Item
1. FINANCIAL STATEMENTS
ANAVEX LIFE
SCIENCES CORP.
INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
ANAVEX
LIFE SCIENCES CORP.
INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
March
31, 2019 and September 30, 2018
|
|
March
31
|
|
|
September
30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
19,457,845
|
|
|
$
|
22,930,638
|
|
Sales
tax recoverable
|
|
|
76,160
|
|
|
|
40,171
|
|
Prepaid
expenses
|
|
|
849,642
|
|
|
|
1,251,798
|
|
Deferred
costs
|
|
|
151,133
|
|
|
|
101,133
|
|
Deposits
- short term
|
|
|
15,000
|
|
|
|
—
|
|
|
|
|
20,549,780
|
|
|
|
24,323,740
|
|
Deposits
|
|
|
—
|
|
|
|
52,396
|
|
Total
Assets
|
|
$
|
20,549,780
|
|
|
$
|
24,376,136
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Equity
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
6,370,604
|
|
|
$
|
3,884,626
|
|
Total
Liabilities
|
|
|
6,370,604
|
|
|
|
3,884,626
|
|
|
|
|
|
|
|
|
|
|
Commitments - Note 5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock
|
|
|
|
|
|
|
|
|
Authorized:
|
|
|
|
|
|
|
|
|
100,000,000 common shares,
par value $0.001 per share
|
|
|
|
|
|
|
|
|
Issued
and outstanding:
|
|
|
|
|
|
|
|
|
48,173,241 common shares
|
|
|
|
|
|
|
|
|
(September 30, 2018
- 45,933,472)
|
|
|
48,175
|
|
|
|
45,935
|
|
Additional paid-in capital
|
|
|
138,696,975
|
|
|
|
129,377,542
|
|
Subscriptions receivable
|
|
|
(292,700
|
)
|
|
|
—
|
|
Accumulated deficit
|
|
|
(124,273,274
|
)
|
|
|
(108,931,967
|
)
|
Total
Stockholders’ Equity
|
|
|
14,179,176
|
|
|
|
20,491,510
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
20,549,780
|
|
|
$
|
24,376,136
|
|
See Accompanying Notes to Condensed
Consolidated Interim Financial Statements
ANAVEX
LIFE SCIENCES CORP.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For
the three and six months ended March 31, 2019 and 2018
(Unaudited)
|
|
Three months
ended March 31,
|
|
|
Six months
ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
$
|
2,061,251
|
|
|
$
|
1,489,450
|
|
|
$
|
3,822,559
|
|
|
$
|
2,887,253
|
|
Research
and development
|
|
|
6,078,786
|
|
|
|
3,245,023
|
|
|
|
11,790,996
|
|
|
|
5,939,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(8,140,037
|
)
|
|
|
(4,734,473
|
)
|
|
|
(15,613,555
|
)
|
|
|
(8,826,588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant income
|
|
|
74,527
|
|
|
|
—
|
|
|
|
149,055
|
|
|
|
—
|
|
Interest income, net
|
|
|
51,465
|
|
|
|
28,647
|
|
|
|
130,265
|
|
|
|
59,023
|
|
Foreign
exchange gain (loss), net
|
|
|
54,199
|
|
|
|
(18,337
|
)
|
|
|
49,693
|
|
|
|
(6,358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income, net
|
|
|
180,191
|
|
|
|
10,310
|
|
|
|
329,013
|
|
|
|
52,665
|
|
Net loss before provision
for income taxes
|
|
|
(7,959,846
|
)
|
|
|
(4,724,163
|
)
|
|
|
(15,284,542
|
)
|
|
|
(8,773,923
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
(48,048
|
)
|
|
|
(27,861
|
)
|
|
|
(56,765
|
)
|
|
|
(37,266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss
|
|
$
|
(8,007,894
|
)
|
|
$
|
(4,752,024
|
)
|
|
$
|
(15,341,307
|
)
|
|
$
|
(8,811,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.17
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
47,134,686
|
|
|
|
44,545,523
|
|
|
|
46,726,649
|
|
|
|
44,210,591
|
|
See
Accompanying Notes to Condensed Consolidated Interim Financial Statements
ANAVEX
LIFE SCIENCES CORP.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the six months ended March 31, 2019 and 2018
(Unaudited)
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash Flows used in Operating
Activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(15,341,307
|
)
|
|
$
|
(8,811,189
|
)
|
Adjustments to reconcile
net loss to net cash used in operations:
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
3,960,139
|
|
|
|
2,347,681
|
|
Changes in non-cash working
capital balances related to operations:
|
|
|
|
|
|
|
|
|
Sales
tax recoverable
|
|
|
(35,989
|
)
|
|
|
4,737
|
|
Prepaid
expenses and deposits
|
|
|
402,156
|
|
|
|
185,268
|
|
Deposits
|
|
|
37,396
|
|
|
|
—
|
|
Accounts
payable and accrued liabilities
|
|
|
2,485,978
|
|
|
|
(167,597
|
)
|
Net cash used in operating
activities
|
|
|
(8,491,627
|
)
|
|
|
(6,441,100
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows provided by Financing
Activities
|
|
|
|
|
|
|
|
|
Issuance of common shares
|
|
|
5,068,834
|
|
|
|
4,688,370
|
|
Deferred
financing charges
|
|
|
(50,000
|
)
|
|
|
(30,943
|
)
|
Net cash provided by financing
activities
|
|
|
5,018,834
|
|
|
|
4,657,427
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash
equivalents during the period
|
|
|
(3,472,793
|
)
|
|
|
(1,783,673
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
22,930,638
|
|
|
|
27,440,257
|
|
Cash
and cash equivalents, end of period
|
|
$
|
19,457,845
|
|
|
$
|
25,656,584
|
|
See Accompanying Notes to Condensed Consolidated Interim Financial Statements
ANAVEX
LIFE SCIENCES CORP.
INTERIM
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For
the three and six months ended March 31, 2019
(Unaudited)
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
|
Shares
to be
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Par
Value
|
|
|
|
Capital
|
|
|
|
Issued
|
|
|
|
Deficit
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019
|
|
|
46,887,056
|
|
|
$
|
46,888
|
|
|
$
|
133,438,276
|
|
|
$
|
—
|
|
|
$
|
(116,265,380
|
)
|
|
$
|
17,219,784
|
|
Shares issued under purchase
agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase shares
|
|
|
1,279,592
|
|
|
|
1,279
|
|
|
|
3,365,555
|
|
|
|
(292,700
|
)
|
|
|
—
|
|
|
|
3,074,134
|
|
Commitment shares
|
|
|
6,047
|
|
|
|
7
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued pursuant to cashless exercise of warrants
|
|
|
546
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,893,152
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,893,152
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,007,894
|
)
|
|
|
(8,007,894
|
)
|
Balance,
March 31, 2019
|
|
|
48,173,241
|
|
|
$
|
48,175
|
|
|
$
|
138,696,975
|
|
|
$
|
(292,700
|
)
|
|
$
|
(124,273,274
|
)
|
|
$
|
14,179,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2018
|
|
|
44,421,992
|
|
|
$
|
44,423
|
|
|
$
|
121,038,635
|
|
|
$
|
—
|
|
|
$
|
(95,537,723
|
)
|
|
$
|
25,545,335
|
|
Shares issued under purchase
agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase shares
|
|
|
150,000
|
|
|
|
151
|
|
|
|
459,699
|
|
|
|
—
|
|
|
|
—
|
|
|
|
459,850
|
|
Commitment shares
|
|
|
826
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Shares issued pursuant to
cashless exercise of options
|
|
|
970
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
Share based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,225,696
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,225,696
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,752,024
|
)
|
|
|
(4,752,024
|
)
|
Balance,
March 31, 2018
|
|
|
44,573,788
|
|
|
$
|
44,575
|
|
|
$
|
122,724,029
|
|
|
$
|
—
|
|
|
$
|
(100,289,747
|
)
|
|
$
|
22,478,857
|
|
See Accompanying Notes to Condensed
Consolidated Interim Financial Statements
ANAVEX
LIFE SCIENCES CORP.
INTERIM
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For
the three and six months ended March 31, 2019
(Unaudited)
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
|
Shares
to be
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Par
Value
|
|
|
|
Capital
|
|
|
|
Issued
|
|
|
|
Deficit
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended March 31, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 1, 2018
|
|
|
45,933,472
|
|
|
$
|
45,935
|
|
|
$
|
129,377,542
|
|
|
$
|
—
|
|
|
$
|
(108,931,967
|
)
|
|
$
|
20,491,510
|
|
Shares issued under purchase
agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase shares
|
|
|
2,229,592
|
|
|
|
2,229
|
|
|
|
5,359,305
|
|
|
|
(292,700
|
)
|
|
|
—
|
|
|
|
5,068,834
|
|
Commitment shares
|
|
|
9,631
|
|
|
|
10
|
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued pursuant to
cashless exercise of warrants
|
|
|
546
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
3,960,139
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,960,139
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,341,307
|
)
|
|
|
(15,341,307
|
)
|
Balance,
March 31, 2019
|
|
|
48,173,241
|
|
|
$
|
48,175
|
|
|
$
|
138,696,975
|
|
|
$
|
(292,700
|
)
|
|
$
|
(124,273,274
|
)
|
|
$
|
14,179,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 1, 2017
|
|
|
43,330,817
|
|
|
$
|
43,332
|
|
|
$
|
115,689,221
|
|
|
$
|
—
|
|
|
$
|
(91,478,558
|
)
|
|
$
|
24,253,995
|
|
Shares issued under purchase
agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase shares
|
|
|
1,233,580
|
|
|
|
1,234
|
|
|
|
4,687,136
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,688,370
|
|
Commitment shares
|
|
|
8,421
|
|
|
|
8
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Shares issued pursuant to
cashless exercise of options
|
|
|
970
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
Share based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
2,347,681
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,347,681
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,811,189
|
)
|
|
|
(8,811,189
|
)
|
Balance,
March 31, 2018
|
|
|
44,573,788
|
|
|
$
|
44,575
|
|
|
$
|
122,724,029
|
|
|
$
|
—
|
|
|
$
|
(100,289,747
|
)
|
|
$
|
22,478,857
|
|
See
Accompanying Notes to Condensed Consolidated Interim Financial Statements
Anavex Life Sciences Corp.
