Incannex Healthcare Inc. Executes Strategic Cancellation of 50.4% of Series A Warrants, Significantly Reducing Potential Dilution

Rhea-AI Summary

Incannex Healthcare (Nasdaq: IXHL) has successfully raised $16.7 million through an at-the-market (ATM) facility, with $12.5 million allocated to cancel up to 50.4% of its Series A Warrants. This strategic move will eliminate the potential issuance of up to 175.2 million additional shares that could have resulted from warrant adjustment features. The cancellation affects up to 5,841,038 warrants from a previous financing agreement.

CEO Joel Latham emphasized that this initiative reduces significant stock overhang and demonstrates the company's commitment to responsible capital management. The timing is particularly strategic as it precedes the upcoming Phase 2 IHL-42X results. The company plans to continue evaluating additional strategic initiatives to improve its capital structure.

Positive

• Cancellation of 50.4% of Series A Warrants eliminates potential dilution of up to 175.2 million shares
• Successfully raised $16.7 million through ATM facility
• Strategic timing ahead of Phase 2 IHL-42X clinical results
• Demonstrates proactive capital management and commitment to shareholder value

Negative

• Current $16.7M capital raise through ATM facility causes immediate dilution
• 49.6% of Series A Warrants remain outstanding, maintaining some dilution risk

Insights

Financial Strategist

Incannex's strategic warrant cancellation reduces potential share dilution by 175.2M shares, improving shareholder value ahead of crucial clinical data.

Incannex has executed a pivotal financial maneuver by raising $16.7 million through its at-the-market facility and allocating $12.5 million to cancel 50.4% of its outstanding Series A Warrants. This strategic decision eliminates approximately 5.84 million warrants that could have resulted in the issuance of up to 175.2 million additional shares if adjustment features were triggered.

This transaction addresses a significant overhang in Incannex's capital structure. Warrants with adjustment features (often called "toxic" or "death spiral" convertibles in financial circles) can create substantial dilution risk, particularly for clinical-stage biotech companies with volatile stock prices. By proactively removing 50.4% of these instruments, management has effectively protected existing shareholders from potential value erosion.

The timing is particularly strategic as Incannex approaches the release of Phase 2 data for its IHL-42X program. Clinical data releases often trigger significant stock volatility - precisely when convertible instruments with adjustment features can cause maximum dilution. By cleaning up the capital structure beforehand, positive clinical data (if achieved) would flow more directly to shareholder value rather than being partially absorbed by warrant holders.

From a balance sheet perspective, this transaction strengthens Incannex's financial position by removing a contingent liability. While using $12.5 million of the $16.7 million raised does reduce near-term operational capital, the removal of future dilution risk creates a more attractive capital structure for potential institutional investors who typically avoid companies with significant warrant overhang.

Raises $12.5M via ATM to Strengthen Shareholder Position Ahead of IHL-42X Phase 2 Data

NEW YORK and MELBOURNE, Australia, May 20, 2025 (GLOBE NEWSWIRE) -- Incannex Healthcare Inc. (Nasdaq: IXHL) (“Incannex” or the “Company”), a clinical-stage biopharmaceutical company pioneering the development of combination drug therapies, today announced the successful completion of a $16.7 million gross proceeds capital raise through its at-the-market (ATM) facility. $12.5 million of these proceeds will be used to cancel up to 50.4% of the Series A Warrants previously issued as part of a prior financing agreement.

This strategic initiative significantly reduces potential future dilution attributable to the Series A Warrants, with up to 5,841,038 of these warrants eligible for cancellation. If triggered, the adjustment features of these Series A Warrants could otherwise have resulted in up to 175.2 million additional shares being issued. This move underscores Incannex’s proactive approach to capitalization management and shareholder alignment.

“This is a positive development for Incannex shareholders,” said Joel Latham, President and CEO of Incannex. “We’ve completed a targeted warrant cancellation that eliminates a significant overhang and reduces significant potential dilution from our prior financing. We believe this initiative demonstrates our commitment to responsible capital management and puts shareholders in a stronger position ahead of our Phase 2 IHL-42X results.”

“Following the successful execution of this warrant cancellation, we plan to continue to evaluate further strategic initiatives to continue improving our capital structure. We view this as an important precedent and a signal to the market that we are focused on long-term value creation and protecting shareholder interests.”

This initiative demonstrates Incannex’s continued commitment to shareholder value creation, responsible capital planning, and strengthening of its long-term financial position as it advances its clinical pipeline.

For more information, please refer to the Form 8-K filed with the SEC on May 15, 2025, including the Letter Agreements referenced therein.

About IHL-42X

IHL-42X is designed to treat obstructive sleep apnea (“OSA”) by targeting its underlying pathophysiology. An oral fixed-dose combination of dronabinol and acetazolamide, IHL-42X is currently advancing through the RePOSA Phase 2/3 clinical trial, which is expected to enroll more than 560 patients at sites worldwide.

