UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to________________
Commission file number: 001-37606
ANAVEX LIFE SCIENCES CORP.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
98-0608404
(I.R.S. Employer Identification No.)
630 5th Avenue, 20th Floor, New York, NY USA
(Address of principal executive offices)
10111
(Zip Code)
Registrant’s telephone number, including area code 1-844-689-3939
Securities registered under Section 12(b) of the Act:
Common Stock, $0.001 par value
Title of each class
AVXL
Trading Symbol
NASDAQ Stock Market LLC
Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes ☒ No ☐
Yes ☐ No ☒
Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files).
Yes ☒ No ☐
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of ―large accelerated filer, ―accelerated filer , ―smaller reporting company and ―emerging growth
company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☒ No☐
Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently
completed second fiscal quarter: $1,011,843,276 based on a price of $14.95 per share, being the closing price of the registrant’s common stock on March
31, 2021.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 76,018,053 issued and
outstanding as of November 19, 2021.
None.
DOCUMENTS INCORPORATED BY REFERENCE
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TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
ITEM 6 SELECTED FINANCIAL DATA
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B OTHER INFORMATION
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
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Forward Looking Statements.
This Annual Report on Form 10-K includes forward-looking statements. All statements other than statements of historical facts contained in this Annual
Report on Form 10-K, 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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volatility in our stock and in the markets in general;
our ability to successfully conduct clinical and preclinical trials for our product candidates;
our ability to raise additional capital on favorable terms and the impact of such activities on our stockholders and stock price;
the impact of the COVID-19 outbreak and its effect on us;
our ability to generate any revenue or to continue as a going concern;
our ability to execute our research and development plan on time and on budget;
our products ability to demonstrate efficacy or an acceptable safety profile of our product candidates;
our ability to obtain the support of qualified scientific collaborators;
our ability, whether alone or with commercial partners, to successfully commercialize any of our product candidates that may be approved for
sale;
our ability to identify and obtain additional product candidates;
our reliance on third parties in non-clinical and clinical studies;
our ability to defend against product liability claims;
our ability to safeguard against security breaches;
our ability to obtain and maintain sufficient intellectual property protection for our product candidates;
our ability to comply with our intellectual property licensing agreements;
our ability to defend against claims of intellectual property infringement;
our ability to comply with the maintenance requirements of the government patent agencies;
our ability to protect our intellectual property rights throughout the world;
competition;
the anticipated start dates, durations and completion dates of our ongoing and future clinical studies;
the anticipated designs of our future clinical studies;
the impact of fast track designation on receipt of actual FDA approval;
our anticipated future regulatory submissions and our ability to receive regulatory approvals to develop and market our product candidates,
including any orphan drug or fast track designations; and
our anticipated future cash position.
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 this Annual Report on
Form 10-K. These risks are not exhaustive. Other sections of this Annual Report on Form 10-K 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 Annual Report on Form 10-K, the terms “we,” “us,” “our,”, “Company” and “Anavex” mean Anavex Life Sciences Corp., unless the context
clearly requires otherwise.
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PART I
ITEM 1. BUSINESS
Overview and Strategy
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. We analyze genomic data from clinical studies to identify
biomarkers, which we use to 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”).
We currently have two core programs and two 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:
* = Orphan Drug Designation by the FDA; Dashed lines indicate planned clinical studies
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.
1
Source: Reyes S et al., Sci Rep. 2021 Aug 25;11(1):17150
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 SIGMAR1
identified biomarker variant (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.
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Clinical Studies Overview
Alzheimer’s Disease
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. The Phase 2a trial demonstrated positive pharmacokinetic (PK) and pharmacodynamic (PD) data, 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.
Two consecutive trial extensions for the Phase 2a trial 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 August 2020, patients completing
these Phase 2a trial extensions were granted continued access to treatment with ANAVEX ®2-73 through the Australian Government Department of
Health – Therapeutic Goods Administration (TGA) compassionate use Special Access Scheme.
A larger Phase 2b/3 double-blind, placebo-controlled study of ANAVEX ®2-73 in Alzheimer’s disease commenced in August 2018. The Phase 2b/3 study
enrolled 509 patients for 48 weeks, randomized 1:1:1 to two different ANAVEX®2-73 doses or placebo. The trial commenced in Australia; and during
fiscal 2020 additional regions were added in the United Kingdom, The Netherlands, Germany, and Canada. 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). The study completed enrollment in June 2021, exceeding the 450 patients
enrollment target at 52 sites across North America, Europe and Australia.
In October 2019, we initiated a long-term open label extension study of ANAVEX ®2-73, entitled the ATTENTION-AD study, for patients who have
completed the 48-week Phase 2b/3 placebo-controlled trial referenced above. This study is expected to last two years and will give patients the
opportunity to continue their treatment. Upon request by patients, caretakers and investigators, this extension study was extended by one further year.
Rett Syndrome
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
was received in quarterly instalments which commenced during fiscal 2018.
In March 2019, we commenced the first Phase 2 clinical trial in a planned Rett syndrome program of ANAVEX ®2-73 for the treatment of Rett syndrome.
The studies are being conducted in a range of patient age demographics and geographic regions, utilizing a convenient oral liquid once-daily formulation
of ANAVEX®2-73.
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The first Phase 2 study, which took place in the United States, was completed in December 2020. This trial was a randomized double-blind, placebo-
controlled safety, tolerability, pharmacokinetic and efficacy study of oral liquid ANAVEX ®2-73 formulation in 25 adult female patients with Rett syndrome
over a 7-week treatment period including ANAVEX ®2-73-specific genomic precision medicine biomarkers. The primary endpoint of the trial was safety.
The dosing of 5 mg ANAVEX®2-73 was well-tolerated and demonstrated dose-proportional PK (pharmacokinetics). All secondary efficacy endpoints of
the trial showed statistically significant and clinically meaningful, drug exposure-dependent response in the Rett Syndrome Behaviour Questionnaire
(RSBQ) Total scores, when compared to placebo, in the ITT cohort (all participants, p = 0.048). 66.7% of ANAVEX ®2-73 treated subjects showed a
statistically significant improvement in drug exposure-dependent RSBQ response as compared to 10% of the subjects on placebo in the ITT cohort (all
participants, p = 0.011). ANAVEX®2-73 treatment resulted in a sustained improvement in Clinical Global Impression Improvement (CGI-I) scores
throughout the 7-week study, when compared to placebo in the ITT cohort (all participants, p = 0.014). 86.7% of ANAVEX ®2-73 treated subjects showed
a statistically significant CGI-I response, defined as sustained improvement to treatment, as compared to 40% of the subjects on placebo in the ITT
cohort (all participants, p = 0.014). Consistent with previous ANAVEX®2-73 clinical trials, patients carrying the common form of the SIGMAR1 gene
treated with ANAVEX®2-73 experienced stronger improvements in the prespecified efficacy endpoints.
The second Phase 2 study of ANAVEX ®2-73 for the treatment of Rett syndrome, called the AVATAR study, commenced in June 2019. This study is
taking place in Australia and the United Kingdom using a higher dose than the U.S. based Phase 2 study for Rett syndrome. This randomized, placebo-
controlled study will evaluate the safety and efficacy of ANAVEX ®2-73 in approximately 33 patients over a 7-week treatment period including
ANAVEX®2-73 specific 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. The AVATAR study is expected to read out topline data around year end 2021.
In July 2020, we commenced the third study of ANAVEX ®2-73 for the treatment of Rett syndrome, called the EXCELLENCE study. This Phase 2/3 study
in pediatric patients with Rett syndrome will evaluate the safety and efficacy of ANAVEX®2-73 in approximately 84 pediatric patients, aged 5 to 18, over a
12-week treatment period incorporating ANAVEX®2-73 specific 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.
Parkinson’s Disease
In September 2016, we presented positive preclinical data for ANAVEX ®2-73 in an animal model of Parkinson’s disease, which demonstrated significant
improvements on behavioral, histopathological, and neuroinflammatory endpoints. The study was funded by the Michael J. Fox Foundation. Additional
data announced in October 2017 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 dementia.
In October 2020, we completed a double-blind, randomized, placebo-controlled proof-of-concept Phase 2 trial with ANAVEX ®2-73 in Parkinson’s Disease
Dementia (PDD), to study the effect of the compound on both the cognitive and motor impairment of Parkinson’s disease. The Phase 2 study enrolled
approximately 132 patients for 14 weeks, randomized 1:1:1 to two different ANAVEX®2-73 doses, 30mg and 50mg, or placebo. The ANAVEX ®2-73
Phase 2 PDD study design incorporated genomic precision medicine biomarkers identified in the ANAVEX®2-73 Phase 2a Alzheimer’s disease study.
Within this study ANAVEX ®2-73 was safe and well tolerated in oral doses up to 50mg once daily. The results show clinically meaningful, dose-
dependent, and statistically significant improvements in the Cognitive Drug Research (CDR) computerized assessment system analysis. Treatment with
ANAVEX®2-73 also resulted in clinically meaningful improvements as measured by the global composite score of Parkinson’s disease symptom severity,
MDS-UPDRS Total score on top of standard of care including dopaminergic therapy, levodopa and other anti-PD medications after 14 weeks of
treatment, suggesting ANAVEX®2-73’s potential global capability of slowing and reversing symptoms that progress in Parkinson’s disease. The study
confirmed the precision medicine approach of targeting SIGMAR1 as a genetic biomarker in response to ANAVEX®2-73.
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In January 2021, we announced we were awarded a research grant of $1.0 million from The Michael J. Fox Foundation for Parkinson’s Research (MJFF)
to develop ANAVEX®2-73 for the treatment of Parkinson’s disease. The award will explore utilization of PET imaging biomarkers to enable measurement
of target engagement and pathway activation of the sigma-1 receptor (SIGMAR1) with clinically relevant doses in people with Parkinson’s disease.
Frontotemporal Dementia
In July 2020, we commenced the First-in-Human Phase 1 clinical trial of ANAVEX ®3-71, which was previously granted orphan drug designation for the
treatment of Frontotemporal Dementia (FTD) by the FDA. ANAVEX®3-71 is an orally administered small molecule targeting sigma-1 and M1 muscarinic
receptors that is designed to be beneficial for neurodegenerative diseases. In preclinical studies, ANAVEX®3-71 demonstrated disease-modifying activity
against the major hallmarks of Alzheimer’s disease in transgenic (3xTg-AD) mice, including cognitive deficits, amyloid and tau pathologies, as well as
beneficial effects on mitochondrial dysfunction and neuroinflammation.
The Phase 1 clinical trial will be a prospective double-blind, randomized, placebo-controlled study. A total of at least 36 healthy male and female subjects
will be included. Single escalating doses of ANAVEX®3-71 will be administered in order to evaluate the safety, tolerability, and pharmacokinetics (PK) of
ANAVEX®3-71 and the effects of food and gender on its PK in healthy volunteers. This study is expected to be followed by longer duration dosing
including patients with FTD or other dementia indications with unmet medical need, incorporating exploratory efficacy and disease biomarker measures.
Our Pipeline
Our research and development pipeline includes ANAVEX ®2-73 currently in three different clinical study indications, and several other compounds in
different stages of clinical and 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. Multiple viruses
including SARS-CoV-2 (COVID-19) induce cellular stress by intrinsic mitochondrial apoptosis and other related cellular processes, in order to ensure
survival and replication. Hence, it is possible that S1R could play a role in modulating the cellular response to viral infection and ameliorate pathogenesis.
Compounds that have been subjects of our research include the following:
ANAVEX®2-73 (blarcamesine)
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.
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In March 2019, we commenced the first Phase 2 clinical trial in a planned Rett syndrome program of ANAVEX ®2-73 for the treatment of Rett syndrome.
This study, which took place in the United States, was completed in December 2020, however two other clinical trials in Rett syndrome, the AVATAR
study and the EXCELLENCE study, are still underway. The studies are being conducted in a range of patient age demographics and geographic regions,
as more fully described above under Clinical Studies Overview – Rett Syndrome .
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. In November 2019, the FDA granted to ANAVEX ®2-73 the Rare Pediatric Disease (RPD) designation for the treatment of Rett syndrome.
The RPD designation provides priority review by the FDA to encourage the development of treatments for rare pediatric diseases.
Further, in February 2020, the FDA granted Fast Track designation for the ANAVEX ®2-73 clinical development program for the treatment of Rett
syndrome. The FDA Fast Track program is designed to facilitate and expedite the development and review of new drugs to address unmet medical needs
in the treatment of serious and life-threatening conditions.
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 October 2020,
we completed a double-blind, randomized, placebo-controlled proof-of-concept Phase 2 trial with ANAVEX ®2-73 in Parkinson’s Disease Dementia
(PDD), to study the effect of the compound on both the cognitive and motor impairment of Parkinson’s disease. The Phase 2 study enrolled
approximately 132 patients for 14 weeks, randomized 1:1:1 to two different ANAVEX®2-73 doses, 30mg and 50mg, or placebo. The ANAVEX ®2-73
Phase 2 PDD study design incorporated genomic precision medicine biomarkers identified in the ANAVEX®2-73 Phase 2a Alzheimer’s disease study.
The study found that ANAVEX ®2-73 was safe and well tolerated in oral doses up to 50mg once daily. The results show clinically meaningful, dose-
dependent, and statistically significant improvements in the Cognitive Drug Research (CDR) computerized assessment system analysis. We anticipate
conducting further clinical trials of ANAVEX®2-73 in Parkinson’s disease dementia after submitting the results of the study to the FDA to obtain regulatory
guidance.
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 amyloid, tau pathology
and inflammation. 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.
In December 2014, a Phase 2a clinical trial was initiated for ANAVEX ®2-73, 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 is
an orally available drug candidate that restores cellular homeostasis by targeting sigma-1 and muscarinic receptors. Preclinical studies demonstrated its
potential to halt and/or reverse the course of Alzheimer’s. The Phase 2a study met both primary and secondary objectives of the study.
6
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 with the common SIGMAR1 wild type gene variant, which is about 80
percent of the population worldwide, demonstrated improved cognitive (MMSE) and the functional (ADCS-ADL) scores. The results from this evaluation
have been used to establish a precision medicine approach in subsequent clinical trials, 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. Clinical trial sites in Canada, the United Kingdom, the Netherlands and
Germany were also added. 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 has completed enrollment, 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 clinical 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 potential disease
modifying treatment for cognitive impairments. 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.
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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.
In July 2020, we commenced the first Phase 1 clinical trial of ANAVEX ®3-71, with focus on the treatment of Frontotemporal Dementia (FTD) and other
dementia indications with unmet medical need. The study is more fully described above under Clinical Studies Overview – Frontotemporal Dementia .
ANAVEX®1-41
ANAVEX®1-41 is a sigma-1 receptor 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.
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.
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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.
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 2021, an estimated 5.7 million Americans were suffering from Alzheimer’s disease. The Alzheimer’s Association ®
estimates that by 2050, this number will rise to nearly 14 million Americans. 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
expected to expand to $11.5 billion by 2029, 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 lead 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 historically 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, in 2015 epilepsy affected 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.
● 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
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● 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 iHealthcareAnalyst, Inc. the worldwide malignant melanoma market is
expected to grow to $6.4 billion by 2027.
● 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 FutureWise forecast that the market for the global pharmaceutical treatment of pancreatic cancer will
increase to $4.7 billion by 2027.
Competition
The drug discovery and development industry is very competitive, characterized by rapid advancements in technology, where protection of proprietary
advancements is essential. Any product candidates that we may successfully develop and commercialize, may compete with existing therapies, or new
therapies that may become available in the future. Our commercial opportunities could be reduced or eliminated if our competitors develop and
commercialize products that are more effective, have fewer side effects, are more convenient or are less expensive than any products that we may
develop.
Our approach to the treatment of Alzheimer’s disease and other CNS diseases differs from our competitors. Our platform may offer a disease-modifying
approach in neurodegenerative and neurodevelopmental diseases by activation of sigma-1 receptors. When activated by SIGMAR1 agonists, such as
ANAVEX®2-73, SIGMAR1 reduces cellular stress before and after RNA gene transcription. Studies confirm the predictive biomarker of response
established through SIGMAR1 mRNA expression. Because of its role in maintaining neuronal homeostasis, sigma receptors show significant promise as
viable targets for therapeutic molecules in an effort to treat Alzheimer’s disease and other CNS diseases and disorders, including Parkinson’s disease
and Rett syndrome, by restoring healthy gene expression.
At this time, our competitors are primarily other biomedical development companies that are aiming to discover and develop compounds to be used in the
treatment of Alzheimer’s disease and other CNS diseases, and those companies already doing so. We also face competition from academic institutions
and government agencies, both in the United States and abroad.
Our competitors may have significantly greater financial resources, an established presence in the market, expertise in research and development,
manufacturing, preclinical and clinical testing, may be in the process of obtaining regulatory approvals and marketing of approved products. These
competitors also compete with us in recruiting and retaining qualified scientific and technical personnel, establishing clinical study sites and patient
registration for clinical studies, as well as in acquiring or developing technologies complementary to, or necessary for, our programs. Smaller or early-
stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
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For additional discussion of the risks related to competition, see Item 1A “Risk Factors.”
Patents, Trademarks and Intellectual Property
We hold ownership or exclusive rights to fifteen U.S. patents, sixteen 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. We own three issued U.S. patents each
with claims directed to crystalline forms of ANAVEX ®2-73. The first of these three patents claims crystalline forms of ANAVEX ®2-73, dosage forms and
compositions containing crystalline ANAVEX®2-73, and methods of treatment for Alzheimer’s disease using them. This patent is expected to expire in
July 2036, absent any patent term extension for regulatory delays. The second of these three patents claims pharmaceutical compositions containing a
crystalline form of ANAVEX®2-73, and methods of treatment for Alzheimer’s disease using the compositions. This patent is expected to expire in June
2037, absent any patent term extension for regulatory delays. The third of these three patents claims pharmaceutical compositions containing a
crystalline form of ANAVEX®2-73, and methods of treatment for Alzheimer’s disease using the compositions. This patent is expected to expire in June
2037, absent any patent term extension for regulatory delays. We also own two issued U.S. patents for seizure treatment. The first of these two patents
claims methods and dosage forms for treating seizures, the dosage forms containing a low-dose anti-epilepsy drug combined with either: (i) ANAVEX ®2-
73 and its active metabolite ANAVEX ®19-144; or (ii) ANAVEX ®19-144. The second of these two patents further claims a combination seizure treatment
involving administration of an anti-epilepsy drug combined with (i) ANAVEX®19-144, or (ii) ANAVEX 19-144 ® and ANAVEX 2-73 ®. Both patents are
expected to expire in October 2035, absent any patent term extension for regulatory delays. We also own two issued U.S. patents with claims directed to
treating neurodevelopmental disorders. These patents claim methods for treating a neurodevelopmental disorder or multiple sclerosis by administering
ANAVEX®2-73, ANAVEX ®19-144, and/or ANAVEX ®1-41 (another sigma receptor ligand similar to ANAVEX ®2-73), or compositions thereof. Both patents
are expected to expire in January 2037, absent any patent term extension for regulatory delays. 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. We also own an issued U.S. patent that claims crystalline forms of ANAVEX®19-144, dosage forms and
compositions containing the crystalline forms of ANAVEX®19-144, and methods of treatment for Alzheimer’s disease. This patent is expected to expire in
July 2036, absent any patent term extension for regulatory delays. Further, we own one issued U.S. Patent with claims directed to methods of treating
cardiac dysfunction with ANAVEX®2-73 . This patent is expected to expire in July 2038, absent any patent term extension for regulatory delays.
We also own two issued U.S. patents related to ANAVEX ®1066. The first of these two patents claims methods for treating or preventing pain using (+)
ANAVEX®1066 isomer. The second patent claims methods for treating or preventing pain using (-) ANAVEX ®1066 isomer. Both patents are expected to
expire in November 2036, absent any patent term extension for regulatory delays.
For ANAVEX®2-73, ANAVEX ®19-144, ANAVEX®1-41, and ANAVEX ®1066, we also have granted or pending applications in Australia, Canada, China,
Europe, Japan, and Hong Kong, which are expected to expire after 2035.
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, which are expected to expire in January 2030.
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We also own other patent applications directed to enantiomers, crystals, formulations, uses, and patient selection methods 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 “Risk Factors”.
Government regulation
Government authorities in the United States, at the federal, state and local levels, and other countries extensively regulate, among other things, the
research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution,
marketing and export and import of products such as those we are developing. A new drug must be approved by the FDA through the NDA process
before it may be legally marketed in the United States. We are subject to various government regulations in connection with the development of our
pipeline.
