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Anavex Life Sciences Corp. Shot 38% Higher in June -- Here's Why

By Sean Williams - Jul 13, 2016 at 6:40PM

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Preclinical data powers Anavex in June, but plenty of risks remain.

Image source: Getty Images.

What: Shares of Anavex Life Sciences (AVXL 6.31%), a clinical-stage biotech company primarily focused on the development of drug candidates to treat Alzheimer's disease and other central nervous disorders, skyrocketed 38% in June, based on data from S&P Global Market Intelligence. The reason for Anavex's price surge can be traced to a glut of positive preclinical press releases for leading experimental candidate Anavex 2-73.

So what: The first catalyst for Anavex came on June 6, when it announced positive preclinical results for Anavex 2-73 (herein known as "2-73") as a treatment for Fragile X syndrome. Anavex describes Fragile X as the biggest single-gene cause of autism. The company noted that after 14 days of 2-73 dosing in mice, a slew of behavioral tests showed an improvement. This data gives Anavex hope that 2-73 could be a promising treatment for various autism spectrum disorders, since there's a clinical overlap between these disorders.

A little more than two weeks later, Anavex announced that it had received the orphan drug designation for 2-73 as a treatment for infantile spasms. The Food and Drug Administration hands out the orphan-drug designation to treatments targeting a patient pool in the U.S. of 200,000 people or fewer. The orphan designation would give 2-73 seven years of marketing exclusivity in the U.S., assuming approval, and could also lead to a reduction in the regulatory fees associated with filing for the approval of a new drug. 

Lastly, Anavex benefited from being in the spotlight and having its CEO, Christopher Missling, present on 2-73 at the 2016 Rett Syndrome Symposium. Among the many ailments 2-73 has shown promise in during preclinical studies is Rett syndrome, a genetic mutation that affects brain development in girls. For a small-cap company like Anavex, the more publicity it can receive, the better.

Image source: Getty Images.

Now what: The big question, of course, is whether 2-73 can live up to its billing as a treatment for Alzheimer's disease. As my Foolish colleague Cory Renauer pointed out recently, Anavex's data at five weeks for Alzheimer's patients taking 2-73 was encouraging. However, both Anavex and the FDA will want to see success at the 52-week mark of the midstage study before the cheering can begin. This phase 2 study should complete in October, meaning critical top-line data should be available before the end of the year.

Although I'd love to see Anavex succeed, I also can't overlook the obvious -- namely, that most Alzheimer's drugs fail miserably in clinical studies. The blood-brain barrier is a tricky thing for researchers to tackle, and while the early data has been encouraging, I'm not sure I'd have the iron stomach to buy into the Anavex thesis with nothing more than a few positive preclinical trials and promising results in the first five weeks of a long-term study in the sails. Instead, I'd rather wait on the sidelines until we get this critical data readout, and I would suggest investors do the same.

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