Anavex Life Sciences Corp. — Form 10-Q Summary
Business context and reporting period. Anavex is a clinical-stage biopharmaceutical company developing precision-medicine treatments for central nervous system diseases. Its lead candidate, ANAVEX 2-73, is being studied in Alzheimer’s disease, Parkinson’s disease and Rett syndrome. This report covers the three months ended December 31, 2020, the first quarter of fiscal 2021; comparisons are with the three months ended December 31, 2019 unless stated otherwise.
Financial results and position
| Metric | Q1 FY2021 | Comparable period |
|---|---|---|
| Revenue from operations | None | None |
| Operating expenses | $9.40 million | $7.70 million |
| Research and development | $7.93 million | $6.35 million |
| General and administrative | $1.47 million | $1.35 million |
| Net loss | $7.86 million | $6.59 million |
| Basic and diluted loss per share | $0.12 | $0.12 |
| Net cash used in operating activities | $7.87 million | $5.73 million |
| Cash from financing activities | $25.98 million | $11.00 million |
Cash and cash equivalents were $47.36 million at December 31, 2020, up from $29.25 million at September 30, 2020. Working capital was $46.30 million, versus $27.24 million at fiscal year-end. Total liabilities were $8.03 million, consisting of current accounts payable and accrued liabilities; the filing reports no debt. The company had no commercial revenue, so a commercial gross margin is not applicable. It reported $1.27 million of Australian R&D incentive income and a $0.33 million foreign-exchange gain in the quarter. These offset part of operating costs but are not product sales.
Material changes and financing
- Operating expenses rose $1.70 million year over year, mainly due to a $1.58 million increase in R&D spending as clinical programs advanced. Operating cash use increased by $2.15 million.
- The company raised $26.24 million in gross proceeds through common-stock sales under its Lincoln Park purchase agreement and at-the-market sales agreement; net financing cash flow was $25.98 million after share issue costs. Shares outstanding increased from 62.05 million at September 30 to 66.96 million at December 31.
- At quarter-end, approximately $6.65 million remained under the Lincoln Park agreement and $33.72 million was registered and available under the sales agreement. The filing says the Lincoln Park availability was exhausted after quarter-end. It also reports substantial subsequent ATM sales and planned a prospectus supplement for an additional offering of up to $50 million.
- Management expects existing cash and third-party financial commitments to cover cash commitments for at least two years from issuance of the statements. It expects negative cash flows for the foreseeable future and cannot predict when, if ever, it will become profitable.
Outlook, clinical developments and risks
- The U.S. Phase 2 Rett syndrome trial completed in December 2020. The company reported that 5 mg was well tolerated and described statistically significant findings on secondary efficacy measures, including RSBQ and CGI-I responses. These are company-reported trial results; the filing does not provide a full results dataset.
- The company reported completion of its Phase 2 Parkinson’s disease dementia trial in October 2020, describing ANAVEX 2-73 as well tolerated and reporting dose-dependent, statistically significant improvements in computerized cognitive assessment. It anticipated seeking FDA guidance before further trials; detailed numerical results are not provided here.
- The Phase 2b/3 Alzheimer’s study, Rett syndrome AVATAR and EXCELLENCE studies, and Phase 1 ANAVEX 3-71 study were ongoing. Clinical timing and outcomes remain uncertain, and preclinical activity may not translate to human benefit.
- After quarter-end, the company reported a $1.0 million Michael J. Fox Foundation research grant for Parkinson’s disease work, with $497,931 received by the filing date. Subsequent equity sales also provided additional capital.
- Management said COVID-19 had no material effect on the quarter’s results or financial condition, but could not estimate future effects on trials, operations or finances. Additional financing may be needed; unavailable or unfavorable financing could force delays or reductions in R&D.
- The filing highlights recent stock-price volatility and the possibility of a short squeeze. Other key risks include clinical and regulatory failure or delay, dependence on third parties, uncertain intellectual-property protection, competition, and potential dilution from future equity sales. Ordinary-course legal matters were not believed to be material; no material pending legal proceedings were identified.
Important facts for investors to verify
- Review the full Rett and Parkinson’s trial results, including endpoints, statistical methods, safety data and any subsequent regulatory feedback; the filing’s summary does not provide complete datasets.
- Track cash burn against the stated two-year liquidity assessment, including the timing and collectability of R&D incentives and grants.
- Confirm the amount and terms of subsequent ATM sales and other equity financing, and assess resulting dilution; reported share count was 66.96 million at December 31 and 69,487,852 as of February 12, 2021.
- Monitor enrollment, trial execution, regulatory milestones and any COVID-19-related disruptions across the clinical programs.
- Assess the company’s reliance on non-product income and equity financing while it has no operating revenue and continues to incur losses.