IXHL: A Deep Dive
There is this video I saw on YouTube a while back where a man suffering from Parkinsons uses cannabis to manage his symptoms. Now when I say manage, I am underselling it. One hit and a few minutes later you could not tell this man suffered from Parkinsons. I was absolutely in awe of the drastic change in the quality of life this man experienced in a few minutes.
It sparked my curiosity, and I went down this rabbit hole of a sector to learn more and keep tabs on progress from different companies. In the last 5 years many have come and gone, some have yet to produce anything worthy of attention, and a few are now showing signs of major progress.
One promising candidate that I have followed for a couple of years and recently invested in is Incannex ($IXHL).
Let me walk you through my thesis.
What IXHL Is and Why It Matters
Incannex is a clinical stage biotech developing cannabinoid and synthetic psychedelic treatments for multiple chronic conditions. The company is currently testing its treatment on humans, and the results so far put it in line with the video I saw many years ago.
Their current pipeline includes three primary programs:
- Obstructive Sleep Apnea (OSA): IHL 42X
- Rheumatoid Arthritis: IHL 675A
- Generalized Anxiety Disorder: PSX 001
All three programs target a large multi billion dollar market that has not seen meaningful advancement and is still offering outdated therapies and limited patient options. While all three programs are undergoing human testing, the program that I am most interested in is IHL 42X.
Mostly because this single drug has the potential to disrupt an entire industry.
IHL 42X: A New Therapeutic Pathway for Obstructive Sleep Apnea
The most commonly prescribed treatment for obstructive sleep apnea (OSA) is a Continuous Positive Airway Pressure (CPAP) machine. It is a big bulky device that takes up precious space on your nightstand, has hoses coming out of it that connect to a mask that goes on your face, and makes this weird low whooshing sound every time you breathe in. Many have called it the budget Darth Vader.
How many? I don’t know.
Besides being reliant on a machine to not die while you sleep, the whole process is life altering because you are sleeping with a mask on your face for as long as you have the condition. Depending on the severity, you are lugging around a budget Darth Vader mask to keep you alive any time you travel.
You know what would be convenient? A pill one could take to achieve nearly the same results that a CPAP does. This is exactly what IHL 42X is aiming for.
IHL 42X is an oral fixed dose combination of:
- acetazolamide
- dronabinol
Together, these two components target the underlying mechanisms of OSA itself, and recent human trials have shown remarkable results.
OSA uses an index called the Apnea Hypopnea Index (see table below) to measure the severity of the patient’s condition. It is a fairly simple scale that tallies the disruptions a patient experiences when they sleep and categorizes the severity of their condition based on where they fall in the index. A CPAP machine is said to be 100 percent effective in controlling sleep apnea.
| AHI Range | Severity Description | Clinical Notes | Typical Symptoms |
|---|---|---|---|
| 0-4 | Normal | No significant sleep apnea | Normal breathing, no apnea-related disruptions |
| 5-14 | Mild Sleep Apnea | Light but measurable sleep interruptions | Snoring, mild daytime fatigue, light airway obstruction |
| 15-29 | Moderate Sleep Apnea | Frequent breathing interruptions | Daytime sleepiness, cognitive fog, reduced sleep quality |
| 30+ | Severe Sleep Apnea | Significant apnea and hypopnea events | Major fatigue, cardiovascular strain, oxygen desaturation, high health risk |
So how well does IHL 42X perform for patients with OSA?
Evidence That Matters
Phase 2 trial results:
- all tested doses reduced the Apnea Hypopnea Index
- the lowest dose delivered the strongest improvements
- average AHI reduction reached 51 percent
- one quarter of patients saw over 80 percent reduction in their AHI
From their press release, they quote
“even a 20 percent reduction is clinically meaningful. IHL 42X more than doubled that threshold on average.”
I searched around to find out if what they say has any weight, and after asking a few doctor buddies and family members, they confirmed that a 20 percent reduction would immediately warrant a closer look.
Recall IHL 42X showed a 51 percent reduction on average, and a quarter of patients saw an 80 percent reduction. If you look at the index and do the math, moderate apnea patients would immediately fall an index, two in some cases. Mild apnea patients will see almost no symptoms if we base everything off these results. Severe users would see a drastic improvement in their quality of life with just one dose.
| Starting Severity | Starting AHI | 20% Reduction | 50% Reduction | 80% Reduction | Post-Reduction Severity (50%) |
|---|---|---|---|---|---|
| Normal | 0-4 | 0-3 | 0-2 | 0-1 | Normal |
| Mild | 5-14 | 4-11 | 2-7 | 1-3 | Normal or Mild depending on baseline |
| Moderate | 15-29 | 12-23 | 7-14 | 3-6 | Mild or Normal depending on baseline |
| Severe | 30+ | 24+ | 15+ | 6+ | Moderate to Mild depending on reduction |
This is an oral therapy that requires no device, no equipment, and no lifestyle interference.
The company is now conducting a global Phase 2 and 3 trial known as RePOSA. It focuses on patients who are CPAP intolerant, CPAP non compliant, or CPAP naive.
I could not find exact numbers, but I was able to ascertain that there are many people online who are absolutely annoyed with their CPAP machines and want an alternative. I have read about marriages suffocating, waking up with mask impressions all over your face, masks coming off mid sleep, and countless patients who cannot stand the noise the machine makes.
It seems that the market is in dire need of a new solution, and IHL 42X is currently the most promising alternative. Let us take a deeper look at the market and see what challenges and opportunities exist for IHL 42X.
