Spirit of the Coast Analytics

Summary

• AVXL just completed their long-awaited Alzheimer's 2b/3 trial in Dec 2022 with statistically significant and clinically meaningful results surpassing existing therapeutic compounds to include emerging MAB treatments like the recently approved Aducanumab & Lecanemab.

• The company is likely positioned to complete and present top-line data from their ongoing pediatric Rett Syndrome trial (EXCELLENCE) by mid-2023.

• Blarcamesine, an S1R & M1-M4 muscarinic agonist is capable of rescuing cellular homeostasis throughout the body, from the CNS to the heart. 

• Reductions in neuroinflammation, expression of neurotransmitters, protein clearing, oxidative maintenance, restorative autophagy, and mRNA transcription likely prompt cascading beneficial effects. 

Investment Thesis

Anavex Life Sciences Corporation (AVXL) is expecting late-stage Rett Syndrome in 2023 for their lead drug candidate Blarcamesine (Anavex 2-73). Blarcamesine is potentially the most promising remedy for holistic neurodegenerative and neurodevelopmental diseases in development, thanks to its wide-sweeping mechanism of action (MOA) revolving around Sigma-1 receptor (S1R) & muscarinic agonist properties. The confidence in this thesis grew explosively in 2022 as Anavex unveiled the most positive phase 2b/3 Alzheimer's data in history. Considering a >4-year cash runway of ~$149m, no expectation for near-term dilution, and short-term pivotal trial outcomes, the current $875m (~$11.25 per share) market cap is significantly undervalued and should currently surpass $5B (~$64 per share). When taking into account Biogen and Eisai explosive growth post-successful Alzheimer's trial data readouts for Aducanumab and Lecanemab, even $5B is extremely conservative in our opinion.  Anavex maintains exceptional room for growth beyond Alzheimer's, featuring an extensive pipeline in large unmet needs, a slew of orphan disorders, an immaculate safety profile, and an entire platform of other early-stage drugs like Anavex 3-71, Anavex 1-41, and Anavex-1066 which provide long-term growth potential. 

Wide-Sweeping Therapeutic Potential

S1R expression is normally triggered in old age and during times of neuronal stress in order to activate failing neurotransmitters (compensatory) such as M1-M4 muscarinic, D1/D2 dopamine, and 5-HT serotonin receptors. S1R is seen to be under-expressed in CNS disorders like Alzheimer's Disease. Additionally, S1R expression resumes mitochondrial autophagy function – a process critical to homeostatic aging. In most neurodegenerative and neurodevelopmental diseases, chronic neuroinflammation, and cascading neurotransmitter faults lead to catastrophic failure of the cell, which intensifies negative effects throughout the body. Perhaps most detrimental, this state of disrepair isn’t conducive to neurogenesis or neuroplasticity, preventing the body from healing itself. In essence, the ability for the body to slowly bring back neurotransmitter expression, rescue autophagy, and suppress neuroinflammation, is what Blarcamesine has now proven to do in a robust array of preclinical and in-human Rett Syndrome, Parkinson’s disease Dementia, and Alzheimer’s disease trials. (Anavex & Autophagy) (In-depth Autophagic Response)

In a robust genomic evaluation featuring Blarcamesine-dosed Alzheimer's and Parkinson's Disease Dementia patients, 14,150 genes were analyzed to see if dosing led to therapeutic upstream effects. Blarcamesine enriched 1,175 of those genes, 70% of which have biological interactions - indicating potent upstream effects as the majority of the modulated genes directly interact in cellular mechanisms. As a result, three primary pathways were identified: the electron transport chain (oxidative phosphorylation), proteasome 26S (proteostasis), and UPR regulation via CHOP and endoplasmic reticulum mechanisms PERK, IRE1a, and ATF6. In essence, Blarcamesine halts expedited cell death by channeling pro-homeostatic nutrients via calcium channels to the mitochondria, resuming disrupted ATP and reducing oxidative stress. By this action, Proteasome 26S is enriched, allowing for the unit to shift into overdrive, tagging and deleting rampant protein buildup. And finally, by resuscitating UPR mechanisms, the cell is no longer driven to unexpected apoptosis - the self-destruct mechanism used during exceptionally heightened cell stress. More about this genomic study can be found here.

Genomic data is extremely important to Anavex as it is the basis behind future approvals. Anavex is touting two primary biomarkers, mRNA expression (abundance) of S1R, and S1R wild type (normal) vs. S1R mutation genes (atypical). In other words, does a patient have higher S1R levels and do they have S1R wild type genes - because those (besides level of cognitive degradation) are the primary prerequisites for higher therapeutic effect. Anavex is developing simple diagnostic tests to ensure the right patient gets Blarcamesine. Importantly, the "right patient" is the majority of the population with S1R wild type, and thus, SOTC Analytics expects extremely high market penetration/revenues as there are no other available therapies meeting clinically meaningful result (high improvement over baseline) in phase 3 studies. See graphic 1 & 2 below for S1R wild type prevalence and graphic 3 for hypothesized revenue in U.S.-only Alzheimer's markets which is expected to be comparable in Europe. 

