Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2019. The filing was signed May 8, 2019. Anavex is a clinical-stage biopharmaceutical company developing CNS therapies; it had no product revenue.
Financial results and liquidity
| Metric | Three months ended March 31, 2019 | Six months ended March 31, 2019 |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $8.14 million | $15.61 million |
| Research and development | $6.08 million | $11.79 million |
| Net loss | $8.01 million; $0.17 per share | $15.34 million; $0.33 per share |
| Net cash used in operating activities | Six months: $8.49 million |
For comparison, second-quarter 2018 operating expenses were $4.73 million and net loss was $4.75 million, or $0.11 per share. First-half 2018 operating expenses were $8.83 million and net loss was $8.81 million. The filing reports no revenue or gross margin; profit margins are not applicable.
At March 31, 2019, cash and cash equivalents were $19.46 million, total current assets were $20.55 million, current liabilities were $6.37 million, and working capital was $14.18 million. Total liabilities consisted of accounts payable and accrued liabilities; the filing reports no debt. Cash declined $3.47 million from September 30, 2018. Financing activities provided $5.02 million in the first half, primarily from common-share issuance. Stock-based compensation was $3.96 million for the six months and is a significant non-cash expense.
Business developments and changes from prior period
- R&D expense increased $2.83 million for the quarter and $5.85 million for the first half year over year, principally reflecting the commencement of three ANAVEX 2-73 trials: Phase 2b/3 Alzheimer’s disease, Phase 2 Parkinson’s disease dementia, and Phase 2 Rett syndrome.
- The Alzheimer’s Phase 2b/3 study began in October 2018 and planned to enroll approximately 450 patients over 48 weeks. The Parkinson’s disease dementia Phase 2 study began in October 2018 and planned to enroll approximately 120 patients over 14 weeks. The Rett syndrome Phase 2 study began in March 2019 and planned to enroll 15 patients over seven weeks.
- The company reported ongoing long-term Phase 2a Alzheimer’s study findings and biomarker analyses as supportive of its development approach. These were exploratory findings, not results from the ongoing placebo-controlled trials.
- Common shares outstanding rose from 45.93 million at September 30, 2018 to 48.17 million at March 31, 2019. The Lincoln Park agreement had $7.84 million remaining available at quarter-end; the separate $50 million at-the-market facility had not been used.
Outlook, risks and unusual items
- Management stated existing cash and third-party financial commitments were expected to cover cash commitments for at least 18 months after issuance of the interim statements. The company nevertheless expects negative cash flows for the foreseeable future and said additional capital will be needed for continued operations and later-stage development. Financing may be unavailable or unacceptable; without it, activities could be scaled back.
- No specific revenue, earnings or clinical-outcome guidance was provided. Management cautioned that trial timing and outcomes are uncertain and that first-half results are not necessarily indicative of full-year results.
- Key risks include clinical-trial success, safety and efficacy, regulatory approval, access to capital, reliance on third parties, competition, and intellectual-property protection. The filing reported no material change to the risk factors in the prior Form 10-K and no material pending litigation.
- Subsequent events: shareholders approved a new incentive plan providing for up to 6 million additional common shares; the company amended its charter to authorize 10 million preferred shares, with board authority to set their terms. On May 3, 2019, the CEO’s agreement was extended through July 2022, with a $550,000 annual base salary, target bonus eligibility of 20%, and 750,000 stock options subject to vesting.
Important facts for investors to verify
- Current enrollment, trial progress, safety data, and timing for the Alzheimer’s, Parkinson’s disease dementia, and Rett syndrome studies.
- Whether exploratory Alzheimer’s findings and proposed genetic biomarkers are confirmed in prospective, controlled trials.
- Actual cash burn and runway relative to management’s 18-month liquidity estimate, and the availability and terms of future financing.
- Remaining capacity and expiry terms of the Lincoln Park purchase agreement, and potential dilution from share issuance, options, and the new incentive plan.
- The terms and potential dilution or priority rights of any preferred shares if issued.