ANAVEX LIFE SCIENCES CORP. quarterly report, Q3 FY2023

Business context and reporting period

Anavex Life Sciences Corp. is a clinical-stage biopharmaceutical company developing precision-medicine treatments for central nervous system diseases. Its lead candidate, ANAVEX 2-73 (blarcamesine), is being studied for Alzheimer’s disease, Parkinson’s disease and Rett syndrome. The unaudited 10-Q covers the three and nine months ended June 30, 2023, the company’s fiscal third quarter. Anavex has not generated operating revenue.

Financial performance and position

Gross margin is not applicable because the company reported no revenue. Nine-month operating cash use was $21.9 million, versus $20.2 million in the prior-year period. Financing activities provided $27.6 million, primarily from common-stock sales under the Lincoln Park purchase agreement. Cash increased by $5.7 million to $154.8 million from September 30, 2022.

At June 30, 2023, total assets were $157.8 million, current liabilities were $11.1 million and working capital was $146.8 million. The balance sheet reports no debt. Common shares outstanding were 81.4 million at quarter-end, up from 77.9 million at September 30, 2022; 81.95 million were outstanding on August 8, 2023.

Material changes versus prior comparable periods

• Quarterly operating expenses rose 9% year over year; nine-month expenses rose 21%. Nine-month R&D expense increased by $7.1 million, reflecting higher personnel and stock-based compensation, manufacturing, trial-startup and Rett EXCELLENCE trial costs.
• Quarterly net loss narrowed to $11.3 million from $12.4 million, mainly because of higher interest income. Nine-month net loss increased to $37.4 million from $33.7 million, primarily due to higher R&D costs.
• Nine-month net other income increased to $5.8 million from $2.2 million, chiefly due to returns on invested cash, partly offset by a $1.0 million financing charge related to the 2023 purchase agreement.
• Cash used in operations increased to $21.9 million from $20.2 million. The company raised $26.7 million in gross proceeds by issuing 3.125 million shares under the Lincoln Park agreement; $123.3 million remained available under that agreement at June 30.

Outlook, commentary and risks

• Management expects operating cash flows to remain negative and R&D spending to increase as clinical programs advance. It says current working capital should meet requirements beyond 12 months after the financial statements’ issuance date; no specific cash-runway estimate is provided.
• Management reported that the Rett syndrome EXCELLENCE trial completed dosing in June 2023 and expected topline results in the second half of 2023. A pivotal six-month Parkinson’s disease study is planned; timing and regulatory pathway remain subject to further development and FDA guidance.
• The company highlighted positive topline results previously reported for its Alzheimer’s Phase 2b/3 trial and positive findings from earlier Rett and Parkinson’s studies. These are company-reported trial results; the filing does not establish regulatory approval or commercial efficacy.
• Material risks include clinical-trial safety and efficacy uncertainty, regulatory approval, development costs, reliance on third parties, intellectual-property challenges and the possibility of needing further financing. Anavex says it may delay or scale back R&D if financing is unavailable when needed.
• Australian research and development tax-incentive claims for 2019–2022 remain open to potential tax-authority review or audit. The company reported ordinary-course claims and litigation but did not expect pending matters to materially affect its financial statements. No material changes to previously disclosed risk factors were reported.
• The company has equity-issuance capacity under both the Lincoln Park purchase agreement and its at-the-market sales agreement, creating potential future dilution. No shares were sold under the at-the-market agreement during the nine-month period.

Most important facts for investors to verify

• Whether the anticipated EXCELLENCE Rett trial topline results were released in the stated second-half 2023 period, and what the complete results showed.
• The clinical and regulatory status, design, funding and timing of the planned pivotal Parkinson’s study and other announced programs.
• Cash burn, R&D commitments and whether management’s stated greater-than-12-month liquidity assessment remains valid as programs expand.
• Future share issuance under the Lincoln Park and at-the-market facilities, including resulting dilution and remaining availability.
• The outcome of any Australian tax-incentive review or audit, and any material developments in litigation or other contingencies.