What: After reporting last week that it has filed to uplist to the Nasdaq exchange and that it had inked a stock purchase deal with Lincoln Park Capital Fund, LLC worth up to $50 million, shares in Anavex Life Sciences (NASDAQ:AVXL) have more than doubled, including an increase of 17.2% earlier today.
So what: In early October, the clinical-stage developer of an Alzheimer's disease therapy applied to be listed on the Nasdaq exchange and on Friday, Anavex Life Sciences management rang the Nasdaq closing bell to celebrate its official launch on the exchange.
The company's move to a major market exchange was done to attract interest from institutional money managers, most of whom avoid investing in stocks that trade over the counter.
On Oct. 21, Anavex Life Sciences also filed a notice with the SEC that it had entered into an agreement with Lincoln Park Capital Fund LLC in which Anavex Life Sciences gave Lincoln Park Capital Fund 179,598 shares in exchange for Lincoln Park's agreement to purchase up to $50 million of its shares over the next three years, the timing of which will be at Anavex Life Sciences discretion.
Money raised from the sale of stock to Lincoln Park Capital over this period will be used to develop Anavex Life Sciences' lead drug candidate, Anavex 2-73.
Now what: It's not surprising that Anavex Life Sciences moved to the Nasdaq and inked its deal with Lincoln Park to shore up its future financing. The company's research and development costs are likely to climb significantly as Anavex 2-73 studies advance into larger, later-stage trials.
In December, Anavex Life Sciences began enrolling Alzheimer's disease patients in a phase 2a trial and the company extended that trial's follow-up period from six to 12 months this past September.
Anavex 2-73's phase 2a trial will determine the maximum tolerated dose of the drug, but Anavex Life Sciences is also evaluating efficacy as a secondary endpoint. If the drug proves to be both safe and effective, then Anavex Life Sciences would likely move it into a phase 3 study that could serve as the basis for a filing for approval with the FDA.
Although there's a significant unmet need for Alzheimer's disease therapies and that makes the treatment market attractive to investors, Alzheimer's disease is notoriously difficult to treat and the vast majority of drugs to treat it that are entering clinical trials have failed. For that reason, investing in Anavex Life Sciences is far too risky for me to consider until the phase 2 data is available and that isn't likely to occur until later next year.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.