz would make a good partner for Lexaria for a collaboration in advancing CBD-based treatments such as Lexaria’s active hypertension program. Perhaps in an attempt to attract Jazz’ attention, Lexaria has announced that it will begin a DHT-CBD epilepsy program that will compare efficacy with Jazz’ Epidiolex for reducing seizure activity. The program is designated EPIL-A21-1 and will use a third-party laboratory to evaluate rodents in an acute seizure model and a chronic chemically induced seizure model. The design of the animal study mirrors that used to advance Epidiolex pre clinically. The study will be funded with Lexaria’s internal resources.

Cannabinoids and SARS-CoV-2

On January 18, 2022, Lexaria announced and responded to an independent study that had been published in the Journal of Natural Products on January 10^th, “Cannabinoids Block Cellular Entry of SARS-CoV-2 and the Emerging Variants | Journal of Natural Products (acs.org)“, that found cannabinoid acids to be allosteric as well as orthosteric ligands with micromolar affinity for spike protein. Among the compounds with the highest affinity for spike protein were CBGA², THCA-A³, and CBDA⁴. CBDA and CBGA were found to prevent infection of human epithelial cells by a pseudovirus expressing the SARS-CoV-2 spike protein and prevent entry of live SARS-CoV-2 into cells. CBDA and CBGA were also found to be equally effective against alpha variant B.1.1.7 and beta variant B.1.351. In an interview with vice.com, lead author, Dr. Richard van Breeman, commented that oral delivery was effective, and that smoking or vaping cannabis was likely not effective. Lexaria is currently conducting research with DHT-cannabinoid formulations across a range of indications, including an advanced oral DHT-CBD formulation that in manufacturing leaves the cannabinoids unaltered by high temperatures.

Sildenafil Results

Lexaria conducted animal studies evaluating the leading phosphodiesterase inhibitor (PDE5 inhibitor), sildenafil, for erectile dysfunction. The February 2^nd release identified a trend of higher overall delivery of sildenafil into the blood stream. Within four minutes of administration, the DHT formulation delivered materially higher levels of the drug in the plasma compared with the generic formulation of the same concentration. One of the shortcomings of current formulations of erectile dysfunction drugs is the extended time period between administration and response, which can make a difference depending on how fast you are. Below is the comparison of DHT sildenafil vs. control over a three hour period. It shows that the DHT-sildenafil formulation achieved a maximum concentration (C_MAX) in the blood plasma that was ~70% higher as compared to the control formulation. The time to C_MAX was achieved 25% faster (15.1 ± 5.9 minutes with the DHT-sildenafil versus 21 ± 7.74 minutes with the Control-sildenafil).

Summary

Lexaria has started 2022 with a full slate of programs from in-human studies for hypertension and nicotine, to preclinical efforts in epilepsy, hormones, dementia, rheumatoid disease and diabetes. The most advanced effort the company is undertaking is the IND preparatory work for clinical hypertension studies which could open up a massive market if successful. We recently initiated on Lexaria, explaining its DHT technology platform and its wide applicability to enabling oral administration of products and therapies. DHT enhances bioavailability of active compounds via the digestive tract and topical administration and appears to be superior to other forms of administration including alternative types of oral delivery as supported by its studies.

In this report, we update Lexaria’s progress on multiple fronts over the last several months and discuss 2Q:22 financial performance. New information includes several advancements in hypertension trials, milestones in nicotine efforts including a new arrangement with Altria and the start of a new study in epilepsy.

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