This is a low-cost biomedical stock that has its hands in several potentially lucrative medications. But please be aware that, at this stage, the shares are speculative, so should be relegated to a small portion of your portfolio.
Anavex Life Sciences Corp. (AVXL)
From BI Research
On Wednesday, 3/21 Anavex Life Sciences Corp. (AVXL) closed at $2.96, and Biogen closed at $320.59. On Thursday morning Biogen announced that it was terminating two much anticipated, late-stage clinical trials testing much heralded aducanumab for Alzheimer’s, concluding that the drug was “unlikely to be effective.” Biogen plunged over 32% by Friday’s close, with most of that on Thursday morning. That’s a huge drop for a company with a market cap of $66 billion. In fact, it is a drop of $21.5 billion in market value in a single day.
Tough day for Biogen, but what’s more than interesting here is the tremendous valuation that investors were placing on a drug that works on Alzheimer’s (and in this case one that had not yet conclusively proven to work (and in fact didn’t work—$20 billion). And I am sure if the drug had instead been a success Biogen would have soared even more. In theory, the present value of what and an Alzheimer’s drug would have been worth to Biogen was placed at over $20 billion.
So, this is one admittedly very rough idea, order of magnitude, of what this would be worth if Anavex can prove A2-73 is effective on Alzheimer’s. Now, Anavex would not have the where with all to market the drug on its own and would be acquired. But, on what planet if that valuation was ascribed to Biogen would Anavex not be worth at least $5 - $10 billion? Let’s say by then Anavex had doubled it share count to more than (100 million (and that’s much higher than it would be, I am sure, the way Dr. Missling, President and CEO, operates). Then that equates to $50 to $100 share.
Yes, we’re fishing for whales here, for Moby Dick, if you will, in an ocean that is littered with the wreckage of 100’s of Alzheimer’s drug wannabes. Which also points to the risk here, but also in theory, suggests a 2% chance of having found a drug that works on Alzheimer’s. But, mind you, the drug does not have to cure Alzheimer’s; it just has to be a little better than anything else out there so it will be prescribed to almost all Alzheimer’s sufferers. And it may well be way better, from the evidence so far.
Anyway, fun to think about. But another driver behind AVXL’s surge is this thought. Biogen now has a gaping hole in its once promising pipeline. And the company did not say it has given up on Alzheimer’s, just given up on aducanumab. So, this raises the very real prospect for this neurologically-focused major to acquire a promising Alzheimer’s candidate. Which leads me into a mailing the company sent out urging subscribers to vote yes on resolution number 2 on the ballot for the Annual Meeting to approve the possibility for a convertible preferred offering, if needed—as a poison pill against the company being acquired before it had proven its real value.
And it does not hurt that it was announced that an industry consortium has been launched to qualify biomarkers for Schizophrenia drug development including Merck, Takeda, Anavex and a few other companies; or that the Parkinson’s dementia (and motor function) trial has already reached the halfway point in enrollment with data due out late this year; or that the Rett trial has now enrolled its first patient; or the recent announcement of the peer reviewed publication in “Cells” of new data by an independent scientific group that “show that Anavex 2-73 induces cellular recycling process linked to the prevention and treatment of age-associated diseases”; or any of the many other good things I have reported on that this company has announced so far, that give a more than average level of comfort that they just might well be onto something.
And I have been wanting to point out something and this is a good a place as any. For those who would argue that the company has not done a placebo controlled study yet (and the one in progress in Australia is), I would argue that the Phase 2a study, while small, was in fact essentially placebo, controlled by virtue of the fact that all patients went into the trial with the same hopeful mindset, but for those who got the low dose, it didn’t work, while it did work in those who got the high dose. So, the low dose was effectively the placebo.
Well enough for now, the shares remain a Buy.
Tom Bishop, BI Research, www.biresearch.com, March 27, 2019