Competitors and Total Addressable Market
CPAP is a symptom management system, so it does not address the physiological cause of apnea. This is where IHL 42X stands out because:
- it targets root causes
- it is taken orally
- it works for patients who reject CPAP
- its components are understood and well studied
- it touches two biological pathways instead of one
There is no oral combination therapy approved for OSA. IHL 42X is alone in this category.
Total Addressable Market
The global sleep apnea device market was worth 8.2 billion dollars in 2023. It is projected to grow to 20.4 billion dollars by 2033. This valuation excludes the pharmaceutical category because no approved OSA drugs exist yet. If IHL 42X succeeds, it will create a new segment inside a rapidly growing market.
I also believe that Incannex has the potential to disrupt the sector with its offering, thereby changing opinions about the use of cannabinoids and psychedelics in treatments. This will open the door to more research and funding, which in turn will provide Incannex the potential to expand its offering to a much larger market.
And Incannex is already positioned to accommodate the market on its terms.
The Broader Pipeline
Beyond IHL 42X, Incannex ($IXHL) is working on two more programs, both of which are in Phase 2 and have shown similarly impressive results.
IHL 675A: Rheumatoid Arthritis
A combination of CBD and hydroxychloroquine that targets inflammation and immune dysregulation simultaneously. Rheumatoid Arthritis is dominated by expensive biologics. An oral combination therapy with a favorable safety profile could carve meaningful space.
PSX 001: Synthetic Psilocybin for GAD
An oral synthetic psilocybin taken with psychological support. Phase 2 data showed that 44 percent of patients achieved at least a 50 percent reduction in anxiety scores with no serious adverse events. Full results are expected in 2025.
My Multi Year Thesis
Base Case
Global trials report clean, consistent results. IHL 42X earns recognition as the first credible pharmaceutical alternative for CPAP intolerant patients.
Growth Case
Both the OSA program and the broader pipeline show momentum. The valuation begins to separate from the underlying assumptions currently priced into the stock.
Asymmetric Tail Case
If IHL 42X achieves approval, IXHL becomes the first pharmaceutical entrant in a multi billion dollar market with no direct competitor. The upside becomes uncapped, and the float amplifies the move.
Scenario Modeling
I decided to use whatever data I could find to create 3 models for a valuation based on market capture if IHL 42X wins approval. This is a very rough, done in my living room estimate. Take it with a bag of salt or something.
Assumptions Used
To keep everything grounded and simple:
- Global adult OSA population: 936 million
- Estimated diagnosable/treatable market: 20 percent
→ ~187 million addressable - Average annual revenue per patient (drug therapy estimate): $1,000 USD
(this is conservative; many chronic therapies run $2,000 to $4,000 annually) - Market cap math uses current share count: 347.7 million shares
- Share price projections are market cap ÷ shares outstanding
These are not predictions, just valuation frameworks.
Scenario 1 — Conservative Case (2 percent penetration)
| Metric | Value |
|---|---|
| Penetration Rate | 2% |
| Patients Using IHL-42X | 3.74 million |
| Annual Revenue (USD) | 3.74 billion |
| Revenue Multiple Used | 2x |
| Estimated Valuation (USD) | 7.48 billion |
| Shares Outstanding | 347.7 million |
| Implied Share Price (USD) | $21.50 |
Even with very low penetration, the valuation dramatically exceeds the current micro-cap level. The gap between today’s market cap and this scenario is the core of the asymmetry.
Scenario 2 — Moderate Case (10 percent penetration)
| Metric | Value |
|---|---|
| Penetration Rate | 10% |
| Patients Using IHL-42X | 18.7 million |
| Annual Revenue (USD) | 18.7 billion |
| Revenue Multiple Used | 3x |
| Estimated Valuation (USD) | 56.1 billion |
| Shares Outstanding | 347.7 million |
| Implied Share Price (USD) | $161.39 |
This is when IXHL becomes a global OSA pharmaceutical leader.
Not guaranteed, but mathematically valid if the drug becomes the go-to alternative.
Scenario 3 — Aggressive Case (25–50 percent penetration)
| Metric | 25% Penetration | 50% Penetration |
|---|---|---|
| Patients Using IHL-42X | 46.75 million | 93.5 million |
| Annual Revenue (USD) | 46.75 billion | 93.5 billion |
| Revenue Multiple Used | 4x | 4x |
| Estimated Valuation (USD) | 187 billion | 374 billion |
| Shares Outstanding | 347.7 million | 347.7 million |
| Implied Share Price (USD) | $538.02 | $1076.05 |
This is not a price prediction. This is simply an attempt to show the upper bound math if IXHL’s therapy becomes a global standard of care with mass adoption. Highly unlikely but useful to illustrate the scale of the opportunity.
My Position
As mentioned earlier, I am currently holding IXHL and have short term plans to increase my investment. I see the current share price as a bargain, and every quarter the stock has shown steady improvement in the technicals, leading me to believe that management is not completely clueless and knows what they are doing.
I am still cautious about IXHL, as it is a risky investment that may never pan out, but the newly released results and progression to Phase 3 have given me enough reasons to continue holding and scaling for now.
This article is for informational purposes only. It reflects my personal research and opinions. It is not financial advice. Always do your own due diligence and consult a licensed professional before making investment decisions.
For moving pictures and questionable facial expressions, check out YouTube @dygres.
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