U.S. Drug Development and Regulation
In the United States, the FDA regulates drugs under the federal Food, Drug, and Cosmetic Act and its implementing regulations (“FDCA”). The process of
obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the
expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product
development process, approval process or after approval may subject an applicant to administrative or judicial sanctions. These sanctions could include
the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or
partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
Any agency or judicial enforcement action could have a material adverse effect on us.
Once a drug candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product
chemistry, toxicity and formulation, as well as other preclinical studies. An Investigational New Drug application (“IND”) sponsor must submit the results of
the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. The sponsor must also include a protocol
detailing, among other things, the objectives of the first phase of clinical trials, the parameters to be used in monitoring the safety of the trial, and the
effectiveness criteria to be evaluated should the first phase lend itself to an efficacy evaluation. Some preclinical testing may continue even after the IND
is filed. The IND automatically becomes effective thirty (30) days after receipt by the FDA, unless the FDA, within the 30-day time period, places the
clinical trial on a clinical hold. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns about
ongoing or proposed clinical trials or non-compliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the
sponsor that the hold has been lifted.
All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with FDA good clinical practice (“GCP”)
requirements, which include a requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial.
Clinical trials must be conducted under protocols detailing the objectives of the trial, dosing procedures, subject selection inclusion and exclusion criteria
and the safety and/or effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and timely safety reports
must be submitted to the FDA and the investigators for serious and unexpected adverse events. An Institutional Review Board (“IRB”) at each institution
participating in the clinical trial must review and approve each protocol before a clinical trial may commence at the institution and must also approve the
information regarding the trial as well as the consent form that must be provided to each trial participant or his or her legal representative, monitor the
study until completed and otherwise comply with all applicable IRB regulations.
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Human clinical trials are typically conducted in three sequential phases that may overlap or be combined in certain cases:
Phase 1: The compound is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution
and excretion and, if possible, to gain an early indication of its effectiveness. In most cases, initial Phase 1 clinical trials are conducted with healthy
volunteers. However, where the compound being evaluated is for the treatment of severe or life-threatening diseases, such as cancer, and especially
when the product may be too toxic to ethically administer to healthy volunteers, the initial human testing may be conducted on patients with the target
disease or condition. Sponsors sometimes subdivide their Phase 1 clinical trials into Phase 1a and Phase 1b clinical trials. Phase 1b clinical trials are
typically aimed at confirming dosage, pharmacokinetics and safety in a larger number of patients. Some Phase 1b studies evaluate biomarkers or
surrogate markers that may be associated with efficacy in patients with specific types of diseases or conditions.
Phase 2: This phase involves clinical trials in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the
efficacy of the product for specific targeted diseases or conditions and to confirm dosage tolerance and appropriate dosage.
Phase 3: Phase 3 clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population, generally at
geographically dispersed clinical study sites. These clinical trials, often referred to as “pivotal” or “confirmatory” clinical trials, are intended to establish the
overall risk-benefit ratio of the compound and provide, if appropriate, an adequate basis for product labeling.
The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including any finding that the research subjects or patients are being
exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not
being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected, serious harm to study subjects. In
addition, clinical trials may be overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board
or committee. Depending on its charter, this committee may determine whether a trial may move forward at designated check points based on access to
certain data from the trial.
Phase 4: Phase 4 or post-approval trials may also be conducted after a drug receives initial marketing approval. These trials, often referred to as “Phase
4” trials, are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may
mandate the performance of such clinical trials as a condition of approval of an NDA.
During the development of a new drug, sponsors are given several opportunities to meet with the FDA. These meetings can provide an opportunity for the
sponsor to share information about the progress of the application or clinical trials, for the FDA to provide advice, and for the sponsor and the FDA to
reach agreement on the next phase of development. These meetings may occur prior to the submission of an IND, at the end of Phase 2 clinical trials, or
before an NDA is ultimately submitted. Sponsors typically use the meetings at the end of the Phase 2 trials to discuss Phase 2 clinical results and present
plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug. Meetings at other times may be made upon request.
Concurrent with clinical trials, companies typically complete additional, animal or other non-clinical studies, develop additional information about the
chemistry and physical characteristics of the drug, and finalize a process for manufacturing the product in commercial quantities in accordance with the
FDA’s current Good Manufacturing Practices (“cGMP”) requirements. The manufacturing process must consistently produce quality batches of the drug
and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. In addition,
appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate the effectiveness of the packaging and that
the compound does not undergo unacceptable deterioration over its shelf life.
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While the IND is active, progress reports summarizing the results of ongoing clinical trials and nonclinical studies performed since the last progress report
must be submitted on at least an annual basis to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and
unexpected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from
animal or in vitro testing suggesting a significant risk to humans, and any clinically important, increased incidence of a serious adverse reaction compared
to that listed in the protocol or investigator brochure.
There are also requirements governing the submission of certain clinical trials and completed trial results to public registries. Sponsors of certain clinical
trials of FDA-regulated products are required to register and disclose specified clinical trial registration and results information, which is made publicly
available at www.clinicaltrials.gov. Failure to properly report clinical trial results can result in civil monetary penalties. Disclosure of clinical trial results can
often be delayed until the new product or new indication being studied has been approved.
U.S. review and approval process
The results of product development, preclinical and other non-clinical studies and clinical trials, along with descriptions of the manufacturing process,
analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of a New Drug
Application (“NDA”). The submission of an NDA is subject to the payment of substantial user fees; a waiver of which may be obtained under certain
limited circumstances.
The FDA reviews NDAs to determine, among other things, whether the product is safe and effective for its intended use and whether it is manufactured in
a cGMP-compliant manner, which will assure and preserve the product’s identity, strength, quality and purity. Under the Prescription Drug User Fee Act
(“PDUFA”), the FDA has a goal of ten months from the date of “filing” of a standard, completed NDA for a new molecular entity to review and act on the
submission. This review typically takes twelve months from the date the NDA is submitted to the FDA because the FDA has approximately two months to
make a “filing” decision after the application is submitted. The FDA conducts a preliminary review of all NDAs within the first sixty days after submission,
before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional
information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application
also is subject to review before the FDA accepts it for filing.
The FDA may refer an application for a new drug to an advisory committee within the FDA. An advisory committee is a panel of independent experts,
including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether and under what conditions the
application should be approved. The FDA is not bound by the recommendations of such an advisory committee, but it considers advisory committee
recommendations carefully when making decisions.
Before approving an NDA, the FDA will also inspect the facility where the product is manufactured. The FDA will not approve an application unless it
determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production
of the product within required specifications. Before approving an NDA, the FDA may also inspect one or more clinical trial sites to assure compliance
with GCP requirements.
After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. A Complete Response Letter indicates that the review
cycle of the application is complete, and the application will not be approved in its present form. A Complete Response Letter usually describes the
specific deficiencies in the NDA identified by the FDA and may require additional clinical data, such as an additional pivotal Phase 3 trial or other
significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the
sponsor must resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information
are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval. An approval letter authorizes commercial marketing of the
drug with prescribing information for specific indications.
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The Pediatric Research Equity Act (“PREA”), requires IND sponsors to conduct pediatric clinical trials for most drugs, for a new active ingredient, new
indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and supplements must contain a pediatric
assessment unless the sponsor has received a deferral or waiver. The required assessment must evaluate the safety and effectiveness of the product for
the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the
product is safe and effective. The sponsor or the FDA may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations. A
deferral may be granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are
complete or that additional safety or effectiveness data needs to be collected before the pediatric clinical trials begin. The FDA must send a non-
compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a
pediatric formulation.
If a drug receives FDA approval, the approval may be limited to specific diseases and dosages, which could restrict the commercial value of the product.
In addition, the FDA may require testing and surveillance programs to monitor the safety of approved products which have been commercialized and may
require a sponsor to conduct post-marketing clinical trials, which are designed to further assess a drug’s safety and effectiveness after NDA approval. The
FDA may also place other conditions on approval, including a requirement for a risk evaluation and mitigation strategy (“REMS”) to assure the safe use of
the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDA without
an approved REMS, if required. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as
restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the
commercial promotion, distribution, prescribing or dispensing of products. Marketing approval may be withdrawn for non-compliance with REMS or other
regulatory requirements, or if problems occur following initial marketing.
Post-approval requirements
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory standards is not maintained or if problems occur after the
drug reaches the market. Later discovery of previously unknown problems with a drug may result in restrictions on the drug or even complete withdrawal
of the drug from the market. After approval, some types of changes to the approved drug, such as adding new indications, certain manufacturing
changes and additional labeling claims, are subject to further FDA review and approval. Manufacturers and other entities involved in the manufacture and
distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic
unannounced inspections by the FDA and certain state agencies for compliance with cGMP regulations and other laws and regulations.
Any drug product manufactured or distributed by us pursuant to FDA approval will be subject to continuing regulation by the FDA, including, among other
things, record-keeping requirements, reporting of adverse experiences with the drug, providing the FDA with updated safety and efficacy information,
drug sampling and distribution requirements, complying with certain electronic records and signature requirements, and complying with FDA promotion
and advertising requirements. FDA strictly regulates labeling, advertising, promotion and other types of information regarding approved drugs that are
placed on the market, and imposes requirements and restrictions on drug manufacturers, such as those related to direct-to-consumer advertising, the
prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”),
industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the
failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product for a certain indication or withdrawal
of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable governmental requirements at any time
during the product development process, approval process or after approval, may subject an applicant or manufacturer to administrative or judicial civil or
criminal sanctions and adverse publicity. The FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical
holds on post-marketing clinical trials, enforcement letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution,
disgorgement of profits, or civil or criminal penalties.
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Expedited development and review programs
The FDA has a fast track designation program that is intended to expedite or facilitate the process for reviewing new drug products that meet certain
criteria. Specifically, new drugs are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and
demonstrate the potential to address unmet medical needs for the disease or condition. With regard to a fast track product, the FDA may consider for
review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the
sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required
user fees upon submission of the first section of the NDA.
Any product submitted to the FDA for approval, including a product with a fast track designation, may also be eligible for other types of FDA programs
intended to expedite development and review, such as priority review and accelerated approval.
A product is eligible for priority review if it is intended to treat a serious condition, and if approved, would provide a significant improvement in safety or
efficacy compared to currently marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug
designated for priority review in an effort to facilitate the review. The FDA endeavors to review applications with priority review designations within six
months of the filing date, as compared to ten months for review of NDAs under its current PDUFA review goals.
In addition, a product may be eligible for accelerated approval. Drugs intended to treat serious or life-threatening diseases or conditions may be eligible
for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit,
or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible
morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of
alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and
well-controlled post-marketing clinical trials. Drugs receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails
to conduct the required post-marketing trials or if such trials fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a
condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the
product.
The Food and Drug Administration Safety and Innovation Act (“FDASIA”) established a category of drugs referred to as “breakthrough therapies” that may
be eligible to receive breakthrough therapy designation. A sponsor may seek FDA designation of a compound as a “breakthrough therapy” if the product
is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical
evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints,
such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as
more intensive FDA interaction and guidance. The breakthrough therapy designation is a distinct status from both accelerated approval and priority
review, which can also be granted to the same drug if relevant criteria are met. If a product is designated as breakthrough therapy, the FDA will work to
expedite the development and review of such drug.
Fast track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development
or approval process. However, even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets
the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
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Orphan drug designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, which is a disease or condition
that affects fewer than 200,000 individuals in the United States or, if it affects more than 200,000 individuals in the United States, there is no reasonable
expectation that the cost of developing and making a drug product available in the United States for this type of disease or condition will be recovered
from sales of the product. Orphan designation must be requested before an NDA is submitted. After the FDA grants orphan designation, the identity of
the therapeutic agent and its potential orphan use are publicly disclosed by the FDA. Orphan designation does not convey any advantage in or shorten
the duration of the regulatory review and approval process.
If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the
product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same
indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or inability to
manufacture the product in sufficient quantities. The designation of such drug also entitles a party to financial incentives such as opportunities for grant
funding towards clinical trial costs, tax advantages and user-fee waivers. However, competitors may receive approval of different products for the
indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product
has exclusivity. Orphan exclusivity also could block the approval of one of our compounds for seven years if our compound is determined to be contained
within the competitor’s product for the same indication or disease, or if a competitor obtains approval of the same drug as defined by the FDA. In addition,
if an orphan designated product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan
exclusivity.
Marketing exclusivity
Market exclusivity provisions under the FDCA can delay the submission or approval of certain marketing applications. The FDCA provides a five-year
period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is
a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion
responsible for the action of the drug substance. During the exclusivity period, the FDA may not approve or even accept for review an abbreviated new
drug application (“ANDA”), or an NDA submitted under Section 505(b)(2) (a “505(b)(2) NDA”), submitted by another company for another drug based on
the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where
the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four
years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.
The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA, if new clinical investigations, other
than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application,
for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received
approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the
active ingredient for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA.
However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and
well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of
marketing exclusivity attached to another period of exclusivity if a sponsor conducts clinical trials in children in response to a written request from the
FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials. In addition, orphan drug exclusivity, as
described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances.
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Foreign Sales
Sales outside the United States of potential drug compounds we develop will also be subject to foreign regulatory requirements governing human clinical
trials and marketing for drugs. The requirements vary widely from country to country, but typically the registration and approval process takes several
years and requires significant resources. In most cases, if the FDA has not approved a potential drug compound for sale in the United States, the
potential drug compound may be exported for sale outside of the United States, only if it has been approved in any one of the following: the European
Union, Canada, Australia, New Zealand, Japan, Israel, Switzerland and South Africa. There are specific FDA regulations that govern this process.
U.S. coverage and reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any compound for which we may seek regulatory approval. Sales in the
United States will depend in part on the availability of sufficient coverage and adequate reimbursement from third-party payors, which include government
health programs such as Medicare, Medicaid, CHIP, TRICARE and the Veterans Administration, as well as managed care organizations and private
health insurers. Prices at which we or our customers seek reimbursement for our therapeutic compounds can be subject to challenge, reduction or denial
by payors.
The process for determining whether a payor will provide coverage for a product is typically separate from the process for setting the reimbursement rate
that the payor will pay for the product. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be
available. Additionally, in the United States there is no uniform policy among payors for coverage or reimbursement. Third-party payors often rely upon
Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies, but also have their own methods and
approval processes. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. If coverage and adequate
reimbursement are not available, or are available only at limited levels, successful commercialization of, and obtaining a satisfactory financial return on,
any product we develop may not be possible.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in
addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might be approved for marketing, we may need to
conduct expensive studies in order to demonstrate the medical necessity and cost-effectiveness of any products, which would be in addition to the costs
expended to obtain regulatory approvals. Third-party payors may not consider our compounds to be medically necessary or cost-effective compared to
other available therapies, or the rebate percentages required to secure favorable coverage may not yield an adequate margin over cost or may not
enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development.
Fraud and Abuse Laws
Federal and state health care laws and regulations restrict business practices in the biopharmaceutical industry. In the biopharmaceutical industry, there
are a number of federal and state health care regulatory requirements that apply to entities, including, but not limited to, the federal and state fraud and
abuse laws. These laws include, but are not limited to, anti-kickback and self-referral law, civil false claims act law, criminal false statement law, civil
monetary penalty laws, exclusion law, and other civil, criminal, and administrative laws. Health care laws, regulations, and guidance continuously evolve
and are thereby subject to constant change.
The Federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), among other things, prohibits the knowing and willful offer, payment, solicitation or receipt of
any form of remuneration, whether directly or indirectly and overtly or covertly in cash or in kind, in return for, or to induce the referral of an individual for
the:
●
furnishing or arranging for the furnishing of items or services reimbursable in whole or in part under Medicare, Medicaid or other federal healthcare
programs; or
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purchase, lease, or order of, or the arrangement or recommendation of the purchasing, leasing, or ordering of any item or service reimbursable in
whole or in part under Medicare, Medicaid or other federal healthcare programs.
There are a number of narrow safe harbors to the Federal Anti-Kickback Statute. Such safe harbors permit certain payments and business practices that,
although they would otherwise potentially implicate the Federal Anti-Kickback Statute, are not treated as an offense under the same if all of the
requirements of the specific applicable safe harbor are met. Actual knowledge of the statute or specific intent to violate it is not required in order for a
person or entity to have committed a violation.
The Federal Anti-Kickback Statute applies to certain arrangements with healthcare providers, product end users and other parties, including marketing
arrangements and discounts and other financial incentives offered in connection with the sales of our products. Regulatory authorities may determine that
certain marketing, pricing, or other activities violate the Federal Anti-Kickback Statute or other applicable laws. Noncompliance with the Federal Anti-
Kickback Statute can result in civil, administrative and/or criminal penalties, restrictions on the ability to operate in certain jurisdictions, and exclusion from
participation in Medicare, Medicaid or other federal healthcare programs. In addition, non-compliance can result in the need to curtail and/or restructure
operations. Any penalties, damages, fines, exclusions, curtailment or restructuring of operations could adversely affect the ability to operate a business,
financial condition, and results of operations. A violation of the Federal Anti-Kickback Statute can serve as a false or fraudulent claim for purposes of the
civil False Claims Act and the civil monetary penalties statute.
The Ethics in Patient Referrals Act, commonly known as the “Stark Law,” 42 U.S.C. § 1395nn, prohibits a physician from making referrals for certain
“designated health services” payable by Medicare to an entity in which the physician or an immediate family member of such physician has an ownership
or investment interest or with which the physician has entered into a compensation arrangement, unless a statutory exception applies. There are a
number of exceptions to the Stark Law. Such exceptions permit certain payments and arrangements that, although they would otherwise potentially
implicate the Stark Law, are not treated as a violation under the same if the requirements of the specific exceptions are met. Violation of the Stark Law
could result in denial of payment, disgorgement of reimbursements received under a noncompliance arrangement, civil penalties, damages and exclusion
from Medicare or other governmental programs. These requirements are highly technical and there can be no guarantee that regulatory authorities will
not determine or assert that arrangements are in violation of the Stark Law and do not otherwise meet applicable Stark Law exceptions.
The federal false statements statute, 42 U.S.C. § 1320a-7b(a), prohibits knowingly and willfully falsifying, concealing, or omitting a material fact or making
any materially false statement in connection with the delivery of health care benefits, items, or services. Similarly, 18 U.S.C. § 1035 prohibits a person or
entity, in any matter involving a health care benefit program, from knowingly or willfully falsifying, concealing, or covering up by any trick, scheme, or
device a material fact; making any materially false, fictitious, or fraudulent statements or representations; or making or using any materially false writing or
document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry. In addition to criminal penalties, violation of these
statutes may result in collateral administrative sanctions, including exclusion from participation in Medicare, Medicaid and other federal health care
programs.
18 U.S.C. § 669 prohibits knowingly and willfully embezzling, stealing, or otherwise without authority converting to the use of any person or entity other
than the rightful owner, or intentionally misapplying any of the moneys, funds, securities, premiums, credits, property, or other assets of a health care
benefit program. In addition to criminal penalties, violation of this statute may result in collateral administrative sanctions, including exclusion from
participation in Medicare, Medicaid and other federal health care programs.
The criminal health care fraud statute, 18 U.S.C. § 1347, establishes criminal liability for whoever knowingly and willfully executes, or attempts to execute,
a scheme or artifice to defraud any health care benefit program, or to obtain, by means of false or fraudulent pretenses, representations, or promises, any
of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for
health care benefits, items, or services. In addition to criminal penalties, violation of this statute may result in collateral administrative sanctions, including
exclusion from participation in Medicare, Medicaid and other federal health care programs. A person or entity need not have actual knowledge of this law
or specific intent to commit a violation of this law.
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18 U.S.C. § 1518 establishes criminal liability for whoever willfully prevents, obstructs, misleads, delays or attempts to prevent, obstruct, mislead, or delay
the communication of information or records relating to a violation of a Federal health care offense to a criminal investigator. In addition to criminal
penalties, violation of this statute may result in collateral administrative sanctions, including exclusion from participation in Medicare, Medicaid and other
federal health care programs.
18 U.S.C. § 286 establishes criminal liability for whoever enters into any agreement, combination, or conspiracy to defraud the United States, or any
department or agency thereof, by obtaining or aiding to obtain the payment or allowance of any false, fictitious or fraudulent claim. In addition to criminal
penalties, violation of this statute may result in collateral administrative sanctions, including exclusion from participation in Medicare, Medicaid and other
federal health care programs.
18 U.S.C. § 287 establishes criminal liability for whoever knowingly makes or presents a false, fictitious or fraudulent claim to the United States
Government, including any department or agency thereof. In addition to criminal penalties, violation of this statute may result in collateral administrative
sanctions, including exclusion from participation in Medicare, Medicaid and other federal health care programs.
