Anavex Life Sciences Corp (AVXL)

[F1ash]

Disclaimer: I don't profess to be any sort of financial analyst. I'm just trying to learn about LPC myself and I'm sharing what I find. (Always check my math )

Now IF the speculation I have put forward on LPC's method of operation is correct, it would seem logical to look to see if they maintain a balance of shares "close" to what their original commitment shares were. They would need those to "influence" the share price to their advantage if they actually do that.

Here's what I found.

"In consideration for entering into the Purchase Agreement, the Company issued to the Selling Security Holder 179,598 shares of common stock for no cash consideration as a commitment fee and agreed to issue up to 89,799 shares pro rata (the “Additional Commitment Shares”), when and if, the Selling Security Holder purchases, at the Company’s discretion, up to the $50,000,000 aggregate commitment amount. As of the date of this prospectus, 34,796 of the Additional Commitment Shares have been issued...."

"As of the date of this prospectus 5,787,235 shares of our common stock have been issued to the Selling Security Holder under the Purchase Agreement for gross proceeds of $19,373,922, which includes 5,572,841 purchase shares and 214,394 commitment shares, and 5,654,700 of such shares have been resold ..."

I get 132,535 shares held in reserve (check math as always )

So that part seems to fit.

I'm certainly not attempting to accuse LPC of anything illegal. (I'm not even qualified to make that assertion).

Here is the biggest thing about LPC type financing that folks seem to miss imho.

The companies they sign with (Anavex in this case) control the timing and, within preset limits, the "amount" of shares they "put" to LPC type financiers.

You can't sell a drug until you get FDA approval. You can't get FDA approval without running trials. You can't run trials without money to pay for them. You can't get money to pay for trials without borrowing or diluting current shareholders in some form unless you already have enough money in the bank.

LPC type companies are not the "cause" of the demise of their clients imho. They are simply a tool and their clients have to decide how to use it.

Here is something to consider:

Zacks...

"Anavex Life Sciences is an emerging biopharmaceutical company engaged in the discovery and development of drugs for the treatment of cancer and neurological diseases. Even though this company operates in a rather unpredictable industry, Anavex sports a beta rating of 0.64. Anavex also received a "B" grade for Momentum on our Style Scores system which means its share prices have already been rising considerably.

Additionally, the company's current Cash Flow growth sits at a whopping 201.66%, meaning that Anavex projects largely positive cash flows in the near future. Finally, Anavex has posted a strong 11.16 Current Ratio. Basically, the company is easily able to pay off its short-term debt obligations to its bondholders. Anavex Life Sciences Corporation holds a Zacks Rank #2 (Buy)."

http://m.nasdaq.com/article/5-biomedical-stocks-that-are-expected-to-surge-cm808968


Now, I suppose that many of you who understand where this "cash flow" came from will get a chuckle out of that analysis. The fact remains though that because Anavex has tapped LPC and is putting that money in the bank instead of spending it on expensive trials... Anavex was included by Zacks in an article with this title:

"5 Biomedical Stocks That Are Expected To Surge"

It's interesting to consider the available strategies.

Dump the entire $50 million dilution right now and put every penny in the bank instead of running trials, or start trials and have to continue to "dilute" which will negatively effect share price.

I believe Anavex has actually done a masterful job so far. Last time they dumped it all (~6 million shares) which hurt share price in the short term but, the price recovered and even increased once folks realized they had strengthened their balance sheet instead of paying for trials.


Note: it seems Jimmy has a handle on the intricacies of "shorting the box". I've seen that proposed as something that LPC can do legally as well. I'm interested if he wants to comment.

Extra note: Looks like Friday's low was $3.71 cents but, it closed the day at $3.93. How well would you do if I gave you 50k shares to sell tomorrow at $3.71? You wouldn't want the share price to decline would you? You would actually love it if the price spiked, right? LPC is not the "enemy" imho. They would just need to slide those 50k shares into the float and would be ticked pink if the share price was going up as they did so.

I'm definitely not going to do the math but, under "accelerated purchases". I believe LPC gets an even bigger discount. From memory it's like a 4% discount to the "volume weighted average" (or something similar, it's from memory). Plus remember LPC also gets "free" commitment shares with each purchase.

I believe it's a pretty good business model myself.