Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Third quarter and nine months ended June 30, 2018; fiscal year ends September 30. The interim financial statements are unaudited. Anavex is a clinical-stage biopharmaceutical company with no product revenue.
Financial results and liquidity
| Metric | Three months ended June 30, 2018 | Three months ended June 30, 2017 | Nine months ended June 30, 2018 | Nine months ended June 30, 2017 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $4.62 million | $3.71 million | $13.44 million | $10.48 million |
| Research and development | $3.00 million | $2.30 million | $8.94 million | $6.84 million |
| General and administrative | $1.62 million | $1.41 million | $4.51 million | $3.65 million |
| Net loss | $2.85 million | $3.61 million | $11.66 million | $8.31 million |
| Basic and diluted loss per share | $0.06 | $0.04 | $0.26 | $0.12 |
| Net cash used in operating activities | Not separately provided | Not separately provided | $8.53 million | $6.83 million |
Quarterly net loss narrowed year over year despite higher operating expenses, helped by $1.77 million of other income, including $1.63 million of Australian R&D incentive income. For the nine-month period, net loss increased as higher operating costs outweighed lower total other income. No revenue or operating margin was reported; margins are not meaningful for this pre-revenue company.
At June 30, 2018, cash and cash equivalents were $25.83 million, compared with $27.44 million at September 30, 2017. Working capital was $23.53 million, down from $24.20 million. Current liabilities were $3.21 million, all accounts payable and accrued liabilities; the filing reports no debt. Financing activities provided $6.92 million during the nine months, principally from $6.97 million of share sales under the Lincoln Park agreement.
Changes, financing and other notable items
- Nine-month R&D expense rose about 31%, to $8.94 million, primarily for preparation of planned clinical trials and pipeline work. G&A increased about 24%, to $4.51 million, largely due to expanded staffing and compensation.
- Stock-based compensation was $4.03 million for the nine months, versus $3.02 million a year earlier. The company estimated approximately $8.60 million of further stock-based compensation over the remaining option vesting terms.
- Under its Lincoln Park purchase agreement, Anavex issued 1.88 million purchase shares for $6.97 million during the period; $14.40 million remained available at June 30. The agreement was due to expire October 21, 2018.
- After quarter-end, Anavex entered a Cantor Fitzgerald at-the-market sales agreement permitting up to $50 million in gross share sales, at the company’s discretion, with commissions of up to 3%. This may provide financing but could dilute existing shareholders.
- Common shares outstanding were 45.31 million at June 30 and 45.43 million as of August 9, 2018. A further 8.45 million potential shares from options and warrants were excluded from diluted loss per share as anti-dilutive.
- Operating lease commitments totaled $102,695. The company disclosed ordinary-course claims but did not believe pending matters would materially affect its financial statements.
Outlook, programs and risks
- Management said existing cash and potential future equity or debt financing were expected to fund operations for the next 12 months after issuance of the statements. The filing cautions that additional financing may not be available on acceptable terms and that failure to obtain it could delay, reduce or halt development activities.
- Management expected R&D spending to increase as planned ANAVEX 2-73 studies in Alzheimer’s disease, Rett syndrome and Parkinson’s disease dementia progressed. The company had no specific revenue guidance.
- After quarter-end, Australian ethics approval was received for a 48-week Phase 2b/3 Alzheimer’s trial planned to enroll approximately 450 patients; Spanish authorization was received for a 14-week Phase 2 Parkinson’s disease dementia trial planned for approximately 120 patients. Both were expected to begin in the second half of calendar 2018. The Rett syndrome Phase 2 study remained in preparation, subject to FDA review of its IND.
- The filing describes prior Phase 2a Alzheimer’s findings as positive, but these were exploratory results from a small, open-label study. The planned larger controlled trials and product candidates remain subject to clinical, safety, regulatory, funding and commercialization risks; preclinical findings may not translate to human benefit.
- Other stated risks include uncertain patent scope and enforceability, potential third-party intellectual-property claims, foreign-currency exposure and reliance on external financing. Management reported disclosure controls were effective as of June 30, 2018.
Important facts for investors to verify
- Whether the planned Alzheimer’s, Parkinson’s dementia and Rett syndrome studies began on schedule, their enrollment progress, and subsequent clinical and regulatory updates.
- Actual cash burn and remaining liquidity relative to management’s 12-month funding expectation, including any use of the Cantor Fitzgerald offering or other financing.
- Share issuance, dilution and remaining availability under the Lincoln Park and Cantor Fitzgerald arrangements.
- Whether Australian R&D incentive receipts recur and how their timing affects reported other income and cash flow.
- Potential option and warrant dilution, including post-quarter warrant exercises and expirations.