The Federal False Claims Act, 31 U.S.C. § 3729, et seq., provides, in part, that the federal government—or a private party on behalf of the government—
may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent claim for payment, or
who has made a false statement or used a false record to get a claim paid or to avoid, decrease or conceal an obligation to pay money to the federal
government or who has knowingly retained an overpayment. Knowledge under the Federal False Claims Act means actual knowledge, deliberate
indifference, or reckless disregard. In addition, amendments in 1986 to the Federal False Claims Act have made it easier for private parties to bring
whistleblower lawsuits against companies.
The civil monetary penalties law, 42 U.S.C. § 1320a-7a, provides, in part, that the federal government may seek civil monetary penalties against any
person who presents or causes to be presented claims to a Federal health care program that the person knows or should know is for an item or services
that was not provided as claimed or is false or fraudulent, or the person has made a false statement or used a false record to get a claim paid. The
federal government may also seek civil monetary penalties for a wide variety of other conduct, including offering remuneration to influence a Medicare or
Medicaid beneficiary’s selection of providers and violations of the Federal Anti-Kickback Statute.
Violations of the Federal False Claims Act and/or the Civil Monetary Penalties Law can result in penalties ranging from $11,665 to $23,331 for each false
claim violation of the Federal False Claims Act and varying amounts based on the type of violation of the Civil Monetary Penalties Law, plus up to three
times the amount of damages that the federal government sustained. In addition, the federal government may also seek exclusion from participation in all
federal health care programs.
42 U.S.C. Section 1320a-7 provides that individuals and entities can be mandatorily or permissively excluded from participation in federal health care
programs. The grounds for mandatory exclusion include, but are not limited to, conviction for a criminal offense related to the delivery of an item or
service reimbursed under a federal or state health care program, and a conviction related to health care fraud. The grounds for permissive exclusion
include, but are not limited to, criminal offenses relating to fraud inside and outside of health care, convictions related to obstruction of an investigation or
audit, and/or failure to disclose certain required information. Exclusion from federal health care programs—whether mandatory or permissive—may mean
that we would not be entitled to participation in federal and/or state health care programs for services rendered.
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State Fraud and Abuse Provisions
Many states have also adopted some form of anti-kickback and anti-referral laws and false claims acts and civil monetary penalties and other fraud and
abuse provisions that apply regardless of payer, in addition to items and services reimbursed under Medicaid and other state programs. A determination
of liability under such laws could result in fines, penalties, and exclusion, as well as restrictions on the ability to operate in these jurisdictions.
Corporate liability can be present as a result of the illegal activities of employees, representatives, contractors, collaborators, agents, subsidiaries, or
affiliates, even if they were not explicitly authorized. There can be no assurance that all employees, representatives, contractors, collaborators, agents,
subsidiaries or affiliates will comply with the foregoing laws at all times. Violation of the aforementioned and other laws could result in whistleblower
complaints, investigations, sanctions, settlements, prosecution, government oversight and reporting, other enforcement actions, disgorgement of profits,
significant fines, damages, other civil and criminal penalties or injunctions or other administrative remedies, suspension and/or debarment from
contracting with certain governments or other persons, the loss of privileges, reputational harm, contract damages, adverse media coverage and other
collateral consequences. In addition, corporate directors, officers, employees, and other representatives who engage in violations of these and other laws
may face imprisonment, fines, and penalties. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if a
company does not prevail in any possible civil or criminal litigation, business, financial condition, and results of operations could be materially harmed. In
addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense
costs and other professional fees. Enforcement actions and sanctions could further harm business, financial condition, and results of operations. Any of
the consequences contained in this paragraph and section could adversely affect the ability to operate the business, financial condition, and the results of
operations.
Health Insurance Portability and Accountability Act
The Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act
(“HITECH”), and implementing regulations thereunder (collectively, “HIPAA”) requires certain healthcare providers, health plans and healthcare
clearinghouses who conduct specified electronic healthcare transactions (“covered entities”), as well as their independent contractors and agents who
conduct certain activities involving protected health information on their behalf (“business associates”) to comply with enumerated requirements relating
to the privacy, security and transmission of protected health information. Failure to comply with HIPAA can result in corrective action, as well as civil fines
and penalties and government oversight. Among other changes, HITECH made HIPAA security standards directly applicable to business associates,
increased the tiered civil and criminal fines and penalties that may be imposed against covered entities, business associates and possibly other persons,
and gave state attorneys general new authority to file actions to enforce HIPAA. Further, the breach notification rule implemented under HITECH requires
covered entities to notify affected individuals, the U.S. Department of Health and Human Services Office of Civil Rights (“OCR”), the agency that enforces
HIPAA, and for breaches affecting more than 500 individuals, the media, of any breaches of unsecured protected health information. HIPAA does not
create a private right of action for individuals, though individuals may submit complaints related to HIPAA to OCR.
Patient Protection and Affordable Care Act
In the United States, there have been, and continue to be multiple legislative and regulatory changes and proposed changes regarding the healthcare
system that could impact our business. Policymakers and third party reimbursement programs (i.e. payors) have articulated the goals of controlling
healthcare costs, improving quality and/or expanding access in connection with these healthcare reform efforts. As a leading example, in March 2010, the
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), was passed,
ushering in significant changes to the way healthcare is financed in the United States. With respect to impacts specific to the U.S. pharmaceutical
industry, among other things, the ACA:
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increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program and extended the rebate program to
include Medicaid managed care organizations as well as Medicaid fee-for-service programs;
expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals,
correspondingly increasing manufacturers’ Medicaid rebate liability;
created a new methodology by which average manufacturing price is calculated for drugs that are inhaled, infused, instilled, implanted or injected
and not generally dispensed through retail community pharmacies;
established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic
products;
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expanded the availability of lower drug pricing under the 340B drug pricing program to additional types of covered entities;
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created a new partial prescription drug benefit for Medicare recipients under the Medicare Part D coverage gap discount program, in which
manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their
coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
amended the Public Health Service Act to create an abbreviated approval pathway for biological products that are demonstrated to be biosimilar to or
interchangeable with an FDA-approved biological product;
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added a requirement to annually report product samples that manufacturers and distributors provide to physicians;
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established new requirements, known as ―Sunshine Act requirements for manufacturers of products reimbursed by Medicare, Medicaid or the
Children’s Health Insurance Program (―CHIP ) to collect and annually report detailed data to the Centers for Medicare and Medicaid Services
(―CMS ) regarding payments or other transfers of value to physicians and teaching hospitals (―covered recipients ), as well as any ownership or
investment interest held by physicians and their immediate family members. The reporting data must be accompanied by an attestation as to the
accuracy of the data and failure to timely and accurately submit required information may result in civil monetary penalties;
established a Center for Medicare & Medicaid Innovation at CMS, to test innovative payment and service delivery models to lower Medicare and
Medicaid spending, potentially including prescription drugs;
created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research; and
●
expanded healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti- Kickback Statute, and enhanced penalties for
noncompliance, which are applicable beyond the U.S. pharmaceutical industry (e.g. to other types of healthcare entities) but also are of specific
relevance to the U.S. pharmaceutical industry.
The Bipartisan Budget Act of 2018 amended the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly
referred to as the “donut hole.” Further, the Substance-Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and
Communities Act (“SUPPORT Act”) amended the Sunshine Act to expand the definition of covered recipient for whom applicable manufacturers must
collect ad report data to include physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists and certified nurse mid-
wives for data reported on or after January 1, 2022.
There have been multiple judicial challenges to certain aspects of the ACA, as well as Congressional efforts to repeal or replace the ACA, and efforts by
the Trump administration to delay or circumvent the implementation of certain ACA requirements. For example, the Tax Cuts and Jobs Act of 2017
repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain minimum
essential health care insurance, commonly known as the “individual mandate.” On December 14, 2018, a U.S. District Court in the Northern District of
Texas ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Cuts
and Jobs Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit affirmed the
District Court’s decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the
remaining provisions of the ACA are invalid as well. The U.S. Supreme Court has agreed to review the case and oral arguments heard oral arguments in
November 2020. Therefore, ongoing force and effect of certain or all of the provisions of the ACA remain in a state of uncertainty at this current time.
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Research and Development Expenses
Historically, a significant portion of our operating expenses has related to research and development. See our Consolidated Financial Statements
contained elsewhere in this Annual Report for costs and expenses related to research and development, and other financial information for fiscal years
2021 and 2020.
Scientific Advisors
We are advised by scientists and physicians with experience relevant to our Company and our product candidates.
clinicians and scientists who are affiliated with a number of highly regarded medical institutions.
Our scientific advisors include
Employees
We currently have twenty-five full-time employees, and we retain several independent contractors on a regular or as-needed basis. We believe that we
have good relations with our employees.
Available Information
Our internet website address is www.anavex.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through our
website. We include our website address in this report only as an inactive textual reference and do not intend it to be an active link to our website. The
contents of our website are not incorporated into this report.
ITEM 1A. RISK FACTORS
In addition to other information in this Annual Report on Form 10-K, the following risk factors should be carefully considered in evaluating our business
because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set
forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently
known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any such
risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such
circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.
Risks Related to our Company
We have had a history of losses and no revenue, which raises a risk regarding our ability to continue as a going concern in the future.
Since inception through September 30, 2021, we have accumulated a deficit of approximately $200 million. We can offer no assurance that we will ever
operate profitably or that we will generate positive cash flow in the future. To date, we have not generated any revenues from our operations. Our history
of losses and no revenues creates a greater risk of our continued ability to continue as a going concern in the future. As a result, our management
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. We will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at all. If we are
unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities, or respond to
competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations.
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We are an early stage pharmaceutical research and development company and may never be able to successfully develop marketable
products or generate any revenue. We have a very limited relevant operating history upon which an evaluation of our performance and
prospects can be made. There is no assurance that our future operations will result in profits. If we cannot generate sufficient revenues, we
may suspend or cease operations.
We are an early stage company and have not generated any revenues to date and have no operating history. All of our potential drug compounds are in
the concept stage or early clinical development stage. Moreover, we cannot be certain that our research and development efforts will be successful or, if
successful, that our potential drug compounds will ever be approved for sales to pharmaceutical companies or generate commercial revenues. We have
no relevant operating history upon which an evaluation of our performance and prospects can be made. We are subject to all of the business risks
associated with a new enterprise, including, but not limited to, risks of unforeseen capital requirements, failure of potential drug compounds either in non-
clinical testing or in clinical trials, failure to establish business relationships and competitive disadvantages against larger and more established
companies. If we fail to become profitable, we may suspend or cease operations.
We will need additional funding and may be unable to raise additional capital when needed, which would force us to delay, reduce or eliminate
our research and development activities.
We will need to raise additional funding and the current economic conditions may have a negative impact on our ability to raise additional needed capital
on terms that are favorable to our Company or at all. We may not be able to generate significant revenues for several years, if at all. Until we can generate
significant revenues, if ever, we expect to satisfy our future cash needs through equity or debt financing. We cannot be certain that additional funding will
be available on acceptable terms, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or
more of our research and development activities.
Risks Related to our Business
Even if we are able to develop our potential drug compounds, we may not be able to receive regulatory approval, or if approved, we may not
be able to generate significant revenues or successfully commercialize our products, which will adversely affect our financial results and
financial condition and we will have to delay or terminate some or all of our research and development plans which may force us to cease
operations.
All of our potential drug compounds will require extensive additional research and development, including non-clinical testing and clinical trials, as well as
regulatory approvals, before we can market them. In particular, human therapeutic products are subject to rigorous non-clinical and clinical testing and
other approval procedures of the FDA and similar regulatory authorities in other countries. Various federal statutes and regulations also govern or
influence testing, manufacturing, safety, labeling, storage, and record-keeping related to such products and their marketing. We cannot predict if or when
any of the potential drug compounds we intend to develop will be approved for marketing. There are many reasons that we may fail in our efforts to
develop our potential drug compounds. These include:
● the possibility that non-clinical testing or clinical trials may show that our potential drug compounds are ineffective and/or cause harmful side
effects;
● regulators may not authorize us to commence or continue a clinical trial or may impose a clinical hold or may limit the conduct of a clinical trial
through the imposition of a partial clinical hold;
● the number of patients required for clinical trials for our drug candidates may be larger than we anticipate, enrollment in these clinical trials may be
slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or the duration of these clinical trials
may be longer than we anticipate;
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● our third-party contractors, including investigators, may fail to meet their contractual obligations to us in a timely manner, or at all, or may fail to
comply with regulatory requirements;
● our potential drug compounds may prove to be too expensive to manufacture or administer to patients;
● our potential drug compounds may fail to receive necessary regulatory approvals from the United States Food and Drug Administration or foreign
regulatory authorities in a timely manner, or at all;
● even if our potential drug compounds are approved, we may not be able to produce them in commercial quantities or at reasonable costs;
● even if our potential drug compounds are approved, they may not achieve commercial acceptance;
● regulatory or governmental authorities may apply restrictions to any of our potential drug compounds, which could adversely affect their
commercial success; and
● the proprietary rights of other parties may prevent us or our potential collaborative partners from marketing our potential drug compounds.
If we fail to develop our potential drug compounds, our financial results and financial condition will be adversely affected, we will have to delay or
terminate some or all of our research and development plans and may be forced to cease operations.
Our research and development plans will require substantial additional future funding which could impact our operations and financial
condition. Without the required additional funds, we will likely cease operations.
It will take several years before we can develop potentially marketable products, if at all. Our research and development plans will require substantial
additional capital, arising from costs to:
● conduct research, non-clinical testing and human studies;
● establish pilot scale and commercial scale manufacturing processes and facilities; and
● establish and develop quality control, regulatory, marketing, sales, finance and administrative capabilities to support these programs.
Our future operating and capital needs will depend on many factors, including:
● the pace of scientific progress in our research and development programs and the magnitude of these programs;
● the scope and results of pre-clinical testing and human studies;
● the time and costs involved in obtaining regulatory approvals;
● the time and costs involved in preparing, filing, prosecuting, securing, maintaining and enforcing patents;
● competing technological and market developments;
● our ability to establish additional collaborations;
● changes in our existing collaborations;
● the cost of manufacturing scale-up; and
● the effectiveness of our commercialization activities.
We base our outlook regarding the need for funds on many uncertain variables. Such uncertainties include the success of our research initiatives,
regulatory approvals, the timing of events outside our direct control such as negotiations with potential strategic partners and other factors. Any of these
uncertain events can significantly change our cash requirements as they determine such one-time events as the receipt or payment of major milestones
and other payments.
Additional funds will be required to support our operations and if we are unable to obtain them on favorable terms, we may be required to cease or reduce
further research and development of our drug product programs, sell some or all our intellectual property, merge with another entity or cease operations.
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We have received fast track designation for one of our compounds and may seek such designation or breakthrough therapy and priority
review for other compounds in the future. Fast track designation or breakthrough therapy designation may not actually lead to a faster FDA
review and approval process.
For some of our compounds, including ANAVEX ®2-73, we hope to benefit from the FDA’s fast track and priority review programs. In February 2020, the
FDA granted Fast Track designation for the ANAVEX ®2-73 clinical development program for the treatment of Rett syndrome. However, the fast-track
designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Under FDA policies, a compound is eligible for priority review, or review within a six-month time frame from the time a complete NDA is accepted for
filing, if the compound provides a significant improvement compared to marketed drugs in the treatment, diagnosis or prevention of a disease. A fast-track
designated compound would ordinarily meet the FDA’s criteria for priority review.
Fast track or breakthrough therapy designation for our compounds may not actually lead to a faster review process, and a delay in the review process or
in the approval of our compounds will delay revenue from their potential sales and will increase the capital necessary to fund these compound
development programs.
We have received orphan drug designation for several of our compounds, but we may be unable to maintain any benefits associated with
orphan drug designation, including market exclusivity.
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition or for which there is no
reasonable expectation that the cost of developing and making available in the United States a drug for a disease or condition will be recovered from
sales in the United States for that drug. If a product that has orphan drug designation subsequently receives the first FDA approval for the indication for
which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications,
including a full NDA, to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of
clinical superiority to the product with orphan drug exclusivity.
We have received orphan drug designation for several of our compounds, but exclusive marketing rights in the United States may be limited if we seek
FDA marketing approval for an indication broader than the orphan designated indication. Additionally, any compound with orphan drug designation may
lose such designation if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure
sufficient quantities of the product to meet the needs of patients with the rare disease or condition. In addition, others may obtain orphan drug exclusivity
for products addressing the same diseases or conditions as products we are developing, thus limiting our ability to compete in the markets addressing
such diseases or conditions for a significant period of time.
If we fail to demonstrate efficacy in our non-clinical studies and clinical trials our future business prospects, financial condition and operating
results will be materially adversely affected.
The success of our research and development efforts will be greatly dependent upon our ability to demonstrate potential drug compound efficacy in non-
clinical studies, as well as in clinical trials. Non-clinical studies involve testing potential drug compounds in appropriate non-human disease models to
demonstrate efficacy and safety. Regulatory agencies evaluate these data carefully before they will approve clinical testing in humans. If certain non-
clinical data reveals potential safety issues or the results are inconsistent with an expectation of the potential drug compound’s efficacy in humans, the
regulatory agencies may require additional more rigorous testing before allowing human clinical trials. This additional testing will increase program
expenses and extend timelines. We may decide to suspend further testing on our potential drug compounds if, in the judgment of our management and
advisors, the non-clinical test results do not support further development.
Moreover, success in non-clinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the
results of later clinical trials will replicate the results of prior clinical trials and non-clinical testing. The clinical trial process may fail to demonstrate that our
potential drug compounds are safe for humans and effective for indicated uses. This failure would cause us to abandon a drug candidate and may delay
development of other potential drug compounds. Any delay in, or termination of, our non-clinical testing or clinical trials will delay the filing of an IND and
NDA with the FDA or the equivalent applications with pharmaceutical regulatory authorities outside the United States and, ultimately, our ability to
commercialize our potential drug compounds and generate product revenues. In addition, we expect that our early clinical trials will involve small patient
populations. Because of the small sample size, the results of these early clinical trials may not be indicative of future results. Also, the IND process may
be extremely costly and may substantially delay the development of our potential drug compounds. Moreover, positive results of non-clinical tests will not
necessarily indicate positive results in subsequent clinical trials.
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Following successful non-clinical testing, potential drug compounds will need to be tested in a clinical development program to provide data on safety and
efficacy prior to becoming eligible for product approval and licensure by regulatory agencies. From the first human trial through to regulatory approval can
take many years and 10-12 years is not unusual for certain compounds.
If any of our future clinical development potential drug compounds become the subject of problems, our ability to sustain our development programs will
become critically compromised. For example, efficacy or safety concerns may arise, whether or not justified, that could lead to the suspension or
termination of our clinical programs. Examples of problems that could arise include, among others:
● efficacy or safety concerns with the potential drug compounds, even if not justified;
● manufacturing difficulties or concerns;
● regulatory proceedings subjecting the potential drug compounds to potential recall;
● publicity affecting doctor prescription or patient use of the potential drug compounds;
● pressure from competitive products; or
● introduction of more effective treatments.
Each clinical phase is designed to test attributes of the drug and problems that might result in the termination of the entire clinical plan can be revealed at
any time throughout the overall clinical program. The failure to demonstrate efficacy in our clinical trials would have a material adverse effect on our
future business prospects, financial condition and operating results.
If we do not obtain the support of qualified scientific collaborators, our revenue, growth and profitability will likely be limited, which would
have a material adverse effect on our business.
We will need to establish relationships with leading scientists and research institutions. We believe that such relationships are pivotal to establishing
products using our technologies as a standard of care for various indications. Additionally, although in discussion, there is no assurance that our current
research partners will continue to work with us or that we will be able to attract additional research partners. If we are not able to establish scientific
relationships to assist in our research and development, we may not be able to successfully develop our potential drug compounds. If this happens, our
business will be adversely affected.
We may not be able to develop, market or generate sales of our products to the extent anticipated. Our business may fail and investors could
lose all their investment in our Company.
Assuming that we are successful in developing our potential drug compounds and receiving regulatory clearances to market our products, our ability to
successfully penetrate the market and generate sales of those products may be limited by a number of factors, including the following:
● If our competitors receive regulatory approvals for and begin marketing similar products in the United States, the European Union, Japan and other
territories before we do, greater awareness of their products as compared to ours will cause our competitive position to suffer;
● Information from our competitors or the academic community indicating that current products or new products are more effective or offer
compelling other benefits than our future products could impede our market penetration or decrease our future market share; and
● The pricing and reimbursement environment for our future products, as well as pricing and reimbursement decisions by our competitors and by
payers, may have an effect on our revenues.
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If this happens, our business will be adversely affected.
None of our potential drug compounds may reach the commercial market for a number of reasons and our business may fail.
