Anavex Life Sciences Corp. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended December 31, 2018; filed February 7, 2019. Financial statements are unaudited. Anavex is a clinical-stage biopharmaceutical company and reported no operating revenue.
Financial performance and liquidity
| Metric | Q1 FY2019 | Q1 FY2018 or prior balance-sheet date |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $5.71 million | $2.69 million |
| General and administrative expense | $1.76 million | $1.40 million |
| Total operating expenses | $7.47 million | $4.09 million |
| Net loss | $7.33 million | $4.06 million |
| Loss per share, basic and diluted | $0.16 | $0.09 |
| Net cash used in operating activities | $4.16 million | $3.62 million |
| Cash and cash equivalents | $20.72 million | $22.93 million at September 30, 2018 |
| Working capital | $17.22 million | $20.44 million at September 30, 2018 |
| Total liabilities | $4.88 million | $3.88 million at September 30, 2018 |
Operating expenses rose about $3.38 million year over year, principally from higher R&D spending. The company attributed the increase to commencement of Alzheimer’s and Parkinson’s disease dementia trials and large-scale ANAVEX 2-73 manufacturing. R&D included approximately $1.9 million for clinical-stage development, $0.9 million for preclinical work, and $1.0 million of non-recurring manufacturing costs. Management said it did not expect significant additional manufacturing costs during the rest of FY2019.
Cash declined $2.22 million during the quarter: $4.16 million of operating cash use was partly offset by $1.94 million of net financing proceeds. Financing included $1.99 million from issuing shares under the Lincoln Park purchase agreement, partly offset by $50,000 of deferred financing charges. The balance sheet reports accounts payable and accrued liabilities as current liabilities; it reports no debt balance. No meaningful operating margin is available because the company has no revenue.
Business, developments, and outlook
The company’s lead candidate, ANAVEX 2-73, is being developed for Alzheimer’s disease, Parkinson’s disease dementia, Rett syndrome, and other CNS indications. An Alzheimer’s Phase 2b/3 trial began in October 2018, with approximately 450 planned participants over 48 weeks. A Phase 2 Parkinson’s disease dementia trial also began in October 2018, with approximately 120 planned participants over 14 weeks. The FDA confirmed the Rett syndrome IND was open in October 2018; the filing describes a planned 15-patient Phase 2 study.
Anavex reported exploratory long-term Phase 2a Alzheimer’s findings, including associations between drug concentration and cognitive and functional measures, and reported continued favorable safety and tolerability through 148 weeks. These are company-reported study results; the filing does not establish that they demonstrate efficacy in the larger controlled trials.
Management stated that existing cash and third-party financial commitments were expected to cover cash commitments for at least two years after the financial statements were issued. It also said additional capital will be needed to continue operations and fully fund later-stage development, with no assurance financing will be available on acceptable terms. If financing is unavailable, the company may have to scale back operations. Equity financing may dilute shareholders.
Financing, contingencies, and risks
- The Lincoln Park agreement permits share sales up to a $50 million commitment through September 6, 2019; $11.20 million remained available at December 31, 2018. The company issued 950,000 purchase shares for $1.99 million during the quarter, plus 3,584 commitment shares.
- A separate Cantor Fitzgerald at-the-market agreement allows up to $50 million of gross share sales, with commissions of up to 3%. No shares had been sold under it as of the filing.
- Stock-based compensation expense was $2.07 million, versus $1.12 million a year earlier. The company expected approximately $6.02 million of additional compensation expense over the remaining option terms through June 2021.
- The company is pre-revenue, expects negative cash flows for the foreseeable future, and cannot predict when it may become profitable. Drug development, trial timing and outcomes, regulatory approval, financing availability, and intellectual-property protection are material risks.
- Management reported no material pending litigation, no material changes to the risk factors in the prior Form 10-K, and no material off-balance-sheet arrangements. Lease payments for FY2019 totaled $35,011.
Important facts for investors to verify
- Cash runway assumptions and the availability and terms of remaining Lincoln Park capacity or potential ATM sales.
- Cash burn trends, especially whether operating spending moderates after the reported manufacturing costs.
- Enrollment, timing, safety, and results of the Alzheimer’s, Parkinson’s disease dementia, and Rett syndrome studies.
- The clinical significance and reproducibility of the exploratory Phase 2a findings and biomarker analyses.
- Potential dilution from future share issuance and the outstanding options and warrants.