Notes to the Condensed Consolidated
Interim Financial Statements
March 31, 2019
(Unaudited)
Note 1
|
Business Description and Basis of Presentation
|
Business
Anavex
Life Sciences Corp. (the “Company”) is a clinical stage biopharmaceutical company engaged in the development of differentiated
therapeutics by applying precision medicine to central nervous system (“CNS”) diseases with high unmet need. Anavex
analyzes genomic data from clinical studies to identify biomarkers, which select patients that will receive the therapeutic benefit
for the treatment of neurodegenerative and neurodevelopmental diseases. The Company’s lead compound ANAVEX®2-73 is being
developed to treat Alzheimer’s disease, Parkinson’s disease and potentially other central nervous system diseases,
including rare diseases, such as Rett syndrome, a rare severe neurological monogenic disorder caused by mutations in the X-linked
gene, methyl-CpG-binding protein 2 (“MECP2”).
Basis
of Presentation
These
unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America
(“US GAAP”) for interim reporting. Accordingly, certain information and note disclosures normally included in the
annual financial statements in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, the disclosures are adequate to make the information presented not misleading.
These
accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for fair presentation of the information contained herein. The consolidated
balance sheet as of September 30, 2018 was derived from the audited annual financial statements but does not include all disclosures
required by US GAAP. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K
for the year ended September 30, 2018 filed with the SEC on December 12, 2018. The Company follows the same accounting policies
in the preparation of interim reports.
Operating
results for the six months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year
ending September 30, 2019.
Liquidity
All
of the Company’s potential drug compounds are in the clinical development stage and the Company cannot be certain that its
research and development efforts will be successful or, if successful, that its potential drug compounds will ever be approved
for sales to pharmaceutical companies or generate commercial revenues. To date, we have not generated any revenues from our operations.
The Company expects the business to continue to experience negative cash flows for the foreseeable future and cannot predict when,
if ever, our business might become profitable.
Anavex Life Sciences Corp.
Notes to the Condensed Consolidated
Interim Financial Statements
March 31, 2019
(Unaudited)
Note 1
|
Business Description and Basis of Presentation
– (continued)
|
The
Company believes that its existing cash and cash equivalents, along with existing financial commitments from third parties, will
be sufficient to meet its cash commitments for at least the next eighteen months after the date that these condensed consolidated
interim financial statements are issued. The process of drug development can be costly, and the timing and outcomes of clinical
trials is uncertain. The assumptions upon which the Company has based its estimates are routinely evaluated and may be subject
to change. The actual amount of the Company’s expenditures will vary depending upon a number of factors including but
not limited to the design, timing and duration of future clinical trials, the progress of the Company’s research and development
programs and the level of financial resources available. The Company has the ability to adjust its operating plan spending levels
based on the timing of future clinical trials.
The
Company will need to raise additional capital in order to continue to fund operations and fully fund later stage clinical development
programs. Such capital may not be available on commercially acceptable terms, if at all. The Company believes that it will be
able to obtain additional working capital to fund future operations through current financing commitments from third parties,
or through other arrangements; however, there can be no assurance that such additional financing, if available, can be obtained
on terms acceptable to the Company. If the Company is unable to obtain such additional financing, future operations
would need to be scaled back.
Use
of Estimates
The
preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset
valuations, asset impairment, stock-based compensation and loss contingencies. The Company bases its estimates and assumptions
on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs
and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially
and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
Anavex Life Sciences Corp.
Notes to the Condensed Consolidated
Interim Financial Statements
March 31, 2019
(Unaudited)
Note 1
|
Business Description and Basis of Presentation
– (continued)
|
Principles
of Consolidation
These
consolidated financial statements include the accounts of Anavex Life Sciences Corp. and its wholly-owned subsidiaries, Anavex
Australia Pty Limited, a company incorporated under the laws of Australia, Anavex Germany GmbH, a company incorporated under the
laws of Germany, and Anavex Canada Ltd., a company incorporated under the laws of the Province of Ontario, Canada. All inter-company
transactions and balances have been eliminated.
Fair
Value Measurements
The
fair value hierarchy under GAAP is based on three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value which are the following:
|
Level 1 -
|
quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
|
Level 2 -
|
observable
inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical
or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose
significant value drivers are observable; and
|
|
Level 3 -
|
assets and liabilities whose significant value drivers are unobservable by little or no market activity
and that are significant to the fair value of the assets or liabilities.
|
The
book value of cash and cash equivalents and accounts payable and accrued liabilities approximate their fair values due to the
short-term maturity of those instruments.
At
March 31, 2019 and September 30, 2018, the Company did not have any Level 3 assets or liabilities.
Basic
and Diluted Loss per Share
Basic
loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted loss per common share is computed similar to basic loss per common share except
that the denominator is increased to include the weighted average number of all potentially dilutive securities convertible into
shares of common stock that were outstanding during the period.
As
of March 31, 2019, loss per share excludes 7,655,850 (September 30, 2018 – 7,185,296) potentially dilutive common shares
related to outstanding options and warrants, as their effect was anti-dilutive.
Anavex Life Sciences Corp.
Notes to the Condensed Consolidated Interim Financial Statements
March 31, 2019
(Unaudited)
Note 2
|
Recent Accounting Pronouncements
|
Recently
Adopted Accounting Pronouncements
In
May 2014, the FASB and the International Accounting Standards Board (IASB) issued a converged standard on revenue recognition
from contracts with customers, ASU 2014-09 (Topic 606 and IFRS 15). This standard superseded nearly all existing revenue recognition
guidance. ASU 2014-09 is effective for the Company on a prospective basis beginning on October 1, 2018. The adoption of this standard
did not have a material impact for any period presented and the Company will apply this standard to all future revenues.
In
May 2017, the FASB issued ASU No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope of Modification Accounting,”
clarifying when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The
new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the
same immediately before and after a change to the terms and conditions of the award. The new guidance was effective for the Company
on a prospective basis beginning on October 1, 2018. The adoption of this standard did not have a material impact for any period
presented.
Recent
Accounting Pronouncements Not Yet Adopted
In
February 2016, the FASB issued Accounting Standards Update No. 2016-02,
Leases
. The guidance would require lessees to recognize
most leases on their balance sheets as lease liabilities with corresponding right –of use assets. The guidance is effective
for annual and interim reporting periods beginning on or after December 15, 2018. The new guidance is effective for the Company
on a prospective basis beginning on October 1, 2019. The Company is currently evaluating the impact this guidance will have on
its financial condition, results of operations and cash flows.
In
June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments
(“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring
goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after
December 15, 2018, with early adoption permitted, but no earlier than the Company’s adoption date of Topic 606. The new guidance
is effective for the Company beginning on October 1, 2019. The new guidance is required to be applied retrospectively with the
cumulative effect recognized at the date of initial application. The Company is currently evaluating the effect ASU 2018-07 will
have on the consolidated financial statements.
Other
than noted above, the Company does not expect the adoption of recently issued accounting pronouncements to have a significant
impact on its results of operations, financial position or cash flow.
Anavex Life Sciences Corp.
Notes to the Condensed Consolidated Interim Financial Statements
March 31, 2019
(Unaudited)
Grant
Income
Clinical
Study Grant
During
the year ended September 30, 2017, the Company was awarded grant funding in the amount of $597,886. The grant is being received
in equal quarterly installments over a period of two years beginning during the year ended September 30, 2018 in exchange for
a commitment to complete clinical testing for a therapeutic drug candidate for the treatment of Rett syndrome.
The
grant income is deferred when received and amortized to other income as the related research and development expenditures are
incurred. During the three and six months ended March 31, 2019, the Company recognized $74,527 and $149,055, respectively (2018:
$Nil and $Nil, respectively) of this grant on its statement of operations within grant income.
Note 4
|
Equity Offering Agreements
|
Controlled
Equity Offering Sales Agreement
On
July 6, 2018, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with
Cantor Fitzgerald & Co., as agent (“Cantor Fitzgerald”), pursuant to which the Company may offer and sell
shares of common stock, for aggregate gross sale proceeds of up to $50,000,000 from time to time through Cantor Fitzgerald (the
“Offering”).
Upon
delivery of a placement notice based on the Company’s instructions and subject to the terms and conditions of the Sales
Agreement, Cantor Fitzgerald may sell the Shares by methods deemed to be an “at the market offering” offering, in
negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices,
or by any other method permitted by law, including negotiated transactions, subject to the prior written consent of the Company.