Successful research and development of pharmaceutical products is high risk. Most products and development candidates fail to reach the market. Our
success depends on the discovery of new drug compounds that we can commercialize. It is possible that our products may never reach the market for a
number of reasons. They may be found ineffective or may cause harmful side-effects during non-clinical testing or clinical trials or fail to receive
necessary regulatory approvals. We may find that certain products cannot be manufactured at a commercial scale and, therefore, they may not be
economical to produce. Our potential products could also fail to achieve market acceptance or be precluded from commercialization by proprietary rights
of third parties. Our patents, patent applications, trademarks and other intellectual property may be challenged, and this may delay or prohibit us from
effectively commercializing our products. Furthermore, we do not expect our potential drug compounds to be commercially available for a number of
years, if at all. If none of our potential drug compounds reach the commercial market, our business will likely fail and investors will lose all of their
investment in our Company. If this happens, our business will be adversely affected.
If our competitors succeed in developing products and technologies faster or that are more effective or with a better profile than our own, or if
scientific developments change our understanding of the potential scope and utility of our potential products, then our technologies and
future products may be rendered undesirable or obsolete.
We face significant competition from industry participants that are pursuing technologies in similar disease states to those that we are pursuing and are
developing pharmaceutical products that are competitive with our products. Nearly all of our industry competitors have greater capital resources, larger
overall research and development staffs and facilities, and a longer history in drug discovery and development, obtaining regulatory approval and
pharmaceutical product manufacturing and marketing than we do. With these additional resources, our competitors may be able to respond to the rapid
and significant technological changes in the biotechnology and pharmaceutical industries faster than we can. Our future success will depend in large part
on our ability to maintain a competitive position with respect to these technologies. Rapid technological development, as well as new scientific
developments, may result in our products becoming obsolete before we can recover any of the expenses incurred to develop them. For example,
changes in our understanding of the appropriate population of patients who should be treated with a targeted therapy like we are developing may limit the
drug’s market potential if it is subsequently demonstrated that only certain subsets of patients should be treated with the targeted therapy.
Our reliance on third parties, such as university laboratories, contract manufacturing organizations and contract or clinical research
organizations, may result in delays in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform under our
agreements with them.
In the course of product development, we may engage university laboratories, other biotechnology companies or contract or clinical manufacturing
organizations to manufacture drug material for us to be used in non-clinical and clinical testing and contract research organizations to conduct and
manage non-clinical and clinical studies. If we engage these organizations to help us with our non-clinical and clinical programs, many important aspects
of this process have been and will be out of our direct control. If any of these organizations we may engage in the future fail to perform their obligations
under our agreements with them or fail to perform non-clinical testing and/or clinical trials in a satisfactory manner, we may face delays in completing our
clinical trials, as well as commercialization of any of our potential drug compounds. Furthermore, any loss or delay in obtaining contracts with such
entities may also delay the completion of our clinical trials, regulatory filings and the potential market approval of our potential drug compounds.
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If we fail to compete successfully with respect to partnering, licensing, mergers, acquisitions, joint venture and other collaboration
opportunities, we may be limited in our ability to research and develop our potential drug compounds.
Our competitors compete with us to attract established biotechnology and pharmaceutical companies or organizations for partnering, licensing, mergers,
acquisitions, joint ventures or other collaborations. Collaborations include contracting with academic research institutions for the performance of specific
scientific testing. If our competitors successfully enter into partnering arrangements or license agreements with academic research institutions, we will
then be precluded from pursuing those specific opportunities. Since each of these opportunities is unique, we may not be able to find a substitute. Other
companies have already begun many drug development programs, which may target diseases that we are also targeting, and have already entered into
partnering and licensing arrangements with academic research institutions, reducing the pool of available opportunities.
Universities and public and private research institutions also compete with us. While these organizations primarily have educational or basic research
objectives, they may develop proprietary technology and acquire patent applications and patents that we may need for the development of our potential
drug compounds. In some instances, we will attempt to license this proprietary technology, if available. These licenses may not be available to us on
acceptable terms, if at all. If we are unable to compete successfully with respect to acquisitions, joint venture and other collaboration opportunities, we
may be limited in our ability to develop new products.
The use of any of our products in clinical trials may expose us to liability claims, which may cost us significant amounts of money to defend
against or pay out, causing our business to suffer.
The nature of our business exposes us to potential liability risks inherent in the testing, manufacturing and marketing of our products. We currently have
one drug compound in clinical trials, however, when any of our products enter clinical trials or become marketed products, they could potentially harm
people or allegedly harm people possibly subjecting us to costly and damaging product liability claims. Some of the patients who participate in clinical
trials are already ill when they enter a trial or may intentionally or unintentionally fail to meet the exclusion criteria. The waivers we obtain may not be
enforceable and may not protect us from liability or the costs of product liability litigation. Although we intend to obtain product liability insurance, which
we believe is adequate, we are subject to the risk that our insurance will not be sufficient to cover claims. The insurance costs along with the defense or
payment of liabilities above the amount of coverage could cost us significant amounts of money and management distraction from other elements of the
business, causing our business to suffer.
If we are unable to safeguard against security breaches with respect to our information systems, our business may be adversely affected.
In the course of our business, we gather, transmit and retain confidential information through our information systems. Although we endeavor to protect
confidential information through the implementation of security technologies, processes and procedures, it is possible that an individual or group could
defeat security measures and access sensitive information about our business and employees. Any misappropriation, loss or other unauthorized
disclosure of confidential information gathered, stored or used by us could have a material impact on the operation of our business, including damaging
our reputation with our employees, third parties and investors. We could also incur significant costs implementing additional security measures and
organizational changes, implementing additional protection technologies, training employees or engaging consultants. In addition, we could incur
increased litigation as a result of any potential cyber-security breach. We are not aware that we have experienced any material misappropriation, loss or
other unauthorized disclosure of confidential or personally identifiable information as a result of a cyber-security breach or other act, however, a cyber-
security breach or other act and/or disruption to our information technology systems could have a material adverse effect on our business, prospects,
financial condition or results of operations.
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Even if we receive regulatory approval for one or more compounds, we will be subject to continuing regulatory obligations and ongoing
regulatory review, which may result in significant additional expense. Additionally, our compounds, if approved, could be subject to labeling
and other restrictions on marketing or withdrawal from the market, and we may be subject to penalties, if we fail to comply with regulatory
requirements or if we experience unanticipated problems with our compounds, when and if any of them are approved.
Following potential approval of any our compounds, the FDA may impose significant restrictions on a drug’s indicated uses or marketing or require
potentially costly and time-consuming post-approval studies, post-market surveillance or clinical trials to monitor the safety and efficacy of the drug. The
FDA may also require a Risk Evaluation and Mitigation Strategy (“REMS”) as a condition of approval of one or more of our compounds, which could
include requirements for a medication guide, physician communication plans or additional elements to ensure safe use of the drug. Additional REMS
elements may include restricted distribution methods, patient registries and other risk minimization tools.
In addition, if the FDA or a comparable foreign regulatory authority approves one or more of our compounds, the manufacturing processes, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for the approved drug will be subject
to additional and potentially extensive ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing
information and reports, establishment registration, as well as continued compliance with cGMPs and GCP requirements for any clinical trials that we
conduct post-approval. Later discovery of previously unknown problems with our products, including adverse events of unanticipated severity or
frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other
things:
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restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product
recalls;
fines, restitutions, disgorgement of profits or revenues, warning letters, untitled letters or holds on clinical trials;
restrictions on product distribution or use, or requirements to conduct post-marketing studies or clinical trials;
product seizure or detention, or refusal to permit the import or export of our products;
injunctions or the imposition of civil or criminal penalties; and
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of approvals.
The occurrence of any event or penalty described above may limit our ability to commercialize our compounds and generate revenue, and could require
us to expend significant time and resources in response or generate negative publicity.
If any of our compounds are approved, our product labeling, advertising and promotion will also be subject to regulatory requirements and ongoing
regulatory review. The FDA strictly regulates the promotional claims that may be made about drug products. In particular, a drug may not be promoted for
uses that are not approved by the FDA as reflected in the drug’s approved labeling. If we receive marketing approval for a compound, physicians may
nevertheless lawfully prescribe it to their patients in a manner that is inconsistent with the approved label. While the FDA recently clarified that mere
knowledge that a physician is prescribing a drug for off label use is not sufficient to constitute unlawful off-label promotion, if we are found to have actively
promoted such off label uses, we may become subject to significant liability under the FDCA. The federal government has levied large civil and criminal
fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also
requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
The FDA’s and other regulatory authorities’ policies are subject to change at any time, and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our compounds. If we are unable to timely adapt to changes in existing requirements or the adoption of new
requirements or policies, or if we are not able to maintain regulatory compliance post-marketing, we may lose any marketing approval that we may have
obtained, and we may not achieve or sustain profitability.
Finally, we cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive
action, either in the United States or abroad. It is difficult to predict how any such legislative, administrative or executive actions will be implemented, and
the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these legislative or executive actions impose constraints on the
FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
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The COVID-19 coronavirus could adversely impact our business, including our clinical trials, and financial condition.
In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, the COVID-19 coronavirus has
spread to multiple countries, including the United States, Australia and European and Asia-Pacific countries, including countries in which we have
planned or active clinical trial sites. As the COVID-19 coronavirus continues to spread around the globe, we may experience disruptions that could
potentially impact our business and clinical trials.
In addition, the spread of COVID-19 coronavirus has had and may continue to severely impact the trading price of shares of our common stock and could
further severely impact our ability to raise additional capital on a timely basis or at all.
The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our future
business operations, including our clinical trials, and financial condition will depend on future developments, which are highly uncertain and cannot be
predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in
the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other
countries to contain and treat the disease.
Risks Related to our Common Stock
A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations and
would severely dilute existing or future investors if we were to raise funds at lower prices.
A prolonged decline in the price of our common stock could result in a reduction in our ability to raise capital. Because our operations have been financed
through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our continued operations. Any
reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant
negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price
declines, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations. We believe
the following factors could cause the market price of our common stock to continue to fluctuate widely and could cause our common stock to trade at a
price below the price at which you purchase your shares of common stock:
● actual or anticipated variations in our quarterly operating results;
● announcements of new services, products, acquisitions or strategic relationships by us or our competitors;
● changes in accounting treatments or principles;
● changes in earnings estimates by securities analysts and in analyst recommendations; and
● general political, economic, regulatory and market conditions.
The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet
these expectations, even if minor, could materially adversely affect the market price of our common stock.
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If we issue additional shares of common stock in the future, it will result in the dilution of our existing stockholders and may cause the share
price of our common stock to fall.
Recently, the stockholders of the Company approved an amendment to our articles of incorporation, increasing the number of authorized shares of
common stock to 200,000,000 shares. We also have 10,000,000 shares of preferred stock authorized. Our Board of Directors has the authority to issue
additional shares of preferred and common stock up to the authorized capital stated in the articles of incorporation. Our Board of Directors may choose to
issue some or all such shares of common stock to acquire one or more businesses or to provide additional financing in the future. The issuance of any
such shares of common stock will result in a reduction of the book value or market price of the outstanding shares of our common stock. If we do issue
any such additional shares of common stock, such issuance also will cause a reduction in the proportionate ownership and voting power of all other
stockholders. Further, any such issuance may result in a change of control of our corporation. In the event we do issue or sell additional shares of
common or preferred stock, it may result in shareholder dilution and may cause our share price to fall.
We may not be able to access sufficient funds under the Sales Agreement when needed.
On May 1, 2020, we entered into an Amended and Restated Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. and SVB Leerink
LLC (the “Sales Agents”), pursuant to which we may offer and sell shares of our common stock registered under an effective registration statement from
time to time through the Sales Agents (the “At-the-Market Offering”). The Sales Agents are only obligated to act as our agent in the sale of shares
pursuant to the Sales Agreement on a commercially reasonable efforts basis and subject to certain conditions set forth in the Sales Agreement.
Therefore, we may not in the future, have access to the full amount available to us under the Sales Agreement. Any amounts we sell under the Sales
Agreement may not satisfy all of our funding needs, even if we are able and choose to sell and issue all of our common stock currently registered.
Our stock price has been volatile and may be volatile in the future.
Our stock price has been volatile at certain times historically, and may be volatile in the future. We may incur rapid and substantial increases or
decreases in our stock price in the foreseeable future that are do not coincide in timing with the disclosure of news or developments by us. The stock
market in general, and the market for biotechnology and pharmaceutical companies in particular, has experienced extreme volatility that has often been
unrelated to the operating performance of particular companies. The market price for our common stock may be influenced by many factors, including the
following:
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announcements of new data, clinical trial results or those of companies that are perceived to be similar to us;
announcements related to any delays in any preclinical or clinical trials related to our products;
announcements related to our products’ ability to demonstrate efficacy or an acceptable safety profile of our product candidates or similar
announcements by companies that are perceived to be similar to us;
our ability to meet or exceed expectations of analysts or investors;
news that the number of patients required for clinical trials for our drug candidates may be larger than we anticipate, enrollment in these clinical
trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or the duration of
these clinical trials may be longer than we anticipate;
actions taken by regulatory agencies with respect to our product candidates or the progress of our clinical studies, including with respect to any
fast track or orphan drug designations;
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic collaboration partners
or our competitors;
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grants awarded to us or companies that are perceived to be similar to us from outside entities;
variations in our financial results or those of companies that are perceived to be similar to us;
trading volume of our common stock;
developments concerning our collaborations or partners;
the impact of the COVID-19 outbreak and its effect on us;
the perception of the biotechnology or pharmaceutical industries by the public, legislatures, regulators and the investment community;
developments or disputes concerning intellectual property rights;
significant lawsuits, including patent or stockholder litigation;
our ability or inability to raise additional capital and the terms on which we raise it;
sales of our common stock by us or our stockholders;
declines in the market prices of stocks generally or of companies that are perceived to be similar to us; and
general economic, industry and market conditions.
In addition, companies trading in the stock market in general, and The Nasdaq Capital Market in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. These broad market and industry
factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in
the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial
costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of
operations and growth prospects. There can be no guarantee that our stock price will remain at current prices.
Our common stock may become the target of a “short squeeze.”
In the past several months prior to the filing of this Annual Report on Form 10-K, securities of certain companies have increasingly experienced significant
and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short squeeze.” These short squeezes have caused
extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that
is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the
risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks have abated. There
can be no assurance that we will not, in the future be, a target of a short squeeze, and you may lose a significant portion or all of your investment if you
purchase our shares at a rate that is significantly disconnected from our underlying value.
Risks Related to our Intellectual Property
If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual
property protection obtained is not sufficiently broad, our competitors could develop and commercialize product candidates similar or
identical to ours, and our ability to successfully commercialize our product candidates that we may pursue may be impaired.
32
Our success depends in large part on our ability to obtain and maintain protection of our intellectual property, particularly patents, in the United States and
other countries with respect to our product candidates and technology. We seek to protect our proprietary position by filing patent applications in the
United States and abroad related to our product candidates or by in-licensing intellectual property. U.S. patents related to ANAVEX®2-73 are directed to a
dosage form comprising certain doses of ANAVEX®2-73 and donepezil, and the coverage is limited to the United States only. We may not be able to
obtain patent protection for ANAVEX®2-73 as a single drug or in other jurisdictions.
Moreover, we may be subject to a third-party preissuance submission of prior art to the United States Patent and Trademark Office, or the USPTO, or
become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights
or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our
patent rights, allow third parties to commercialize our product candidates and compete directly with us, without payment to us, or result in our inability to
manufacture or commercialize drugs without infringing on third-party patent rights. In addition, if the breadth or strength of protection provided by our
patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or
commercialize current or future product candidates.
In addition, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the
courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being
narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or
identical product candidates, or limit the duration of the patent protection of our product candidates. Given the amount of time required for the
development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such
candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing drugs
similar or identical to ours.
We hold ownership or exclusive rights to nine issued U.S. patent, ten 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. Neither patents nor patent applications ensure the protection of our
intellectual property for a number of reasons, including the following:
1.
2.
3.
4.
5.
6.
7.
8.
Competitors may interfere with our patenting process in a variety of ways. Competitors may claim that Anavex is not entitled to an issued
patent for a variety of legal reasons. Competitors may also claim that we are infringing their patents and restrict our freedom to operate. If
a court or, in some circumstances, a board of a national patent authority, agrees, we would lose some or all of our patent protection. As a
company, we have no meaningful experience with competitors interfering with our patents or patent applications.
Because of the time, money and effort involved in obtaining and enforcing patents, our management may spend less time and resources
on developing potential drug compounds than they otherwise would, which could increase our operating expenses and delay product
programs.
Issuance of a patent may not provide significant practical protection. If we receive a patent of narrow scope, then it may be possible for
competitors to design products that do not infringe our patent(s).
Anavex is seeking patent protection for a number of indications, combination products and drug regimens. The lack of patent protection in
global markets for a specific end product or indication may inhibit our ability to advance our compounds and may make Anavex less
attractive to potential partners.
Defending a patent lawsuit takes significant time and can be very expensive.
If a court decides that an Anavex compound, its method of manufacture or use, infringes on the competitor’s patent, we may have to pay
substantial damages for infringement.
A court may prohibit us from making, selling or licensing the potential drug compound unless the patent holder grants a license. A patent
holder is not required to grant a license. If a license is available, we may have to pay substantial royalties or grant cross licenses to our
patents, and the license terms may be unacceptable.
Redesigning our potential drug compounds so that they do not infringe on other patents may not be possible or could require substantial
funds and time.
33
It is also unclear whether our trade secrets are adequately protected. While we use reasonable efforts to protect our trade secrets, our employees or
consultants may unintentionally or willfully disclose our information to competitors. Enforcing a claim that someone illegally obtained and is using our
trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets. Our competitors may independently develop equivalent knowledge, methods and know-how.
We may also support and collaborate in research conducted by government organizations, hospitals, universities or other educational institutions. These
research partners may be unable or unwilling to grant us exclusive rights to technology or products derived from these collaborations.
If we do not obtain required intellectual property licenses or rights, we could encounter delays in our product development efforts while we attempt to
design around other patents or even be prohibited from developing, manufacturing or selling potential drug compounds requiring these rights or licenses.
There is also a risk that legal disputes may arise as to the rights to technology or potential drug compounds developed in collaboration with other parties,
all with attendant risk, distraction, expense, and lack of predictability.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise
experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our
business.
We are party to an exclusive license agreement with Life Science Research Israel Ltd., with respect to certain in-licensed intellectual property related to
our ANAVEX®3-71 product candidate, and we may need to obtain additional licenses from others in the future. Our license agreement with Life Science
Research Israel Ltd. imposes, and we expect that future license agreements will impose, various development, diligence, commercialization, and other
obligations on us. In spite of our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements
and might therefore terminate the license agreements, thereby removing or limiting our ability to develop and commercialize products and technology
covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors
or other third parties would have the freedom to seek regulatory approval of, and to market, products identical to ours and we may be required to cease
our development and commercialization of ANAVEX®3-71 or other product candidates covered by any such future licenses. Any of the foregoing could
have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:
● the scope of rights granted under the license agreement and other interpretation-related issues;
● the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the
licensing agreement;
● the sublicensing of patent and other rights under our collaborative development relationships;
● our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
● the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors
and us and our partners; and
● the priority of invention of patented technology.
In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in
such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow
what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other
obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations,
and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our licensing arrangements
on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a
material adverse effect on our business, financial conditions, results of operations, and prospects.
34
If we do not obtain required intellectual property licenses or rights, we could encounter delays in our product development efforts while we attempt to
design around other patents or even be prohibited from developing, manufacturing or selling potential drug compounds requiring these rights or licenses.
There is also a risk that legal disputes may arise as to the rights to technology or potential drug compounds developed in collaboration with other parties,
all with attendant risk, distraction, expense, and lack of predictability.
Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
Our success will also depend in part on our ability to commercialize our compounds without infringing the proprietary rights of others. We have not
conducted extensive freedom of use patent searches and no assurance can be given that patents do not exist or could be issued which would have an
adverse effect on our ability to market our technology or maintain our competitive position with respect to our technology. If our compounds or other
subject matter are claimed under other United States patents or other international patents or are otherwise protected by third party proprietary rights, we
may be subject to infringement actions. In such event, we may challenge the validity of such patents or other proprietary rights or we may be required to
obtain licenses from such companies in order to develop, manufacture or market our technology. There can be no assurances that we would be
successful in a challenge or be able to obtain such licenses or that such licenses, if available, could be obtained on commercially reasonable terms.
Furthermore, the failure to succeed in a challenge, develop a commercially viable alternative or obtain needed licenses could be materially adverse.
