August 15, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Perhaps one of the more underrated aspects of a successful biotech startup is business savvy. The science can be outstanding, but if the company isn’t being run smart, all the best science in the world might not be able to save it. Which makes one wonder exactly what’s going on with New York-based Anavex Life Sciences Corp . Cory Renauer, writing for The Motley Fool, puzzles over the company’s missteps.
Back in April, the company’s stock popped about 23 percent after two promising anecdotes about patients receiving its Alzheimer’s drug, Anavex 2-73, were reported. The drug was being given in a Phase II trial held in Sydney, Australia, and two patients showed what appeared to be remarkably positive responses.
A closer look at the studies, although interesting, presented some problems and questions. It was a small trial with only 32 patients, and all the patients in the trial received the drug—there was no control group receiving a placebo.
Renauer, writing in The Motley Fool at the time, contacted an outside expert to discuss the trial. “What I learned was, they’re basically meaningless. James Hendrix, Ph.D., director, global science initiatives, at the Alzheimer’s Association, was quick to point out patients over the age of 65 have several different health problems. When something else bothering them—think arthritis, asthma, even depression—is alleviated, some patients appear to have better cognitive abilities.”
Which doesn’t rule out the possibility of Anavex-2-73 being an amazing drug, it was just too early to tell. Which then brings up what appears to be a lot of management blunders by the company.
Renauer calls it “lopsided spending,” but what it comes down to is that Anavex is spending a disproportionate amount of money on general and administrative (G&A) expenses. In the nine-month period that ended in June, Anavex spent $6.1 million in G&A and $2.9 million on research and development. Compare that to the chief executive officer, Christopher Missing’s total compensation of $3.74 million last year.
Renauer then brings up an odd aspect, assets. “Bringing candidates to a stage where you can suggest it works in a test tube is relatively easy, but it isn’t free. The most disturbing aspect of Anavex’s extensive laboratory program is that it lacks a laboratory. At the end of June, the Manhattan-headquartered company reported long-term assets worth just $506, which is probably less than the cost of the device you’re using to read this.”
Which does seem to fly in the face of its G&A expenses. What is the company spending its money on? It’s looking at more indications for 2-73 and additional drug candidates, but there’s not much evidence on what they’re doing. It started its Alzheimer’s trial in December 2014, but otherwise has mentioned non-human preclinical data for 2-73 in Rett syndrome, infantile spasms, and autism. It also indicated preclinical data on 3-71 for Alzheimer’s or other dementias.
Renauer writes, “Anavex hasn’t started any human trials with 2-73 in the three non-Alzheimer’s indications with preclinical data, and it hasn’t announced, or disclosed, any investigational new drug applications (a requirement to begin human testing) for 3-71, 1-41, or 1037.”
He also notes that the company seems to work in secrecy, ignoring potential investors and avoiding conference calls with investment bank analysts.
There are some positives. It has plans to update its clinical development plan for a Phase II trial of 2-73 in Rett syndrome, although it hasn’t announced a schedule yet.
The biggest positive appears to be that the U.S. Securities and Exchange Commission (SEC) told the company’s legal counsel that it wasn’t going to recommend enforcement action as the result of an investigation it began in December. Since the investigation threw a lot of uncertainty on whether the company could even try to raise money, this is good news.
SeekingAlpha writes, “This is a win for the company, as it was this investigation that seemed to be preventing the company’s S-4 filed in October of last year from becoming effective and allowing the company to sell more shares. With a newly disclosed cash burn of $2.3 million, the company only had about four quarters of cash left on hand to do its business with. We suspect a capital raise will come very soon now.”
Although Anavex wrote in a press release related to its most recent financial filings that “We are encouraged by the ongoing Phase IIa Alzheimer’s trial data,” no one else seems too excited about it. SeekingAlpha noted, “While the company just showed that its Anavex 2-73 drug clearly is not a promising prospect for Alzheimer’s, this press release also notes that the company plans on looking into other indications.”
Renauer noted the Alzheimer’s data as well. The Phase II trial was essentially to determine a safe dosage to be used in larger, later studies. But it also included efficacy tests, but didn’t use a control group. When there was a minor decline in the average mini-mental state exam (MMSE), stock dropped by more than 50 percent.
“The observed MMSE decline from baseline scores isn’t that bad,” Renauer writes, “considering the mix of mild to moderate patients. If patients in a control arm had declined significantly further, the stock probably would have moved in the opposite direction, making this one of the worst blunders of Anavex’s last fiscal year.”
So the safety data suggests a larger trial is possible. But Avanex doesn’t really have the cash to start one, doesn’t have a partner to help, and hasn’t indicated what its plans are.