The Company is not obligated to make any sales of Shares under the Sales Agreement. The Company or Cantor Fitzgerald may suspend
or terminate the offering of Shares upon notice to the other party, subject to certain conditions. Cantor Fitzgerald will
act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable
state and federal law, rules and regulations and the rules of Nasdaq.
The
Company has agreed to pay Cantor Fitzgerald commissions for its services of acting as agent of up to 3.0% of the gross proceeds
from the sale of the Shares pursuant to the Sales Agreement. The Company has also agreed to provide Cantor Fitzgerald with
customary indemnification and contribution rights. At March 31, 2019, the Company had incurred $151,133 in legal and accounting
fees associated with the Sales Agreement. This amount is included in deferred financing charges at March 31, 2019 and is expected
to be reclassified to share capital upon issuance of shares under the Sales Agreement. At March 31, 2019, no shares have been
sold pursuant to the Offering.
Anavex
Life Sciences Corp.
Notes
to the Condensed Consolidated Interim Financial Statements
March 31, 2019
(Unaudited)
|
Note
4
|
Equity
Offering Agreements
– Continued
|
Purchase
Agreement
On
October 21, 2015, the Company entered into a $50,000,000 purchase agreement (the “2015 Purchase Agreement”) with Lincoln
Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company may sell and issue to Lincoln Park, and Lincoln
Park is obligated to purchase, up to $50,000,000 in value of its shares of common stock from time to time over a 36-month period
starting from the effective date of the respective registration statement, to September 6, 2019.
The
Company may direct Lincoln Park, at its sole discretion, and subject to certain conditions, to purchase up to 50,000 shares of
common stock on any business day, provided that at least one business day has passed since the most recent purchase. The amount
of a purchase may be increased under certain circumstances provided, however that Lincoln Park’s committed obligation under
any single purchase shall not exceed $2,000,000. The purchase price of shares of common stock related to the future funding will
be based on the then prevailing market prices of such shares at the time of sales as described in the 2015 Purchase Agreement.
In
consideration for entering into the 2015 Purchase Agreement, the Company issued to Lincoln Park 179,598 shares of common stock
as a commitment fee and agreed to issue up to 89,799 shares pro rata, when and if, Lincoln Park purchases at the Company’s
discretion the $50,000,000 aggregate commitment.
During
the three months ended March 31, 2019, the Company issued to Lincoln Park an aggregate of 2,239,223 (2018: 1,242,001) shares of
common stock under the Purchase Agreement, including 2,229,592 (2018: 1,233,580) shares of common stock for an aggregate purchase
price of $5,361,534 (2018: $4,688,370) and 9,631 (2018: 8,421) commitment shares. At March 31, 2019, an amount of $7,836,072 remained
available under the 2015 Purchase Agreement.
At March 31, 2019, an amount of $292,700 (September 30, 2018: $0) was receivable under the Purchase Agreement in respect of
100,000 purchase shares and 526 commitment shares issued and outstanding. This amount was received subsequent to March 31,
2019.
Anavex
Life Sciences Corp.
Notes
to the Condensed Consolidated Interim Financial Statements
March 31, 2019
(Unaudited)
a)
Litigation
The
Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently
uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that
the resolution of any such matter will not have a material adverse effect upon the Company’s consolidated financial statements.
The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its
consolidated financial statements.
b)
Share Purchase Warrants
A
summary of the status of the Company’s outstanding share purchase warrants is presented below:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Number of Shares
|
|
|
Exercise Price
|
|
Balance, October 1, 2017
|
|
|
|
1,609,309
|
|
|
$
|
2.66
|
|
Issued
|
|
|
|
350,000
|
|
|
$
|
4.19
|
|
Exercised
|
|
|
|
(756,143
|
)
|
|
$
|
2.96
|
|
Expired
|
|
|
|
(524,787
|
)
|
|
$
|
3.00
|
|
Balance, September 30, 2018
|
|
|
|
678,379
|
|
|
$
|
2.87
|
|
Exercised
|
|
|
|
(1,250
|
)
|
|
$
|
1.68
|
|
Expired
|
|
|
|
(307,129
|
)
|
|
$
|
1.47
|
|
Balance, March 31, 2019
|
|
|
|
370,000
|
|
|
$
|
4.03
|
|
During
the six months ended March 31, 2019, the Company issued 546 shares in connection with the exercise of 1,250 share purchase warrants
on a cashless basis.
Anavex
Life Sciences Corp.
Notes
to the Condensed Consolidated Interim Financial Statements
March 31, 2019
(Unaudited)
|
Note
5
|
Commitments
– (Continued)
|
c) Stock–based Compensation Plan
2015
Stock Option Plan
On
September 18, 2015, the Company’s board of directors approved a 2015 Omnibus Incentive Plan (the “2015 Plan”),
which provides for the grant of stock options and restricted stock awards to directors, officers, employees and consultants of
the Company.
The
maximum number of our common shares reserved for issue under the plan is 6,050,553 shares, subject to adjustment in the event
of a change of the Company’s capitalization. As a result of the adoption of the 2015 Plan, no further option awards will
be granted under any previously existing stock option plan. Stock option awards previously granted under the previously existing
stock option plans remain outstanding in accordance with their terms.
The
2015 Plan provides that it may be administered by the board of directors, or the board of directors may delegate such responsibility
to a committee. The exercise price will be determined by the board of directors at the time of grant shall be at least equal to
the fair market value on such date. If the grantee is a 10% stockholder on the grant date, then the exercise price shall not be
less than 110% of fair market value of the Company’s shares of common stock on the grant date. Stock options may be granted
under the 2015 Plan for an exercise period of up to ten years from the date of grant of the option or such lesser periods as may
be determined by the board, subject to earlier termination in accordance with the terms of the 2015 Plan.
A
summary of the status of Company’s outstanding stock purchase options is presented below:
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
Number of
|
|
|
Average
|
|
|
Average Grant
|
|
|
Aggregate
|
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Date Fair Value
|
|
|
intrinsic value
|
|
Outstanding at October 1, 2017
|
|
|
|
5,092,030
|
|
|
$
|
4.13
|
|
|
|
|
|
|
$
|
5,280,544
|
|
Granted
|
|
|
|
1,730,000
|
|
|
$
|
2.71
|
|
|
$
|
2.09
|
|
|
|
|
|
Forfeited
|
|
|
|
(164,280
|
)
|
|
$
|
3.66
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
(150,833
|
)
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2018
|
|
|
|
6,506,917
|
|
|
$
|
3.83
|
|
|
|
|
|
|
$
|
2,353,088
|
|
Granted
|
|
|
|
1,030,399
|
|
|
$
|
2.45
|
|
|
$
|
1.97
|
|
|
|
|
|
Forfeited
|
|
|
|
(238,966
|
)
|
|
$
|
2.86
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2019
|
|
|
|
7,298,350
|
|
|
$
|
3.67
|
|
|
|
|
|
|
$
|
3,642,978
|
|
Exercisable at March 31, 2019
|
|
|
|
5,240,285
|
|
|
$
|
3.73
|
|
|
|
|
|
|
$
|
2,976,021
|
|
The
aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted market
price of the Company’s stock for the options that were in-the-money at March 31, 2019.
Anavex
Life Sciences Corp.
Notes
to the Condensed Consolidated Interim Financial Statements
March 31, 2019
(Unaudited)
|
Note
5
|
Commitments
–
(Continued)
|
c)
Stock–based Compensation Plan – (Continued)
During
the three and six months ended March 31, 2019, the Company recognized stock-based compensation expense in connection with the
issuance and vesting of stock options in exchange for services. These amounts have been included in general and administrative
expenses and research and development expenses on the Company’s statement of operations as follows:
|
|
Three months ended March 31,
|
|
|
Six months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
General and administrative
|
|
$
|
950,999
|
|
|
$
|
625,679
|
|
|
$
|
2,006,587
|
|
|
$
|
1,197,041
|
|
Research and development
|
|
|
942,153
|
|
|
|
600,017
|
|
|
|
1,953,552
|
|
|
|
1,150,640
|
|
Total share based compensation
|
|
$
|
1,893,152
|
|
|
$
|
1,225,696
|
|
|
$
|
3,960,139
|
|
|
$
|
2,347,681
|
|
An
amount of approximately $4,546,000 in stock-based compensation is expected to be recorded over the remaining term of such options
through June 2021.
The
fair value of each option award is estimated on the date of grant using the Black Scholes option pricing model based on the following
weighted average assumptions:
|
|
2019
|
|
|
2018
|
|
Risk-free interest rate
|
|
|
2.91
|
%
|
|
|
2.43
|
%
|
Expected life of options (years)
|
|
|
5.59
|
|
|
|
6.57
|
|
Annualized volatility
|
|
|
105.96
|
%
|
|
|
112.23
|
%
|
Dividend rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Subsequent
to March 31, 2019,
|
i)
|
The
Company filed a Certificate of Amendment with the Secretary of State of Nevada to amend the Company’s articles of incorporation
to authorize the issuance of 10,000,000 shares of preferred stock having a par value of $0.001 per share. The Board of Directors
of the Company shall have the authority to issue shares of preferred stock in one or more series and shall have the authority
to establish by duly appointed resolution such voting powers, designations, preferences, limitations and restrictions and relative
rights of the preferred shares it deems necessary or advisable.
|
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ii)
|
On
January 15, 2019, the Board approved, subject to stockholder approval, the 2019 Omnibus Incentive Plan (the “2019 Plan”)
and, on April 5, 2019, the 2019 Plan was approved the Company’s stockholders. Under the terms of the 2019 Plan, 6,000,000
additional shares of Common Stock are available for issuance under the 2019 Plan, in addition to the shares available under the
2015 Plan. Any awards outstanding under the 2015 Plan or the Company’s 2007 Stock Option Plan (the “2007 Plan”)
will remain subject to and be paid under the 2015 Plan or the 2007 Plan, respectively, and any shares subject to outstanding awards
under the 2015 Plan or the 2007 Plan that subsequently cease to be subject to such awards (other than by reason of settlement
of the awards in shares) will automatically become available for issuance under the 2019 Plan.
|
Anavex
Life Sciences Corp.