Adverse consequences include delays in marketing some or all of our potential drug compounds based on our drug technology or the inability to proceed
with the development, manufacture or sale of potential drug compounds requiring such licenses. If we defend ourselves against charges of patent
infringement or to protect our proprietary rights against third parties, substantial costs will be incurred regardless of whether we are successful. Such
proceedings are typically protracted with no certainty of success. An adverse outcome could subject us to significant liabilities to third parties and force us
to curtail or cease the research and development of our technology.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and
commercialize ANAVEX®2-73 or our other product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation
expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we
may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing
products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Additionally,
parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have
substantially greater resources. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or
administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition, any uncertainties
resulting from the initiation and continuation of any litigation could have material adverse effect on our ability to raise additional funds or otherwise have a
material adverse effect on our business, results of operations, financial condition and prospects.
If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our
business would be harmed.
While we use reasonable efforts to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our information to
competitors. Enforcing a claim that someone illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming, and
the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Our competitors may
independently develop equivalent knowledge, methods and know-how.
35
We seek to protect our confidential proprietary information, in part, by confidentiality agreements and invention assignment agreements with our
employees, consultants, scientific advisors, contractors and collaborators. These agreements are designed to protect our proprietary information.
However, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets
and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently
develop substantially equivalent information and techniques. For example, any of these parties may breach the agreements and disclose our proprietary
information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. We also seek to preserve the integrity
and confidentiality of our confidential proprietary information by maintaining physical security of our premises and physical and electronic security of our
information technology systems, but it is possible that these security measures could be breached. If any of our confidential proprietary information were
to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or
information to compete with us, which could harm our competitive position.
Although we are not currently involved in any litigation, we may become involved in lawsuits to protect or enforce our patents or other
intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our patents or other intellectual property. Although we are not currently involved in any litigation, if we were to initiate legal
proceedings against a third party to enforce a patent covering ANAVEX®2-73 or our other product candidates, the defendant could counterclaim that the
patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity
and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements,
including lack of novelty, obviousness, written description or non-enablement. Grounds for an unenforceability assertion could be an allegation that
someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution.
The outcome following legal assertions of invalidity and unenforceability is unpredictable.
Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of
inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt
to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially
reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation or
interference or derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees.
In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our
clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us
bring ANAVEX®2-73 or our other product candidates to market.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed
patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes arise
from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. Litigation may be necessary to
defend against these and other claims challenging inventorship or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or
other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable
intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates. Even if we are
successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of
the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and
other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance
with these requirements.
36
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the
USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We
have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S.
patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply,
and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However,
there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss
of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a
material adverse effect on our business.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our
intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some
foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not
be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using
our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained
patent protection to develop their own products and may also export infringing products to territories where we have patent protection, but enforcement is
not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be
effective or sufficient to prevent them from competing.
The risk factors disclosed in this Annual Report on Form 10-K could materially and adversely affect our business, financial condition and results of
operations. The risks described herein are not the only risks we face. Our operations could also be affected by additional factors that are not presently
known to us or by factors that we currently consider immaterial to our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We do not own any real property. We maintain a corporate head office at 51 West 52nd Street, 7 th Floor, New York, NY, USA. Our lease costs for this
office are approximately $4,500 per month. We believe our offices are suitable and adequate to operate our business currently, as they provide us with
sufficient space to conduct our operations.
ITEM 3. LEGAL PROCEEDINGS
We know of no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which our Company or our
subsidiary is a party or of which any of their property is subject. There are no proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial stockholder holding more than 5% of our shares, is an adverse party or has a material interest adverse to our or our subsidiary’s
interest.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
37
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market information
Our common stock is quoted on the Nasdaq Global Select Stock Market (“Nasdaq”) under the symbol “AVXL.”
Holders of Common Stock
As of November 19, 2021, there were approximately 49 holders of record, and 76,018,053 shares of our common stock were issued and outstanding.
Dividends
We have not paid any cash dividends on our common stock and have no intention of paying any dividends on the shares of our common stock. Our
current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined
from time to time by our Board of Directors.
Recent Sales of Unregistered Securities
Since the beginning of our fiscal year ended September 30, 2021, we have not sold any equity securities that were not registered under the Securities Act
of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.
Repurchases of Equity Securities by Our Company and Affiliated Purchasers
None.
ITEM 6 [RESERVED]
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended
September 30, 2021, included elsewhere in this Annual Report on Form 10-K.
Financial Overview
We are in the development stage and have not earned any revenues since our inception in 2004. 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.
Our operating costs consist primarily of research and development activities including the cost of clinical studies and clinical supplies as well as clinical
drug manufacturing and formulation. Research and development expenses also include personnel related costs such as salaries and wages, and third-
party contract research organization (CRO) expenses in support of these clinical studies. Personnel costs include salaries and wages, benefits, and non-
cash stock-based compensation charges associated with options and other equity awards granted to employees and consultants who are directly
engaged in support of our research and development activities.
38
General and administrative expenses consist of personnel costs, expenses for outside professional services and expenses for associated with operating
as a public company. Personnel costs consist of salaries and wages, benefits and stock-based compensation for general and administrative personnel.
Outside professional services and public company expenses, include expenses related to compliance and reporting, additional insurance expenses, audit
and SOX compliance, expenses associated with patent research, applications and filings, investor and shareholder relations activities and other
administrative expenses and professional services
Year ended September 30, 2021
During fiscal 2021, we made significant progress in the advancement of clinical studies for ANAVEX ®2-73, including completing enrollment of our
international Phase 2b/3 Alzheimer’s disease trial, completion of our proof-of-concept Phase 2 Parkinson ’s disease dementia trial, continued
advancement of a multi-regional Phase 2/3 clinical program for the treatment of Rett syndrome, including completion of the Phase 2 U.S. trial, expansion
of the AVATAR Phase 2 study internationally into the United Kingdom and the commencement of the EXCELLENCE Phase 2/3 pediatric Rett syndrome
study and expansion of this trial into Canada and the United Kingdom. Additionally, we advanced the first in human Phase 1 clinical trial of ANAVEX®3-
71 with focus on the treatment of Frontotemporal Dementia (FTD).
Operating Expenses
Our operating expenses for fiscal 2021 increased to $42.0 million, from $31.1 million in fiscal 2020. The increase is attributable to an increase in research
and development expenses of $7.8 million in 2021 to $33.0 million, primarily due to the advancement of our clinical programs, as described above.
General and administrative expenses for fiscal 2021 increased to $9.0 million, from $5.9 million in fiscal 2020, most significantly related to an increase in
personnel and an increase in associated non-cash stock option compensation charges.
During fiscal 2021, we utilized $30.4 million to fund our operations, compared to $21.3 million during fiscal 2020. Our cash position increased to $152.1
million at September 30, 2021, an increase of $122.9 million over the prior year. Cash for operations was generated through the issuance of shares of
common stock under financing arrangements described below, and through the completion of a registered direct offering.
We will continue to see an increase in our research and development expenditures as we advance our ANAVEX ®2-73 clinical studies, including adding
extension studies to allow us to continue to gather longer term data, continuing to advance our other pipeline compounds such as ANAVEX®3-71, and as
we continue to add additional staffing to manage and support these clinical studies.
Other income
Net other income for the year ended September 30, 2021 was $4.4 million as compared to $4.8 million for fiscal 2020. The primary reason for the
decrease in other income was due to an increased foreign exchange loss associated with Incentive and other receivables denominated in Australian
dollars, and related impact from the fluctuation of the Australian dollar against the US dollar during the year.
During fiscal 2021, we recorded $4.5 million in research and development incentive income, consisting of the Australian research and development
incentive credit administered through the Australian Tax Office, in connection with fiscal 2021 eligible expenditures and fiscal 2020 expenditures for which
an overseas finding ruling was obtained during the current year. In comparison, research and development incentive income for fiscal 2020 was $4.4
million in connection with fiscal 2020 eligible expenditures. We expect to continue to receive support from the Australian government for various clinical
trials being conducted within Australia.
Net loss
Net loss for fiscal 2021 was $37.9 million, or $0.54 per share, compared to a net loss of approximately $26.3 million, or $0.45 per share for fiscal 2020.
39
Liquidity and Capital Resources
Working Capital
Current Assets
Current Liabilities
Working Capital
2021
161,616,490
10,798,386
150,818,104
$
$
$
$
2020
34,542,197
7,305,628
27,236,569
At September 30, 2021, we had $152.1 million in cash and cash equivalents, an increase of $122.9 million, from $29.2 million at September 30, 2020.
The principal reason for this increase is due to cash received from financing activities of $153.2 million from the issuance of common shares, offset by
cash utilized in operations of $30.4 million.
We intend to continue to use our capital resources to advance our clinical trials for ANAVEX ®2-73 and ANAVEX ®3-71, and to perform work necessary to
prepare for future development of our pipeline compounds.
Cash Flows
Cash flows used in operating activities
Cash flows provided by financing activities
Increase in cash
Cash flow used in operating activities
2021
(30,383,674)
153,242,401
122,858,727
$
$
2020
(21,287,046)
28,350,434
7,063,388
$
$
There was an increase in cash used in operating activities of $9.1 million during fiscal 2021 due to an increase in clinical trial activities, as more fully
described above.
Cash flow provided by financing activities
Cash provided by financing activities in fiscal 2021 was $153.2 million, net of financing costs, primarily attributable to cash received from the issuance of
common shares at various market prices under the 2019 Purchase Agreement, the Sales Agreement and a direct registered offering we completed for
net proceeds of $46.9 million, after deducting expenses associated with the offering.
Cash provided by financing activities in fiscal 2020 were $28.4 million, attributable to cash received from the issuance of common shares at various
market prices under the 2019 Purchase Agreement and under the Sales Agreement.
Other Financings
Purchase Agreement
On June 7, 2019, we entered into a Purchase Agreement (the “2019 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), as
amended on July 1, 2020, pursuant to which Lincoln Park committed to purchase up to $50.0 million of our common stock. Concurrently with the
execution of the 2019 Purchase Agreement in 2019, we issued 324,383 shares of our common stock to Lincoln Park as a fee for its commitment to
purchase shares of our common stock under the 2019 Purchase Agreement and became obligated to issue up to 162,191 shares pro rata, when and if
Lincoln Park purchased, at our discretion, the $50.0 million aggregate commitment.
During fiscal year 2021, the Company issued to Lincoln Park an aggregate of 4,086,209 shares of common stock under the 2019 Purchase Agreement,
including 4,007,996 shares of common stock for an aggregate purchase price of $24.1 million and 78,213 commitment shares. As of September 30, 2021,
no shares of our common stock remain available for purchase by Lincoln Park under the 2019 Purchase Agreement.
40
Controlled Equity Offering Sales Agreement
On May 1, 2020, we entered into an Amended and Restated Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. and SVB Leerink
LLC (the “Sales Agents”), pursuant to which we may offer and sell shares of common stock registered under an effective registration statement from time
to time through the Sales Agents (the “At-the-Market Offering”).
Upon delivery of a placement notice based on our instructions and subject to the terms and conditions of the Sales Agreement, the Sales Agents may sell
shares of common stock by methods deemed to be an “at the market 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 our prior written
consent. We are not obligated to make any sales of shares under the Sales Agreement. We or the Sales Agents may suspend or terminate the At-the-
Market Offering upon notice to the other party, subject to certain conditions. The Sales Agents will act as agents on a commercially reasonable efforts
basis consistent with their normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of Nasdaq.
We have agreed to pay the Sales Agents commissions for their services of 3.0% of the gross proceeds from the sale of the Shares pursuant to the Sales
Agreement. We have also agreed to provide the Sales Agents with customary indemnification and contribution rights.
During fiscal 2021, 5,634,576 shares were sold pursuant to the At-the-Market Offering for gross proceeds of $79.1 million (net proceeds of $76.7 million
after deducting commissions and offering expenses).
Registered Direct Offering
On June 24, 2021, the Company completed a registered direct offering off of the Company’s shelf registration statement on Form S-3 filed with the SEC
on July 3, 2019. The Company issued 2,380,953 common shares at $21.00 per share for gross proceeds of $50.0 million (net proceeds of $46.9 million
after deducting offering fees and expenses).
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.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the
basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our
financial statements.
We base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time. Actual results may vary
from our estimates due to changes in circumstances, politics, global economics, general business conditions and other factors. Our significant estimates
are related to the valuation of warrants and options.
There are accounting policies that we believe are significant to the presentation of our financial statements. The most significant of these accounting
policies relates to the accounting for our research and development expenses and stock-based compensation expense.
41
Research and Development Expenses
Research and development costs are expensed as incurred. These expenses are comprised of the costs of the Company’s proprietary research and
development efforts, including preclinical studies, clinical trials, manufacturing costs, employee salaries and benefits and stock based compensation
expense, contract services including external research and development expenses incurred under arrangements with third parties such as contract
research organizations (“CROs”), facilities costs, overhead costs and other related expenses. Milestone payments made by the Company to third parties
are expensed when the specific milestone has been achieved. Manufacturing costs are expensed as incurred in accordance with Accounting Standard
Codification (“ASC”) 730, Research and Development, as these materials have no alternative future use outside of their intended use.
Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and
amortized over the period that the goods are delivered, or the related services are performed, subject to an assessment of recoverability. The Company
makes estimates of costs incurred in relation to external CROs, and clinical site costs. The Company analyzes the progress of clinical trials, including
levels of patient enrollment, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset
and accrued liability. Judgments and estimates must be made and used in determining the accrued balance and expense in any accounting period. The
Company reviews and accrues CRO expenses and clinical trial study expenses based on work performed and relies upon estimates of those costs
applicable to the stage of completion of a study. Accrued CRO costs are subject to revisions as such trials progress to completion. Revisions are charged
to expense in the period in which the facts that give rise to the revision become known. With respect to clinical site costs, the financial terms of these
agreements are subject to negotiation and vary from contract to contract. Payments under these contracts may be uneven and depend on factors such as
the achievement of certain events, the successful recruitment of patients, the completion of portions of the clinical trial or similar conditions. The objective
of our policy is to record expenses in our financial statements based on actual services received and efforts expended. As such, expense accruals related
to clinical site costs are recognized based on our estimate of the degree of completion of the event or events specified in the specific clinical study or trial
contract.
In addition, we incur expenses in respect of the acquisition of intellectual property relating to patents and trademarks. The probability of success and
length of time to develop commercial applications of the drugs subject to the acquired patents and trademarks is difficult to determine and numerous risks
and uncertainties exist with respect to the timely completion of the development projects. There is no assurance the acquired patents and trademarks will
ever be successfully commercialized. Due to these risks and uncertainties, we expense the acquisition of patents and trademarks.
Stock-based Compensation
We account for all stock-based payments and awards under the fair value-based method.
The fair value of all share purchase options and warrants are expensed over their contractual vesting period, or over the expected performance period for
only the portion of awards expected to vest, in the case of milestone-based vesting, with a corresponding increase to additional paid-in capital.
Compensation costs for stock-based payments with graded vesting are recognized on a straight-line basis. Stock based compensation expense is
adjusted for actual forfeitures of unvested awards as they occur.
We have granted share purchase option awards that vest upon achievement of certain performance criteria, or milestone-based awards. We estimate an
implicit service period for achieving performance criteria for each award and recognizes the resulting fair value as expense over the implicit service
period when we conclude that achieving the performance criteria is probable. We periodically review and update, as appropriate, our estimates of implicit
service periods and conclusions on achieving the performance criteria. Performance awards vest upon achievement of the performance criteria.
42
We use the Black-Scholes option valuation model to calculate the fair value of share purchase options and warrants at the date of the grant. This model
requires the input of subjective assumptions, including the expected price volatility, expected life and estimated forfeitures of each award. We use the
U.S. Treasury daily treasury yield curve rates for the expected term of the option as the risk-free rate. The expected term represents the period that
options granted are expected to be outstanding using the simplified method. Our historical share option exercise experience does not provide a
reasonable basis for estimating the expected term. Expected volatility is based on the average of the daily share price changes over the expected term.
We do not estimate forfeitures and elect to record actual forfeitures as they occur. We have not paid any dividends on our common stock historically,
therefore no assumption of dividend payments is made in the model. These assumptions consist of estimates of future market conditions, which are
inherently uncertain, and therefore, are subject to management’s judgment. Changes in these assumptions can materially affect the fair value estimates.
The purchase price of options or warrants may be paid in cash or, if approved by our compensation committee in advance, “net settled” in shares of our
common stock. In a net settlement of an option or warrant, we do not receive payment of the exercise price from the holder but reduce the number of
shares of common stock issued upon the exercise of the stock option or warrant by the smallest number of whole shares that have an aggregate fair
market value equal to or over the aggregate exercise price for the option shares covered by the option or warrant being exercised. Shares issued
pursuant to the exercise of options and warrants are issued from our treasury.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements and their possible effect on our results, see Note 2(n) to our Consolidated Financial Statements
found elsewhere in this Annual Report.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
43
ANAVEX LIFE SCIENCES CORP.
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
44
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Anavex Life Sciences Corp.
New York, New York
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Anavex Life Sciences Corp. (the “Company”) as of September 30, 2021 and 2020,
the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period
ended September 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2021 and 2020, and the results of its
operations and its cash flows for each of the two years in the period ended September 30, 2021, in conformity with accounting principles generally
accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s
internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated November 24, 2021 expressed an
unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2)
involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ BDO USA, LLP
We have served as the Company’s auditor since 2013.
New York, New York
November 24, 2021
45
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Anavex Life Sciences Corp.
New York, New York
Opinion on Internal Control over Financial Reporting
We have audited Anavex Life Sciences Corp.’s (the “Company’s”) internal control over financial reporting as of September 30, 2021, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the
“COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30,
2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated
balance sheets of the Company as of September 30, 2021 and 2020, the related consolidated statements of operations and comprehensive loss,
stockholders’ equity, and cash flows for each of the two years in the period ended September 30, 2021, and the related notes, and our report dated
November 24, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ BDO USA, LLP
New York, New York
November 24, 2021
46
ANAVEX LIFE SCIENCES CORP.
CONSOLIDATED BALANCE SHEETS
As at September 30, 2021 and 2020
Assets
Current
Cash and cash equivalents
Incentive and tax receivables
Prepaid expenses and deposits
Deferred financing charges
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable
Accrued liabilities - Note 3
Deferred grant income
Total Liabilities
Commitments and Contingencies - Note 6
Capital stock
Authorized:
10,000,000 preferred stock, par value $ 0.001 per share
200,000,000 common stock, par value $0.001 per share
(2020: 100,000,000 common stock, par value $ 0.001 per share)
Issued and outstanding:
75,918,465 common shares (2020 - 62,045,198)
Additional paid-in capital
Accumulated deficit
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
2021
2020
$
$
$
$
152,107,745
9,136,831
355,549
16,365
161,616,490
4,739,781
5,614,774
443,831
10,798,386
—
75,920
348,328,048
(197,585,864)
150,818,104
161,616,490
$
$
$
$
29,249,018
4,849,340
443,839
—
34,542,197
3,989,054
3,316,574
—
7,305,628
—
62,047
186,851,752
(159,677,230)
27,236,569
34,542,197
See Accompanying Notes to Consolidated Financial Statements
47
ANAVEX LIFE SCIENCES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the years ended September 30, 2021 and 2020
Operating expenses
General and administrative
Research and development
Total operating expenses
Other income (expenses)
Grant income
Research and development incentive income
Interest income, net
Foreign exchange gain (loss), net
Total other income, net
Net loss before provision for income taxes
Income tax expense, current
Net loss and comprehensive loss
Net Loss per share
Basic and diluted
Weighted average number of shares outstanding
Basic and diluted
2021
9,017,511
32,983,674
(42,001,185)
54,100
4,547,099
26,261
(267,344)
4,360,116
(37,641,069)
(267,565)
(37,908,634)
(0.54)
$
$
$
2020
5,856,609
25,231,623
(31,088,232)
149,888
4,375,025
179,973
125,540
4,830,426
(26,257,806)
(22,664)
(26,280,470)
(0.45)
$
$
$
69,802,960
58,194,894
See Accompanying Notes to Consolidated Financial Statements
48
ANAVEX LIFE SCIENCES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended September 30, 2021 and 2020
Cash Flows used in Operating Activities
Net loss
Adjustments to reconcile net loss to net cash used in operations:
Stock-based compensation
Changes in non-cash working capital balances related to operations:
Incentive and tax receivables
Prepaid expenses and deposits
Accounts payable
Accrued liabilities
Deferred grant income
Net cash used in operating activities
Cash Flows provided by Financing Activities
Issuance of common shares
Share issue costs
Proceeds from exercise of warrants
Proceeds from exercise of stock options
Net cash provided by financing activities
Increase in cash and cash equivalents during the period
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental Cash Flow Information
Cash paid for state and local minimum income taxes
2021
2020
$
(37,908,634)
$
(26,280,470)
8,231,403
(4,287,491)
88,290
750,727
2,298,200
443,831
(30,383,674)
153,218,762
(5,550,921)
1,466,500
4,108,060
153,242,401
122,858,727
29,249,018
152,107,745
139,531
$
$
4,876,906
(2,206,595)
57,159
465,722
1,800,232
—
(21,287,046)
28,754,198
(403,764)
—
—
28,350,434
7,063,388
22,185,630
29,249,018
22,664
$
$
See Accompanying Notes to Consolidated Financial Statements
49
ANAVEX LIFE SCIENCES CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended September 30, 2021 and 2020
Balance, September 30, 2019
Shares issued under 2019 purchase agreement
Purchase shares
Commitment shares
Shares issued pursuant to cashless exercise of stock
options
Shares issued under Sales Agreement, net of share
issuance costs
Share based compensation
Net loss
Balance, September 30, 2020
Shares issued under 2019 purchase agreement
Purchase shares
Commitment shares
Shares issued pursuant to exercise of stock options
Shares issued under Sales Agreement, net of share
issuance costs
Shares issued pursuant to registered direct offering,
net of share issue costs
Shares issued pursuant to exercise of warrants
Share based compensation
Net loss
Balance, September 30, 2021
Common Stock
Shares
Par Value
Additional
Paid-in
Capital
Accumulated
Deficit
Total
52,650,521
$
52,652
$ 153,633,807 $ (133,396,760) $
20,289,699
7,564,584
68,943
7,565
69
21,246,733
(69)
721
1
(1)
—
—
—
1,760,429
—
—
62,045,198
$
1,760
—
—
62,047
7,094,376
4,876,906
—
—
—
(26,280,470)
$ 186,851,752 $ (159,677,230) $
21,254,298
—
—
7,096,136
4,876,906
(26,280,470)
27,236,569
4,007,996
78,213
1,421,529
4,008
78
1,421
24,107,190
(78)
4,106,639
—
—
—
24,111,198
—
4,108,060
5,634,576
5,635
76,664,392
—
76,670,027
2,380,953
350,000
—
—
75,918,465
2,381
350
—
—
75,920
46,900,600
1,466,150
8,231,403
—
348,328,048
—
46,902,981
1,466,500
8,231,403
(37,908,634)
(197,585,864) $ 150,818,104
—
—
(37,908,634)
See Accompanying Notes to Consolidated Financial Statements
50
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 1
Note 1 Business Description and Basis of Presentation
Business
Anavex Life Sciences Corp. (“Anavex” or 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 are used to 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”).
