Anavex Life Sciences Corp. — FY2017 Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2017; this is an annual report, not a quarterly filing. Anavex is a clinical-stage biopharmaceutical company with no product revenue. Its lead candidate, ANAVEX 2-73, is being developed for Alzheimer’s disease and other CNS indications.
Financial performance and position
| Metric | FY2017 | FY2016 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $15.68 million | $15.59 million |
| Research and development expense | $10.67 million | $7.25 million |
| General and administrative expense | $5.01 million | $8.33 million |
| Net loss | $13.46 million | $14.74 million |
| Basic and diluted loss per share | $0.33 | $0.42 |
| Cash and cash equivalents at year-end | $27.44 million | $9.19 million |
| Operating cash used | $9.02 million | $9.24 million |
| Current liabilities | $3.58 million | $3.19 million |
| Long-term debt | None | None |
Year-end working capital was $24.20 million, versus $6.26 million a year earlier. Total assets were $27.84 million and stockholders’ equity was $24.25 million. With no revenue, profit margins are not meaningful.
Material changes and notable items
- R&D expense increased 47%, driven by clinical-trial preparation and expanded preclinical work; G&A fell about 40%, mainly because prior-year compensation and financing-related legal costs did not recur.
- Net loss narrowed despite higher R&D, partly reflecting $2.02 million of Australian R&D incentive income, compared with $0.57 million in FY2016. Total other income was $2.28 million, including $0.14 million of grant income.
- Cash increased by $18.25 million, principally from $27.27 million of net equity proceeds under the Lincoln Park purchase agreement. Anavex issued about 7.06 million purchase shares during FY2017; $21.37 million remained available under the facility at year-end. Share count rose from 36.17 million to 43.33 million during the year and was 44.22 million as of December 8, 2017.
- Accumulated deficit was $91.48 million. The filing says Anavex has never generated operating revenue and expects negative cash flows for the foreseeable future.
Pipeline, outlook, and risks
- The company reported that its 32-patient, open-label Phase 2a Alzheimer’s study of ANAVEX 2-73 met primary and secondary objectives over 57 weeks. Reported cognitive and functional findings were exploratory; the filing describes preparation for a larger, placebo-controlled Phase 2/3 study.
- A Rett syndrome Phase 2 trial was planned, subject to FDA action on the IND. A foundation grant of at least $0.6 million was awarded toward trial costs. The company also reported preclinical Parkinson’s findings and was preparing for clinical development.
- Management expected R&D spending to increase as planned studies and the Alzheimer’s trial extension proceed, and said it intended to pursue potential commercial partners within 12 months.
- Management states additional funding will be needed and may not be available on acceptable terms. The filing identifies substantial doubt about the company’s ability to continue as a going concern, notwithstanding its year-end cash balance. Failure to raise funds could delay or reduce development programs.
- Key risks include clinical or regulatory failure, the possibility that early or preclinical results will not be replicated, competition, dependence on third parties, patent uncertainty, and dilution from future equity issuance. The clinical evidence cited for ANAVEX 2-73 was from a small, open-label study and does not establish efficacy in a controlled trial.
- The company reported no material pending legal proceeding. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also reported effective disclosure controls and financial-reporting controls.
Investor verification points
- Check subsequent FDA decisions and actual initiation, design, enrollment, and results of the planned Alzheimer’s and Rett syndrome trials.
- Assess cash burn against the planned increase in R&D spending, and confirm financing availability and the remaining terms and capacity of the Lincoln Park facility.
- Track share issuance, options, and warrants for potential dilution; verify reported share counts and facility proceeds against later filings.
- Review the composition and recurrence of grant and Australian incentive income when evaluating the improvement in net loss.
- Evaluate the strength and limitations of the small, open-label Alzheimer’s study separately from management’s exploratory efficacy claims.