Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended June 30, 2020. The filing was signed August 6, 2020. Anavex is a clinical-stage biopharmaceutical company with no product revenue; its lead candidate, ANAVEX 2-73, is being developed for CNS conditions including Alzheimer’s disease, Parkinson’s disease dementia and Rett syndrome.
Financial results and liquidity
| Metric | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Nine months ended June 30, 2020 | Nine months ended June 30, 2019 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Operating expenses | $8.1 million | $7.1 million | $23.6 million | $22.8 million |
| Net loss | $6.5 million | $6.5 million | $20.3 million | $20.7 million |
| Basic and diluted loss per share | $0.11 | $0.13 | $0.35 | $0.43 |
| Net cash used in operating activities | Not stated for the quarter | $15.0 million | $16.0 million |
- Third-quarter R&D expense was $6.7 million, up from $5.8 million; nine-month R&D expense rose to $19.1 million from $17.5 million, primarily reflecting increased clinical-trial activity. Nine-month G&A declined to $4.5 million from $5.2 million, mainly due to lower stock-option compensation.
- Other income was $1.6 million for the quarter and $3.3 million for nine months, including R&D incentive income of $1.3 million and $3.0 million, respectively. This income helped offset operating expenses; it is not product revenue.
- At June 30, cash and cash equivalents were $27.6 million, versus $22.2 million at September 30, 2019. Working capital was $24.7 million, compared with $20.3 million. Current liabilities were $6.9 million, including accounts payable and accrued liabilities; the balance sheet reports no debt.
- Nine-month financing cash flow was $20.5 million, primarily from issuing 7.36 million shares under the Lincoln Park purchase agreement for $20.5 million. Cash increased by $5.4 million after $15.0 million of operating cash use. The company reported no material off-balance-sheet arrangements.
Material changes and financing
- Operating expenses increased 13% for the quarter and 4% for the nine-month period year over year; net loss was nearly unchanged for the quarter and narrowed modestly for nine months.
- At June 30, approximately $24.9 million remained available under the $50 million Lincoln Park purchase agreement, as amended July 1, 2020. Future sales are discretionary and subject to agreement limits, including share-count restrictions, and may dilute existing holders.
- A separate at-the-market facility permits up to $50 million in gross share sales. No shares had been sold under it by June 30; commissions may be up to 3% of gross proceeds.
Outlook, programs and risks
- Management expects continued negative cash flows and says existing cash and financial commitments are expected to cover cash commitments for at least two years after the statements were issued. This estimate depends on trial timing, spending and other assumptions; the company may need further financing, and failure to obtain it could delay or scale back R&D.
- The Alzheimer’s Phase 2b/3 trial was ongoing, with approximately 450 patients planned. The Parkinson’s disease dementia Phase 2 trial had completed enrollment, with topline results described as forthcoming. The U.S. Rett syndrome Phase 2 trial completed enrollment in June 2020, with topline results expected in late 2020; the AVATAR Rett study was also underway.
- After quarter-end, the company commenced the pediatric Rett EXCELLENCE Phase 2/3 study and a Phase 1 study of ANAVEX 3-71 for frontotemporal dementia. These are subsequent developments described in the filing, not June 30 financial-period results.
- COVID-19 could disrupt clinical trials and operations, affect the share price and constrain access to capital. The company said the pandemic’s financial and operational effects could not then be estimated. It also noted that clinical success, regulatory approval and commercialization are uncertain, and preclinical results may not translate to humans.
- The filing reports no material pending litigation and no material changes to previously disclosed risk factors other than the added COVID-19 risk. Disclosure controls were assessed as effective at June 30, 2020.
Important facts for investors to verify
- Progress, timing and results of the Alzheimer’s, Parkinson’s disease dementia and Rett syndrome trials, including the anticipated Rett topline results and the status of the PDD results.
- Whether COVID-19 affected trial enrollment, site operations, timelines or costs after the reporting date.
- Actual cash burn and the assumptions behind management’s stated two-year funding outlook, including expected R&D incentive receipts.
- Subsequent Lincoln Park and ATM share sales, remaining facility capacity, applicable share limits and resulting dilution.
- That the filing’s stated period is the quarter ended June 30, 2020; fiscal-year results for the year ending September 30, 2020 were not provided as guidance.