On May 25, 2021, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of the State of Nevada
effecting an amendment to increase the number of authorized shares of the Company’s common stock, par value $0.001 per share, from
100,000,000 shares to 200,000,000 shares. The Certificate of Amendment was approved by the Company’s stockholders at an annual meeting
of stockholders on May 25, 2021.
Basis of Presentation
These consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”) and the instructions to Form 10-K and have been prepared under the accounting principles generally accepted in the United States of
America (“U.S. GAAP”).
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 sale 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, its business might become profitable.
Management believes that the current working capital position will be sufficient to meet the Company’s working capital requirements beyond the
next 12 months after the date that these consolidated 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.
Other than our rights related to the Sales Agreement (as defined below in Note 5), 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 the Company is not able to obtain the
additional financing on a timely basis, if and when it is needed, it will be forced to delay or scale down some or all of its research and
development activities.
51
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 2
Note 1 Business Description and Basis of Presentation – Continued
Coronavirus Disease 2019 (COVID-19)
The recent global outbreak of COVID-19 has not had a material impact on the Company’s result of operations or financial condition for the year
ended September 30, 2021. However, the pandemic continues to rapidly evolve as of the date these consolidated financial statements are
issued and has created a dynamic and uncertain situation in the global economy. As such, it is uncertain as to the full magnitude that the
outbreak will have on the Company’s financial condition and future results of operations. Management is actively monitoring the global situation
on its business, including on its clinical trials and operations and financial condition. Given the daily evolution of the COVID-19 situation, and the
global responses to curb its spread, the Company is not able to estimate the effects COVID-19 may have on its future results of operations or
financial condition.
Note 2 Summary of Significant Accounting Policies
a) Use of Estimates
The preparation of financial statements in accordance with U.S. 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 accounting for research and development costs,
incentive income receivable, valuation and recoverability of deferred tax assets, 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 book 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.
b) Principles of Consolidation
These consolidated financial statements include the accounts of Anavex Life Sciences Corp. and its wholly-owned subsidiaries, Anavex
Australia Pty Limited. (“Anavex Australia”), 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.
c) Cash and equivalents
The Company considers only those investments which are highly liquid, readily convertible to cash and that mature within three months from the
date of purchase to be cash equivalents.
Highly liquid investments that are considered cash equivalents include money market accounts, money market funds and certificates of deposit.
The carrying value of cash equivalents approximates fair value due to the short-term maturity of these securities. The Company’s investment
policy allows for investments in domestic money market certificates, certificates of deposit, money market funds, commercial papers, bonds or
commercial papers, and establishes diversification and credit quality requirements and limits investments by maturity and issuer. The Company
currently maintains its investments at one large well known financial institution.
52
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 3
Note 2 Summary of Significant Accounting Policies – (continued)
c) Cash and equivalents – (continued)
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the
Federal Deposit Insurance Corporation (FDIC) up to $250,000, under current regulations. The Company mitigates this risk by maintaining its
cash balances in a large well known financial institutions. The Company has not experienced any losses in such accounts.
d) Research and Development Expenses
Research and development costs are expensed as incurred. These expenses are comprised of the costs of the Company’s proprietary
research and development efforts, including preclinical studies, clinical trials, manufacturing costs, employee salaries and benefits and stock-
based compensation expense, contract services including external research and development expenses incurred under arrangements with third
parties such as contract research organizations (“CROs”), facilities costs, overhead costs and other related expenses. Milestone payments
made by the Company to third parties are expensed when the specific milestone has been achieved. Manufacturing costs are expensed as
incurred in accordance with Accounting Standard Codification (“ASC”) 730, Research and Development, as these materials have no alternative
future use outside of their intended use.
Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are
deferred and amortized over the period that the goods are delivered, or the related services are performed, subject to an assessment of
recoverability. The Company makes estimates of costs incurred in relation to external CROs, and clinical site costs. When evaluating the
adequacy of the accrued liabilities, the Company analyzes progress of the studies including the phase or completion of events, invoices
received and contracted costs. Judgments and estimates are made in determining the accrued balances at the end of any reporting period.
Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from
actual costs.
In addition, the Company incurs expenses in respect of intellectual property costs relating to patents and trademarks. The probability of success
and length of time to develop commercial applications of the drugs subject to the underlying patent and trademark costs is difficult to determine
and numerous risks and uncertainties exist with respect to the timely completion of the development projects. There is no assurance the drugs
subject to the underlying patents and trademarks will ever be successfully commercialized.
Due to these risks and uncertainties, the patent and trademark costs do not meet the definition of an asset and thus are expensed as incurred
within general and administrative expenses.
53
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 4
Note 2 Summary of Significant Accounting Policies – (continued)
e) Research and Development Incentive Income
The Company is eligible to obtain certain research and development tax credits, including the Australian research and development tax
incentive credit (the “Australia R&D credit”) through a program administered through the Australian Tax Office (the “ATO”), which provides for a
cash refund based on a percentage of certain research and development activities undertaken in Australia by the Company’s wholly owned
subsidiary, Anavex Australia Pty Ltd. (“Anavex Australia”). The cash refund is available to eligible companies with an annual aggregate revenue
of less than $20.0 million Australian during the reimbursable period.
The tax incentives are available on the basis of specific criteria with which the Company must comply. Although the tax incentive may be
administered through the local tax authority, the Company has accounted for the incentives outside of the scope of ASC Topic 740, Income
Taxes (“ASC 740”), since the incentives are not linked to the Company’s taxable income and can be realized regardless of whether the
Company has generated taxable income in the respective jurisdictions.
With respect to the Australia R&D credit, Anavex Australia may be eligible to receive the cash refund for certain research and development
expenses incurred by Anavex Australia outside of Australia, to the extent such expenses are pre-approved by the Australian authority pursuant
to an advanced overseas finding application. The Company accrues for the amount of cash refund it expects to receive in relation to research
and development expenses outside of Australia only to the extent it has received advanced approval from the Department of Industry,
Innovation and Science in Australia, pursuant to an approved advanced overseas finding application.
In addition, Anavex Australia and Anavex Canada incur Goods and Services Tax (GST) on certain services provided by local vendors. As a
domestic entity in those jurisdictions, Anavex Australia and Anavex Canada are entitled to a refund of the GST paid. Similarly, Anavex Germany
incurs Value Added Tax (VAT) on certain services provided by local vendors, to which it is entitled to a refund of such VAT paid. The
Company’s estimate of the amount of cash refund it expects to receive related to GST and VAT incurred is included in Incentive and tax
receivables in the accompanying consolidated balance sheets.
f) Basic and Diluted Loss per Share
Basic income/(loss) per common share is computed by dividing net income/(loss) available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted income/(loss) per common share is computed by dividing net income/(loss)
available to common stockholders by the sum of (1) the weighted-average number of common shares outstanding during the period, (2) the
dilutive effect of the assumed exercise of options and warrants using the treasury stock method and (3) the dilutive effect of other potentially
dilutive securities. For purposes of the diluted net loss per share calculation, options and warrants are potentially dilutive securities and are
excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.
54
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 5
Note 2 Summary of Significant Accounting Policies – (continued)
f) Basic and Diluted Loss per Share – (continued)
As of September 30, 2021, diluted loss per share excludes 11,540,903 (2020 – 10,576,266) potentially dilutive common shares related to
outstanding options and warrants, as their effect was anti-dilutive.
g) Financial Instruments
The book value of the Company’s financial instruments, consisting of cash and equivalents, incentive and tax receivables, and accounts
payable and accrued liabilities approximate their fair value due to the short-term maturity of such instruments. Unless otherwise noted, it is
management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
h) Foreign Currency Translation
The functional currency of the Company is the US dollar. Monetary items denominated in a foreign currency are translated into US dollars at
exchange rates prevailing at the balance sheet date and non-monetary items are translated at exchange rates prevailing when the assets were
acquired, or obligations incurred. Foreign currency denominated expense items are translated at exchange rates prevailing on the transaction
date. Unrealized gains or losses arising from the translations are credited or charged to income in the period in which they occur.
The Company has determined that the functional currency of Anavex Australia Pty Limited, Anavex Germany GmbH, and Anavex Canada Ltd.
is also the US dollar.
i) Segment and Geographic Reporting
Operating segments are defined as components of an enterprise for which separate discrete information is available for evaluation by the chief
operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views
its operations and manages its business as one operating segment, which is the business of developing novel therapies for the management of
CNS diseases.
j) Grant Income
Grant income is recognized at the fair value of the grant when it is received, and all substantive conditions have been satisfied. Grants received
from government and other agencies in advance of the specific research and development costs to which they relate are deferred and
recognized in the consolidated statement of operations in the period they are earned and when the related research and development costs are
incurred.
k)
Income Taxes
The Company follows the provisions of ASC 740, which requires the asset and liability method of accounting for income taxes. Under the asset
and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
55
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 6
Note 2 Summary of Significant Accounting Policies – (continued)
k)
Income Taxes – (continued)
The Company follows the provisions of ASC 740 regarding accounting for uncertainty in income taxes. The Company initially recognizes tax
positions in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such
tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon
ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. Application requires numerous
estimates based on available information. The Company considers many factors when evaluating and estimating its tax positions and tax
benefits, and its recognized tax positions and tax benefits may not accurately anticipate actual outcomes. As additional information is obtained,
there may be a need to periodically adjust the recognized tax positions and tax benefits. These periodic adjustments may have a material
impact on the consolidated statements of operations.
The Company recognizes interest and penalties related to current income tax expense on the interest income, net line, in the accompanying
consolidated statement of operations. Accrued interest and penalties, if any, are included in accrued liabilities on the consolidated balance
sheets.
l) Stock-based Compensation
The Company accounts for all stock-based payments and awards under the fair value method.
The fair value of all share purchase options and warrants are expensed over their contractual vesting period, or over the expected performance
period for only the portion of awards expected to vest, in the case of milestone-based vesting, with a corresponding increase to additional paid-
in capital.
Compensation costs for stock-based payments with graded vesting are recognized on a straight-line basis. Stock based compensation expense
is adjusted for actual forfeitures of unvested awards as they occur.
The Company has granted share purchase option awards that vest upon achievement of certain performance criteria, or milestone-based
awards. The Company estimates an implicit service period for achieving performance criteria for each award and recognizes the resulting fair
value as expense over the implicit service period when it concludes that achieving the performance criteria is probable. The Company
periodically reviews and updates as appropriate its estimates of implicit service periods and conclusions on achieving the performance criteria.
Performance awards vest upon achievement of the performance criteria.
The Company uses the Black-Scholes option valuation model to calculate the fair value of share purchase options and warrants at the date of
the grant. This model requires the input of subjective assumptions, including the expected price volatility, expected life and estimated forfeitures
of each award. The Company uses the U.S. Treasury daily treasury yield curve rates for the expected term of the option as the risk-free rate.
The expected term represents the period that options granted are expected to be outstanding using the simplified method. The Company’s
historical share option exercise experience does not provide a reasonable basis for estimating the expected term. Expected volatility is based
on the average of the daily share price changes over the expected term. The Company does not estimate forfeitures and elects to record actual
forfeitures as they occur. The Company has not paid any dividends on its common stock historically, therefore no assumption of dividend
payments is made in the model. These assumptions consist of estimates of future market conditions, which are inherently uncertain, and
therefore, are subject to management’s judgment. Changes in these assumptions can materially affect the fair value estimates.
The purchase price of options or warrants may be paid in cash or, if approved by the Company’s compensation committee in advance, “net
settled” in shares of the Company’s common stock. In a net settlement of an option or warrant, the Company does not receive payment of the
exercise price from the holder but reduces the number of shares of common stock issued upon the exercise of the stock option or warrant by
the smallest number of whole shares that have an aggregate fair market value equal to or over the aggregate exercise price for the option
shares covered by the option or warrant exercised. Shares issued pursuant to the exercise of options and warrants are issued from the
Company’s treasury.
56
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 7
Note 2 Summary of Significant Accounting Policies – (continued)
m) Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and
liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair
value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to
measure fair value are as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the
measurement date;
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.
At September 30, 2021 and 2020, the Company did not have any Level 3 assets or liabilities.
n) Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (ASC 740)", which is intended to simplify
various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and
amending existing guidance to improve consistent application. ASU 2019-12 will be effective for the Company on October 1, 2021. The
Company does not expect such guidance to have a material impact on the Company’s operations, financial condition, or cash flows.
Note 3 Accrued Liabilities
The principal components of accrued liabilities consists of:
Clinical site costs and patient visits
Accrued compensation and benefits
Fixed contract accruals
All other accrued liabilities
Total accrued liabilities
2021
2,035,800
1,201,903
649,649
1,727,422
5,614,774
$
$
2020
760,900
567,805
367,429
1,620,440
3,316,574
$
$
57
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 8
Note 4 Other Income
Grant income
During the year ended September 30, 2021, the Company received $ 497,931 of a $995,862 research grant awarded by the Michael J. Fox
Foundation for Parkinson’s Research. The grant will be used to fund a clinical trial of the Company’s lead compound, ANAVEX®2-73 related to
Parkinson’s disease.
The grant income is being deferred when received and amortized to other income as the related research and development expenditures are
incurred. During the year ended September 30, 2021, the Company recognized $54,100 of this grant on its statements of operations within
grant income. At September 30, 2021 an amount of $443,831 (2020: $Nil) of this grant is recorded as deferred grant income, representing the
amount of this grant which has not yet been amortized to other income.
During the year ended September 30, 2017, the Company was awarded grant funding in the amount of $ 597,886. The grant was received in
equal quarterly installments over a period of two years ending during the year ended September 30, 2020, in exchange for a commitment to
complete clinical testing for a therapeutic drug candidate for the treatment of Rett syndrome.
The grant income was deferred when received and amortized to other income as the related research and development expenditures were
incurred. During the year ended September 30, 2021, the Company recognized $Nil (2020: $149,888) of this grant on its statement of
operations as a component of other income. At September 30, 2020, the Company had recognized the full amount of grant funding.
Research and development incentive income
Research and development incentive income represents income earned by the Company’s Australian subsidiary, of the Australian research
and development incentive credit, (the “ATO R&D Credit”).
During the year ended September 30, 2021, the Company recorded research and development incentive income of $ 4,547,099 (AUD
6,068,993) (2020: $4,375,025 (AUD 6,392,266)) in respect of the ATO R&D Credit for eligible research and development expenses incurred
during the year.
As a matter of course, the Company may be subject to pre-issue review or audit by the ATO. The Company was notified that the ATO is
performing a pre-issue review of the 2020 research and development incentive income return. The Company is responding to questions and
requests for information and does not expect an adverse finding.
58
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 9
Note 5 Equity Offerings
Common Stock
Common shares are voting and are entitled to dividends as declared at the discretion of the Board of Directors.
Preferred Stock
The Company’s Board of Directors (the “Board”) has the authority to issue preferred stock in one or more series and to fix the rights,
preferences, privileges, restrictions and the number of shares constituting any series or the designation of the series.
Registered Direct Offering
On June 22, 2021, the Company and Deep Track Capital entered into a securities purchase agreement pursuant to which the Company sold to
Deep Track Capital an aggregate of 2,380,953 shares of common stock at $ 21 per share in a registered direct offering, for gross proceeds of
$50,000,013. Net proceeds of the offering were $ 46,902,981 after deducting offering fees and expenses.
Sales Agreement
The Company entered into a Controlled Equity Offering Sales Agreement on July 6, 2018, which was amended and restated on May 1, 2020
(the “Sales Agreement”) with Cantor Fitzgerald & Co. and SVB Leerink LLC (together the “Sales Agents”), pursuant to which the Company may
offer and sell shares of common stock registered under an effective registration statement from time to time through the Sales Agents (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, the
Sales Agents 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 Sales Agents may suspend or terminate the offering of Shares upon notice to the other party, subject to certain
conditions. The Sales Agents will act as agent on a commercially reasonable efforts basis consistent with their 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 the Sales Agents commissions for their services of up to 3.0% of the gross proceeds from the sale of the
Shares pursuant to the Sales Agreement. The Company also agreed to provide the Sales Agents with customary indemnification and
contribution rights. During the year ended September 30, 2021, 5,634,576 shares were sold pursuant to the Offering for gross proceeds of
$79,107,550 (net proceeds of $76,670,027 after deducting offering expenses) (2020: 1,760,429 shares were sold for gross proceeds of
$7,499,900 (net proceeds of $7,096,136)). At September 30, 2021, an amount of $ 163,392,550 was registered pursuant to an effective
registration statement and available to be sold under the Sales Agreement.
59
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 10
Note 5 Equity Offering Agreements – (continued)
2019 Purchase Agreement
On June 7, 2019, the Company entered into a $ 50,000,000 purchase agreement (the “2019 Purchase Agreement”) with Lincoln Park, as
amended on July 1, 2020, pursuant to which the Company had the right to sell and issue to Lincoln Park, and Lincoln Park was obligated to
purchase, up to $50,000,000 in value of its shares of common stock from time to time over a three-year period until July 1, 2022.
In consideration for entering into the 2019 Purchase Agreement, the Company issued to Lincoln Park 324,383 shares of common stock as a
commitment fee during the year ended September 30, 2019 and agreed to issue up to 162,191 shares pro rata, when and if, Lincoln Park
purchased, at the Company’s discretion, the $50,000,000 aggregate commitment.
During the year ended September 30, 2021, the Company issued to Lincoln Park an aggregate of 4,086,209 (2020 – 7,633,527) shares of
common stock under the 2019 Purchase Agreement, including 4,007,996 (2020: 7,564,584) shares of common stock for an aggregate
purchase price of $24,111,198 (2020: $21,254,298) and 78,213 (2020: 68,943) commitment shares.
At September 30, 2021, no shares remained available for issuance under the 2019 Purchase Agreement (September 30, 2020: $ 24,111,198 in
value of shares).
