Annovis Bio, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Annovis is a clinical-stage biotechnology company developing buntanetap for neurodegenerative diseases, including Alzheimer’s disease (AD) and Parkinson’s disease (PD). It has not generated product revenue.
Financial performance and position
| Metric | Q3 2023 / September 30, 2023 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $13.84 million for Q3; $29.89 million for nine months | $4.12 million and $10.31 million, respectively, for 2022 |
| General and administrative expense | $1.03 million for Q3; $4.71 million for nine months | $2.36 million and $7.40 million, respectively, for 2022 |
| Net loss | $14.72 million for Q3; $33.99 million for nine months | $6.43 million and $17.60 million, respectively, for 2022 |
| Loss per share, basic and diluted | $1.63 for Q3; $3.90 for nine months | $0.79 and $2.16, respectively, for 2022 |
| Cash and cash equivalents | $6.35 million | $28.38 million at December 31, 2022 |
| Total assets / liabilities | $10.22 million / $3.56 million | $36.02 million / $7.70 million at December 31, 2022 |
| Operating cash used | $30.60 million for nine months | $13.70 million for the first nine months of 2022 |
No debt is reported on the balance sheet. Operating margins are not meaningful given the absence of revenue and ongoing operating losses. The company reported $601,768 of net interest income for the first nine months of 2023.
Material changes and financing
- Q3 net loss more than doubled year over year; nine-month net loss increased from $17.60 million to $33.99 million. The principal driver was increased clinical-trial spending: nine-month R&D expense rose by $19.58 million, primarily due to the Phase 3 PD and Phase 2/3 AD trials.
- Nine-month operating cash use increased by $16.90 million year over year, mainly reflecting higher cash paid for clinical trials. G&A expense decreased, primarily because of lower stock-based compensation.
- During the first nine months, the company received $8.57 million net from common-stock sales and $8,386 from option exercises. Shares outstanding were 9,012,273 at September 30, 2023.
- After quarter-end, the company completed a public offering of 1.25 million units at $6.00 each, with each unit including a common share and a warrant exercisable at $9.00. Net proceeds were approximately $6.77 million, excluding warrant exercises. The filing reports 10,262,273 common shares outstanding as of November 6, 2023.
Outlook, risks, and unusual items
- Management said September 30 cash, together with the subsequent offering and existing grants, was expected to fund operations into the first quarter of 2024, including the ongoing AD and PD trials. The company stated it lacks sufficient capital to fund the next 12 months and will need additional financing; management concluded substantial doubt exists about its ability to continue as a going concern for one year after issuance of the financial statements.
- Management expected higher 2023 R&D expense and operating cash use as clinical development continued. It targeted completion of the ongoing Phase 3 PD and Phase 2/3 AD studies by year-end 2023, with final results intended for release in the first quarter of 2024. These are forward-looking expectations, not assured outcomes.
- The AD trial interim analysis was based on 107 patients completing six weeks; the company said it would proceed without adding patients and that the safety board found buntanetap generally well tolerated. The PD trial remained blinded; management cautioned that its earlier interim analysis might not predict final results.
- The 2022 comparative interim financial statements were restated for errors in the timing and classification of R&D expenses. The restatement reduced reported 2022 nine-month net loss by $4.63 million and increased September 2022 prepaid assets by the same amount.
- Disclosure controls were deemed ineffective due to a material weakness concerning classification of R&D expenses. Remediation actions include enhanced review of CRO/CMO contracts, additional staff, and stronger review processes; effectiveness had not yet been demonstrated. No pending legal actions were reported at September 30, 2023.
Important facts for investors to verify
- Whether subsequent financing and any further capital raise are sufficient to support operations beyond the stated first-quarter 2024 runway.
- Final AD and PD trial results, timelines, regulatory feedback, and the costs and funding needs of any planned follow-on studies.
- Whether the R&D expense-control material weakness is fully remediated and whether future filings avoid further restatements.
- The offering’s dilution and potential warrant exercise or redemption effects, and the company’s updated share count and cash balance.
- Clinical, regulatory, third-party trial execution, and going-concern risks, including the possibility that financing may not be available on acceptable terms.