Anavex Life Sciences (AVXL) - 2019 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited interim condensed consolidated financial statements for the period ended June 30, 2019, including balance sheets, statements of operations, cash flows, and changes in stockholders' equity, along with accompanying notes, for a clinical-stage biopharmaceutical firm with no revenue to date Interim Condensed Consolidated Balance Sheets As of June 30, 2019, total assets decreased to $22.0 million from $24.4 million at September 30, 2018, primarily due to reduced cash and cash equivalents, while total liabilities slightly increased to $4.3 million and total stockholders' equity decreased from $20.5 million to $17.6 million Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | June 30, 2019 | September 30, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $21,249,206 | $22,930,638 | | Total Assets | $21,968,271 | $24,376,136 | | Total Liabilities | $4,336,607 | $3,884,626 | | Total Stockholders' Equity | $17,631,664 | $20,491,510 | Interim Condensed Consolidated Statements of Operations For the nine months ended June 30, 2019, the company reported a net loss of $22.4 million, nearly double the $11.7 million loss from the same period in 2018, driven by a significant rise in research and development expenses, widening the loss per share to $0.47 from $0.26 year-over-year Statement of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Nine Months Ended June 30, 2019 | Nine Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $5,758,446 | $2,997,634 | $17,549,442 | $8,936,969 | | Total operating expenses | ($7,147,175) | ($4,618,013) | ($22,760,729) | ($13,444,601) | | Net loss | ($7,074,261) | ($2,849,164) | ($22,415,568) | ($11,660,353) | | Loss per share (Basic and diluted) | ($0.14) | ($0.06) | ($0.47) | ($0.26) | Interim Condensed Consolidated Statements of Cash Flows For the nine months ended June 30, 2019, net cash used in operating activities increased to $16.0 million from $8.5 million in the prior-year period due to higher clinical development costs, largely offset by $14.3 million in net cash provided by financing activities, resulting in a $1.7 million decrease in cash and cash equivalents Cash Flow Summary (Unaudited) | Cash Flow Item | Nine months ended June 30, 2019 | Nine months ended June 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($15,992,811) | ($8,529,234) | | Net cash provided by financing activities | $14,311,379 | $6,916,569 | | Decrease in cash and cash equivalents | ($1,681,432) | ($1,612,665) | | Cash and cash equivalents, end of period | $21,249,206 | $25,827,592 | Notes to the Condensed Consolidated Interim Financial Statements The notes provide detailed explanations of accounting policies and specific financial statement items, including the company's business focus on CNS diseases, its liquidity position, significant equity offering agreements for financing, and commitments related to stock-based compensation and litigation - The company is a clinical-stage biopharmaceutical company focused on developing therapeutics for Central Nervous System (CNS) diseases, with its lead compound ANAVEX®2-73 being developed for Alzheimer's, Parkinson's, and Rett syndrome[18] - The company has not generated any revenue and anticipates continued negative cash flows, however, management believes existing cash and financial commitments are sufficient to fund operations for more than two years[22][23] - The company entered into a new $50 million purchase agreement with Lincoln Park in June 2019 and has a separate $50 million "at-the-market" offering agreement with Cantor Fitzgerald to secure future funding[39][45] - In January 2019, the Board approved the 2019 Omnibus Incentive Plan, making 6.0 million additional shares available for issuance as stock-based compensation[58] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business, financial performance, and outlook, highlighting the progress of its clinical programs, particularly for its lead compound ANAVEX2-73, with a significant increase in R&D expenses noted as the primary driver for the increased net loss, and its liquidity strategy relying on equity financing agreements Our Current Business and Pipeline Anavex is a clinical-stage biopharmaceutical company focused on CNS diseases, using its proprietary SIGMACEPTOR™ Discovery Platform, with its lead compound, ANAVEX2-73, in clinical development for Alzheimer's, Parkinson's, and Rett syndrome, and a pipeline including four other preclinical candidates - The company's core focus is on developing therapeutics for CNS diseases by applying precision medicine and analyzing genomic data to identify biomarkers[69] - The lead compound, ANAVEX2-73, is being developed for Alzheimer's disease, Parkinson's disease, and the rare disease Rett syndrome[70] - The company's pipeline includes ANAVEX2-73 and several preclinical compounds such as ANAVEX3-71, ANAVEX1-41, ANAVEX1066, and ANAVEX1037, targeting various neurodegenerative diseases, pain, and cancer[84][109][113] Clinical