Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2017. The interim financial statements are unaudited. Anavex is a clinical-stage biopharmaceutical company with no product revenue.
Key financial metrics
| Metric | Three months ended March 31, 2017 | Six months ended March 31, 2017 |
|---|---|---|
| Revenue | No revenue | No revenue |
| Operating expenses | $3.61 million | $6.78 million |
| Net loss | $1.55 million | $4.70 million |
| Loss per share, basic and diluted | $0.04 | $0.12 |
| Operating cash flow | $(3.85) million for the six months |
- Cash and cash equivalents were $23.35 million at March 31, 2017, versus $9.19 million at September 30, 2016. Working capital was $21.43 million, up from $6.26 million.
- Current liabilities were $2.12 million. The balance sheet reports no debt; contractual obligations consisted primarily of $224,377 in operating lease payments.
- Financing cash flow was $18.02 million for the six months, from issuing shares under the Lincoln Park purchase agreement. The agreement had $30.63 million remaining available at quarter-end.
- No meaningful operating margin is applicable because the company had no revenue. Net interest income for the six months was $21,802.
Changes versus prior comparable periods
- Second-quarter operating expenses rose $1.43 million year over year, chiefly as research and development expense increased to $2.49 million from $1.09 million. The company cited expanded preclinical work, clinical preparation, and the Phase 2a extension.
- Six-month operating expenses were $6.78 million versus $6.71 million. Higher R&D spending was largely offset by lower general and administrative expense.
- Second-quarter net loss narrowed to $1.55 million from $2.03 million; six-month net loss narrowed to $4.70 million from $5.99 million.
- Other income included a $2.02 million Australian R&D tax incentive in the second quarter and six-month period, compared with none in the prior-year quarter and $571,093 in the prior-year six-month period. This materially supported the lower reported loss.
- Cash increased primarily because of the $18.02 million equity issuance. Shares outstanding rose to 41,376,061 at March 31 from 36,168,299 at September 30, 2016, creating dilution.
Business, outlook, and risks
- Lead candidate ANAVEX 2-73 is being developed for Alzheimer’s disease, Parkinson’s disease, and other CNS indications, including Rett syndrome. The company reported completion of a 52-week, open-label Phase 2a Alzheimer’s trial in November 2016 and described results as meeting primary and secondary endpoints. The small study was designed for 32 patients; the filing characterizes efficacy findings as exploratory.
- A larger Phase 2/3 Alzheimer’s study was in planning. A U.S. Phase 2 Rett syndrome trial was scheduled to begin in calendar 2017; the company reported a foundation grant of at least $0.6 million intended to cover most of its cost. These are forward-looking plans, not completed milestones.
- Management expected R&D spending to rise as Alzheimer’s development advanced and stated that existing cash and potential future equity financing were expected to fund operations for the next 12 months. It intended to use most available capital for the next ANAVEX 2-73 trial and related development work.
- Management warned that additional financing may not be available on acceptable terms; inability to raise funds could delay, reduce, or halt R&D. Further equity financing would dilute shareholders. The company had no assurance that preclinical results would translate to human trials or that candidates would be commercialized.
- Other exposures include foreign currency risk from Australian and euro-denominated costs, clinical and regulatory uncertainty, and ordinary-course legal claims. The company said it knew of no material pending legal proceedings and no material change to the risks described in its prior Form 10-K.
- Management reported effective disclosure controls as of March 31, 2017, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Clinical-trial status, enrollment, results, safety profile, and timing for the planned Alzheimer’s Phase 2/3 and Rett syndrome Phase 2 studies.
- Whether the reported Australian tax incentive is repeatable, and the timing and eligibility of future incentive receipts.
- Cash burn and runway relative to rising clinical-development costs and management’s 12-month funding expectation.
- Actual future use of the Lincoln Park facility, remaining availability, share issuance terms, and resulting dilution.
- Whether clinical evidence supports efficacy claims: the Alzheimer’s Phase 2a study was open-label, small, and exploratory; results are not proof of efficacy in controlled trials.