Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended December 31, 2019. The interim financial statements are unaudited. Anavex is a clinical-stage biopharmaceutical company developing treatments for central nervous system diseases; it reported no operating revenue.
Financial results and position
| Metric | Three months ended Dec. 31, 2019 | Prior-year comparable period |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $7.70 million | $7.47 million |
| Research and development | $6.35 million | $5.71 million |
| General and administrative | $1.35 million | $1.76 million |
| Other income, net | $1.12 million | $0.56 million |
| Net loss | $6.59 million; $0.12 per share | $6.92 million; $0.15 per share |
| Operating cash flow | $(5.73) million | $(4.16) million |
| Financing cash flow | $11.00 million | $1.94 million |
At December 31, 2019, cash and cash equivalents were $27.46 million, total assets $31.42 million, total liabilities $5.46 million, and working capital $25.96 million. The filing reports no debt. Cash increased $5.27 million from September 30, 2019, principally due to common-stock issuance. The company recorded $943,215 of Australian R&D incentive income, compared with $413,682 in the prior-year quarter. No operating margins are meaningful because the company had no revenue.
Changes versus the prior period
- Operating expenses rose $0.23 million: R&D increased $0.64 million, partly offset by a $0.41 million decrease in G&A.
- Net loss narrowed by approximately $0.33 million, while loss per share improved from $0.15 to $0.12. Weighted-average shares rose to 54.77 million from 46.33 million.
- Operating cash use increased $1.56 million, which management attributed principally to higher R&D incentive receivables and lower trade payables.
- The company issued 4,394,160 purchase shares for $10.998 million under its 2019 Lincoln Park agreement, plus 35,675 commitment shares. About $34.4 million remained available under that agreement at quarter-end, subject to its terms and share limits.
Business outlook, risks and notable items
- Anavex expects continued negative cash flows and cannot predict when, if ever, it will become profitable. Management believes existing cash and third-party financial commitments will cover cash commitments for at least two years after issuance of the statements; this is an estimate, not a guarantee.
- The lead candidate ANAVEX 2-73 was being studied in Alzheimer’s disease, Parkinson’s disease dementia and Rett syndrome. The Alzheimer’s Phase 2b/3 trial was planned for approximately 450 patients; Rett syndrome and Parkinson’s disease dementia studies were also underway. These are clinical programs, and the filing cautions that preclinical and early clinical findings do not establish efficacy or approval.
- The FDA granted Rare Pediatric Disease designation for ANAVEX 2-73 for Rett syndrome in November 2019. Fast Track designation was granted after quarter-end.
- Further financing may dilute shareholders; if financing is unavailable or not obtained on acceptable terms, the company may delay or scale back R&D. The Cantor Fitzgerald at-the-market agreement permits up to $50 million of sales, but no shares had been sold under it as of quarter-end. The 2015 Lincoln Park agreement had expired.
- The company disclosed a prior material weakness related to accounting for Australia’s R&D incentive program and established additional quarterly review procedures during this quarter. Management concluded disclosure controls were effective at December 31, 2019. Prior-period financial statements were adjusted for the timing of R&D incentive income; the company described those adjustments as immaterial.
- Management reported no material pending litigation and no material changes to the risk factors disclosed in its latest Form 10-K. Stock-based compensation was $1.26 million for the quarter; approximately $4.60 million was expected to be recognized over the remaining option terms through fiscal 2022.
Key facts for investors to verify
- Clinical trial enrollment, timelines, safety findings and eventual efficacy results for ANAVEX 2-73, particularly the Alzheimer’s Phase 2b/3 and Rett syndrome studies.
- Actual cash burn and whether management’s stated two-year funding sufficiency remains supported by updated trial plans and cash commitments.
- Remaining usable capacity and conditions under the Lincoln Park purchase agreement and the Cantor Fitzgerald offering, including potential share dilution.
- Collection, eligibility and accounting for Australian R&D incentive receivables, and the effectiveness of the added control procedures.
- Whether later-period share issuance, clinical spending or other developments materially change the quarter-end liquidity and share-count picture.