Anavex Life Sciences Corp (OTCMKTS:AVXL) Slips for No Apparent Reason
Anavex Life Sciences Corp (OTCMKTS:AVXL)’s stock performance from the last couple of years has been less than impressive. Just twelve months ago, for example, the ticker was sitting comfortably above the $1 per share mark. On Friday, AVXL got crushed by quite a lot of selling, finishing the day at $0.37 as well as hitting a 52-week low of $0.231 in the early afternoon when trading was at its peak. While it’s somewhat hard to explain the sudden drop from the end of last week, there are enough reasons to justify the horrific overall performance.
As is often the case with penny stocks, the pumpers have played their part. There was a rather big campaign back in November 2012 and, as we already noted, it didn’t do the ticker any favors. The pumpers haven’t mentioned AVXL since August and we’re quite sure that most of the shareholders prefer things to stay this way.
Unfortunately, the November 2012 pump isn’t the only factor depressing the price. AVXL were in a rather big financial mess and they were struggling to get out of it. The figures found in the latest 10-Q should give you an idea of how big the problem was. Here’s a quick summary:
- cash: $1,645
- total assets: $3,480
- total liabilities: $3.5 million
- NO revenues since inception
- quarterly net loss: $151 thousand
- accumulated deficit: $38 million
The lack of financial stability meant that at one point, they were forced to suspend the clinical testing for their flagship product – the ANAVEX 2-73 compound. Fortunately, they did manage to raise some cash through a private placement back in July and they also entered into a $10 million funding commitment. Some of the liabilities were satisfied as well which should give them some room to breathe, but unfortunately, there’s a twist.
Quite a lot of stock was issued along the way and much more could see the light of day in the future. AVXL has quite a lot of testing to go through before commercialization and, ultimately, profitability are on the agenda and until then, the issuance of new shares can only depress the current shareholders’ investments. This is true for virtually all development stage penny stocks, but in the case of AVXL, it brings us on to the last problem that, we reckon, is wreaking havoc with the chart movement.
It is no secret that coming up with an effective treatment, especially for a disease as cruel as Alzheimer’s, takes quite a lot of time. Yet, AVXL have been at it since 2004 and we fear that the prolonged stage of research and development might prove to be too much for the more impatient investors. Some of them have already hit the panic button because of the difficulties, but even now, when financial stability should be secured, the management team seems reluctant to give shareholders a deadline for the commercialization of the miraculous product.
This means that the stock performance remains as unpredictable as ever and it also means that drops such as the one witnessed on Friday shouldn’t be uncommon. One thing is for sure – putting too much confidence in an enterprise’s business plan can end in tears, as the people who got overly excited about American community (OTCMKTS:ACYD)’s success can confirm. Make sure you weigh the risks carefully and consider all the options before making your final decision.
