Why I am short Anavex Life Sciences Corp (AVXL)

Anavex Life Sciences Corp., a biopharmaceutical company, is currently engaged in the discovery (and in the future maybe development) of drugs for the treatment of Alzheimer’s disease, central nervous system diseases, and pain and various cancers. Its lead drug candidates include ANAVEX 2-73 and ANAVEX PLUS, a combination of ANAVEX 2-73 with donepezil (Aricept), which is in a Phase IIa clinical trial for the treatment of Alzheimer’s disease. The company’s product candidates also include ANAVEX 3-71, a drug candidate that is effective in very small doses against the major Alzheimer’s hallmarks in transgenic (3xTg-AD) mice via sigma-1 receptor activation and M1 muscarinic allosteric modulation; ANAVEX 1-41, a sigma-1 agonist for neuroprotective application; and ANAVEX 1037, ANAVEX 1079, and ANAVEX 1519 for the treatment of pain and various cancers. Anavex Life Sciences Corp. was founded in 2006 and is a US Company (headquarters in New York).

The company currently have ONLY 4 FULL-TIME STAFF. You haven’t read it wrong! It has 30.1M shares outstanding with over 28.5M shares currently floating. With today’s valuation the market cap is over $377 Million (you haven’t read that wrong either!).

Looking at the SEC filing, Mr. Christopher Missling is company’s President and also Chief Executive Officer and also Treasurer and also Company Secretary and also the Director (the man with many talents I guess!)

As a discovery stage pharma it has no revenues and its current EBITD is -$3.78M with net income available to common is -$11.4M. High burn rate with additional funding required in every stage.

One of the biggest criticism against AVXL is the company is using cherry-picked historical study of Aricept as a control biomarker. The data is extremely misleading and will (might) create problem during next phase applications. More on this can be found on the net. The stock promoters are currently doing an excellent job, almost creating a cult-like following. From experience, this never ends well.

The company has just reached an agreement with Lincoln Park Capital Fund, LLC for the sale of up to $50M of common stock over a 36-month period. The company also issued 179,598 shares to Lincoln as a commitment fee. Net proceeds will try to fund the clinical development of ANAVEX 2-73, its potential treatment for Alzheimer’s disease. Lincoln Park Capital Fund is not a stranger fund to AVXL. On 30th December 2010, Lincoln Park Capital Fund invest $1M and then 8th July 2013, Lincoln Park Capital fund once again invested a further $2.6M in a private placement and a $10M further financing commitment. As the company couldn’t deliver the expected results, they haven’t received the further investments. The latest investments is part of their ongoing deal and the company is now giving away more stock then originally agreed in the first place – Lincoln is not a new investor in the park, they are just looking forward to come out of it profitably and with the recent stock prices, they might manage to do this as well.

In the last 4 sessions, the stock managed to climb from 8.75 to almost 12.75 today. This itself doesn’t mean that it needs to come back down but such a climb without supporting fundamentals is simply wrong (at least to me!). I have started my short position at around 12.25 region and added further around 12.50s. I am currently building a short swing position so happy to add more short if the stock ends up with further gains in the short term. However, my expectation is a big red day is imminent sooner than some think…

MT

One thought on “Why I am short Anavex Life Sciences Corp (AVXL)

  1. Hi MonacoTrader, I am just started trading and its very interesting and useful to follow your posts. I also discovered a lot of AVXL and was going to short it when she was about 14 but could not find the shares. She was available to short just yesterday. I use Interactive broker. Please recommend the broker were you usually short such kind of shares. Thanks, Andrey

Leave a Reply

Your email address will not be published. Required fields are marked *