Anavex Life Sciences Corp. — FY2011 Form 10-K
Reporting period: Fiscal year ended September 30, 2011. The filing was signed December 21, 2011. This is a development-stage biopharmaceutical company with no commercial revenue.
Business context and development
Anavex is developing sigma-receptor compounds for central nervous system diseases and cancer. Its lead candidate, ANAVEX 2-73, targets Alzheimer’s disease. The company reported that the candidate entered its first human trial in early 2011 and announced completion of a Phase 1 single-ascending-dose study on November 14, 2011. Other CNS and oncology candidates remained preclinical.
Financial performance and liquidity
| Metric | FY2011 | FY2010 |
|---|---|---|
| Revenue | $0 | $0 |
| Total expenses | $6.181 million | $5.648 million |
| Net loss | $7.307 million | $8.783 million |
| Loss per share, basic and diluted | $0.29 | $0.41 |
| Research and development expense | $2.597 million | $2.729 million |
| Cash used in operations | $3.801 million | $4.594 million |
Revenue and profit margins are not meaningful because the company had no revenue and incurred losses. FY2011 expenses rose $532,314, primarily due to consulting fees, which increased $674,947; the filing attributes this mainly to stock-option repricing compensation. R&D expense decreased $131,557. Net loss improved by $1.476 million, largely as debt-discount accretion and interest/financing charges fell; this was partly offset by debt-conversion and debt-settlement charges.
Cash was $134,702 at year-end, down from $264,669. Financing activities provided $3.672 million, including $3.022 million from common-share issuance and $750,000 from promissory notes. Current assets were $200,605 and current liabilities $1.345 million, for a working-capital deficit of $1.145 million, improved from $2.964 million in 2010. Total liabilities were $1.345 million. Notes payable had a carrying value of $867,919; the filing also reports a $67,500 derivative liability. The filing does not provide a clear standalone debt-to-equity or margin measure.
Changes, outlook and material risks
- Accumulated deficit reached $29.203 million. The independent auditor highlighted substantial doubt about the company’s ability to continue as a going concern.
- Management estimated that up to $10 million would be required for the 12 months ending September 30, 2012, principally to continue ANAVEX 2-73 clinical work and develop the SIGMACEPTOR platform. The company had no committed additional financing and warned that a funding shortfall could delay or reduce development or lead to cessation of operations.
- After year-end, the company reported issuing a $250,000, 8% promissory note and raising $769,500 through units priced at $1.25, before a $57,000 cash finder’s fee. These proceeds were substantially below the stated funding requirement.
- In the Phase 1 study, the protocol-defined maximum tolerated single dose was 55–60 mg. The company reported no significant laboratory or ECG changes and mild adverse events below that dose; headache and dizziness were moderate and reversible above it. The study involved healthy male volunteers and does not establish efficacy in Alzheimer’s patients.
- Principal risks include clinical and regulatory failure, uncertain patent protection, dependence on external research and clinical organizations, intense competition, dilution from future financing, and limited access to capital. The common stock traded on the OTC Bulletin Board and was subject to penny-stock risks.
- Management concluded that disclosure controls and internal control over financial reporting were ineffective at year-end, citing material weaknesses in segregation of duties, management review, governance documentation, and technical accounting expertise. Management planned remediation, including hiring accounting staff.
Important facts for investors to verify
- Current cash, subsequent financing, debt maturities and the remaining gap against the stated $10 million funding need.
- Full Phase 1 safety and pharmacokinetic results, and the design, timing and funding of planned patient studies.
- Whether internal-control weaknesses were remediated and whether later filings report accounting corrections or control improvements.
- Current status and geographic scope of patents, and any obligations tied to transferred intellectual property or collaborations.
- Potential dilution from outstanding options, warrants and convertible notes; the filing reported 27,187,174 common shares outstanding as of December 19, 2011.