Notes
to the Condensed Consolidated Interim Financial Statements
March 31, 2019
(Unaudited)
|
Note 6
|
Subsequent
Events
– Continued
|
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iii)
|
On May 3, 2019 (the “Effective Date”), the
Company entered into a Second Amendment to the Employment Agreement (the “Amendment”) with the Company’s Chief
Executive Officer (the “CEO”) in his continuing capacity as Chief Executive Officer of the Company. The Amendment
amends the Employment Agreement by and between the Company and the CEO, effective July 5, 2013 (the “Employment Agreement”),
as amended, and extends the term of the Employment Agreement through July 5, 2022, unless earlier terminated
as
provided in the Amendment. Pursuant to the terms of the Amendment, the CEO shall receive an annual base salary of $550,000 and
is eligible to earn an annual cash target bonus for each whole or partial calendar year of twenty percent of his base salary.
Subject to the terms of the Amendment, the CEO will also receive on the Effective Date 750,000 options for shares of the Company’s
common stock, one-third of which shall vest on each of July 5, 2020, July 5, 2021 and July 5, 2022. The options shall have an
exercise price equal to the closing price of the Company’s common stock on the Effective Date.
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q includes forward-looking statements. All statements other than statements of historical facts contained
in this Quarterly Report on Form 10-Q, including statements regarding our anticipated future clinical and regulatory milestone
events, future financial position, business strategy and plans and objectives of management for future operations, are forward-looking
statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,”
“intend,” “expect” “should,” “forecast,” “could,” “suggest,”
“plan” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such forward-looking
statements include, without limitation, statements regarding:
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our
ability to generate any revenue or to continue as a going concern;
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our
ability to successfully conduct clinical and preclinical trials for our product candidates;
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our
ability to raise additional capital on favorable terms;
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our
ability to execute our research and development plan on time and on budget;
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our
products ability to demonstrate efficacy or an acceptable safety profile;
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our
ability to obtain the support of qualified scientific collaborators;
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our
ability, whether alone or with commercial partners, to successfully commercialize any
of our product candidates that may be approved for sale;
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our
ability to identify and obtain additional product candidates;
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our
reliance on third parties in non-clinical and clinical studies;
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our
ability to defend against product liability claims;
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our
ability to safeguard against security breaches;
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our
ability to obtain and maintain sufficient intellectual property protection for our product
candidates;
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our
ability to comply with our intellectual property licensing agreements;
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our
ability to defend against claims of intellectual property infringement;
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our
ability to comply with the maintenance requirements of the government patent agencies;
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our
ability to protect our intellectual property rights throughout the world;
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the
anticipated start dates, durations and completion dates of our ongoing and future clinical
studies;
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the
anticipated designs of our future clinical studies;
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our
anticipated future regulatory submissions and our ability to receive regulatory approvals
to develop and market our product candidates; and
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our
anticipated future cash position.
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We
have based these forward-looking statements largely on our current expectations and projections about future events, including
the responses we expect from the U.S. Food and Drug Administration, (“FDA”), and other regulatory authorities and
financial trends that we believe may affect our financial condition, results of operations, business strategy, preclinical and
clinical trials, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions
including without limitation the risks described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form
10-K. These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q include additional factors which could
adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment.
New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess
the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements. You should not rely upon forward-looking statements
as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements
will be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except
as required by applicable laws including the securities laws of the United States, we assume no obligation to update or supplement
forward-looking statements.
As
used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and “Anavex”
mean Anavex Life Sciences Corp., unless the context clearly requires otherwise.
Our
Current Business
Anavex
Life Sciences Corp. is a clinical stage biopharmaceutical company engaged in the development of differentiated therapeutics by
applying precision medicine to central nervous system (“CNS”) diseases with high unmet need. Anavex analyzes genomic
data from clinical studies to identify biomarkers, which select patients that will receive the therapeutic benefit for the treatment
of neurodegenerative and neurodevelopmental diseases.
Our
lead compound, ANAVEX
®
2-73, is being developed to treat Alzheimer’s disease, Parkinson’s disease and
potentially other central nervous system diseases, including rare diseases, such as Rett syndrome, a rare severe neurological
monogenic disorder caused by mutations in the X-linked gene, methyl-CpG-binding protein 2 (“MECP2”).
Our
total portfolio currently consists of five programs. To prioritize the allocation of our resources, we designate certain programs
as core programs and others as seed programs, and we currently have two core programs and three seed programs. Our core programs
are at various stages of clinical and preclinical development, in neurodegenerative and neurodevelopmental diseases.
The
following table summarizes key information about our programs:
Anavex
has a portfolio of compounds varying in sigma-1 receptor (S1R) binding activities. The SIGMAR1 gene encodes the S1R protein, which
is an intracellular chaperone protein with important roles in cellular communication. S1R is also involved in transcriptional
regulation at the nuclear envelope and restores homeostasis and stimulates recovery of cell function when activated. In order
to validate the ability of our compounds to activate quantitatively the S1R, we performed in collaboration with Stanford University
a quantitative Positron Emission Tomography (PET) imaging scan in mice, which demonstrated a dose-dependent ANAVEX
®
2-73
target engagement or receptor occupancy (RO) with S1R in the brain.
Cellular
Homeostasis
Many
diseases are possibly directly caused by chronic homeostatic imbalances or cellular stress of brain cells. In pediatric diseases
like Rett syndrome or infantile spasms, the chronic cellular stress is possibly caused by the presence of a constant genetic mutation.
In neurodegenerative diseases, such as Alzheimer’s and Parkinson’s diseases, chronic cellular stress is possibly caused
by age-correlated buildup of cellular insult and hence chronic cellular stress. Specifically, defects in homeostasis of protein
or ribonucleic acid (“RNA”) lead to the death of neurons and dysfunction of the nervous system. The spreading of protein
aggregates resulting in a proteinopathy, a characteristic finding in Alzheimer’s and Parkinson’s diseases that results
from disorders of protein synthesis, trafficking, folding, processing or degradation in cells. The clearance of macromolecules
in the brain is particularly susceptible to imbalances that result in aggregation and degeneration in nerve cells. For example,
Alzheimer’s disease pathology is characterized by the presence of amyloid plaques, neurofibrillary tangles, which are aggregates
of hyperphosphorylated Tau protein that are a marker of other diseases known as tauopathies as well as inflammation of microglia.
With the SIGMAR1 activation through SIGMAR1 agonists like ANAVEX
®
2-73, our approach is to restore cellular balance,
i.e. homeostasis. Therapies that correct defects in cellular homeostasis might have the potential to halt or delay neurodevelopmental
and neurodegenerative disease progression.
ANAVEX
®
2-73-specific
Biomarkers
A
full genomic analysis of Alzheimer’s disease (AD) patients treated with ANAVEX
®
2-73 resulted in the identification
of actionable genetic variants. A significant impact of the genomic biomarkers SIGMAR1, the direct target of ANAVEX
®
2-73
and COMT, a gene involved in memory function, on the drug response level was identified, leading to an early ANAVEX
®
2-73-specific
biomarker hypothesis. It is expected that
excluding
patients with these two identified biomarker variants (approximately
10%-20% of the population) in prospective studies would identify approximately 80%-90% patients that would display clinically
significant improved functional and cognitive scores. The consistency between the identified DNA and RNA data related to ANAVEX
®
2-73,
which are considered independent of AD pathology, as well as multiple endpoints and time-points, provides support for precision
medicine clinical development of ANAVEX
®
2-73 by using genetic biomarkers identified within the study population
itself to target patients who are most likely to respond to ANAVEX
®
2-73 treatment in AD as well as indications
like Parkinson’s disease dementia (PDD) or Rett syndrome (RTT) in which ANAVEX
®
2-73 is currently studied
or planned to be studied.
Clinical
Studies Overview
In
November 2016, we completed a Phase 2a clinical trial, consisting of PART A and PART B, which lasted a total of 57 weeks, for
ANAVEX
®
2-73 in mild-to-moderate Alzheimer’s patients. This open-label randomized trial met both primary and
secondary endpoints and was designed to assess the safety and exploratory efficacy of ANAVEX
®
2-73 in 32 patients.
ANAVEX
®
2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress
levels in the brain believed to restore cellular homeostasis and to reverse the pathological hallmarks observed in Alzheimer’s
disease. In October 2017, we presented positive pharmacokinetic (PK) and pharmacodynamic (PD) data from the Phase 2a study, which
established a concentration-effect relationship between ANAVEX
®
2-73 and study measurements. These measures obtained
from all patients who participated in the entire 57 weeks include exploratory cognitive and functional scores as well as biomarker
signals of brain activity. Additionally, the study appears to show that ANAVEX
®
2-73 activity is enhanced by its
active metabolite (ANAVEX19-144), which also targets the sigma-1 receptor and has a half-life approximately twice as long as the
parent molecule.
