Replies to post #516494 on Anavex Life Sciences Corp (AVXL)

[Doc328]

I gave this some thought a couple months ago (my assumption was the re-exam would fail) and had quizzed my son about accounting aspects of accumulated deficit when he was visiting to try to calculate a reasonable price bottom for AVXL and reasonable takeout price.

Value of AVXL is roughly = (cash + NAV of accumulated deficit to an acquirer + NAV of pipeline)/shares. This is then hugely affected by Wall Street impressions of the leadership.
Currently there’s about 130 MM cash and 388MM accumulated deficit. The naïve cash value of the Acc Def is 0.21 x 388 = 81 MM. My son went into a lot of details (discounting due to time value loss of annual caps, reductions due to section 382 after an acquisition, expiration of some credits, etc) He said taking these into account and maybe adding a couple million for value of R & D credits and Australian tax credits – a good estimate is present value is 30% at a takeout at $3/share and maybe 40% at a takeout at $5/share. So the AccDef and associated tax credits +/- 30MM (not 81 MM). Cash plus credits = 160 MM

Pipeline valuation is always a rough estimate (and employing more complicated models do not necessarily improve accuracy).

A273: First question is whether existing data from A273 is good enough to justify 100 MM expenditure for the adequate P3. None of us have access to anything except the highly processed data that is reported to us. The criss-cross figure and changing imputation of the data troubles me tremendously and there is a real chance the study was a complete failure and not just a partial failure. A positive Go-No Go decision is not guaranteed – the EMA spanked Missling hard. So the drug may be worth 0. If a P3 is appropriate to initiate and is a clear cut success (likely assuming S1R WT, in MCI and mildest AD only), I calculate NAV as 5 x peak sales, discounted to the year of peak sales and Baby Bio WACC (so with need for a P3 and approval (IF it occurs) being 2031 then 5 years to peak sales 2036 and peak sales 5BB. We get 25 BB and this is discounted to 7 BB (using WACC 12-14%). So actual value is between 0 and 7 BB. In competent hands and in a risky area like AD with far more failure than success we could use a value of 10% or 700 MM. In incompetent hands, closer to zero. Companies considering an acquisition will have their own statisticians evaluate. My guess is they are more rigid than Missling’s KOL's.

A371: We have not seen the clinical data from the 2a. For schizophrenia approval, most companies would do a +/- 100 patient 2b to work out dosing and get a better glimpse at efficacy before the Go-No Go decision. Then, using the highly successful Karuna model, 2 256 patient P3’s could be done comparing best dose to placebo in acute psychotic patients. And if signals look good an add-on trial --- KarXT succeeded as monotherapy but mostly failed as an add-on (pre specified non-Risperdol was successful). BMS paid 14 billion and expected both indications. If they knew monotherapy only, they would have paid closer to 5 BB. KarXT data looked very good and tolerability is reasonable. Is 3-71 as good and as well tolerated? So hard to value but somewhere between 0 and 5 BB. As an early stage drug we can say 100 MM.

1066: 3 million max until an IND and P1 is complete.

So, bottom line for me is cash and credits worth $150 ($1.5/share) , A273 in March 2026 is between 0 and 700 MM, A371 March 2026 is 50-100 MM. With the current level of transparency, one could make a good argument that a fair current price for AVXL is $2.50-$9.00. $2.50 with current CEO and BOD and $5-9 with more competent managers and new BOD. Missling needs to realize his shares are more valuable if he, Donhauser and Thomas (and maybe Ma) leave the company/BOD. I will continue to follow (I still have 2000 shares) and consider buying more if the price goes closer to $2 or if management changes.

As a neurologist you can offer no hope for those with AD except to relieve some symptoms and assist them in dying. What a depressing job you have.

As far as my job, it is quite exciting as the majority of my patients are in my sub-specialty of neuroimmunology. Multiple sclerosis has 21 FDA approved med's. If an MS patient goes to a competent MS specialist, at the earliest signs of the disease,impairments are low and have minimal impact on life. Some patients present later and life can be more sad -- time is brain. We are designed to make it to our 50's Any time after that with family is a blessing. I wish I could offer an effective drug to the AD patients I do see.