Interesting news today. The bear case against Anavex certainly strengthened this morning but for now this is a body blow. Painful but probably not fatal.
We saw a similar situation play out with Sarepta back in 2016 when the drug underperformed its trials but it had a strong political movement that pushed it through to approval. A few years ago Biogen announced that its drug failed, yet a few years later it was somehow approved against all odds. I'm not one to bet on the long shot but the reality is, Rett families can pressure the FDA in ways Anavex cannot, and this is why we're seeing Rett Australia suddenly putting out short videos showcasing personal testimonies. Anavex most likely told Rett foundations that the results are good, it's a heightened placebo effect (apparently more common in pediatric trials) and at a minimum Blarcamesine should be available for patients if they want it because it's safe and data shows some elements of efficacy.
For most diseases this would be catastrophic data, but for a rare pediatric disease whose only current standard causes devastating side effects the data could be good enough to get it into the end zone despite its newly-grown warts. At a minimum there is strong efficacy data for adults and that is going to count for something. I'd be much more concerned if Blarcamesine had a so-so safety profile.
So here's the playbook:
1. The hit pieces and "I told you so" articles will appear on Stat News, Seeking Alpha, etc.
2. Shareholder lawsuit PRs will begin popping up like STDs at the Villages Senior Center. Share price will crash on this short signal.
3. At some point Anavex will comment on its Rett strategy. I'd be willing to bet we see another trial, at a cost of around $30 million. So figure an extra 5-10 million shares dilution if Dr. Missling wants to keep the $150mm cash reserve depending on what price he taps into the ATM.
4. Anavex pivots back to Alzheimer's in Europe, arguably where it should have focused from day 1. There is a current unmet need for something effective there, particularly because Europe has a much larger population not close to facilities with MRIs and infusion capability. The -mab drugs will soon be injectable at home but the need for constant MRI monitoring remains and that alone will be reason for the EMA to consider Blarcamesine if the data it presents is in the ballpark of the -mab family of drugs currently available.
5. There should be a peer-review article. Who knows.
Dr. Missling's credibility is shot because he flat-out lied to the shareholders, at least through omission. Maybe there was a safety CRO but I find it hard to believe today's news took him by surprise, too. And the lack of actual data numbers today seems like a weak attempt to hide what could be a double failure in both CGI and ADAMS.
So let's assume worst case: Rett is toast. It's not worth pursuing, even despite the positive adult trial results. Goodbye pediatric voucher, too. We lose about $5B in market cap potential.
The question now becomes whether and how this impacts Dr. Missling's credibility. We'll see how the Alzheimer's data plays out, but if this is the track record -- delaying and delaying and then using the pretense of placebos being too strong is an indicator, the silence coming from Alzheimer's is not good. Dr. Missling hasn't explicitly stated that he has submitted for peer review, and that is something that we as shareholders MUST demand that he communicate in a simple yes or no question. If not, fire his ass.
But all that being said, as a gambler, I still give Blarcamesine a better than 50/50 shot at getting approved for something. As such, even if the stock price drops to $3 short term, positive Alzheimer's news could come at any time that would send the share price skyrocketing well past the 2021 highs.
I've been mocked here for saying that Anavex is a patient investor's stock and a trader's dream. It's too early to build a coffin, but it's also too early to buy a Ferrari. We're in a holding pattern. It doesn't mean the plane is going to crash. Unless, of course, LEO is at the traffic controls. All kidding aside, congrats to the traders and good luck to the bulls. I still think the shorts are going to suffer long-term, but if this were a tennis match the set would go to the shorts today.
In the short term, however. Pain and suffering. If you're a long-term investor who is willing to possibly go down with the ship, the truth is nobody knows how the FDA is going to think of today's news. At the very least the data is strong enough to warrant another trial, which isn't all bad if that one performs well. Just takes more time and opportunity cost.
Eat your veggies, say no to dope and go with God.
