Anavex Stock Plunges on European Setback for Alzheimer's Drug
Company confirms negative regulatory signal for its lead drug blarcamesine, overshadowing a narrower Q4 loss and sparking analyst downgrades.
Anavex Life Sciences Corp. (NASDAQ: AVXL) saw its shares fall over 5% in morning trading after the company’s latest earnings report confirmed a significant regulatory setback in Europe for its lead Alzheimer’s drug candidate, blarcamesine.
The clinical-stage biopharmaceutical company announced a narrower-than-expected fourth-quarter loss but the positive financial metric was heavily overshadowed by the confirmation of a “negative trend vote” from the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP). This procedural step signals a high likelihood that the agency will formally reject the drug's marketing application, jeopardizing its path to the European market.
Shares of Anavex were trading at $3.08, down 5.5%, shortly after the market opened. The stock has been under immense pressure since the initial news of the negative CHMP vote on November 14, which wiped out nearly half of the company's market value in pre-market trading that day.
In its fiscal fourth-quarter results released Monday, Anavex reported a net loss of $9.8 million, or $0.11 per share. This marked an improvement from the $11.6 million, or $0.14 per share, loss reported in the same quarter last year and beat analyst estimates of a $0.15 per share loss. The company also highlighted a cash position of $102.6 million as of September 30, stating it has a cash runway of over three years.
However, the financial details did little to soothe investor nerves focused on the fate of blarcamesine, the cornerstone of Anavex's pipeline. A negative trend vote from the CHMP is a critical development indicating that the committee's scientific evaluation has found the drug's risk-benefit profile to be unfavorable based on the data submitted.
Anavex management confirmed they intend to request a re-examination of the CHMP's opinion, a formal process to appeal the decision. While possible, successful reversals of negative CHMP opinions are historically rare, according to analyses of EMA decisions.
The European setback has prompted Wall Street analysts to reassess the company's prospects. Following the initial announcement, H.C. Wainwright & Co. maintained a "Buy" rating but slashed its price target on Anavex shares by more than half, from $42.00 to $20.00. Similarly, analysts at D. Boral Capital cut their price target to $24.00 from $46.00 while maintaining a buy rating, reflecting the heightened risk and delayed revenue projections.
Blarcamesine is an orally available small-molecule activator of the sigma-1 receptor, which is believed to play a role in protecting nerve cells. The drug is being studied not only for Alzheimer's but also for Parkinson's disease and Rett syndrome, making the regulatory outcome in one indication pivotal for the entire platform.
Anavex's path forward now hinges on the re-examination process in Europe and its discussions with the U.S. Food and Drug Administration (FDA). The company has stated the FDA advised it to request a meeting to discuss its clinical trial results for Alzheimer's. The outcome of that engagement will be critical for the drug's future in the lucrative U.S. market and for rebuilding investor confidence.
For now, the improved earnings per share offers a small consolation against the formidable regulatory and clinical challenges that lie ahead for Anavex and its ambitious Alzheimer's program.