Designed to act synergistically, IHL-42X uniquely targets two physiological pathways associated with the intermittent hypoxia (“IH”) and hypercapnia that characterize OSA. In a prior Australian Phase 2 clinical trial, IHL-42X was shown to reduce the Apnea-Hypopnea Index (“AHI”) in all dosage strengths, with the lowest dose reducing AHI by an average of 51 percent relative to baseline. RePOSA, a global Phase 2/3 clinical trial is underway, evaluating IHL-42X in individuals with OSA who are either non-compliant, intolerant, or naïve to positive airway pressure devices, including CPAP, with the Phase 2 portion conducted in the United States. A topline readout from the U.S. Phase 2 portion is anticipated in July 2025.

About Incannex Healthcare Inc.
Incannex is leading the way in developing combination medicines that target the underlying biological pathways associated with chronic conditions, including obstructive sleep apnea, rheumatoid arthritis and generalized anxiety disorder. The company is advancing three clinical-stage product candidates based on evidence-based innovation, and supported by streamlined operations. Incannex's lead clinical program, IHL-42X, is an oral fixed-dose combination of dronabinol and acetazolamide designed to target underlying mechanisms and act synergistically in the treatment of obstructive sleep apnea. In a Phase 2 development program, IHL-675A is an oral fixed-dose combination of cannabidiol and hydroxychloroquine sulfate designed to act synergistically to alleviate inflammatory conditions, such as rheumatoid arthritis. Approved for Phase 2 clinical development, PSX-001 is an oral synthetic psilocybin treatment for the treatment of generalized anxiety disorder. Incannex's programs target disorders that have limited, inadequate, or no approved pharmaceutical treatment options. For additional information on Incannex, please visit our website at www.incannex.com.

Forward Looking Statements
This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements in this press release include statements about, among other things: Incannex's business strategy, future operations; Incannex's ability to execute on its objectives, prospects, or plans, evaluations and judgments regarding Incannex's research and development efforts, including any implications that the results of earlier clinical trials will be representative or consistent with later clinical trials or final results; the expected timing of enrollment for these trials and the availability of data or results of these trials, and the potential benefits, safety or of Incannex's drug candidates. Forward-looking statements are statements other than historical facts and relate to future events or circumstances or Incannex's future performance, and they are based on management's current assumptions, expectations, and beliefs concerning future developments and their potential effect on Incannex's business; Incannex’s ability to obtain the requisite stockholder approval for the exercise of the Series A Warrants; Incannex’s ability to potentially improve its capital structure in the future. These forward-looking statements are subject to a number of risks and uncertainties, which may cause the forward-looking events and circumstances described in this press release to not occur, and actual results to differ materially and adversely from those described in or implied by the forward-looking statements. These risks and uncertainties include, among others: the continued availability of financing; Incannex's ability to raise capital to fund continuing operations, to complete capital raising transactions and to potentially improve its capital structure; the impact of any infringement actions or other litigation brought against Incannex; the success of Incannex's development efforts, including Incannex's ability to progress its drug candidates through clinical trials on the timelines expected; competition from other providers and products; that the market for its drug candidates may not grow at the rates anticipated or at all; Incannex's compliance with the various evolving and complex laws and regulations applicable to its business and its industry; and Incannex's ability to protect its proprietary technology and intellectual property; and other factors relating to Incannex's industry, its operations and results of operations. The forward-looking statements made in this press release speak only as of the date of this press release, and Incannex assumes no obligation to update publicly any such forward-looking statements to reflect actual results or to changes in expectations, except as otherwise required by law. Incannex's reports filed with the U.S. Securities and Exchange Commission (SEC) including its annual report on Form 10-K for the fiscal year ended June 30, 2024, filed with the SEC on September 30, 2024, and the other reports it files from time to time, including subsequently filed annual, quarterly and current reports, are made available on Incannex's website upon their filing with the SEC. These reports contain more information about Incannex, its business and the risks affecting its business, as well as its results of operations for the periods covered by the financial results included in this press release. For additional information on Incannex, please visit our website at www.incannex.com.

Contact Information
Jennifer Drew-Bear
Edison Group for Incannex
Jdrew-bear@edisongroup.com

FAQ

What is the purpose of IXHL's $16.7 million ATM capital raise in May 2025?

$12.5 million of the raised funds will be used to cancel 50.4% of Series A Warrants, reducing potential future dilution that could have resulted in up to 175.2 million additional shares being issued.

How many Series A Warrants will be cancelled by Incannex Healthcare?

Incannex will cancel up to 5,841,038 Series A Warrants, representing 50.4% of the previously issued warrants from a prior financing agreement.

What is the significance of IXHL's warrant cancellation timing?

The warrant cancellation is strategically timed to strengthen shareholder position ahead of the company's Phase 2 IHL-42X clinical trial results.

How will the Series A Warrant cancellation benefit IXHL shareholders?

The cancellation eliminates significant stock overhang and reduces potential future dilution that could have resulted in up to 175.2 million additional shares, protecting shareholder value.