Studies Overview The company is actively advancing its lead compound, ANAVEX2-73, through multiple clinical trials, including a Phase 2b/3 study for Alzheimer's disease initiated in October 2018, and Phase 2 trials for Rett syndrome (March and June 2019) and Parkinson's Disease Dementia (October 2018) - A Phase 2b/3 double-blind, placebo-controlled study of ANAVEX2-73 in approximately 450 Alzheimer's disease patients commenced in October 2018[78] - A Phase 2 clinical trial of ANAVEX2-73 for Rett syndrome commenced in the United States in March 2019, followed by a second Phase 2 study (AVATAR) in Australia in June 2019[80][81] - A double-blind, randomized, placebo-controlled Phase 2 trial with ANAVEX2-73 in approximately 120 Parkinson's Disease Dementia (PDD) patients was initiated in October 2018[83] Results of Operations Operating expenses for the nine months ended June 30, 2019, increased to $22.8 million from $13.4 million in the prior-year period, driven by an $8.6 million rise in R&D expenses to $17.5 million due to three new clinical studies, while other income declined to $0.4 million from $1.8 million due to a delay in Australian R&D incentive income Operating Expense Comparison | Expense Category | Nine Months Ended June 30, 2019 | Nine Months Ended June 30, 2018 | | :--- | :--- | :--- | | Research and development | $17.5 million | $8.9 million | | Total operating expenses | $22.8 million | $13.4 million | - The increase in R&D expenses was primarily due to the commencement of a Phase 2b/3 study for Alzheimer's, a Phase 2 study for Parkinson's Disease Dementia, and a Phase 2 program for Rett syndrome[140] - Other income for the nine-month period decreased to $0.4 million from $1.8 million year-over-year, mainly because the Australian research and development incentive income was received in the fourth quarter of fiscal 2019, compared to the third quarter in fiscal 2018[141] Liquidity and Capital Resources As of June 30, 2019, the company had $21.2 million in cash and cash equivalents and $17.5 million in working capital, with $16.0 million in cash used for operations primarily funded by $14.3 million from equity issuances, and future liquidity supported by a $50 million "at-the-market" offering facility and a new $50 million purchase agreement Working Capital | | June 30, 2019 | September 30, 2018 | | :--- | :--- | :--- | | Current Assets | $21,817,138 | $24,222,607 | | Current Liabilities | $4,336,607 | $3,884,626 | | Working Capital | $17,480,531 | $20,337,981 | - Cash used in operations increased to $16.0 million for the nine months ended June 30, 2019, compared to $8.5 million in the prior year period, due to increased clinical development activities[146][147] - The company secured a new $50 million purchase agreement with Lincoln Park on June 7, 2019, to provide capital over a 36-month period, succeeding the fully utilized 2015 agreement[153][156] Quantitative and Qualitative Disclosures About Market Risks This section is not applicable to the company for this reporting period - Not applicable[163] Controls and Procedures Based on an evaluation as of June 30, 2019, the company's management, including the principal executive and financial officers, concluded that its disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[164] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2019, that materially affected, or are reasonably likely to materially affect, internal controls[165] PART II – OTHER INFORMATION Legal Proceedings The company reports that it is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to its business - The company knows of no material pending legal proceedings to which it or its subsidiaries are a party[165] Risk Factors The company states that there have been no material changes to the significant risk factors affecting its business as described in its Annual Report on Form 10-K for the fiscal year ended September 30, 2018 - There have been no material changes in the significant risk factors from those disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2018[166] [Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS.) During the quarter, the company did not sell any equity securities that were not registered under the Securities Act of 1933 and not previously reported in a Form 8-K - No unregistered sales of equity securities occurred during the reporting period that were not previously reported[167] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[167] Mine Safety Disclosures This section is not applicable to the company - Not applicable[167] Other Information The company reports no other information for this period - None[167] Exhibits This section lists the exhibits filed with the Form 10-Q, which include material contracts such as the Purchase Agreement with Lincoln Park Capital Fund, LLC, and certifications by the company's officers - Filed exhibits include the Purchase Agreement with Lincoln Park Capital Fund, LLC dated June 7, 2019, and certifications from the CEO and Principal Financial Officer[169] Signatures