I have been covering Anavex Life Sciences Corp. (NASDAQ:AVXL) for a long time, and I am always amused by the tremendous social media and market reaction every small piece of news from this company seems to generate. In January, I covered the hullabaloo around their then recently published Alzheimer’s data, and in March I discussed a similar fussiness on their Rett syndrome data.
For the Rett trial, two main issues were raised: one, an allegation of ill-intentioned change of an endpoint in the middle of the trial; and two, questioning the RSBQ AUC endpoint’s utility over the standard RSBQ endpoint. Of note, Acadia’s Rett trial used the latter measure, and these two rivals will arrive in the market at the same time if there are no hiccups.
I noted in my earlier coverages that these two issues are actually non-issues. The first one is more clearly so; Anavex has shown, to my satisfaction, that the trial endpoint change was benign and without “malice aforethought.” The second issue is more difficult to judge. The difference between RSBQ and RSBQ AUC is that RSBQ is a behavioral questionnaire used to understand the patterns of behaviors of individuals with Rett syndrome, while RSBQ AUC is a statistical measure used to determine whether the RSBQ questionnaire has been able to properly distinguish between people with Rett syndrome and people without. Thus, in an interventional study, RSBQ is more appropriate because it helps determine treatment strategies and interventions. I have not come across a detailed explanation of why Anavex thinks the AUC endpoint is more relevant, although the CEO clearly told us that it was.
Between my January article and my March article, I also discussed the issues surrounding the Alzheimer’s trial, and how the company addressed at least a few of them. There were three main issues – changes in data from slide to slide, some basic math errors, and missing patient data. As I noted in my March article, some of these have not really been satisfactorily addressed.
So that was where we stood with respect to Anavex in March, so let’s see what else is new.
In March, the company published topline data from a 48-week extension study of blarcamesine in patients with Parkinson’s disease (“PD”) dementia. This study followed the 14-week phase 2 placebo controlled study, and a 41-week drug holiday due to covid-19. 20 patients completed the study. Data showed that blarcamesine or ANAVEX 2-73 led to longitudinal beneficial effects (i.e., benefits for groups and individuals) on the prespecified primary and secondary objectives, as well as planned primary and key secondary endpoints of a future pivotal trial. That last phrase is important. The planned primary and secondary endpoints for the upcoming phase 3 trial are as follows:
The two endpoints, MDS-UPDRS Part II + III and Clinical Global Impression – Improvement (CGI-I) measured in this study are the planned primary and key secondary endpoints in Anavex’s forthcoming pivotal 6-month Parkinson’s disease study.
In each of these endpoints, according to the company, the drug performed well, where patient conditions in these endpoints worsened during the drug holiday, and patients performed consistently well during the extension study.
Blarcamesine is now in a phase 3 study in Rett Syndrome. In June, they also released data from another extension study in this indication. Data showed that patients who took blarcamesine in the actual trial and then in the extension part fared better than those who took placebo and then the drug in the extension study. These first patients fared better in reducing disease progression.
Rett is a rare disease, with 4600 U.S. patients. In April, Acadia became the first company ever to get an approval in Rett, for its drug Daybue, approved for Rett syndrome in children two years and older. This sets the stage for Anavex, which has the next most advanced stage clinical asset. They may report data from the ph2/3 Excellence trial in pediatric patients in H2 2023.
In Parkinson’s, the situation is a little different. Levodopa and carbidopa together is the gold standard, but patients may experience “off” states after a few years of treatment. This may make their motor and non-motor symptoms come back again. One goal of current therapies in the pipeline is to reduce these off states. Anavex will start a six-month pivotal study in Parkinson’s patients with and without dementia this year.
There are a lot of “in-depth” articles on AVXL. I sometimes think we lose the big picture. AVXL’s big picture is that over the years, despite considerable opposition from various quarters, this company has managed to run its lead candidate through multiple trials in 3 major diseases. These programs are now all coming to fruition, with multiple pivotal trial data readouts in the next one year or so. All those debates about minute points of its trials – debates I have also taken part in earlier – will now be decided by the FDA. There will be no further confusion. This is a great thing.
Financials
AVXL has a market cap of $680mn and a cash balance of $153mn. Research and development expenses for the quarter were $11.3 million while general and administrative expenses were $2.9 million. At that low and controlled rate of expenses, they have a cash balance of over 10 quarters.
AVXL has a 33% institutional presence and a 63% retail presence. I kind of prefer it the other way round. Anyway, key holders are BlackRock, State Street, Vanguard, Bank of America and Goldman Sachs, folks who usually shy away from controversial or scam stocks. Over the years, the principal thrust of the AVXL short sellers has been that it is some kind of a scam. Bad data, anyone can have, but the allegations have mainly been of manipulated data – and Anavex by its policy of aggressive silence on those allegations has perhaps given those allegations some unwanted legitimacy. But the presence of these big names – the top two hold 7% each of AVXL – gives investors some confidence.
As for insider transactions, there are none in the last 2 years. In the last 4 years, there have been two very small purchases by the same director. In the last 2 years, there have been 2 option exercises; 6 in the last 4 years. Some of these are very large, with one for a director being over $4mn. The CEO also had a total of around $3.5mn in option exercises. This gives me some confidence, since management is making money from the company but not directly selling shares, they seem to have confidence in themselves. There has been no open market sales in the last 4 years.
AVXL received a composition of matter patent for certain crystal forms of blarcamesine, which is valid till 2036 at least. This is very interesting because, as readers also pointed out, companies increase their patent moat through use patents in the later part of their lives. Getting a composition of matter patent for an existing molecule – even if a different formulation – is highly interesting. Can such a new formulation be used instead of the existing one to extend the asset’s patent life? If it cannot be, where is the use of the new patent? If it can be, how is it a novel formulation with different properties? These are some issues we need to understand. As Christopher U. Missling, PhD, President and Chief Executive Officer of Anavex, noted:
This new patent relating to ANAVEX®2-73 is exceptionally important for ANAVEX, because all clinical trials with ANAVEX®2-73 (blarcamesine), including Alzheimer’s disease Phase 2b/3 ANAVEX®2-73-AD-004 study are using the patent protected crystal forms as the active pharmaceutical ingredient.
In June, they received another method of use patent for the same molecule, extending its coverage to the treatment of systolic hypertension, or lowering systolic blood pressure.
Bottom Line
I have closely followed Anavex Life Sciences Corp. without buying into it, because I do not prefer controversy. Such a controversial or highly debated stock adds a new element of irrationality to the investment analysis of it, and this sort of irrational attitude is unpredictable. However, that does not mean I am not impressed by the company’s ability to withstand withering controversies while silently doing its work. An assessment of the quality of that work is best left for the FDA, which has the expertise to sort through the data and arrive at rational conclusions. But I will be watching AVXL’s endgame closely, just out of interest, to see if patients win.
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