Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2018, the three months ended December 31, 2017. The interim financial statements are unaudited. Anavex is a clinical-stage biopharmaceutical company developing treatments for neurological and other diseases; it reported no revenue.
Financial performance and position
| Metric | Q1 FY2018 / Dec. 31, 2017 | Comparable period / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.69 million | $2.04 million |
| General and administrative expense | $1.40 million | $1.13 million |
| Total operating expenses | $4.09 million | $3.17 million |
| Net loss | $4.06 million; $0.09 per share | $3.15 million; $0.08 per share |
| Operating cash flow | $(3.62) million | $(3.15) million |
| Cash and cash equivalents | $28.05 million | $27.44 million at Sept. 30, 2017 |
| Total liabilities | $2.80 million | $3.58 million at Sept. 30, 2017 |
- Cash increased by $0.61 million during the quarter after $4.23 million of equity proceeds from Lincoln Park offset operating cash use. No debt was reported.
- Working capital was reported as $25.49 million. The MD&A table labels its comparative date September 30, 2016, although the balance-sheet figures and nearby discussion compare with September 30, 2017; verify the table’s date.
- Operating expenses rose about 29% year over year. R&D increased 32%, primarily reflecting preparation for planned ANAVEX 2-73 clinical studies. The company reported no revenue or profit margins; margins are not meaningful for this pre-revenue business.
Business, outlook, and material developments
- ANAVEX 2-73 is the lead candidate, being developed for Alzheimer’s disease and other conditions. Management described the Phase 2a Alzheimer’s study as meeting its objectives and reported exploratory findings, including a concentration-effect relationship; the study was open-label and involved 32 patients.
- The company was preparing a larger placebo-controlled Alzheimer’s study and Phase 2 studies for Parkinson’s disease and Rett syndrome. The Rett study depended on FDA action on the IND; timing and approvals were not assured. A foundation grant of at least $0.6 million was intended to cover some Rett trial costs.
- Management expects R&D costs to rise with planned studies and stated that existing cash and anticipated equity or debt financing should fund operations for at least the next 12 months after issuance of the statements. This is not a guarantee; additional financing may be unavailable or dilutive.
- Up to $17.14 million remained available under the Lincoln Park purchase agreement at quarter-end. The company issued 1.08 million purchase shares for $4.23 million during the quarter; total common shares outstanding were 44.42 million at December 31, 2017, versus 43.33 million at September 30, 2017.
- Other notable items: stock-based compensation was $1.12 million, up from $0.89 million; approximately $9.84 million of additional compensation expense was expected over the remaining option terms through June 2020. Lease commitments totaled about $144,000. The company reported no material pending litigation and no material change to previously disclosed risk factors.
Key investor verification points
- Confirm the status, timing, regulatory requirements, and funding for the planned Alzheimer’s, Parkinson’s, and Rett syndrome trials; distinguish exploratory or preclinical findings from demonstrated clinical efficacy.
- Assess cash runway against rising R&D spending, expected trial costs, and the availability and terms of future financing.
- Review potential dilution from Lincoln Park share sales, options, and warrants; 7.25 million potentially dilutive option and warrant shares were excluded from loss per share as anti-dilutive.
- Check the working-capital comparison date inconsistency in the MD&A table and reconcile it with the balance sheet.