If we didn’t know better, we’d think Anavex Life Sciences Corp. (OTC: AVXL) enthusiasts had ripped off a “Saturday Night Live” sketch featuring pump-you-up guys Hans and Franz.
Picking up three patents and one patent application, Anavex conducted a reverse merger in 2007 and switched from a digital-to-photo-print business targeting corner stores into a biotech company targeting Alzheimer’s.
Today, the company has no commercial product, hasn’t earned a penny since inception and does “not anticipate earning any revenues” until it can convince some other company to come aboard.
The company has lost $61.8 million over about 12 years of operations and is living on the ragged edge of survival.
And don’t let the stock price fool you. Though it sports an astonishing $230 million-plus market valuation, this stock is worth a fraction of today’s price.
The company has not responded to TheStreetSweeper’s request for comment but investors may find other viewpoints here. We’re just scratching the surface with this first look at a batch of highly promotional biotech stocks poised to dive.
*”We’re Here to Pump (clap) You Up!”
The 25 top biotech giants such as Johnson & Johnson and Novartis and Eli Lilly do not rely on hype to push their stock.
But Anavex has everyone from the CEO to pump sites to message board fans clapping their hands and cheering on Anavex with, “We’re here to pump you up!”
The chief executive officer, Christopher Missling, had this to say in a recent interview:
“Anavex has now a team of big pharma and biotech experts, doubled the number of Scientific Advisors which is mostly Medical Doctors, raised a company's record amount of $10M in one funding transaction, advanced after that quickly into Phase 2a, licensed additional promising compounds into the company. Anavex is significantly more advanced than in 2007.”
Yet Anavex filings say it operates with just “four (4) full-time employees, and we retain several independent contractors on an as-needed basis.” (Don’t miss the section below titled “Executive Compensation” to put employee compensation into perspective.)
Other concerning promotional efforts include:
A. The CEO sounds highly promotional - talking about reversing the disease and stopping the disease today (despite having its experimental drug just barely in the human testing stage involving dose toleration of just 32 subjects) - in this one video of four Anavex videos on Wide World of Stocks. WWOS is a site Timothy Sykes connected with Viral Genetics and one that also discloses that its employees sometimes receive investments in companies it features. This series just begs for a dose of the brash objectivity of SNL character Roseanne Roseannadanna.
B. Additional promotion on Stock News Now, here, a rather well-known microchip promotional site.
C. The front page of the company website looks rather promotional instead of professional, here.
D. The stock has been pumped ahead of possible uplisting, here. However, an uplisting includes the potential for a reverse stock split.
E. Anavex pumpers on message boards get wild, furious and misleading, here.
But those are the sorts of promotions that have fallen on Avanex; the chart below shows stock ownership and indicates the lack of significant institutional interest that encourages such desperate promotional efforts:
*No Cure, But Lots Of Hype
Mr. Missling tells a reporter that Anavex believes they may have found a way to address the disease from a “more causative point of view. And we believe so far this gives us the possibility of maybe curing the disease.” He adds that they are going after the largest healthcare market and data appears efficient and promising.
Yet … after years of research by numerous top companies, no one has found an Alzheimer’s cure. Eli Lilly, plus Pfizer, Elan and Johnson & Johnson are finally expecting trial results soon and could conceivably get a drug to market as early as next year.
Sadly, even these companies with the most advanced possibilities face significant odds. An analyst recently told Barron’s that the Pfizer-Elan-J&J drug bapineuzumab has a less than 50 percent shot at success, while the Lilly drug solanezumab has no better than a 20 percent chance.
*Executive Compensation: Sometimes Exceeds Research And Development Costs
Amid Anavex’s cash-consuming habits that would satisfy any self-respecting Conehead in a “Saturday Night Live” sketch (“Consume mass quantities!”), the company has generously rewarded CEO Missling.
Add in the other general and administrative expenses and Anavex spends nearly as much in that category as in research and development. That sounds like a stunning misplacement of priorities for a company dependent on research. The chart below demonstrates:
(Source: Company SEC filing)
*Dilutive Stock Offering Looms
Anavex faces additional issues of the current high stock price, cash of just $13 million, and a material weakness, noted in filings this way: “Based on that evaluation, our management, with the participation of our principal executive officer and principal financial officer, concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to the material weaknesses disclosed in our Annual Report on Form 10-K filed on December 29, 2014.”
And Anavex has to pay that cushy executive compensation somehow.
So, it wouldn’t be surprising to see Anavex conduct a stock offering very soon, potentially diluting shares held by today’s stockholders.
All in all, Anavex carries enough questionable issues to raise the eyebrows of the most jaded Saturday Night Live fan – or cognizant investor. We think a generous valuation for Anavex would be about 10 cents to 15 cents per share.
* Important Disclosure: The owners of TheStreetSweeper hold a short position in AVXL and stand to profit on any future declines in the stock price.
* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to [email protected].