In
March 2016, we received approval from the Ethics Committee in Australia to extend the Phase 2a clinical trial by an additional
108 weeks, which had been requested by patients and their caregivers. Subsequently, in May 2018, we received approval from the
Ethics Committee in Australia to further extend the Phase 2a extension trial for an additional two years. The two consecutive
trial extensions have allowed participants who completed the 52-week PART B of the study to continue taking ANAVEX
®
2-73,
providing an opportunity to gather extended safety data for a cumulative time period of five years.
In
October 2018, we presented new long-term clinical data for ANAVEX
®
2-73 in a presentation at the 2018 Clinical Trials
on Alzheimer’s Disease (CTAD) Meeting. At 148 weeks into the five-year extended Phase 2a clinical study, data confirmed
a significant association between ANAVEX
®
2-73 concentration and both exploratory functional and cognitive endpoints
as measured by the Alzheimer’s Disease Cooperative Study-Activities of Daily Living (ADCS-ADL) evaluation and
the Mini Mental State Examination (MMSE), respectively. The cohort of patients treated with higher ANAVEX
®
2-73
concentration maintained ADCS-ADL performance compared to the lower concentration cohort (p<0.0001). As well, the patient cohort
with the higher ANAVEX
®
2-73 concentration performed better at MMSE compared to the lower concentration cohort (p<0.0008).
A significant impact on the drug response levels of both the SIGMAR1 (p<0.0080) and COMT (p<0.0014) genomic biomarkers,
identified and specified at week 57, was also confirmed over the 148-week period. Further, ANAVEX
®
2-73 demonstrated
continued favorable safety and tolerability through 148 weeks.
A
larger Phase 2b/3 double-blind, placebo-controlled study of ANAVEX
®
2-73 in Alzheimer’s disease commenced
in October 2018, which is independent of the ongoing Phase 2a extension study. The Phase 2b/3 study will enroll approximately
450 patients for 48 weeks, randomized 1:1:1 to two different ANAVEX
®
2-73 doses or placebo. The trial is currently
taking place in Australia; however, North American sites may also be added. The ANAVEX
®
2-73 Phase 2b/3 study design
incorporates genomic precision medicine biomarkers identified in the ANAVEX
®
2-73 Phase 2a study. Primary and secondary
endpoints will assess safety and both cognitive and functional efficacy, measured through Alzheimer’s Disease Assessment
Scale – Cognition (ADAS-Cog), ADCS-ADL and Clinical Dementia Rating – Sum of Boxes for cognition and function (CDR-SB).
In
February 2016, we presented positive preclinical data for ANAVEX
®
2-73 in Rett syndrome, a rare neurodevelopmental
disease. The study was funded by the International Rett Syndrome Foundation (“Rettsyndrome.org”). In January 2017,
we were awarded a financial grant from Rettsyndrome.org of a minimum of $0.6 million to cover some of the costs of a multicenter
Phase 2 clinical trial of ANAVEX
®
2-73 for the treatment of Rett syndrome. This award is being received in quarterly
instalments which commenced during fiscal 2018. Further, in March 2019, the Company commenced a Phase 2 clinical trial of ANAVEX
®
2-73
for the treatment of Rett syndrome. The Phase 2 study is taking place in the United States and is a randomized double-blind, placebo-controlled
safety, tolerability, pharmacokinetic and efficacy study of oral liquid ANAVEX
®
2-73 formulation to treat Rett syndrome.
Pharmacokinetic and dose findings will be investigated in a total of 15 patients over a 7-week treatment period including ANAVEX
®
2-73-specific
genomic precision medicine biomarkers. All patients who participate in the study will be eligible to receive ANAVEX
®
2-73
under a voluntary open label extension protocol. This study will be followed by a planned placebo-controlled safety and efficacy
evaluation of ANAVEX
®
2-73 over a 3-month treatment period. Primary and secondary endpoints include safety as well
as Rett syndrome conditions such as cognitive impairment, motor impairment, behavioral symptoms and seizure activity. The ANAVEX
®
2-73
Phase 2 Rett syndrome study design incorporates genomic precision medicine biomarkers identified in the ANAVEX
®
2-73
Phase 2a Alzheimer’s disease study.
In
September 2016, we presented positive preclinical data for ANAVEX
®
2-73 in Parkinson’s disease, which demonstrated
significant improvements on all measures: behavioral, histopathological, and neuroinflammatory endpoints. The study was funded
by the Michael J. Fox Foundation. Additional data was announced in October 2017 from the model for experimental parkinsonism.
The data presented indicates that ANAVEX
®
2-73 induces robust neurorestoration in experimental parkinsonism. The
encouraging results we have gathered in this model, coupled with the favorable profile of this compound in the Alzheimer’s
disease trial, support the notion that ANAVEX
®
2-73 is a promising clinical candidate drug for Parkinson’s
disease.
In
October 2018, the Company initiated in Spain, a double-blind, randomized, placebo-controlled Phase 2 trial with ANAVEX
®
2-73
in Parkinson’s Disease Dementia (PDD), which will study the effect of the compound on both the cognitive and motor impairment
of Parkinson’s disease. The Phase 2 study will enroll approximately 120 patients for 14 weeks, randomized 1:1:1 to two different
ANAVEX
®
2-73 doses or placebo. The ANAVEX
®
2-73 Phase 2 PDD study design incorporates genomic precision
medicine biomarkers identified in the ANAVEX
®
2-73 Phase 2a study.
Our
Pipeline
Our
research and development pipeline includes ANAVEX
®
2-73 currently in three different clinical studies, and several
compounds in different stages of pre-clinical study.
Our
proprietary SIGMACEPTOR™ Discovery Platform produced small molecule drug candidates with unique modes of action, based on
our understanding of sigma receptors. Sigma receptors may be targets for therapeutics to combat many human diseases, both of neurodegenerative
nature, including Alzheimer’s disease, as well as of neurodevelopmental nature, like Rett syndrome. When bound by the appropriate
ligands, sigma receptors influence the functioning of multiple biochemical signals that are involved in the pathogenesis (origin
or development) of disease.
Compounds
that have been subjects of our research include the following:
ANAVEX
®
2-73
ANAVEX
®
2-73
may offer a disease-modifying approach in neurodegenerative and neurodevelopmental diseases by activation of sigma-1 receptors.
In
Rett syndrome, administration of ANAVEX
®
2-73 resulted in both significant and dose related improvements in an array
of behavioral paradigms in the MECP2 HET Rett syndrome disease model. In addition, in a further experiment sponsored by Rettsyndrome.org,
ANAVEX
®
2-73 was evaluated in automatic visual response and respiration tests in 7-month old mice, an age at which
advanced pathology is evident. Vehicle-treated MECP2 mice demonstrated fewer automatic visual responses than wild-type mice. Treatment
with ANAVEX
®
2-73 for four weeks significantly increased the automatic visual response in the MECP2 Rett syndrome
disease mouse. Additionally, chronic oral dosing daily for 6.5 weeks of ANAVEX
®
2-73 starting at ~5.5 weeks of age
was conducted in the MECP2 HET Rett syndrome disease mouse model assessed the different aspects of muscular coordination, balance,
motor learning and muscular strengths, some of the core deficits observed in Rett syndrome. Administration of ANAVEX
®
2-73
resulted in both significant and dose related improvements in an array of these behavioral paradigms in the MECP2 HET Rett syndrome
disease model.
In
March 2019, the Company initiated a Phase 2 clinical trial of ANAVEX
®
2-73 for the treatment of Rett syndrome. The
Phase 2 study is taking place in the United States and is a randomized double-blind, placebo-controlled safety, tolerability,
pharmacokinetic and efficacy study of oral liquid ANAVEX
®
2-73 formulation to treat Rett syndrome. Pharmacokinetic
and dose finding will be investigated in a total of 15 patients over a 7-week treatment period using ANAVEX®2-73-specific
genomic precision medicine biomarkers. All patients who participate in the study will be eligible to receive ANAVEX®2-73 under
a voluntary open label extension protocol. This study is part of a planned Rett syndrome program.
In
May 2016 and June 2016, the FDA granted Orphan Drug Designation to ANAVEX
®
2-73 for the treatment of Rett syndrome
and infantile spasms, respectively.
For
Parkinson’s disease, data demonstrates significant improvements and restoration of function in a disease modifying animal
model of Parkinson’s disease. Significant improvements were seen on all measures tested: behavioral, histopathological,
and neuroinflammatory endpoints. In July 2018 the Company received approval from the Spanish Agency for Medicinal Products and
Medical Devices (AEMPS), to initiate its Phase 2, double-blind, placebo-controlled 14-week trial of the safety and efficacy of
ANAVEX
®
2-73 for the treatment of Parkinson’s disease dementia. The Phase 2 study commenced in October 2018
and will involve approximately 120 patients, randomized 1:1:1 to two different ANAVEX
®
2-73 doses or placebo, in
up to 24 clinical study sites.
In
Alzheimer’s disease (AD) animal models, ANAVEX
®
2-73 has shown pharmacological, histological and behavioral
evidence as a potential neuroprotective, anti-amnesic, anti-convulsive and anti-depressive therapeutic agent, due to its potent
affinity to sigma-1 receptors and moderate affinities to M1-4 type muscarinic receptors. In addition, ANAVEX
®
2-73
has shown a potential dual mechanism which may impact both amyloid and tau pathology. In a transgenic AD animal model Tg2576,
ANAVEX
®
2-73 induced a statistically significant neuroprotective effect against the development of oxidative stress
in the mouse brain, as well as significantly increased the expression of functional and synaptic plasticity markers that is apparently
amyloid-beta independent. It also statistically alleviated the learning and memory deficits developed over time in the animals,
regardless of sex, both in terms of spatial working memory and long-term spatial reference memory.
