Annovis Bio, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; interim financial statements are unaudited. Annovis is a clinical-stage drug company developing ANVS401 for neurodegenerative diseases, including Alzheimer’s disease (AD), Parkinson’s disease (PD), and AD in Down syndrome. It has not generated product revenue.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Research and development expense | $856,478 | $6,040 | $922,924 | $12,061 |
| General and administrative expense | $1,687,151 | $300,036 | $2,203,867 | $480,805 |
| Net loss | $2,309,490 | $344,700 | $2,751,080 | $535,603 |
| Basic and diluted loss per share | $0.34 | $1.22 | $0.48 | $1.90 |
Revenue and profit margins are not meaningful because the company had no product sales and reported losses. Grant income was $208,261 in Q2 and $365,699 for the first half; it relates to an NIH grant and is reported as other income, not product revenue.
- Cash and liquidity: Cash and cash equivalents were $9.76 million at June 30, 2020, versus $1,858 at December 31, 2019. Current assets were $10.20 million and current liabilities were $702,936.
- Cash flow: First-half operating cash use was $2.28 million, compared with $379,332 in the prior-year period. Financing provided $12.04 million, principally net IPO proceeds. Cash increased by $9.76 million.
- Debt: No convertible notes remained outstanding at June 30. The $530,000 principal, accrued interest, and embedded derivative converted into common shares upon the IPO. The company reported no other debt balance.
- Equity: Stockholders’ equity was $9.50 million, compared with a deficit of $8.58 million at year-end 2019. Accumulated deficit was $11.53 million. Common shares outstanding were 6,866,608 at June 30.
Material changes versus prior periods
- Operating expenses and net losses increased substantially as clinical and toxicology work expanded. First-half R&D expense rose by about $911,000 year over year, mainly due to long-term toxicology studies and initial Phase 2a trial costs.
- First-half G&A expense rose by about $1.72 million, driven in part by $1.11 million of share-based compensation, higher personnel and insurance costs, and public-company expenses.
- The January 2020 IPO raised approximately $13.8 million gross and $12.0 million net. Preferred stock and convertible notes converted into common stock. The company ended the period with materially higher cash and positive stockholders’ equity.
Outlook, risks, and unusual items
- Management said cash, cash equivalents, and expected funding from existing grants were sufficient for at least the next 12 months. It expected funds to support completion of Phase 2a trials and planning for a Phase 3 study in AD-DS, while cautioning that additional capital will be needed for later development and commercialization and may not be available on acceptable terms.
- The company expected R&D spending to increase in 2020 with clinical trials and toxicology work, and G&A spending to increase with public-company costs. It expects continued losses and negative operating cash flow; no specific financial guidance was provided.
- COVID-19 had temporarily suspended new enrollment at sites in the AD Phase 2a study. Fourteen of 24 planned patients had enrolled and completed treatment before the suspension. Management believed trials would be completed on time but said the impact remained uncertain. Recruitment for a second Phase 2a proof-of-concept study began in July 2020, according to management.
- The NIH awarded a $1.7 million grant for ANVS401 chronic toxicology studies. The company recognized $365,699 of grant income in the first half and reported a $199,221 grant receivable at June 30.
- Accrued license payments were $529,000, with no amounts paid to date; the company was discussing amounts payable with the licensor. The agreement also includes milestone payments, royalties, and sublicense-income obligations. No milestones had been achieved by June 30.
- Executive options resulted in $1.11 million of first-half share-based compensation. At June 30, 903,847 options and 100,000 underwriter warrants were outstanding. No material legal proceedings were reported, and management stated disclosure controls were effective.
Important facts for investors to verify
- Whether COVID-related enrollment delays affect the timing, completion, or cost of the AD and PD clinical programs, and whether the trial timelines remain achievable.
- The assumptions supporting management’s 12-month liquidity estimate, including NIH grant reimbursements, expected spending, and the timing and terms of any future financing.
- The status and potential payment obligations under the license agreement, including the $529,000 accrued amount and future milestone, royalty, and sublicense fees.
- Potential dilution from outstanding options, warrants, and future equity financing; reported loss per share excludes anti-dilutive securities.
- Clinical evidence and regulatory progress for ANVS401: the filing describes early human and preclinical findings, which do not establish efficacy or approval prospects.