Market Applicability

This section expands on the rationale behind graphic 3 above and explains the most desirable patient populations for Blarcamesine in Alzheimer's. To determine market suitability for Alzheimer’s disease in the United States, I used the genomic data revealed in the Alzheimer’s 2a ADCS-ADL data, Alzheimer’s Association statistics, and National Library of Medicine data. (ADCS-ADL Data) (Alzheimer’s Association Disease Statistics) (NLM Human Genome Study)

The metrics derived from these sources include the following:

• Number of Alzheimer's patients in the United States (all severity): 6,200,000

• Number of Alzheimer's patients in the United States (mild): 3,124,800

• Number of Mild Cognitive Impairment due to Alzheimer's patients (MCI-AD) in the United States: 5,000,000

• Combined MCI-AD and mild-AD (M-AD) patients in the United States: 8,124,800

• Prevalence of S1R WT in population: 84%

• Prevalence of APOE3 allele in population: 78%

Using these data points, there are ~11,200,000 total MCI-AD and all-stage Alzheimer's patients in the United States. Of the 11,200,000 patients, 8,124,800 are in early stages - a category which appears to respond to Blarcamesine better than later stages. For these early patients, Blarcamesine would be able to provide potentially reversible treatment to 5,323,368 (66%). This high effect patient population have the S1R wild type variant (84% probability) and APOE3 alleles (78% probability). Individuals have approximately 66% chance of having both S1R wild type and APOE3 alleles. 

If disease stage is unaccounted for, Blarcamesine could be expected to most optimally treat 48% of all MCI-AD and all-stage Alzheimer's patients. Most optimal treatment could see a 486% improvement over standard of care, in many cases resulting in reversal of pathology.

In a similar situation accounting for 8,124,800 early stage patients, Blarcamesine can likely provide therapeutic effect vastly outpacing placebo and standard of care to 1,501,463 patients (18% of all early stage patients). These patients have the S1R wild type variant (84% probability) and non-APOE3 alleles (22% probability). Individuals have approximately 18% chance of having both S1R wild type and non-APOE3 alleles. 

If disease stage is unaccounted for, Blarcamesine could be expected to second-most optimally treat 13% of all MCI-AD and all-stage Alzheimer's patients. Second-most optimal treatment could see a 237% improvement over standard of care, in most cases substantially stagnating pathogenesis.

Alzheimer's Disease 2b/3 Results & Competitor Comparisons

Of course, all of this genomic data and market theorization only matters in the event that Blarcamesine (and the rest of the pipeline) works - so does it? Absolutely it does. In Nov/Dec 2022 Anavex and Eisai both released their latest pivotal trial data at CTAD 2022. Lecanemab data was a marked improvement over its predecessor - Aducanumab (marketed as Aduhelm). Despite these improvements, their CDR-SB primary endpoint and key secondary endpoints including ADAS-COG (cognitive) and ADCS-ADL (activities of daily living) scores failed to meet clinically meaningful thresholds. Lecanemab patients still declined - albeit slower than placebo. Meanwhile, Anavex's co-primary endpoints (ADAS-COG/ADCS-ADL) and key secondary endpoint (CDR-SB) met statistical significant outcomes with clinically meaningful cognitive and functional results - a feat that has never been accomplished in a pivotal trial for Alzheimer's disease. Blarcamesine-dosed patients - especially those on the high dose - improved over baseline. They reversed disease pathology and began to restore their memories and functional abilities. Lecanemab just received accelerated approval by the FDA, even with their lackluster outcomes. Efficacy results aside, it is likely Lecanemab will be at least 4 - 4.5x the cost of Blarcamesine, as Eisai announced a $26,500 annual cost for patients and need for multiple expensive MRI-imaging sessions to confirm ARIA. This expense is above what ICER considers to be cost-effective. Please see graphic 4, 5, & 6 below for TLD and comparative analysis conducted by Anavex and SOTC Analytics. [Additional comparative cost/data analysis is forthcoming]

Anavex approached their trial design deliberately with EMA (European) approval as a primary consideration. Unlike the Aducanumab and Lecanemab trials (ENGAGE, EMERGE & CLARITY), the Anavex Alzheimer's 2b/3 utilized guidance directly from the EMA's 2018 Alzheimer's instruction. This is important because so far, MAB treatments like Aducanumab and Lecanemab have failed to garner approval in Europe and Australia. Reason being, the EMA noted that although Aducanumab reduces amyloid beta in the brain, the link between this effect and clinical improvement had not been established. In addition, the studies did not show that the medicine was sufficiently safe. Therefore, the EMA's opinion was that the benefits did not outweigh the risks.

Anavex has excellent opportunity for approval in Europe due to their deliberate accommodating design. These are some of the items implemented towards this end.