Note 6 Commitments and Contingencies
a) Lease
During the year ended September 30, 2021 the Company incurred office lease expense of $ 130,784 (2020: $233,423).
b) Employee 401(k) Benefit Plan
The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. The plan covers all United States
based employees. United States based employees eligible to participate in the plan may contribute up to the current statutory limits under the
Internal Revenue Service regulations. The 401(k) plan permits the Company to make additional matching contributions on behalf of contributing
employees. During the year ended September 30, 2021, the Company made $ 128,856 (2020: $98,058) in matching contributions under the
401(k) plan.
c) Litigation
The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain,
and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such
matter will not have a material adverse effect upon the Company’s consolidated financial statements. The Company does not believe that any
of such pending claims and legal proceedings will have a material adverse effect on its consolidated financial statements.
60
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 11
Note 6 Commitments and Contingencies – (continued)
d) Share Purchase Warrants
The following table summarizes the warrant activity during the years ended September 30, 2021 and 2020:
Balance, September 30, 2019
Granted
Balance, September 30, 2020
Granted
Exercised
Balance, September 30, 2021
Number of Shares
350,000
150,000
500,000
60,000
(350,000)
210,000
At September 30, 2021 the Company had share purchase warrants outstanding as follows:
Weighted
Average
Exercise Price
($)
4.19
3.17
3.88
12.00
4.19
5.69
Number
Exercise Price
Expiry Date
150,000
60,000
210,000
$
$
e) Stock–based Compensation Plan –(continued)
2015 Stock Option Plan
3.17
12.00
May 6, 2024
April 21, 2026
On September 18, 2015, the Company’s board of directors approved a 2015 Omnibus Incentive Plan (the “2015 Plan”), which provided 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 was 6,050,553 shares, subject to adjustment in the event of a
change of the Company’s capitalization. At September 30, 2021, 146,371 (2020: 133,036) options remain available for issue under the 2015
Plan.
2019 Stock Option Plan
On January 15, 2019, the Board approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which provides for the grant of stock options
and restricted stock awards to directors, officers, employees, consultants and advisors of the Company. 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.
61
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 12
Note 6 Commitments and Contingencies – (continued)
e) Stock–based Compensation Plan – (continued)
The 2019 Plan provides that it may be administered by the Board, or the Board 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 2019 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
2019 Plan. At September 30, 2021, 456,332 (2020: 3,161,665) options remain available for issue under the 2019 Plan.
A summary of the status of Company’s outstanding stock purchase option activity during the years ended September 30, 2021 and 2020 is
presented below:
Number of Shares
Weighted
Average Exercise
Price ($)
Weighted
Average Grant
Date Fair
Value ($)
Outstanding, September 30, 2019
Granted
Forfeited
Exercised
Outstanding, September 30, 2020
Granted
Forfeited
Exercised
Outstanding, September 30, 2021
Exercisable, September 30, 2021
8,462,933
1,695,000
(68,332)
(13,335)
10,076,266
2,732,000
(55,834)
(1,421,529)
11,330,903
7,228,488
3.58
2.96
3.01
3.15
3.48
12.55
3.04
2.89
5.74
3.73
2.27
2.44
2.61
9.32
2.43
2.43
The following summarizes information about stock options at September 30, 2021 by a range of exercise prices:
Range of exercise prices
To
From
$
$
$
$
$
0.92
3.15
5.04
12.00
18.11
$
$
$
$
$
2.96
4.80
8.98
13.01
24.58
Number of
outstanding
options
4,309,349
2,117,500
3,397,054
230,000
1,277,000
11,330,903
Weighted average
remaining
contractual life
(in years)
Weighted average
exercise
price
Number of
vested
options
6.25
6.33
6.45
9.52
9.82
2.31
3.30
6.05
12.44
19.33
3,167,682
1,830,836
2,207,054
22,916
7,228,488
Aggregate
intrinsic value
($)
4,115,032
2,400
14,982,581
24,446,305
140,132,451
102,786,851
Weighted
average
exercise
price
2.10
3.29
6.35
12.42
The weighted average grant date fair value of options vested during the year ended September 30, 2021 was $ 2.54 (2020: $2.55). At
September 30, 2021, the weighted average contractual life of options outstanding was 6.79 years (2020: 6.96 years) and for options
exercisable was 5.51 years (2020: 6.25 years).
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 September 30, 2021.
The Company recognized stock-based compensation expense of $8,231,403 during the year ended September 30, 2021 (2020: $ 4,876,906) in
connection with the issuance and vesting of stock options and warrants in exchange for services. These amounts have been included in
general and administrative expenses and research and development expenses on the Company’s consolidated statements of operations as
follows:
General and administrative
Research and development
Total stock-based compensation
2021
3,571,335
4,660,068
8,231,403
$
$
$
2020
2,210,789
2,666,117
4,876,906
$
$
$
62
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 13
Note 6 Commitments – (continued)
e) Stock–based Compensation Plan – (continued)
An amount of approximately $ 21,650,000 in stock-based compensation is expected to be recorded over the remaining term of such options and
warrants through fiscal 2024.
The fair value of each option and warrant award is estimated on the date of grant using the Black Scholes option pricing model based on the
following weighted average assumptions:
Risk-free interest rate
Expected life of options (years)
Annualized volatility
Dividend rate
2021
2020
0.73%
5.74
93.43%
0.00%
1.57%
5.53
95.99%
0.00%
The fair value of stock compensation charges recognized during the years ended September 30, 2021 and 2020 was determined with reference
to the quoted market price of the Company’s shares on the grant date.
Note 7 Income Taxes
The Company’s U.S. and foreign loss before income taxes are set forth below:
United States
Foreign
Total
2021
(28,850,926)
(8,790,143)
(37,641,069)
$
$
The components of net deferred income tax assets as of September 30, 2021 and 2020 are as follows:
Net operating loss carryforwards
Research and development tax credit carryforwards
Stock-based compensation
Unpaid charges
Intangible asset costs
Foreign exchange and other
Valuation allowance deferred tax assets
Net deferred tax assets
2021
34,982,000
1,577,000
10,453,000
89,000
323,000
62,000
(47,486,000)
—
$
$
63
2020
(18,096,148)
(8,161,658)
(26,257,806)
2020
23,397,000
2,069,000
8,283,000
83,000
132,000
27,000
(33,991,000)
—
$
$
$
$
Anavex Life Sciences Corp.
Notes to the Consolidated Financial Statements
September 30, 2021 – Page 14
Note 7 Income Taxes – (Continued)
A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial
statements for the years ended September 30, 2021 and 2020 is as follows:
Income tax benefit at statutory federal rate
Foreign income taxed at other rates
Permanent differences relating to stock based compensation
Permanent differences relating to Section 162(m)
Other permanent differences
Adjustment to tax assets based on Section 382
Research and development credits, net
State and local taxes
Adjustment and true up to prior years' tax provision
Effect of change in statutory rates
State minimum and exise taxes
Change in valuation allowances
Income tax expense
2021
(7,934,000)
(353,000)
(4,379,000)
816,000
741,000
3,330,000
1,042,000
(7,022,000)
48,000
216,000
267,565
13,495,000
267,565
$
$
2020
(5,519,000)
(723,000)
—
—
35,000
—
1,267,000
(2,911,000)
373,000
36,000
22,664
7,442,000
22,664
$
$
As of September 30, 2021, the Company had U.S. federal net operating loss carryforwards of approximately $ 101.6 million (2020: $77.0 million)
of which $37.7 will begin to expire in 2025 and $63.9 can be carried forward indefinitely , state and local net operating loss carryforwards of
approximately $177.7 million (2020: $103.1 million) which will begin to expire in 2036, and Research and Development tax credits of $ 1.6
million (2020: $2.1 million) which will begin to expire in 2029. The Company had approximately $ 7.9 million (approximately AU$ 11.2 million)
(2020: $4.3 million) of net operating loss carryforwards in Australia, which have an indefinite life, available to offset future taxable income in
those jurisdictions.
The Company evaluates its valuation allowance requirements based on available evidence. When circumstances change, and this causes a
change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is
reflected in current income. Because management of the Company does not currently believe that it is more likely than not that the Company
will receive the benefit of these assets, a valuation allowance has been established at September 30, 2021 and 2020.
Uncertain Tax Positions
The Company files income tax returns in the U.S. federal jurisdiction and various state and local and foreign jurisdictions. The Company’s tax
returns are subject to tax examinations by U.S. federal and state tax authorities, or examinations by foreign tax authorities until the respective
statutes of limitation expire. The Company is subject to tax examinations by tax authorities for all taxation years commencing on or after 2014.
Under the provisions of the Internal Revenue Code, the net operating loss (“NOL”) carryforwards are subject to review and possible adjustment
by the Internal Revenue Service and state tax authorities. Under Section 382 of the Internal Revenue Code, NOL and tax credit carryforwards
may become subject to an annual limitation in the event of an over 50% cumulative change in the ownership interest of significant stockholders
over a three-year, as well as similar state tax provisions.
The Company conducted a Section 382 study during the year ended September 30, 2021 and determined that, during the year ended
September 30, 2015, there was a change in ownership which resulted in $25.8 million of federal NOLs being subject to an annual limitation.
During the year ended September 30, 2021, the Company reduced its federal NOLs by $12.1 million and its Research and development tax
credit carryforwards by $0.8 million, which are the amount of tax assets that will expire unutilized pursuant to the Section 382 study. This
resulted in a reduction of $2.5 million of NOLs and $0.8 million of research and development credits and a corresponding reduction in the
valuation allowance of $3.3 million, which was recorded in the current fiscal year. Subsequent ownership changes in future years could trigger
additional limitations of the Company’s NOLs.
As of September 30, 2021, the Company did not provide any foreign withholding taxes related to its foreign subsidiaries’ undistributed earnings,
as such earnings have been retained and are intended to be indefinitely reinvested to fund ongoing operations of the foreign subsidiaries. It is
not practicable to estimate the amount of taxes that would be payable upon remittance of these earnings, because such tax, if any, is
dependent upon circumstances existing if and when remittance occur.
64
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS
Not Applicable
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in
our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules
and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, our chief executive officer
and our principal financial officer, to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial
officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the Exchange Act.
Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were
effective as of September 30, 2021.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal
Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the
framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Based on this evaluation, our management concluded that our internal controls over financial reporting were effective as of September 30, 2021.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2021, there were no changes in our internal control over financial reporting identified in management’s
evaluation pursuant to Rules 13a 15(d) or 15d 15(d) of the Exchange Act that materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.
ITEM 9B OTHER INFORMATION
None.
65
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Our directors are to be elected at our annual meeting and each director elected is to hold office until his or her successor is elected and qualified. Our
Board of Directors may remove our officers at any time.
Our directors and executive officers, their ages, positions held, and duration of such, are as follows:
Name
Christopher Missling, PhD
Athanasios Skarpelos
Claus van der Velden, PhD
Steffen Thomas, PhD
Peter Donhauser, D.O.
Jiong Ma, PhD
Sandra Boenisch, CPA, CGA
Business Experience
Position
Director, President, Chief Executive Officer, Secretary
Director
Director
Director
Director
Director
Principal Financial Officer, Treasurer
Age
56
54
49
55
56
57
40
Date first appointed
July 5, 2013
January 9, 2013
March 2, 2018
June 15, 2015
February 8, 2017
May 25, 2021
October 1, 2015
The following is a brief account of the education and business experience of directors and executive officers during at least the past five years, indicating
their principal occupations during the period, and the names and principal businesses of the organizations by which they were employed.
Christopher Missling, PhD. Christopher Missling has over twenty years of healthcare industry experience in big pharmaceutical, biotech industry and
investment banking. Most recently, from March 2007 until his appointment by our Company, Dr. Missling served as the head of healthcare investment
banking at Brimberg & Co. in New York, New York. Also, Dr. Missling served as the Chief Financial Officer of Curis, Inc. (NASDAQ:CRIS) and
ImmunoGen, Inc. (NASDAQ:IMGN). Dr. Missling earned his MS and PhD from the University of Munich and an MBA from Northwestern University
Kellogg School of Management and WHU Otto Beisheim School of Management.
Athanasios Skarpelos. Athanasios (Tom) Skarpelos is a self-employed investor with 20 years of experience working with private and public companies
with a focus on biotechnology companies involved in drug discovery and drug development projects. His experience has led to relationships with
researchers at academic institutes in Europe and North America. Mr. Skarpelos is a founder of Anavex.
Claus van der Velden, PhD . Claus van der Velden, PhD, brings significant expertise in management, accounting, internal controls, information security
and risk management. Since May 2021, he has served as Managing Director (Chief Financial Officer) of NetCologne GmbH, a regional
telecommunication provider in Germany. From July 2011 to May 2021, he served as corporate head of Management Accounting, Internal Audit and Risk
Management at Stroeer SE & Co KGaA, a publicly listed German digital media company. Previously, Dr. van der Velden served as the Director of
Corporate Business Controlling for the Nutrition & Health business unit at Cognis, a worldwide supplier of global nutritional ingredients and specialty
chemicals. In this position, he was also a compliance representative and a member of the global leadership team. After the acquisition of Cognis by
BASF, he was responsible for the management accounting processes of the BASF Nutrition & Health division, developing and producing mostly natural-
source ingredients for the food and healthcare industries. Dr. van der Velden started his career as a strategy consultant at an international marketing and
strategy consultancy firm. He studied in Kiel and Stockholm and received a degree in economics from the University of Kiel and later obtained his
doctorate in business management from the WHU-Otto Beisheim School of Management where he also previously taught economics.
66
Steffen Thomas, PhD. Steffen Thomas, has over 15 years of experience as a European patent attorney and is currently practicing at Epping Hermann
Fischer, a major intellectual property law firm in Europe. Previously, he worked for Japan-based Takeda Pharmaceutical Company, the largest
pharmaceutical company in Asia and a top firm worldwide, as an in-house patent attorney. Prior to that, he worked for Nycomed Pharma, acquired by
Takeda in 2011 for approximately USD $10 billion. Dr. Thomas’ legal practice covers drafting of patent applications, prosecuting patent applications
before national and international patent offices, defending and challenging patents in opposition, appeal, and nullity proceedings, enforcing patents before
the infringement courts, and preparing opinions on patentability and infringement in the technical field of chemistry. Dr. Thomas has particular expertise in
small molecule pharmaceuticals. He holds MS and PhD degrees in Chemistry from the University of Munich.
Peter Donhauser, D.O. Peter Donhauser, had more than 20 years of expertise in clinical research prior to practicing osteopathic medicine with an
integrated medical approach in private practice beginning in 2000. He worked at the University Hospital of Munich in the fields of geriatrics and
neuromusculoskeletal diseases. During this time, he was a clinical trial investigator in multiple Phase 3 studies, including studies sponsored by Merck
Sharp & Dohme, Merck, Boehringer Mannheim, Roche, Servier and Sanofi. He received his human medicine degree at the University of Munich and
Doctor of Osteopathic Medicine (D.O.) from the German-American Academy for Osteopathy, or DAAO, a member of the European Register for
Osteopathic Physicians, or EROP, at the Philadelphia College of Osteopathic Medicine.
Jiong Ma, PhD. Jiong Ma has over 25 years of experience in investing, building and scaling of companies with a focus on innovative product launches in
digital health, technology and the new energy transition. Dr. Jiong Ma serves and served as a Board Director of LinkinVax, Aledia, Voxel8, Lo3 Energy,
mc10, acquired by Medidata, Storiant, Fulham, Convey Computer, acquired by Micron Technology, Powervation, acquired by RHOM Semiconductor,
Laser Light Engine and Carbonite, Inc., which went public via IPO in 2011 and was subsequently acquired by OpenText in 2019 for approximately $1.45
billion. As a Partner at Braemar Energy Ventures, where she has worked since 2008, Dr. Ma has focused on investments in digitization of industry,
resource efficiency, mobility, renewable energy infrastructure, and deeptech. She was on the firm’s investment committee and has led more than 15
investments in growth stage companies with focus on innovative product launches, as well as fund raising, negotiating and structuring investments, hiring
management teams, and assembling boards. As a result of her investment experience, Dr. Ma has significant knowledge and expertise in the technology
industry, including information security. Prior to Braemar Energy Ventures, she was with the Venture Capital Group at 3i, a global private equity firm,
where she led investments across multiple stages in Digital Health, TMT and Cleantech. Among them TransMedics Group and ImpactRx/Symphony
Health Solutions, which was later acquired by PRA Health Sciences. Preceding the Venture Capital Group at 3i, Dr. Ma held several senior positions at
Lucent Technologies and Bell Labs. Her responsibilities included lead roles in product portfolio strategy, new product launches for Optical and Data
Networking, and research and product development. Dr. Ma was also a founding team member of Onetta Inc., a fiber networks company. She has a PhD
in Electrical and Computer Engineering from the University Colorado at Boulder and an MS in Electrical Engineering from Worcester Polytechnic Institute.
Dr. Ma is a Kauffman Fellow.
Sandra Boenisch, CPA, CGA. Ms. Boenisch is a Chartered Professional Accountant (CPA, CGA) with over 15 years of accounting, audit, and financial
reporting experience in a variety of industries, both in the United States and Canada. Ms. Boenisch was an independent consultant, providing financial
reporting services to a range of public companies in the United States and Canada since January 2012. From 2008 until 2012, Ms. Boenisch was
employed at BDO Canada LLP (Vancouver, BC) where she was hired as a Senior Accountant and was later promoted to Manager, Audit Assurance. Ms.
Boenisch specialized in managing assurance engagements for public companies in the United States and Canada. Prior to that, Ms. Boenisch worked for
another public accounting firm from 2001 to 2008. As an independent consultant, Ms. Boenisch has acquired considerable experience in finance,
governance, and regulatory compliance. She holds a BComm from Laurentian University.
Family Relationships
There are no family relationships between any director or executive officer.
67
Involvement in Certain Legal Proceedings
There are no material proceedings to which any director or executive officer or any associate of any such director or officer is a party adverse to our
Company or has a material interest adverse to our Company.
Delinquent Section 16(a) Reports
None.
Code of Ethics
We have adopted a code of ethics that applies to our directors, principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, and to all employees. We have posted our policy on our website at www.anavex.com.
Audit Committee and Audit Committee Financial Experts
The members of the Audit Committee are Claus van der Velden (Chairman), Athanasios Skarpelos, Steffen Thomas and Jiong Ma. Our Board of
Directors has determined that Claus van der Velden is an “audit committee financial expert” as defined by applicable SEC and Nasdaq rules.
The Audit Committee oversees and reports to our Board of Directors on various auditing and accounting-related matters, including, among other things,
the maintenance of the integrity of our financial statements, reporting process and internal controls; the selection, evaluation, compensation and retention
of our independent registered public accounting firm; legal and regulatory compliance, including our disclosure controls and procedures; and oversight
over our risk management policies and procedures.
The Audit Committee operates under a charter that was adopted by our Board of Directors. The Audit Committee met four times during fiscal 2021.
The Audit Committee has reviewed and discussed the audited consolidated financial statements with management. The Audit Committee has discussed
with BDO USA, LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”)
and the Securities and Exchange Commission (the “Commission”). In addition, the Audit Committee has received the written disclosures and the letter
from BDO USA, LLP required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit
Committee concerning independence, and has discussed with BDO USA, LLP its independence from the Company and management. Based on the
reviews and discussions referred to above, the Audit Committee recommended that the audited consolidated financial statements for the Company for
the fiscal year ended September 30, 2021 be included in this Annual Report on Form 10-K for the year ended September 30, 2021 for filing with the
Commission.
MEMBERS OF THE AUDIT COMMITTEE
Claus van der Velden (Chairman)
Athanasios Skarpelos
Steffen Thomas
Jiong Ma
Nominating and Corporate Governance Committee
The members of our Nominating and Corporate Governance Committee are Claus van der Velden (Chairman), Steffen Thomas and Peter Donhauser.
The Nominating and Corporate Governance Committee is appointed by the board to oversee and evaluate the Board’s performance and the Company’s
compliance with corporate governance regulations, guidelines and principles, to identify individuals qualified to become Board members, to recommend to
the Board proposed nominees for board membership, and to recommend to the Board directors to serve on each standing committee. The Nominating
and Corporate Governance Committee operates under a charter that was adopted by our Board of Directors. The Nominating and Corporate Governance
Committee met one time during fiscal 2021.
68
Compensation Committee
The members of our Compensation Committee are Claus van der Velden (Chairman), Steffen Thomas and Peter Donhauser.
The Compensation Committee assists our Board of Directors in discharging its responsibilities relating to compensation of our directors and executive
officers. Its responsibilities include, among other things: reviewing, approving and recommending compensation programs and arrangements applicable
to our officers; determining the objectives of our executive officer compensation programs; overseeing the evaluation of our senior executives;
administering our incentive compensation plans and equity-based plans, including reviewing and granting equity awards to our executive officers; and
reviewing and approving director compensation and benefits. The Compensation Committee can delegate to other members of our Board of Directors, or
an officer or officers of the Company, the authority to review and grant stock-based compensation for employees who are not executive officers.
