Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Three months ended December 31, 2021 (fiscal Q1 2022); filed February 9, 2022. Financial statements are unaudited. Anavex is a clinical-stage biopharmaceutical company developing precision-medicine treatments for CNS diseases, led by ANAVEX 2-73. The company reported no revenue from operations.
Key financial metrics
| Metric | Q1 FY2022 | Q1 FY2021 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $8.66 million | $7.93 million |
| General and administrative expense | $3.07 million | $1.47 million |
| Total operating expenses | $11.72 million | $9.40 million |
| Other income, net | $0.87 million | $1.60 million |
| Net loss | $10.88 million | $7.86 million |
| Basic and diluted loss per share | $0.14 | $0.12 |
| Net cash used in operating activities | $3.50 million | $7.87 million |
| Net cash from financing activities | $2.54 million | $25.98 million |
| Cash and cash equivalents, period-end | $151.15 million | $47.36 million at December 31, 2020 |
| Working capital, period-end | $146.37 million | $150.82 million at September 30, 2021 |
At December 31, 2021, total assets were $156.90 million and total liabilities were $10.53 million. The filing reports no debt. Profit margins are not meaningful because the company had no operating revenue. Stock-based compensation was $3.91 million, up from $0.94 million, and contributed to reported operating costs.
Changes versus the prior comparable period
- Operating expenses rose 25% to $11.72 million. G&A increased mainly because of higher noncash compensation tied to milestone-based options; R&D also increased, primarily due to higher stock-based compensation.
- Net loss increased to $10.88 million from $7.86 million. Other income declined, principally because Australian R&D incentive income was lower.
- Operating cash use fell to $3.50 million from $7.87 million, principally reflecting R&D incentive tax refunds received in the current quarter. Financing inflows were substantially lower than in the prior-year quarter, which included larger share issuances.
- Cash declined $0.96 million from September 30, 2021. The company sold 99,588 shares through its at-the-market Sales Agreement for $2.31 million gross and $2.15 million net proceeds.
Outlook, developments and risks
- Management said existing working capital should fund requirements for more than 12 months after the financial statements were issued. The company expects negative cash flows to continue and cannot predict when, if ever, it will become profitable.
- Management expects R&D spending to increase as it advances ANAVEX 2-73 studies and extensions, progresses ANAVEX 3-71, and adds clinical-trial support staff. No specific financial or earnings guidance was provided.
- The filing reports that the AVATAR Rett syndrome study’s positive top-line results were announced in February 2022, after the quarter, and that ANAVEX 3-71 Phase 1 top-line results were announced in January 2022. These are company-reported clinical developments, not evidence of regulatory approval.
- Key risks include uncertain clinical efficacy and safety, trial timing and outcomes, regulatory approval, future financing availability, commercialization and intellectual-property protection. Management stated that preclinical activity may not translate to human trials and additional financing, if needed, may not be available on acceptable terms.
- COVID-19 had not materially affected results or financial condition as of December 31, 2021, but management said future effects remained uncertain. Routine legal matters were disclosed; the company did not expect pending claims to have a material adverse effect. No material changes to the annual-report risk factors were reported.
- The company reported effective disclosure controls. It implemented a new ERP system and digitized certain financial-control processes during the quarter.
Important facts for investors to verify
- Clinical-trial results, including the full data and subsequent development plans for AVATAR and ANAVEX 3-71, and whether findings are confirmed in larger or longer studies.
- Cash burn and runway assumptions, including the timing and amount of future trial spending, incentive-credit receipts, and any financing needs.
- Potential dilution: 76,155,187 common shares were outstanding at December 31, 2021; 76,174,887 were reported outstanding as of February 8, 2022. The ATM remained available, with approximately $161.1 million registered for sale at quarter-end.
- Equity-compensation overhang: 11,243,769 options and 160,000 warrants were outstanding at December 31, 2021; the filing estimated about $18.17 million of future stock-based compensation over the remaining option terms through fiscal 2025.
- Reliance on Australian R&D incentive income and the extent to which changes in eligible activity or refund timing could affect cash flow.