Anavex Life Sciences Corp (AVXL)

[WolfWayne]

DD regarding allegations questioning the credibility of Steve Macfarlane, Anavex media coverage, and P300 trends.

Allegation # 1 from cloeburner on reddit: "Look up Prana biotech; they had an Alzheimer's study led by the same researcher [Steve] "McFarlane" (sic). They produced similar results in phase two and then had the exact same Alzheimer's patient [Kelvin Lawler] serve as a miraculous example of their medication's efficacy. They rose to ten dollars or so then crashed precipitously.

Analysis of Allegation #1: I took cloeburner’s advice here and investigated the Prana, Macfarlane, and Lawler connection to determine the validity of this allegation. I have not spoken to cloeburner to determine the depth of his/her research; however, in attempting to follow this lead, I believe cloeburner’s due diligence here was only cursory. I have logged many hours researching this allegation and have determined there is indeed some truth to these allegations; however, the truth – as far as I can tell – is much more complex, and does not call into question the integrity of Macfarlane or Lawler. Moreover, the Macfarlane and Lawler connection in no way calls into question the integrity of Christopher Missling or Anavex. So what happened?

First, allow me to outline some background information that may be useful to investors who are not intimately familiar with Macfarlane. Macfarlane is the lead investigator for the ongoing Phase II A – PART A, Anavex clinical trial. Macfarlane was also the lead investigator for the Prana Phase II Imagine Trial, which was also tested for Alzheimer’s indication. Macfarlane is a central figure in Alzheimer’s clinical trials in Australia and Australia is among the worldwide leaders in Alzheimer’s clinical trials. Macfarlane is well respected throughout the world for his research and expertise in Alzheimer’s clinical trials.

On November 15, 2013, Today Tonight, a low-caliber Australian news agency, released a video titled “Breakthrough Alzheimer’s Drug”, which included an interview with Macfarlane, Lawler, and Lawler’s wife. I have scoured the websites and Facebook pages of Today Tonight, 7 Network Australia (the parent company), as well as Yahoo News Australia (the syndication servers) to no avail. I have also scoured forums of HotCopper, Delphi Forums, Yahoo Message Boards, Investor HUB, Reddit, StockTwits, Twitter, Seeking Alpha, etc. Following study of the social media forums mentioned above, I located several links to the video, which were without exception redirected to the Yahoo News Australia homepage or failed to load. I also found a few links to a private YouTube video that requires permission to view but does not enable users to request permission in the first place!

You can attempt to access the video via YouTube here https://www.youtube.com/watch?v=rvCE8CujeV0.

You can attempt to access the video via Yahoo News Australia here: http://au.news.yahoo.com/today-tonight/health/article/-/19826663/breakthrough-alzheimers-drug/

Despite my failures in accessing the video, I have learned a great deal about Today Tonight, Macfarlane, and Lawler.

Here are a few snippets of social media comments regarding the credibility of the video.

From Handel on Delphi Forums: “It seems to me that Today Tonight has…conflated two different stories, which would not be surprising considering their normal journalistic standards”.

From What A Gas on HotCopper: “If you go through the plethora of posts both here and on Yahoo MB, I think you will find that this rather pathetic piece of journalism spliced segments relating to two trials”.

From dontaskme on HotCopper: “Atrocious journalism now seems confirmed. The professor [Macfarlane] should take action for being misrepresented”.

From LostOut on HotCopper: “[Today Tonight] got hold of an [Imagine] trial participant showing good results and wanted to do a miracle cure story, but no one from the trial of Prana would talk to them. [Therefore], they set up the poor professor [Macfarlane] asked him about another trial completely, edited his responses carefully, and then conflated two trials, which explains why he was talking about antibodies. An example of ‘don’t let the facts stand in the way of a good story’ journalism, but what do you expect from [Today Tonight]? Nevertheless… it was built around a grain of truth”.

Prana took issue with the video as well and subsequently issued a press release denouncing the media coverage, denying any participation or awareness of the coverage, as the Prana study was not yet unblinded. You can view the press release here: http://www.marketwired.com/press-release/prana-responds-to-media-segment-under-asx-guidance-note-8-nasdaq-pran-1853018.htm.