Based
on the results of pre-clinical testing, we initiated and completed a Phase 1 single ascending dose (SAD) clinical trial of ANAVEX
®
2-73.
In this Phase 1 SAD trial, the maximum tolerated single dose was defined per protocol as 55-60 mg. This dose is above the equivalent
dose shown to have positive effects in mouse models of AD. There were no significant changes in laboratory or electrocardiogram
(ECG) parameters. ANAVEX
®
2-73 was well tolerated below the 55-60 mg dose with only mild adverse events in some
subjects. Observed adverse events at doses above the maximum tolerated single dose included headache and dizziness, which were
moderate in severity and reversible. These side effects are often seen with drugs that target CNS conditions, including AD.
The
ANAVEX
®
2-73 Phase 1 SAD trial was conducted as a randomized, placebo-controlled study. Healthy male volunteers
between the ages of 18 and 55 received single, ascending oral doses over the course of the trial. Study endpoints included safety
and tolerability together with pharmacokinetic parameters. Pharmacokinetics includes the absorption and distribution of a drug,
the rate at which a drug enters the blood and the duration of its effect, as well as chemical changes of the substance in the
body. This study was conducted in Germany in collaboration with ABX-CRO, a clinical research organization that has conducted several
Alzheimer’s disease studies, and the Technical University of Dresden.
In
December 2014, a Phase 2a clinical trial was initiated for ANAVEX
®
2-73, which is being evaluated for the treatment
of Alzheimer’s disease. The open-label randomized trial was designed to assess the safety and exploratory efficacy of ANAVEX
®
2-73
in 32 patients with mild-to-moderate Alzheimer’s disease. ANAVEX
®
2-73 targets sigma-1 and muscarinic receptors,
which have been shown in preclinical studies to reduce stress levels in the brain believed to restore cellular homeostasis and
to reverse the pathological hallmarks observed in Alzheimer’s disease.
The
Phase 2a study met both primary and secondary objectives of the study. The 31-week preliminary exploratory safety
and efficacy data from the Phase 2a study of ANAVEX
®
2-73 in Alzheimer’s patients, with most
receiving also donepezil, the current standard of care, demonstrated favorable safety, maximum tolerated dose,
positive dose response, sustained efficacy response through 31 weeks for both cognitive and functional measures, as well as positive
unexpected therapeutic response events. ANAVEX
®
2-73 continued to demonstrate a favorable adverse event (AE) profile through
31 weeks in a patient population of elderly Alzheimer’s patients with varying degrees of physical fragility. The most common side
effects across all AE categories tended to be of mild severity grade 1 and were resolved with dose reductions that were anticipated
within the adaptive design of the study protocol.
Through
57 weeks, Alzheimer’s patients taking a daily oral dose between 10mg and 50mg of ANAVEX
®
2-73 was well tolerated.
There were no clinically significant treatment-related adverse events and no serious adverse events. Despite non-optimized dosing
of ANAVEX
®
2-73 throughout the 57-week study, continued significant improvements from baseline of cognitive, functional
and behavioral scores in a group of patients were observed, respectively. This data was analyzed using refined mathematical modeling
methods in conjunction with the detailed pharmacokinetic (PK) information.
In
October 2017, we presented positive PK and PD data from the Phase 2a study, which established a concentration-effect relationship
between ANAVEX
®
2-73 and study measurements. These measures, obtained from all patients who participated in the
entire 57 weeks, include exploratory cognitive and functional scores as well as biomarker signals of brain activity. Additionally,
the study appears to show that ANAVEX
®
2-73 activity is enhanced by its active metabolite (ANAVEX19-144), which
also targets the sigma-1 receptor and has a half-life approximately twice as long as the parent molecule.
Pre-specified
exploratory analyses included the cognitive (MMSE) and the functional (ADCS-ADL) changes from baseline. A continued stabilization
of both cognitive and functional measures in patients treated with ANAVEX
®
2-73 was observed. This correlation was
positive within all measured scores (MMSE, ADCS-ADL, Cogstate, HAM-D and EEG/ERP).
In
July 2018, we presented the results of a genomic DNA and RNA evaluation of the participants in the Phase 2a study. More than 33,000
genes were analyzed using unbiased, data driven, machine learning, artificial intelligence (AI) system for analyzing DNA &
RNA data in patients exposed to ANAVEX
®
2-73. The analysis identified genetic variants that impacted response to
ANAVEX
®
2-73, among them variants related to the Sigma-1 receptor (SIGMAR1), the target for ANAVEX
®
2-73.
Results showed that study participants without the SIGMAR1 (rs1800866) variants, which is about 80 percent of the population worldwide,
demonstrated improved cognitive (MMSE) and the functional (ADCS-ADL) scores. The results from this evaluation may enable a precision
medicine approach, since these signatures can now be applied to neurological indications tested in clinical studies with ANAVEX
®
2-73
including Alzheimer’s disease, Parkinson’s disease dementia and Rett syndrome.
ANAVEX
®
2-73
data presented met prerequisite information in order to progress into a Phase 2b/3 placebo-controlled study. On July 2, 2018,
the Human Research Ethics Committee in Australia approved the initiation of our Phase 2b/3, double-blind, randomized, placebo-controlled
48-week safety and efficacy trial of ANAVEX
®
2-73 for the treatment of early Alzheimer’s disease. This Phase
2b/3 study design incorporates inclusion of genomic precision medicine biomarkers identified in the ANAVEX
®
2-73
Phase 2a study. The Phase 2b/3 study, which is expected to enroll approximately 450 patients, randomized 1:1:1 to either two different
ANAVEX
®
2-73 doses or placebo, commenced in October 2018.
Preclinical
data also validates ANAVEX
®
2-73 as a prospective platform drug for other neurodegenerative diseases beyond Alzheimer’s
disease, Parkinson’s disease or Rett syndrome, more specifically, epilepsy, infantile spasms, Fragile X syndrome, Angelman
syndrome, multiple sclerosis and, more recently, tuberous sclerosis complex (TSC). ANAVEX
®
2-73 demonstrated significant
improvements in all of these indications in the respective preclinical animal models.
In
a study sponsored by the Foundation for Angelman Syndrome, ANAVEX
®
2-73 was assessed in a mouse model for the development
of audiogenic seizures. The results indicated that ANAVEX
®
2-73 administration significantly reduced audiogenic-induced
seizures. In a study sponsored by FRAXA Research Foundation regarding Fragile X syndrome, data demonstrated that ANAVEX
®
2-73
restored hippocampal brain-derived neurotrophic factor (BDNF) expression to normal levels. BDNF under-expression has been observed
in many neurodevelopmental and neurodegenerative pathologies. BDNF signaling promotes maturation of both excitatory and inhibitory
synapses. ANAVEX
®
2-73 normalization of BDNF expression could be a contributing factor for the positive data observed
in both neurodevelopmental and neurodegenerative disorders like Angelman and Fragile X syndromes.
Preclinical
data presented also indicates that ANAVEX
®
2-73 demonstrates protective effects of mitochondrial enzyme complexes
during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative and neurodevelopmental
diseases.
Preclinical
data on ANAVEX
®
2-73 related to multiple sclerosis indicates that ANAVEX
®
2-73 may promote remyelination
in multiple sclerosis disease. Further, data also demonstrates that ANAVEX
®
2-73 provides protection for oligodendrocytes
(“OL’s”) and oligodendrocyte precursor cells (“OPC’s”), as well as central nervous system
neurons in addition to helping repair by increasing OPC proliferation and maturation in tissue culture.
In
March 2018, we presented preclinical data of ANAVEX
®
2-73 in a genetic mouse model of tuberous sclerosis complex
(“TSC”). TSC is a rare genetic disorder characterized by the growth of numerous benign tumors in many parts of the
body with a high incidence of seizures. The new preclinical data demonstrates that treatment with ANAVEX
®
2-73 significantly
increases survival and reduces seizures.
ANAVEX
®
3-71
ANAVEX
®
3-71
is a preclinical drug candidate with a novel mechanism of action via sigma-1 receptor activation and M1 muscarinic allosteric
modulation, which has been shown to enhance neuroprotection and cognition in Alzheimer’s disease models. ANAVEX
®
3-71
is a CNS-penetrable mono-therapy that bridges treatment of both cognitive impairments with disease modifications. It is highly
effective in very small doses against the major Alzheimer’s hallmarks in transgenic (3xTg-AD) mice, including cognitive
deficits, amyloid and tau pathologies, and also has beneficial effects on inflammation and mitochondrial dysfunctions. ANAVEX
®
3-71
indicates extensive therapeutic advantages in Alzheimer’s and other protein-aggregation-related diseases given its ability
to enhance neuroprotection and cognition via sigma-1 receptor activation and M1 muscarinic allosteric modulation.
A
preclinical study examined the response of ANAVEX
®
3-71 in aged transgenic animal models and showed a significant
reduction in the rate of cognitive deficit, amyloid beta pathology and inflammation with the administration of ANAVEX 3-71. In
April 2016, the FDA granted Orphan Drug Designation to ANAVEX
®
3-71 for the treatment of Frontotemporal dementia
(FTD).
