Annovis Bio, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Annovis is a clinical-stage biotechnology company developing buntanetap for Alzheimer’s disease (AD), Parkinson’s disease (PD), and other neurodegenerative diseases. It had no product revenue.
Financial highlights
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Research and development expense | $8.26 million | $4.03 million | $16.05 million | $6.18 million |
| General and administrative expense | $1.50 million | $1.94 million | $3.68 million | $5.04 million |
| Net loss | $9.54 million | $5.94 million | $19.27 million | $11.17 million |
| Basic and diluted loss per share | $1.07 | $0.73 | $2.25 | $1.37 |
At June 30, 2023, cash and cash equivalents were $15.72 million, versus $28.38 million at December 31, 2022. Six-month operating cash outflow was $21.23 million, compared with $9.72 million in the prior-year period; financing provided $8.58 million, primarily from common-stock sales. Total current liabilities were $2.07 million, with no debt reported on the balance sheet. The filing reports no product revenue, so operating margins are not meaningful.
Stockholders’ equity was $20.74 million and accumulated deficit was $73.33 million. Common shares outstanding were 9,012,273 at June 30, 2023. The company raised $8.57 million net from common-stock issuances during the six months, including an at-the-market sale and a private placement.
Changes and unusual items
- Research and development expense rose substantially year over year, mainly due to clinical-trial costs for the Phase 3 PD and Phase 2/3 AD studies. Management expects 2023 R&D expense and operating cash use to exceed 2022 levels.
- General and administrative expense declined, mainly because of lower stock-based compensation; interest income increased with higher returns on invested funds.
- The company restated its previously issued June 2022 interim financial statements for errors in the timing and classification of R&D expenses. The restatement reduced reported Q2 2022 R&D expense and net loss by $2.78 million and reduced first-half 2022 R&D expense and net loss by $3.44 million. The comparative figures above are restated.
Outlook, risks, and contingencies
- Management said existing cash and grant funding were expected to support operations into the first quarter of 2024, including ongoing AD and PD trials. It also stated that the company lacked sufficient capital to fund the next 12 months and would need additional financing; there are no committed external funding sources. Management concluded substantial doubt exists about the company’s ability to continue as a going concern for one year after issuance of the financial statements.
- The company expected both ongoing trials to be completed by year-end 2023 and final analyses to be announced in Q1 2024. It planned an AD interim-analysis disclosure in fall 2023. The filing also describes a PD safety interim analysis as in progress and expected in Q2 2023; the report does not provide its result.
- Plans for potential longer disease-modifying studies and eventual regulatory applications depend on trial results, FDA feedback, funding, and other development and regulatory risks. The company’s stated goal was to conduct required pivotal studies by the end of 2026 to support two NDAs.
- Disclosure controls were determined to be ineffective because of a material weakness in financial reporting related to classification of R&D expenses. Remediation included enhanced contract review, additional staff, and stronger review procedures; effectiveness had not yet been established.
- Clinical contracts can require payments for services through termination. Maximum aggregate executive severance payments were approximately $1.27 million. No pending legal actions were reported at June 30, 2023.
Investor verification priorities
- Check subsequent cash balances, cash burn, financing activity, and whether additional capital was raised on acceptable terms.
- Verify the actual timing and results of the PD safety interim analysis, AD interim analysis, and final trial readouts against the stated expectations.
- Review trial progress, FDA feedback, and any changes to the planned clinical-development timeline or costs.
- Track remediation and testing of the material weakness, and whether disclosure controls were later deemed effective.
- Review the restatement disclosures and comparative-period figures, which were corrected for R&D expense timing and classification.