Shortly after, it appears the video was removed from Today Tonight as well as YouTube. I have emailed Today Tonight asking for access to the original video but have not received and answer and likely will not, as it is possible that a gag order exists. The poor journalism of Today Tonight led to a spike in Prana share prices, that later crashed when Prana failed to demonstrate statistically significant results in their Imagine Trial for Alzheimer's. Certainly Macfarlane, Prana, and Prana shareholders were none too happy with Today Tonight. Today Tonight’ legal team probably thought best to remove the video; however, for whatever reason, a summarized article of at least a portion of the video remains available on the Today Tonight website. The article can be viewed here: http://www.7perth.com.au/view/today-tonight-articles/today-tonight-alzheimers-trial

The summarized article includes quotes from Macfarlane that are derived from his published works, although the article does not state as such. It is also possible that Macfarlane quoted himself, knowing these statements were already public knowledge. Nonetheless, Macfarlane’s discussion of Lawler as the poster boy for clinical trials is not derived from his published works, and without the original video it is impossible to determine whether or not Macfarlane actually said this or not. Nonetheless, a feel-good statement as such is not a violation of double-blind protocol. In fact, in double-blind protocol, Macfarlane would not be aware whether Lawler was taking a placebo or the Prana drug in question.

Allegation # 1 Conclusions: I have no reason to question the integrity of Macfarlane or Missling’s decision to request Macfarlane to serve as the lead investigator. However, I do have significant doubts about the journalist competency and integrity of Today Tonight and the parent company 7 Network Australia.

Allegation # 2 from "watsonofoz" on yahoo: “The video related to the [Anavex 2-73] Phase 2a [Part A] PR may be, in part, a hoax. Claims on this board that an AD patient, Lawler, said, "It's like being in the dark, and then someone switched the light on" are not true. Lawler's wife finished…Lawler's sentence because he could not remember the last part. Was this a carefully rehearsed line with his wife that went awry when Lawler could not remember the ending?”

Allegation # 2 Analysis: First, it seems implicit from analysis of Allegation # 1 that Lawler is a local resident who became familiar with both Caulfield Hospital and Macfarlane. Accordingly, Lawler seems to have completed the Imagine extension trial and later sought to enroll in the Phase II A, Part A Anavex 2-73 clinical trial. Logic dictates this does not indicate a conspiracy but rather proves Lawler is not yet cured. This has not prevented allegations that the Anavex 2-73 video featuring Lawler was a hoax and that Macfarlane and Lawler are somehow complicit in fraud. Piggybacking this alleged conspiracy, some have alleged that Missling is also complicit and specifically selected Macfarlane because of his willingness to participate in another fraud. If the claims about Lawler and Macfarlane are baseless, so too are the claims about Missling.

Admittedly, I did not attempt to contact watsonofoz because his/her claims seem to be speculative and opinionated. Nonetheless, if I understand the claims of watsonofoz, his assertion is operating under the assumption that Lawler’s wife is not loving, protective, and familiar with finishing the sentences of her husband, and Alzheimer’s sufferer. This happens with great frequency with sufferers and is likely to occur on camera when the wife of a sufferer is trying to protect the dignity of her husband, at least in my opinion. Moreover, it seems as if Lawler is indeed in the process of trying to recall and sound out the word light. Again, “losing” words in conversation is indicative of the disease. Regardless, Lawler struggles do not indicate failure in Anavex 2-73 after merely 36 days of treatment. Insinuating a conspiracy here lacks basis and is merely speculation.

Regarding the producer of the video watsonofoz is questioning here, you might be surprised to learn that 7 Network Australia is also responsible for the production. As such, you will see a poorly edited transition into the discussion of Solanezumab, followed by a few words of Jack Sach, concluding with an abrupt return to Lawler, and his wife, which further exacerbates the point that the producers of this film exercised editorial liberties to create a fluid narrative. To the nonprofessional, it seems as if Jack Sach, Solanezumab, Kevin Lawler, Steve Macfarlane, and Anavex 2-73 are all participating in one study. We, here on this forum, know this not to be true; however, perception is reality to most and we cannot deny that aspect of human confusion. Not a critical piece of information here; however, given the lack of availability of the video discussed in Allegation #1, this video provides insight into the confusing splicing practices of 7 Network Australia. You can watch the video here: https://au.news.yahoo.com/video/watch/29015798/new-pills-offer-hope-for-alzheimers-sufferers/#page1