During
pathological conditions ANAVEX
®
3-71 demonstrated the formation of new synapses between neurons (synaptogenesis)
without causing an abnormal increase in the number of astrocytes. In neurodegenerative diseases such as Alzheimer’s and
Parkinson’s disease, synaptogenesis is believed to be impaired. Additional preclinical data presented also indicates that
in addition to reducing oxidative stress, ANAVEX
®
3-71 demonstrates protective effects of mitochondrial enzyme complexes
during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative and neurodevelopmental
diseases.
ANAVEX
®
1-41
ANAVEX
®
1-41
is a sigma-1 agonist. Pre-clinical tests revealed significant neuroprotective benefits (i.e., protects nerve cells from degeneration
or death) through the modulation of endoplasmic reticulum, mitochondrial and oxidative stress, which damages and impairs cell
viability. In addition, in animal models, ANAVEX
®
1-41 prevented the expression of caspase-3, an enzyme that plays
a key role in apoptosis (programmed cell death) and loss of cells in the hippocampus, the part of the brain that regulates learning,
emotion and memory. These activities involve both muscarinic and sigma-1 receptor systems through a novel mechanism of action.
Preclinical
data presented also indicates that ANAVEX
®
1-41 demonstrates protective effects of mitochondrial enzyme complexes
during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative and neurodevelopmental
diseases.
ANAVEX
®
1066
ANAVEX
®
1066,
a mixed sigma-1/sigma-2 ligand is designed for the potential treatment of neuropathic and visceral pain. ANAVEX
®
1066
was tested in two preclinical models of neuropathic and visceral pain that have been extensively validated in rats. In the chronic
constriction injury model of neuropathic pain, a single oral administration of ANAVEX
®
1066 dose-dependently restored
the nociceptive threshold in the affected paw to normal levels while leaving the contralateral healthy paw unchanged. Efficacy
was rapid and remained significant for two hours. In a model of visceral pain, chronic colonic hypersensitivity was induced by
injection of an inflammatory agent directly into the colon and a single oral administration of ANAVEX
®
1066 returned
the nociceptive threshold to control levels in a dose-dependent manner. Companion studies in rats demonstrated the lack of any
effects on normal gastrointestinal transit with ANAVEX
®
1066 and a favorable safety profile in a battery of behavioral
measures.
Our
compounds are in the pre-clinical and clinical testing stages of development, and there is no guarantee that the activity demonstrated
in pre-clinical models will be shown in human testing.
ANAVEX
®
1037
ANAVEX
®
1037
is designed for the treatment of prostate and pancreatic cancer. It is a low molecular weight, synthetic compound exhibiting high
affinity for sigma-1 receptors at nanomolar levels and moderate affinity for sigma-2 receptors and sodium channels at micromolar
levels. In advanced pre-clinical studies, this compound revealed antitumor potential. It has also been shown to selectively kill
human cancer cells without affecting normal/healthy cells and also to significantly suppress tumor growth in immune-deficient
mice models. Scientific publications highlight the possibility that these ligands may stop tumor growth and induce selective cell
death in various tumor cell lines. Sigma receptors are highly expressed in different tumor cell types. Binding by appropriate
sigma-1 and/or sigma-2 ligands can induce selective apoptosis. In addition, through tumor cell membrane reorganization and interactions
with ion channels, our drug candidates may play an important role in inhibiting the processes of metastasis (spreading of cancer
cells from the original site to other parts of the body), angiogenesis (the formation of new blood vessels) and tumor cell proliferation.
We
continue to identify and initiate discussions with potential strategic and commercial partners to most effectively advance our
programs and realize maximum shareholder value. Further, we may acquire or develop new intellectual property and assign, license,
or otherwise transfer our intellectual property to further our goals.
Our
Target Indications
We
have developed compounds with potential application to two broad categories and several specific indications. including:
Central
Nervous System Diseases
|
●
|
Alzheimer’s
disease – In 2018, an estimated 5.5 million Americans were suffering from Alzheimer’s
disease. The Alzheimer’s Association
®
reports that by 2025, 7.1
million Americans will be afflicted by the disease, about a 29 percent increase from
currently affected patients. Medications on the market today treat only the symptoms
of Alzheimer’s disease and do not have the ability to stop its onset or its progression.
There is an urgent and unmet need for both a disease modifying cure for Alzheimer’s
disease as well as for better symptomatic treatments.
|
|
●
|
Parkinson’s
disease – Parkinson’s disease is a progressive disease of the nervous system
marked by tremors, muscular rigidity, and slow, imprecise movement. It is associated
with degeneration of the basal ganglia of the brain and a deficiency of the neurotransmitter
dopamine. Parkinson’s disease afflicts more than 10 million people worldwide, typically
middle-aged and elderly people. The Parkinson’s disease market is set to expand
from $2.1 billion in 2014 to $3.2 billion by 2021, according to business intelligence
provider GBI Research.
|
|
●
|
Rett
syndrome - Rett syndrome is a rare X-linked genetic neurological and developmental disorder
that affects the way the brain develops, including protein transcription, which is altered
and as a result leads to severe disruptions in neuronal homeostasis. It is considered
a rare, progressive neurodevelopmental disorder and is caused by a single mutation in
the MECP2 gene. Because males have a different chromosome combination from females, boys
who have the genetic MECP2 mutation are affected in devastating ways. Most of them die
before birth or in early infancy. For females who survive infancy, Rett syndrome leads
to severe impairments, affecting nearly every aspect of the child’s life; severe
mental retardation, their ability to speak, walk and eat, sleeping problems, seizures
and even the ability to breathe easily. Rett syndrome affects approximately 1 in every
10,000-15,000 females.
|
|
●
|
Depression
- Depression is a major cause of morbidity worldwide according to the World Health Organization.
Pharmaceutical treatment for depression is dominated by blockbuster brands, with the
leading nine brands accounting for approximately 75% of total sales. However, the dominance
of the leading brands is waning, largely due to the effects of patent expiration and
generic competition.
|
|
●
|
Epilepsy
- Epilepsy is a common chronic neurological disorder characterized by recurrent unprovoked
seizures. These seizures are transient signs and/or symptoms of abnormal, excessive or
synchronous neuronal activity in the brain. According to the Centers for Disease Control
and Prevention, epilepsy affects 3.4 million Americans. Today, epilepsy is often controlled,
but not cured, with medication that is categorized as older traditional anti-epileptic
drugs and second generation anti-epileptic drugs. Because epilepsy afflicts sufferers
in different ways, there is a need for drugs used in combination with both traditional
anti-epileptic drugs and second generation anti-epileptic drugs. GBI Research estimates
that the epilepsy market will increase to $4.5 billion by 2019.
|
|
●
|
Neuropathic
Pain – We define neuralgia, or neuropathic pain, as pain that is not related to
activation of pain receptor cells in any part of the body. Neuralgia is more difficult
to treat than some other types of pain because it does not respond well to normal pain
medications. Special medications have become more specific to neuralgia and typically
fall under the category of membrane stabilizing drugs or antidepressants.
|
Cancer
|
●
|
Malignant
Melanoma - Predominantly a skin cancer, malignant melanoma can also occur in melanocytes
found in the bowel and the eye. Malignant melanoma accounts for 75% of all deaths associated
with skin cancer. The treatment includes surgical removal of the tumor, adjuvant treatment,
chemo and immunotherapy, or radiation therapy. According to IMS Health the worldwide
malignant melanoma market is expected to grow to $4.4 billion by 2022.
|
|
●
|
Prostate
Cancer – Specific to men, prostate cancer is a form of cancer that develops in
the prostate, a gland in the male reproductive system. The cancer cells may metastasize
from the prostate to other parts of the body, particularly the bones and lymph nodes.
Drug therapeutics for prostate cancer are expected to increase to nearly $13.5 billion
in 2024 according to Datamonitor Healthcare.
|
|
●
|
Pancreatic
Cancer - Pancreatic cancer is a malignant neoplasm of the pancreas. In the United States,
approximately 55,000 new cases of pancreatic cancer will be diagnosed this year and approximately
44,000 patients will die as a result of their cancer, according to the American Cancer
Society. Sales predictions by GBI Research forecast that the market for the pharmaceutical
treatment of pancreatic cancer in the United States and five largest European countries
will increase to $2.9 billion by 2021.
|
Patents,
Trademarks and Intellectual Property
Anavex
holds ownership or exclusive rights to four U.S. patents, nine U.S. patent applications, and various PCT or ex-U.S. patent applications
relating to our drug candidates, methods associated therewith, and to our research programs.
We
own one issued U.S. patent entitled “ANAVEX
®
2-73 and certain anticholinesterase inhibitors composition and
method for neuroprotection” claims a composition of matter of ANAVEX®2-73 directed to a novel and synergistic neuroprotective
compound combined with donepezil and other cholinesterase inhibitors. This patent is expected to expire in June 2034, absent
any patent term extension for regulatory delays. A related continuation application is also pending in the U.S. In addition, we
own one issued U.S. Patent with claims directed to methods of treating melanoma with a compound related to ANAVEX
®
2-73.
This patent is expected to expire in February 2030, absent any patent term extension for regulatory delays.
With
regard to ANAVEX
®
3-71, we own exclusive rights to two issued U.S. patents with claims respectively directed to
the ANAVEX
®
3-71 compound and methods of treating various diseases including Alzheimer’s with the same. These
patents are expected to expire in April 2030, and January 2030, respectively, absent any patent term extension for regulatory
delays. We also own exclusive rights to related patents or applications that are granted or pending in Australia, Canada, China,
Europe, Japan, Korea, New Zealand, Russia, and South Africa, and are expected to expire in January 2030.
