Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Three months ended December 31, 2016, the first quarter of fiscal 2017. The interim financial statements are unaudited. Anavex is a clinical-stage biopharmaceutical company; its lead candidate, ANAVEX 2-73, is being developed for Alzheimer’s disease and other central nervous system indications.
Financial performance and position
- Revenue: None. The company reports no revenue since inception and does not expect revenue until it establishes a commercial or development relationship.
- Operating expenses: $3.17 million, down from $4.53 million in the prior-year quarter. General and administrative expense declined to $1.13 million from $3.37 million; research and development expense rose to $2.04 million from $1.16 million.
- Net loss: $3.15 million, or $0.08 per basic and diluted share, compared with a $3.95 million loss, or $0.12 per share. The prior-year period included substantially higher operating costs, including one-time CEO restricted-stock vesting charges, and higher grant income.
- Other income: $53,000, versus $596,000 a year earlier. Prior-year grant income included $571,093 from an Australian government R&D incentive program; the company anticipated recognizing additional Australian grant income in fiscal Q2 2017.
- Cash flow: Operating cash use was $3.15 million, compared with $3.25 million. Financing provided $15.13 million, mainly from common-stock sales under the Lincoln Park purchase agreement. Cash increased $11.97 million during the quarter.
- Liquidity: Cash was $21.16 million at December 31, 2016, versus $9.19 million at September 30, 2016. Working capital was $19.13 million, up from $6.26 million. Current liabilities were $2.19 million.
- Debt and obligations: No long-term debt or capital lease obligations were reported. Operating lease commitments totaled $252,425, including $84,142 due within one year. The filing gives no gross-margin figure; with no revenue, a revenue-based margin is not meaningful.
- Equity financing and dilution: The company issued 4,472,841 purchase shares under its Lincoln Park agreement for $15.13 million, plus 27,171 commitment shares. It reported $33.51 million of remaining capacity under the agreement. Shares outstanding at December 31 were 40,668,311; 41,073,353 were outstanding as of February 7, 2017.
Business developments, outlook and risks
- Anavex reported that its 32-patient, open-label Phase 2a Alzheimer’s study of ANAVEX 2-73 completed 52 weeks in November 2016 and met its primary and secondary endpoints. The company described safety and exploratory efficacy findings as favorable; the study was small and open-label, and the filing notes that a larger placebo-controlled Phase 2/3 study remained in planning.
- A trial extension allows participants to continue treatment for up to an additional 104 weeks to collect longer-term safety data. Management expected R&D spending to increase as it advanced Alzheimer’s clinical development and other research.
- In January 2017, the company received a Rettsyndrome.org grant of at least $0.6 million to cover most of a planned U.S. Phase 2 Rett syndrome trial, which it expected to begin in calendar 2017.
- Management said it intended to pursue potential research partners within the next 12 months. The company cautioned that financing beyond cash and the Lincoln Park facility is not assured; inability to obtain funding could delay, scale back or halt research and development. Additional equity financing would dilute shareholders.
- Material risks include clinical and regulatory uncertainty, the possibility that preclinical findings will not translate to human trials, dependence on future financing, foreign-currency exposure from Australian and euro-denominated costs, and ordinary-course claims. A purported securities class action was dismissed with prejudice on December 29, 2016; plaintiffs appealed on January 27, 2017, and Anavex said it would continue to defend the matter.
- The company stated that disclosure controls were effective at December 31, 2016. It said added audit-committee review procedures remediated a previously reported material weakness, while noting that weaknesses could be identified in a later assessment.
Important facts for investors to verify
- Whether the planned Alzheimer’s Phase 2/3 study and Rett syndrome Phase 2 trial began as expected, and their design, enrollment, endpoints and funding.
- The full clinical data and limitations behind the company’s reported Phase 2a Alzheimer’s results, including the open-label design and small patient group.
- Cash runway and expected spending against the reported $21.16 million cash balance, including the pace and terms of any further Lincoln Park share sales.
- A discrepancy in the filing’s comparative stock-based compensation figures: the cash-flow statement lists $826,020 for the prior-year quarter, while the stock-compensation note reports $216,020.
- Developments in the securities-litigation appeal and the status of any other contingencies or financing arrangements.