Fortunately, for Anavex and Anavex shareholders, MSN Australia provided coverage of another Phase II A, Part A, Anavex 2-73 clinical trial participant in Frank Merkli. This video makes the 7 Network Australia issues in the Anavex 2-73 coverage a mute point, at least in my opinion. You can watch the video here: http://www.msn.com/en-au/health/other/ground-breaking-trials-show-new-alzheimer%E2%80%99s-drug-to-be-four-times-more-effective/vi-AAdmZ8F?ocid=st

Allegation # 2 Conclusions: I have no reason to question the integrity of Lawler or his wife. Although the quality of journalism is again lacking in the 7 Network Australia video given the misleading splicing of two ongoing clinical trials, Anavex investors can easily omit the Solanezumab segment and focus on Lawler, his testimony, and the testimony of Macfarlane. Significantly, Macfarlane was free to discuss the results of the first patient data of Phase II A, Part A of the Anavex 2-73 clinical trial when this video was filmed, as Anavex had previously released the associated poster at AAIC 2015. In short, Lawler’s inclusion in this video is not indicative of fraud; rather, it is indicative that Alzheimer’s drugs can and do fail and that Lawler is still seeking experimental treatment. Can you blame him? Moreover, I still have no reason to question the integrity of Macfarlane or Missling’s decision to request Macfarlane to serve as the lead investigator. However, I do have significant doubts about the journalistic competency and integrity of Today Tonight and the parent company, 7 Network Australia.

The sole concern I have following analysis of Allegation # 2 is the wisdom in allowing Lawler to participate in the Phase II A, Part A of the Anavex 2-73 clinical trial given Lawler’s prior treatment in the Prana Imagine Trial. For better or worse, could the prior effects of the Prana Imagine Trial potentially prove an uncontrolled variable for Lawler’s treatment? At any rate, we might assume 31 out of 32 participants of the Phase II A, Part A of the Anavex 2-73 clinical trial were not involved in previous clinical trials. However, is this assumption wise? In other words, is there any way for us to know how many other participants previously participated in Alzheimer’s clinical trials? Admittedly, this concern hinges on the assumption the Lawler was either in the group within the Prana Imagine trial that received the drug and not the placebo and/or Lawler continued into the unblinded extension period. It is logical to me that Lawler would have moved forward into the extension period, given the claims of Lawler’s wife that the Prana treatment was indeed helping her husband, as evidenced in the original Today Tonight video/article, it is logical Lawler would have proceeded into the extension period.

We should ask Anavex IR about this, perhaps.

Allegation # 3 from superokgo on reddit: "I'm confused about why [Anavex] didn't release the MMSE cognitive test scores. They said they are in-line with the P300 values, but the P300 values do not mean much by themselves. The scores on the cognitive tests are what determine if it is actually working. [Moreover], there seems to be some controversy about whether the P300 even correlates with cognitive ability to begin with. I saw this post on yahoo (here) where the lead researcher addressed it, but it seemed like a non-answer to me. He just referenced an old study from 2002 and called it good. Weird."

Allegation # 3 Analysis: As demonstrated above, allegations have arisen that the results for the Phase II A, Part A first patient data for the Anavex 2-73 clinical trial are premature and the results are not statistically significant. As these allegations have surfaced elsewhere, namely via Adam Feuerstein, I did not attempt to contact superokgo for clarity in his question. More pointedly, it is clear that the first patient data was not statistically significant; however, the data was never intended to prove statistical significance. Upon review of the clinical trial design, it is clear to me that Phase II, Part A, never intended to demonstrate statistical significance in either MMSE or ADAS-COG changes. In fact, Phase II A, Part A was designed to capture a baseline for patients MMSE and ADAS-COG changes that would later juxtaposed in Part B. Per clinicaltrials.gov, the Primary Outcome measure of the trial is to “determine maximum tolerated dose of Anavex 2-73”. The Secondary Outcome measures include the following, which you can view here: https://clinicaltrials.gov/ct2/show/record/NCT02244541?term=anavex&rank=1.