The Compensation Committee has the responsibilities and authority designated by Nasdaq rules. Specifically, the Compensation Committee has the sole
discretion to select and receive advice from a compensation consultant, legal counsel or other adviser and is directly responsible for oversight of their
work. The Compensation Committee must also determine reasonable compensation to be paid to such advisors by us.
The Compensation Committee operates under a charter that was adopted by our Board of Directors. The Compensation Committee met two times during
fiscal 2021 and also acted by written consent as required.
ITEM 11. EXECUTIVE COMPENSATION
The Company’s compensation objectives are to offer our executive officers’ compensation and benefits that are competitive and meet our goals of
attracting, retaining and motivating highly skilled, talented management, which is necessary for the Company to achieve its financial and strategic
objectives and create long-term value for our stockholders.
A significant portion of the Company’s executive compensation opportunity is related to factors that directly and indirectly influence shareholder value,
including long-term stock performance and operational performance. We believe the levels of compensation we provide should be competitive,
reasonable and appropriate for our business needs and circumstances.
Our Executive Compensation Program and Philosophy
The intent of the Company’s compensation program is to attract and retain talent, to create incentives for and to reward excellent performance. We seek
to compensate our executives in a manner that is competitive, rewards performance that creates shareholder value, recognizes individual contributions,
and encourages long-term value creation.
The Compensation Committee meets at least twice per year to review and evaluate executive compensation and each executive officer’s performance.
The Compensation Committee utilizes quantitative and qualitative factors, including the accomplishment of initiatives, attitude, and leadership and applies
overall judgment to assess performance, taking into account the financial condition of the Company. Ultimately, the Compensation Committee seeks to
evaluate, based on the achievement of financial and nonfinancial objectives, the variable compensation, including special awards, of executive officers of
the Company and decide on the base salary and target discretionary bonus for such persons taking into account relevant benchmark data.
The Compensation Committee believes that a significant portion of each executive’s compensation opportunity should be tied to variable compensation
and value creation for shareholders. The Compensation Committee believes this mix provides an appropriate balance between the financial security
required to attract and retain qualified individuals, and the Compensation Committee’s goal of ensuring that executive compensation rewards
performance that benefits shareholders over the long term.
69
Compensation Consultants
The Compensation Committee makes recommendations to the Board for all compensation for executives, including the structure and design of the
compensation programs. The Compensation Committee is responsible for retaining and terminating compensation consultants and determining the terms
and conditions of their engagement. During fiscal 2021, the Compensation Committee did not engage any compensation consultants.
Annual Discretionary Cash Bonuses
The Company has an annual discretionary cash bonus program. The Compensation Committee, or Board of Directors works with the Chief Executive
Officer to evaluate the Company’s financial performance and overall financial condition to determine if discretionary bonuses are to be paid.
Benefits
The Company’s executives are entitled to participate in employee benefit plans, programs and arrangements implemented by the Company and generally
available to all salaried employees, such as medical, dental and insurance programs. Executives are also allowed to participate in the Company’s tax-
qualified 401(k) Plan offered to all similarly situated full-time employees.
Summary Compensation
The particulars of compensation paid to our named executive officers for the last two completed fiscal years:
Name and Principal Position
Christopher Missling, PhD
President, Chief Executive Officer, and
Director
Sandra Boenisch(1)
Principal Financial Officer and Treasurer
Year
Salary ($)
Bonus ($)
2021
2020
550,000
550,000
110,000
55,000
Option
Awards ($)
8,745,457
1,224,648
All other
Compensation
($)
11,600
11,400
Total ($)
9,417,057
1,841,048
2021
2020
158,300
117,041
—
22,313
724,314
155,864
—
—
882,614
295,218
(1)
Compensation to Ms. Boenisch denominated in Canadian Dollars and has been translated to US dollars at an exchange rate of 0.7915 during the
year ended September 30, 2021 (2020: 0.7438).
Employment Agreements
Christopher Missling
We and Dr. Missling entered into an employment agreement dated July 5, 2013, as amended and extended (the “CEO Employment Agreement”),
whereby we currently pay to Dr. Missling an annual base salary of $550,000. In addition, Dr. Missling is eligible to earn an annual cash bonus for each
whole or partial calendar year of up to twenty percent of his base salary, and to participate in our employee benefit plans. We have agreed to indemnify
Dr. Missling in connection with his provision of services to us.
Sandra Boenisch
We and Ms. Boenisch entered into an amended and restated employment agreement dated October 4, 2017, as amended and extended, whereby we
currently pay Ms. Boenisch an annual base salary of $200,000 Canadian dollars. Ms. Boenisch is eligible for discretionary salary increases.
70
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth for each named executive officer and director certain information concerning the outstanding equity awards as of September
30, 2021.
Option Awards
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Number of
Securities
Underlying
Unexercisable
Options
(#)
Option
Exercise
Price
($)
—
—
—
—
—
—
—
—
—
—
—
250,000
550,000
550,000
500,000
—
—
—
—
70,000
50,000
40,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.60
1.32
0.92
5.04
6.26
7.06
3.28
5.92
3.30
2.30
2.58
3.15
2.96
5.49
18.11
3.30
2.30
2.58
2.93
2.96
5.49
18.11
Number of
Securities
Underlying
Exercisable
Options
(#)
500,000
73,380
500,000
187,500
379,625
861,429
500,000
450,000
400,000
450,000
409,500
500,000
—
—
—
30,000
30,000
27,300
35,000
—
—
—
Option
Expiration
Date
July 5, 2023
May 8, 2024
April 2, 2025
Sept 18, 2025
July 5, 2026
July 18, 2026
Sept 22, 2026
May 12, 2027
Dec 13, 2027
May 15, 2028
Oct. 1, 2028
May 3, 2029
January 6, 2030
December 30, 2030
August 2, 2031
Dec 13, 2027
May 15, 2028
Oct. 1, 2028
June 4, 2029
January 6, 2030
December 30, 2030
August 2, 2031
Name
Christopher Missling
Sandra Boenisch
Compensation of Directors
The table below shows the compensation of our directors who were not our named executive officers for the fiscal year ended September 30, 2021:
71
Name
Athanasios Skarpelos
Claus van der Velden
Elliot Favus
Steffen Thomas
Peter Donhauser
Jiong Ma
Fees
Earned
or Paid
in Cash
($)
18,750
34,750
—
18,750
18,750
8,750
Stock
Awards
($)
—
—
—
—
—
—
Option
Awards
($) (1)
458,960
458,960
142,860
458,960
458,960
677,000
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation ($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
($)
477,710
493,710
142,860
477,710
477,710
685,750
(1) At September 30, 2021, the aggregate number of outstanding vested and unvested stock option awards held by each director was: Mr. Skarpelos
options to purchase 305,500 shares, Dr. van der Velden options to purchase 205,500 shares, Dr. Thomas options to purchase 305,500 shares, Dr.
Donhauser options to purchase 205,500 shares and Dr. Ma options to purchase 60,000 shares.
We currently compensate non-employee directors $25,000 per year, paid quarterly, effective January 1, 2021. We compensate Claus van der Velden an
additional $4,000 per quarter for performing the functions of Chairman of our Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee.
In addition, directors are entitled to participate in our long term incentive plans adopted by our Board of Directors and are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors. Our Board of Directors
may award further special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.
Resignation, Retirement, Other Termination, or Change in Control Arrangements
Our Employment Agreement with Dr. Missling contains provisions regarding our obligations upon his termination and upon a change of control. In the
event of a change of control, as such term is defined in the employment agreement, all previously granted but unvested stock options held by Dr. Missling
shall vest. Depending on the nature of the termination of Dr. Missling’s services, certain of his salary, bonus and granted securities shall vest in the
amounts at such time as set forth in the Employment Agreement. A copy of Dr. Missling’s Employment Agreement and all amendments thereto are set
forth as exhibits hereto.
Our employment agreement with Sandra Boenisch contains provisions regarding our obligations to Ms. Boenisch upon a change of control. In the event of
a change of control, as such term is defined in the employment agreement, all of the remaining unvested option shares granted to Ms. Boenisch will
immediately vest with no restrictions on purchase or sales. A copy of Ms. Boenisch’s employment agreement is set forth in its entirety as an exhibit
hereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth, as of November 19, 2021, certain information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and our named executive
officers and by our current directors and executive officers as a group. We have determined the number and percentage of shares beneficially owned by
such person in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. This information does not necessarily indicate beneficial
ownership for any other purpose.
72
Title of class
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
*Less than 1%
Name and address of
beneficial owner
Christopher Missling
(CEO/Director)
Athanasios Skarpelos (Director)
Claus van der Velden (Director)
Steffen Thomas (Director)
Peter Donhauser (Director)
Jiong Ma (Director)
Sandra Boenisch (Principal
Financial Officer)
Directors & Executive
Officers as a group (7
persons)
Amount and nature of
beneficial ownership
Percent of
class (1)
6,229,644(2)
1,586,958(3)
180,500(4)
280,500(5)
182,665(6)
—(7)
145,263(8)
8,605,530
7.7%
2.1%
*
*
*
*
10.5%
(1) Percentage of ownership is based on 76,018,053 of our common stock issued and outstanding as of November 19, 2021. Except as otherwise
indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to securities. Shares
of common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of
computing the percentage ownership of the person holding such option or warrants but are not deemed outstanding for purposes of computing
the percentage ownership of any other person.
(2) Includes options to purchase 500,000 shares of our common stock at $1.60 per share, options to purchase 73,380 shares of our common stock at
$1.32 per share, options to purchase 500,000 shares of our common stock at $0.92 per share, options to purchase 187,500 shares of our
common stock at $5.04 per share, options to purchase 379,625 shares of our common stock at $6.26 per share, options to purchase 861,429
shares of our common stock at $7.06 per share, options to purchase 500,000 shares of our common stock at $3.28 per share, options to
purchase 450,000 shares of our common stock at $5.92 per share, options to purchase 400,000 shares of our common stock at $3.30 per share,
options to purchase 450,000 shares of our common stock at $2.30 per share, options to purchase 409,500 shares of our common stock at $2.58
per share, and options to purchase 500,000 shares of our common stock at $3.15 per share that are vested or are vesting within 60 days.
Excludes options to purchase 250,000 shares of our common stock at $3.15 per share, options to purchase 550,000 shares of our common stock
at $2.96 per share, options to purchase 550,000 shares of our common stock at $5.49 per share, and options to purchase 500,000 shares of our
common stock at $18.11 that do not vest within 60 days.
(3) Includes options to purchase 50,000 shares of our common stock at $0.92 per share and options to purchase 100,000 shares of our common
stock at $3.28 per share, options to purchase 45,500 shares of our common stock at $2.58 per share , options to purchase 50,000 shares of our
common stock at $2.96 per share, and options to purchase 35,000 shares of our common stock at $5.49 per share that have vested or are
vesting within 60 days. Excludes options to purchase 25,000 shares of our common stock at $18.11 that do not vest within 60 days.
(4) Includes options to purchase 50,000 shares of our common stock at $2.60 per share, options to purchase 45,500 shares of our common stock at
$2.58 per share, options to purchase 50,000 shares of our common stock at $2.96 per share, and options to purchase 35,000 shares of our
common stock at $5.49 that have vested or are vesting within 60 days. Excludes options to purchase 25,000 shares of our common stock at
$18.11 per share that are not vesting within 60 days.
73
(5) Includes options to purchase 50,000 shares of our common stock at $1.76 per share and options to purchase 100,000 shares of our common
stock at $3.28 per share, options to purchase 45,500 shares of our common stock at $2.58 per share, options to purchase 50,000 shares of our
common stock at $2.96 per share, and options to purchase 35,000 shares of our common stock at $5.49 per share that have vested or are
vesting within 60 days. Excludes options to purchase 25,000 shares of our common stock at $18.11 per share that are not vesting within 60 days.
(6) Includes options to purchase 50,000 shares of our common stock at $5.39 per share, options to purchase 45,500 shares of our common stock at
$2.58 per share, options to purchase 50,000 shares of our common stock at $2.96 per share, and options to purchase 35,000 shares of our
common stock at $5.49 per share that have vested or are vesting within 60 days. Excludes options to purchase 25,000 shares of our common
stock at $18.11 per share that are not vesting within 60 days.
(7) Excludes options to purchase 35,000 shares of common stock at $13.01 per share and options to purchase 25,000 shares of our common stock
at $18.11 per share that do not vest within 60 days.
(8) Includes options to purchase 30,000 shares of our common stock at $3.30 per share, and options to purchase 30,000 shares of our common
stock at $2.30 per share, options to purchase 27,300 shares of our common stock at $2.58 per share, options to purchase 35,000 shares of our
common stock at $2.93 that have vested or are vesting within 60 days. Excludes options to purchase 70,000 shares of our common stock at
$2.96 per share, options to purchase 50,000 shares of our common stock at $5.49 and options to purchase 40,000 shares of our common stock at
$18.11 that do not vest within 60 days.
Change in Control
We are unaware of any contract or other arrangement, the operation of which may at a subsequent date result in a change of control of our Company.
Securities Authorized for Issuance under Equity Compensation Plans or Individual Compensation Arrangements
The following table summarizes certain information regarding our equity compensation plan or individual compensation arrangements at September 30,
2021:
Equity Compensation Plan Information
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
12,050,553
—
12,050,553
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
6.26
—
6.26
Number of
securities
remaining
available for
future issuances
under equity
compensation
plans (excluding
securities
reflected in
column (a))
(c)
602,703
—
602,703
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
2019 Stock Option Plan
On January 15, 2019, the Board approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which provides for the grant of stock options and
restricted stock awards to directors, officers, employees, consultants and advisors of the Company. The 2019 Plan was approved by our stockholders on
April 5, 2019.
Under the terms of the 2019 Plan, 6,000,000 shares of Common Stock were made available for issuance[, in addition to the shares available under the
2015 Plan]. Any awards outstanding under the Company’s 2015 Omnibus Incentive Plan (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.
74
The 2019 Plan provides that it may be administered by the Board, or the Board 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 2019 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 2019 Plan.
The purpose of the 2019 Plan is to retain the services of valued key employees and consultants of our Company and such other persons, and to
encourage such persons to acquire a greater proprietary interest in our Company, thereby strengthening their incentive to achieve the objectives of the
shareholders of our Company. The purpose is also to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to
consultants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with related persons
There have been no transactions, since October 1, 2020, or currently proposed transactions, in which we were or are to be a participant and the amount
involved exceeds the lesser of $120,000 or one percent of the average of the smaller reporting company’s total assets at year end for the last two
completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest.
i.
ii.
iii.
any director or executive officer of our Company;
any beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; and
any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.
Compensation of Named Executive Officers and Directors
For information regarding compensation of named executive officers and directors, please see “Item 11. Executive Compensation.”
Director Independence
Under the NASDAQ Stock Market Rules, the Board has a responsibility to make an affirmative determination that those members of its Board that serve
as independent directors do not have any relationships with the Company and its businesses that would impair their independence. The Board has
determined that that Christopher Missling, PhD is not independent as that term is defined by NASDAQ 5605(a)(2) because Mr. Missling serves as our
President, Chief Executive Officer, and Secretary.
The Board has determined that that Claus van der Velden, Athanasios Skarpelos, Steffen Thomas, Peter Donhauser and Jiong Ma are independent as
that term is defined by NASDAQ 5605(a)(2) and the applicable rules of the Commission.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Fees Paid to Our Independent Registered Public Accounting Firm
75
The following table sets forth the aggregate fees billed or expected to be billed to our Company for professional services rendered by our independent
registered public accounting firm, for the fiscal years ended September 30, 2021 and 2020:
Audit Fees
Audit Related Fees
Tax Fees
All Other Fees
Total Fees
2021
2020
$
$
392,676
—
—
—
392,676
$
$
305,751
—
—
—
305,751
Audit Fees. Consist of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim financial statements
included in quarterly reports, services performed in connection with regular filings with the Commission for the fiscal years ended September 30, 2021
and 2020 in connection with statutory and regulatory filings or engagements.
Policy on Pre-Approval by Audit Committee of Services Performed by Independent Registered Public Accounting Firm
Our Audit Committee pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees were
reviewed and approved by our Audit Committee before the respective services were rendered.
Our Audit Committee has considered the nature and amount of fees billed or expected to be billed by BDO USA, LLP and believes that the provision of
services for activities unrelated to the audit was compatible with maintaining BDO USA, LLP’s independence.
76
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit
Number
(3)
3.1
3.3
(10)
10.1^
10.2^
10.3^
10.4^
10.5^
10.6^
10.7^
10.8^
10.9
10.10
10.11
Description
Articles of Incorporation and Bylaws
Articles of Incorporation, as amended*
Bylaws (incorporated by reference to our Current Report on Form 8-K filed on September 28, 2007)
Material Contracts
2015 Omnibus Incentive Plan (incorporated by reference to our Annual Report on Form 10-K filed on December 29, 2015)
2019 Omnibus Incentive Plan (incorporated by reference to our Proxy Statement, dated February 11, 2019, as filed on February 11,
2019)
Employment Agreement, dated as of July 5, 2013, by and between the Company and Christopher Missling, PhD (incorporated by
reference to our Quarterly Report on Form 10-Q filed on August 13, 2014)
First Amendment to Employment Agreement, dated as of July 5, 2016, by and between the Company and Christopher Missling, PhD
(incorporated by reference to our Current Report on Form 8-K filed on July 7, 2016)
Amended and Restated First Amendment to Employment Agreement, dated as of July 18, 2016, by and between the Company and
Christopher Missling, PhD (incorporated by reference to our Current Report on Form 8-K filed on July 22, 2016)
Second Amendment to Employment Agreement, dated as of May 3, 2019 by and between the Company and Christopher Missling,
PhD (incorporated by reference to our Quarterly Report on Form 10-Q filed on May 9, 2019)
Amended and Restated Employment Agreement by and between the Company and with Sandra Boenisch (incorporated by reference
to our Annual Report on Form 10-K filed on December 11, 2017)
Amendment No. 1 to Amended and Restated Employment Agreement between the Company and Sandra Boenisch, dated February 4,
2020 (incorporated by reference to our Quarterly Report on Form 10-Q filed on February 6, 2020)
Amended and Restated Sales Agreement, dated May 1, 2020, by and among the Company, Cantor Fitzgerald & Co. and SVB Leerink
LLC (incorporated by reference to our Current Report on Form 8-K filed on May 1, 2020)
Letter Agreement, dated June 22, 2021 between the Company and H.C. Wainwright & Co., LLC (incorporated by reference to our
Current Report on Form 8-K filed on June 24, 2021)
Form of Securities Purchase Agreement, dated June 22, 2021 between the Company and the investor named therein (incorporated by
reference to our Current Report on Form 8-K filed on June 24, 2021)
77
Exhibit
14
14.1
(21)
21.1*
(23)
23.1*
(31)
31.1*
31.2*
(32)
32.1*
(101)
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
104
Number Description
Code of Ethics
Code of Ethics Adopted on September 13, 2016 (incorporated by reference to our Annual Report on Form 10-K filed on December 14,
2016)
Subsidiaries
Subsidiaries of the Registrant
Consent
Consent of Independent Registered Public Accounting Firm
Section 302 Certifications
Section 302 Certification of Christopher Missling, PhD.
Section 302 Certification of Sandra Boenisch
Section 906 Certifications
Section 906 Certification of Christopher Missling, PhD and Sandra Boenisch
XBRL
XBRL INSTANCE DOCUMENT
XBRL TAXONOMY EXTENSION SCHEMA
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
XBRL TAXONOMY EXTENSION LABEL LINKBASE
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.
^ Denotes a management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
Not Applicable.
78
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SIGNATURES
Date: November 24, 2021
ANAVEX LIFE SCIENCES CORP.
By:
Name:
Title:
/s/ Christopher Missling, PhD
Christopher Missling, PhD
Chief Executive Officer (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures
Title(s)
Date
/s/ Christopher Missling, PhD
Christopher Missling, PhD
Chief Executive Officer (Principal Executive Officer)
Principal Financial Officer and Treasurer (Principal Accounting Officer)
/s/ Sandra Boenisch
Sandra Boenisch, CPA, CGA
/s/ Athanasios Skarpelos
Athanasios Skarpelos
Director
/s/ Claus van der Velden, PhD
Claus van der Velden, PhD
Director
/s/ Steffen Thomas, PhD
Steffen Thomas, PhD
Director
/s/ Peter Donhauser, D.O.
Peter Donhauser, D.O.
Director
/s/ Jiong Ma, PhD
Jiong Ma, PhD
Director
79
November 24, 2021
November 24, 2021
November 24, 2021
November 24, 2021
November 24, 2021
November 24, 2021
November 24, 2021