Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2020; filed May 7, 2020. The company is a clinical-stage biopharmaceutical developer focused on CNS disorders and reported no revenue from operations.
Financial position and results
| Metric | Three months ended March 31, 2020 | Six months ended March 31, 2020 |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $7.77 million | $15.47 million |
| Net loss | $7.24 million; $0.12 per share | $13.83 million; $0.24 per share |
| Net cash used in operations | Not separately stated | $10.99 million |
- At March 31, cash and cash equivalents were $26.56 million, total assets $31.02 million, current liabilities and total liabilities $6.23 million, and working capital $24.79 million. The balance sheet reports no debt.
- Six-month cash increased $4.38 million: $15.37 million of financing inflows from share issuance offset $10.99 million of operating cash use. No investing cash flows are shown.
- Operating margins are not meaningful because the company has no operating revenue. Research and development (R&D) was $6.05 million for the quarter and $12.40 million for six months; general and administrative expense was $1.72 million and $3.07 million, respectively.
Changes versus prior comparable periods
- Quarterly operating expenses declined from $8.14 million to $7.77 million; six-month expenses declined from $15.61 million to $15.47 million. Lower stock-based compensation reduced general and administrative expense, while six-month R&D rose $0.61 million with increased clinical-trial activity.
- Quarterly net loss was broadly stable year over year ($7.24 million versus $7.25 million), while loss per share improved to $0.12 from $0.15, reflecting a higher weighted-average share count. Six-month net loss improved to $13.83 million from $14.17 million.
- Six-month operating cash use increased to $10.99 million from $8.49 million. Financing proceeds rose to $15.37 million from $5.02 million, primarily due to greater common-stock issuance under the 2019 Purchase Agreement.
- Quarterly other income declined to $0.54 million from $0.94 million, mainly because of foreign-exchange losses affecting Australian-dollar incentive and tax receivables. Six-month other income increased to $1.65 million from $1.50 million.
Outlook, risks and notable items
- Management said existing cash and third-party financial commitments are expected to cover cash commitments for at least two years after the financial statements were issued. The company expects negative cash flow for the foreseeable future and cannot predict when it may become profitable. This outlook depends on uncertain trial timing and spending; additional financing may be needed.
- The 2019 Lincoln Park equity purchase agreement had approximately $30 million remaining at March 31, 2020. The company issued 5.96 million purchase shares for $15.37 million during the six months, plus commitment shares. Further equity issuance could dilute shareholders.
- On May 1, 2020, after quarter-end, the company entered an amended at-the-market sales agreement allowing up to $50 million of stock sales, with 3% commissions. The filing states no shares had been sold under the agreement as of the report.
- COVID-19 could disrupt clinical trials and operations, affect financial condition, and impair access to capital; management said its impact could not then be estimated. The CARES Act had no reported impact on the interim statements.
- Clinical milestones include an approximately 450-patient Alzheimer’s Phase 2b/3 trial and Rett syndrome Phase 2 studies. The Parkinson’s disease dementia Phase 2 trial had completed enrollment, with topline results expected by mid-2020. FDA Fast Track designation for ANAVEX 2-73 in Rett syndrome was granted in February 2020. These programs remain investigational; clinical efficacy and regulatory approval are uncertain.
- Ordinary-course legal matters were disclosed; management did not expect pending claims to have a material adverse effect. The filing reported no material changes to prior-year risk factors other than the new COVID-19 risk.
Important facts for investors to verify
- Whether expected Parkinson’s trial results and Alzheimer’s and Rett trial progress meet stated timelines, particularly given COVID-19 disruption risk.
- Actual operating cash burn, incentive-credit collection and whether management’s stated two-year funding outlook remains supportable.
- Subsequent use of the Lincoln Park commitment and the $50 million at-the-market facility, including resulting dilution and proceeds.
- Clinical evidence supporting the company’s biomarker-based treatment claims and the safety and efficacy of its candidates in controlled trials.