• PK sampling- blood test results (PART A), first period (hours): 1, 48, 264; second period (hours): 1, 72, 264; extension period (PART B): Week 1, 12 and 26.
• MMSE Baseline, and during the extension period at Week 1, 12 and 26.
• ADCS-ADL: Baseline, and during the extension period at Week 1, 12 and 26.
• CBB Score and ISLT score at baseline, Day 1, 2, 6, 9, 12 of Period 1 and Day 1, 2, 6, 9, 12 of Period 2 and during the extension period at Week 12 and 26.
• EEG/ERP: Baseline, Day 1, 5, 11 of Period 1 and Day 1, 5, 11 of Period 2 and, Week 12 and 26 of the extension period.
• HAM-D Score: Baseline at Period 1.
• RM/HIS10: Baseline at period 1.

Significantly, you might have noticed the absence of ADAS-COG measurement in the trial design; however, you likely noticed the inclusion of the CBB. According to cogstate.com, recent research indicates CBB is more effective than ADAS-COG in determining cognitive measures. More importantly, cogstate.com asserts that CBB is “well placed to assist in the search for true disease modifying drugs as well as symptomatic treatments”. You can view the article discussing the study here: http://cogstate.com/two-new-alzheimers-disease-studies-show-sensitivity-cogstate-tests/

Within the framework of the Phase II A, Part A trial design, first patient data merely demonstrated a trend in cognitive improvement consistent with relationship between P300 and MMSE, and ADAS-COG changes, as demonstrated in a previous study of Aricept – which also served as the historical control. As such, the Anavex 2-73 trend is quite positive despite lacking statistical significance up until this point. We likely will not have statistical significance until after the Phase II A, Part B study. Regarding the validity of P300 correlation and cognitive improvement, it comforts me to know that Anavex is using the current standard of care P300 correlation as a milestone measurement! This is exactly the same sentiment of Macfarlane’s alleged email, as posted on Yahoo Message Boards

Also of significance is what Macfarlane has said up until this point regarding cognitive improvement. Upon review of the two news stories covering Anavex linked above, you will learn that participant caregivers noted improvements in function, behavior, alertness, and decreased need for prompting in activities of daily living. You will learn that preliminary brain scans show Anavex could be four times more effective than current standard of care medication, and that Anavex 2-73 saw 10 out of 12 patients improve four times as much at one month on their EEG reading than the current standard of care medication. Lastly, will learn that Macfarlane states that this is probably the most exciting thing he has been involved with in his entire life!

Allegation # 3 Conclusions: I am comfortable with the trial design, the data to date, as I understand statistically significant data as it relates to cognitive improvement will not be available until after the Phase II A, Part B portion of the study. Given the participant-initiated request to extend from 26 weeks to 52 weeks, I rest assured the patients are likely improving cognitively, and the full 52 weeks will allow quantifiable data to be collected that COULD demonstrate statistically significant improvement in MMSE and CBB, amongst other improved scores. Still, I understand the caution superokgo and others on IHUB, Yahoo Message Boards, and Seeking Alpha have voiced in an effort to temper our expectations in the near term, particularly as it relates to exponential PPS movement.

Moving Forward: At this time, I am holding 50,000 shares and intend to hold all 50,000 shares through Phase II A, Part B. For personal reasons, I have decided that I am going to use my remaining equity I acquired from selling 10,000 shares to bring my personal debt to $0, with the exception of my investment property mortgage. I understand the opportunity cost in doing this should AVXL skyrocket; however, I also understand the importance of mental tranquility when all debt is paid off, and any added fortune AVXL might bring my family is simply a blessing from God. With the remaining cash on hand, I intend to day trade AVXL in an effort to further my self-driven educational agenda. I remain fully confident in Anavex Life Sciences; however, I encourage you do to do your own DD and arrive at your own conclusions. Moreover, I can assure you a few hours of DD will bring you much more confidence in your investment than weeks of speculating and following others about PPS on social media.

Lastly, I encourage each of you to counter-argue any points or conclusions you may disagree with regarding what I have stated in this DD.

God bless you, your family, Anavex, and those affected by Alzheimer’s.