Annovis Bio, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Annovis is a clinical-stage drug company developing ANVS401 for neurodegenerative diseases, including Alzheimer’s and Parkinson’s disease. It reported no product revenue.
Financial results and liquidity
- Operating expenses: $583,000, up from $187,000 in Q1 2019. Research and development was $66,000 (up from $6,000); general and administrative was $517,000 (up from $181,000).
- Net loss: $442,000 versus $191,000. Basic and diluted loss per share was $0.10 versus $0.68; the lower per-share loss reflects a larger weighted-average share count after the IPO and conversions.
- Cash flow: Operating cash used was $970,000, compared with $229,000 used a year earlier. Financing provided $12.09 million, primarily from the IPO. Cash increased by $11.12 million to $11.12 million.
- Balance sheet: Current assets were $11.44 million and current liabilities $749,000, yielding working capital of approximately $10.69 million. Total liabilities were $749,000; no convertible notes or derivative liability remained after the IPO conversions. Stockholders’ equity was $10.69 million.
- Margins: Not meaningful because the company had no product revenue. Grant income was $157,000; interest income was $11,000.
Material changes and financing
- The January 2020 IPO sold 2.3 million shares at $6.00 per share, generating approximately $13.8 million gross proceeds and $12.08 million net proceeds. The filing also describes net proceeds as approximately $12.0 million.
- At IPO closing, preferred stock converted into 4.12 million common shares and convertible notes plus accrued interest converted into 118,470 common shares. The company reported 6.85 million common shares outstanding at March 31 and 6,859,744 at April 30.
- R&D spending increased mainly because of long-term toxicology studies; G&A increased due to personnel, professional fees and insurance. Management expected both expense categories to rise in 2020.
Outlook, risks and unusual items
- Management said cash, grant funding and IPO proceeds were expected to fund operations and capital requirements for at least 12 months. It expected these funds to support completion of Phase 2a trials and planning for an AD-DS Phase 3 study, but said additional capital would be needed for later clinical and commercial development. No external funding was committed.
- COVID-19 temporarily halted enrollment at sites in the AD Phase 2a trial. Fourteen of 24 patients had enrolled and completed treatment before the pause. Management believed trials could finish on time, while noting substantial uncertainty. The company planned to begin another Phase 2a study in May 2020, targeting 54 Parkinson’s and 14 Alzheimer’s patients.
- The company recognized $157,000 of income under a $1.7 million NIH grant for toxicology studies and received $855,000 in grant payments during the quarter.
- Accrued unpaid license payments were $518,000, and the company was discussing amounts payable with the licensor. The license also provides for future milestone payments, royalties and sublicense-income payments; no milestones had been achieved by quarter-end.
- Other potential obligations include maximum aggregate executive severance of approximately $720,000. The filing reported no pending legal actions or off-balance-sheet arrangements.
Investor verification points
- Track COVID-related enrollment interruptions and actual timelines and outcomes for both planned Phase 2a studies.
- Assess cash burn against management’s stated 12-month funding outlook, including increasing clinical and public-company costs, and the need for further financing.
- Confirm NIH grant reimbursement and eligible study costs, and clarify the status and potential settlement of accrued license payments.
- Monitor dilution from outstanding options and the 100,000 underwriter warrants, exercisable at $7.50 per share after January 29, 2021.
- Evaluate the evidence supporting ANVS401’s clinical potential: the filing cites human findings in four mildly cognitively impaired patients and preclinical results, not established efficacy in the Phase 2a trials.