• Favors co-primary endpoints with a cognitive outcome (ADAS-COG) and a functional outcome (ADCS-ADL). [Anavex, Eisai/Biogen]

• Secondary endpoint with global measure (CDR-SB). [Anavex, Eisai/Biogen]

• Company  clearly identified the 'responder' criteria. [Anavex, Eisai/Biogen]

Beyond those design considerations, differences between FDA & EMA Alzheimer's guidance is favorable towards Blarcamesine as shown below:

• EMA favors disease modification whereas FDA favors a 'persistent effect on disease course.

  • • This is interesting because when Lecanemab patients stopped dosing, the little improvement they had began to once again degenerate.

    • Blarcamesine is easily identifiable as the only true disease modifying compound to complete pivotal trials.

• EMA favors trial designs showing dose dependency (30mg + 50mg).

• EMA approves less drugs than the FDA, but the EMA places higher value on high therapeutic value.

  • • From a semi-recent analysis: 

      • • Expedited drug approvals requiring high therapeutic value: 45% (FDA), 67% (EMA)

        • Standard drug approvals requiring high therapeutic value: 13% (FDA), 27% (EMA)

• "In mild to moderate AD to accept an effect on cognition it should be clinically meaningful. The clinical relevance should be confirmed by an effect on function or clinical global assessment in a co-primary endpoint approach."

More information can be found here, but as a brief summation, Anavex has postured themselves in clinical design to approach the EMA for approval. Additionally, their 2b/3 outcomes meet approval preferences by the EMA, being an efficacious, inexpensive, and safe drug. In our opinion, Lecanemab still fails to meet many of the criteria set out by the European regulatory agency, and Lecanemab is unlikely to garner approval there; we give an ~20% chance.

United States Alzheimer's Market Size Conclusion

Considering the metrics described during market applicability, Blarcamesine could feasibly provide at least dramatically slowed or disease-halting treatment to ~84% of early-stage patients (66%+18%), and the same treatment to ~61% of all-stage Alzheimer's patients (48%+13%).

According to multiple financial analysis conveyed prior to Aduhelm approval, large unmet need CNS indications like Alzheimer’s and Parkinson’s disease Dementia could yield $2,500 to $8,300 per patient annually (Cost Analysis f/Aduhelm). In addition, Anavex’s CEO, Christopher Missling, has mentioned expected revenues for Rett Syndrome to be in the $2-6B ballpark. The top 10 publicly traded biopharmaceutical companies currently (Jan 23) trade at an average of 21.57 P/E (Astrazeneca being an outlier at 107). When we combine large market penetration into highly unmet needs, the potential revenue generated could cause Anavex to easily surpass $1,000 per share if the company maintains current dilution and doesn’t further split the stock. If Alzheimer’s disease is approved in 2023, the company could see potential peak revenues of $17-24B annually (mid-valuation). With a P/E of 21.57 and minimal additional dilution, the share price would exceed $2,480 in the U.S. alone. Rett Syndrome peak sales alone could cause the share price to exceed $700 in similar circumstances.

Unknowns & Assumptions

Most of the analysis within this article is contingent upon the drugs MOA working as intended and as described by the company/peer-reviewed journals. Deviation from this hypothesis would likely change market size, chances of approval, and indication swath. In addition, it is important to note potential partnership and marketing costs which would devalue the best case share price presented above. It is also possible the company ultimately fails its current clinical trials, or fails to maintain its coffers - although unlikely considering its multi-year runway. While it is technically feasible for Anavex to be surpassed in clinical development by a competitor, this seems unlikely as there are few companies running like-trials, and most are not as far in development. Finally, while the author regulated as many variables and biases as possible during the indication prioritization analysis, the author is an expert is aerospace and does not have a formal background in biotechnology - please view this analysis with a level of speculation and set expectation. 

Exceedingly Bullish on Long-term & Short-term Company Growth

With the extraordinary reward presented with Anavex’ s potential clinical success, a long position in Anavex appears to be exceptionally warranted. All trials to date have had overwhelming efficacy. Anavex is breaking the mold in precision medicine and in the future has potential to surpass even the largest of existing biopharmaceutical companies in market capitalization (exceeding $100B) over the long-term. In the short-term, Anavex represents an extremely undervalued prospect with an absolute minimal fair value around $55-65 per share. 2023 will be an exciting and pivotal moment for Anavex as they pursue approval for Blarcamesine in Alzheimer's disease, and likely Rett Syndrome later in the year. As other biotech developing S1R agonists continue expanding, it is increasingly likely S1R platforms will become a healthcare staple. Furthermore, it is my strong belief that Blarcamesine’s address of sweeping dysfunction presents the drug as the best catch-all medicine in development today. The current (Jan 2023) Anavex pipeline can be seen below, stay-tuned in the 2023 Compendium section for updates throughout the year and feel free to view archived analysis from 2022 as well.