Sunday, November 20, 2016 12:47:55 AM
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The last we talked about AVXL was after the company released 31-week safety data from the Phase 2a study of 2-73 in Alzheimer’s patients. We won’t go into all the data today, but here is our fair and balanced take on the results. As we said at the time:
Are we disappointed by the results? Yes and No. We’re more disappointed in the market’s reaction. However, when the market overreacts, that creates a buying opportunity. For those that missed out on the earlier bull run in AVXL, the pullback is welcomed. While in the short term, we expect some further weakness as more nervous longs bail, the reality is that we’re still in the middle of the 2-73 study. There’s still plenty of innings left to play.
The latest news is that Anavex signed a material transfer agreement with Biogen (Cambridge, MA) under which Biogen will test Anavex’s lead drug candidate, ANAVEX 2-73 in an oligodendrocyte precursor cell (OPC) differentiation assay. A satisfactory result from the OPC assay study may lead to an in vivo remyelination study using a chemical demyelination model. AVXL CEO Dr. Christopher Missling said:
“Battling demyelinating diseases such as multiple sclerosis requires an understanding of the processes that cause remyelination to fail. Remyelination of demyelinated axons is typically a function of oligodendrocyte precursor cells. These studies will examine the therapeutic role ANAVEX 2-73 may play in permitting remyelination in the brain.”
This is all the press release said. In our opinion, it was short and sweet. Fools took another approach and jumped all over it. Basically downright dismissing the deal and its implications. Here’s what the Fools are missing.
Biogen needs Anavex more than Anavex needs Biogen. Biogen has a $68 billion market cap, yet its share price is only up 2% YTD. This follows a dismal 2015 where Biogen fired 11% of its workforce and enacted cost-cutting programs. Furthermore, Biogen has bet a great deal on Aducanumab for the treatment of Alzheimer’s. Aducanumab is part of the amyloid hypothesis that the plaques are responsible for the pathology of Alzheimer’s disease. However, the data from Aducanumab has been rather unimpressive. From this article on Seeking Alpha:
However, Biogen’s own data indicates that its drug is ineffective or minimally effective at slowing down the progression of the disease in its early stages. At 26 weeks there was no difference between placebo and the highest dose drug group (10 mg) using a cognitive staging test for Alzheimer’s disease (CDR-SB). At 54 weeks, there was a 1.44 difference between Aducanumab at 10mg and placebo using the same test. The high dose group seemed to show an incremental improvement between 26 and 54 weeks. The mini-mental state scores followed a similar pattern except at 26 weeks the 10mg group performed slightly better than the placebo group.
Anavex’s approach is completely different and this is the key. It’s the science behind Anavex that will make the difference. ANAVEX 2-73 is the most promising drug being developed right now for Alzheimer’s. ANAVEX 2-73 is based on oxidation and nitration causing Alzheimer’s. Other drug companies have instead focused on the cause being amyloid. They have misdiagnosed the cause while we believe Anavex has the correct approach.
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The deal with Biogen is just the first step for Anavex. Of course, 2-73 needs to show positive results, but the key is both companies need 2-73 to be a winner. Currently trading with a market cap of just $129 million, a buyout of AVXL would be a drop in the bucket for Biogen’s $3.8 billion war chest. Biogen has no other choice, but to grow through M&A and get its stock price moving higher. After disappointing its investors quarter after quarter, Biogen is on its heels and Dr. Christopher Missling is in the driver’s seat. Key is can he get a good enough deal for AVXL and its shareholders? By not taking any money upfront from Biogen, he might be playing poker better than the shorts give him credit for. The reality is that we believe he’s got a winning hand with 2-73 and he needs to press his bets. We will be updating our subscribers as soon as we know more. For the latest updates on AVXL, sign up below
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