We
also own other patent applications directed to enantiomers, formulations and uses that may provide additional protection for one
or more of our product candidates.
We
regard patents and other intellectual property rights as corporate assets. Accordingly, we attempt to optimize the value of intellectual
property in developing our business strategy including the selective development, protection, and exploitation of our intellectual
property rights. In addition to filings made with intellectual property authorities, we protect our intellectual property and
confidential information by means of carefully considered processes of communication and the sharing of information, and by the
use of confidentiality and non-disclosure agreements and provisions for the same in contractor’s agreements. While no agreement
offers absolute protection, such agreements provide some form of recourse in the event of disclosure, or anticipated disclosure.
Our
intellectual property position, like that of many biomedical companies, is uncertain and involves complex legal and technical
questions for which important legal principles are unresolved. For more information regarding challenges to our existing or future
patents, see Item 1A “Risk Factors.”
Financial
Highlights
Operating
expenses for the second quarter of fiscal 2019 were $8.1 million, compared to $4.7 million for the comparable quarter in fiscal
2018. The operating expenses include an aggregate of $1.9 million, as compared to $1.2 million in second quarter fiscal 2018,
in non-cash charges related to the issuance and vesting of stock options. The increase in operating expenses is primarily attributable
to a $2.8 million increase in research and development expenses to $6.1 million in the second quarter of fiscal 2019, mainly due
to the commencement of three clinical studies for ANAVEX®2-73, a Phase 2b/3 Alzheimer’s disease clinical study, a Phase
2 Parkinson’s disease dementia clinical study, and a Phase 2 Rett syndrome clinical study.
Net
loss for the second quarter of fiscal 2019 was $8.0 million, or $0.17 per share, as compared to $4.8 million, or $0.11 per share
in the comparative quarter of fiscal 2018.
Results
of Operations
Revenue
We
are in the development stage and have not earned any revenues since our inception and we do not anticipate earning any revenues
until we can establish an alliance with other companies to develop, co-develop, license, acquire or market our products.
Three
and six months ended March 31, 2019 compared to three and six months ended March 31, 2018
Operating
Expenses
Total
operating expenses for the second quarter of fiscal 2019 were $8.1 million, compared to $4.7 million for the second quarter of
fiscal 2018. Total operating expenses for the first half of fiscal 2019 were $15.6 million compared to $8.8 million for the same
period in fiscal 2018. This represents an increase of $3.4 million for the three-month period and $6.8 million for the six months
period.
Research
and development expenses have increased by $2.8 million to $6.1 million for the three months ended March 31, 2019, and by $5.9
million to $11.8 million for the six-month period ended March 31, 2019, as compared to the applicable prior year periods.
Research
and development expenses includes approximately $3.1 million for the three-month period and $6.0 million for the six-month period
ended March 31, 2019 spent in connection with the clinical stage development of ANAVEX
®
2-73. The increases were
associated with expenditures incurred in connection with the commencement of three clinical studies for ANAVEX
®
2-73.
During the first half of fiscal 2019, the Company commenced a Phase 2b/3 clinical study for the treatment of Alzheimer’s
disease, a Phase 2 study for the treatment of Parkinsons Disease Dementia and a Phase 2 study for the treatment of Rett syndrome.
In addition, the Company’s Phase 2a extension study in Alzheimer’s disease continued. Research and development expenses
include approximately $1.0 million for the three-month period and $1.9 million for the six-month period spent in preclinical development
activities for ANAVEX
®
2-73 and ANAVEX
®
3-71.
Other
income
The
net amount of other income was $0.18 million as compared to $0.0 million for the three-month period ended March 31, 2019 and $0.3
million for the six-month period as compared to $0.05 million for the comparable six-month period in fiscal 2018.
During
fiscal 2019 we received $149,055 in grant income from the Rett Syndrome Foundation, which is being utilized towards the ANAVEX
®
2-73
Phase 2 clinical study for Rett syndrome, which commenced in March 2019.
Liquidity
and Capital Resources
Working
Capital
|
|
March
31, 2019
|
|
|
September
30, 2018
|
|
Current
Assets
|
|
$
|
20,549,780
|
|
|
$
|
24,323,740
|
|
Current
Liabilities
|
|
|
6,370,604
|
|
|
|
3,884,626
|
|
Working
Capital
|
|
$
|
14,179,176
|
|
|
$
|
20,439,114
|
|
At March 31, 2019, we had $19.5 million in cash and cash equivalents, a decrease of $3.5 million from September 30, 2018. The
principal reason for this decrease is due to an increase in cash utilized in operations to $8.5 million, due to an increase in
clinical development activities, as described above, offset by cash received of $5.1 million from the issuance of shares of common
stock issued under the Purchase Agreement (as defined below).
Cash
Flows
|
|
Six
months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Net
cash flows used in operating activities
|
|
$
|
(8,491,627
|
)
|
|
$
|
(6,441,100
|
)
|
Net
cash flows from financing activities
|
|
|
5,018,834
|
|
|
|
4,657,427
|
|
Decrease
in cash and cash equivalents during the period
|
|
$
|
(3,472,793
|
)
|
|
$
|
(1,783,673
|
)
|
Cash
flow used in operating activities
Net
cash used in operating activities for the first six months in fiscal 2019 was $8.5 million, compared to $6.4 million during the
comparable period during fiscal 2018. The principal reason for this increase in net cash used from operating activities in the
current period is due to the increase in operating expenses, particularly clinical development costs, as described above.
Cash
flow provided by financing activities
Cash
provided by financing activities for the first six months in fiscal 2019 was $5.0 million, attributable to cash received from
the issuance of common shares at various market prices under the Purchase Agreement.
Cash
provided by financing activities for the first six months in fiscal 2018 was $4.6 million, attributable to cash received from
the issuance of common shares at various market prices under the Purchase Agreement.
Other
Financing
Controlled
Equity Offering Sales Agreement
On
July 6, 2018, we entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor
Fitzgerald & Co., as agent (“Cantor Fitzgerald”), pursuant to which we may offer and sell shares of common
stock, for aggregate gross sale proceeds of up to $50,000,000 from time to time through Cantor Fitzgerald (the “At-the-Market
Offering”).
Upon
delivery of a placement notice based on the Company’s instructions and subject to the terms and conditions of the Sales
Agreement, Cantor Fitzgerald may sell shares of common stock by methods deemed to be an “at the market offering” offering,
in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices,
or by any other method permitted by law, including negotiated transactions, subject to the prior written consent of the Company.
We are not obligated to make any sales of shares under the Sales Agreement. We or Cantor Fitzgerald may suspend or terminate the
At-the-Market Offering upon notice to the other party, subject to certain conditions. Cantor Fitzgerald will act as sales
agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and
federal law, rules and regulations and the rules of Nasdaq.
The
Company has agreed to pay Cantor Fitzgerald commissions for its services of acting as agent of up to 3.0% of the gross proceeds
from the sale of the Shares pursuant to the Sales Agreement. We have also agreed to provide Cantor Fitzgerald with customary
indemnification and contribution rights. To date, no shares of common stock have been sold pursuant to the Sales Agreement.
Purchase
Agreement
On
October 21, 2015, we entered into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund,
LLC (“Lincoln Park”), pursuant to which Lincoln Park committed to purchase up to $50,000,000 of our common stock.
Concurrently with the execution of the Purchase Agreement, we issued 179,598 shares of our common stock to Lincoln Park as a fee
for its commitment to purchase shares of our common stock under the Purchase Agreement and shall issue up to 89,799 shares pro
rata, when and if Lincoln Park purchases, at our discretion, the $50,000,000 aggregate commitment. The purchase shares that may
be sold pursuant to the Purchase Agreement may be sold by us to Lincoln Park at our discretion from time to time until September
6, 2019, 36 months after the SEC declared effective the related registration statement.
We
may direct Lincoln Park, at our sole discretion, and subject to certain conditions, to purchase up to 50,000 shares of common
stock on any business day, provided that at least one business day has passed since the most recent purchase. The amount of a
purchase may be increased under certain circumstances provided, however that Lincoln Park’s committed obligation under any
single purchase shall not exceed $2,000,000. The purchase price of shares of common stock related to the future funding will be
based on the then prevailing market prices of such shares at the time of sales as described in the Purchase Agreement.
Other
than our rights related to the At-the-Market Offering and the Lincoln Park financing, there can be no assurance that additional
financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we
are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to delay or scale
down some or all of our research and development activities or perhaps even cease the operation of our business.
We
expect that we will be able to continue to fund our operations through existing cash on hand and through equity and debt financing
in the future. If we raise additional financing by issuing equity securities, our existing stockholders’ ownership will
be diluted. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash
commitments.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to our stockholders.
CRITICAL
ACCOUNTING POLICIES
We
prepare our interim condensed consolidated financial statements in accordance with accounting principles generally accepted in
the United States of America, and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue
and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other
assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates.
There
have been no significant changes in the critical accounting policies and estimates described in our Annual Report on Form 10-K
for the year ended September 30, 2018 as filed with the SEC on December 12, 2018.
RECENT
ACCOUNTING PRONOUNCEMENTS
Please
refer to Note 2 “Recent Accounting Pronouncements” in notes to our Interim Condensed Consolidated Financial Statements
included in this Form 10-Q.