The Anavex Story for Honest Investors

This article is a rebuttal to one published yesterday purporting to tell the Anavex story. It doesn’t. It merely attacks Anavex with dishonest arguments on irrelevant issues, and unfairly impugns the integrity and ability of the men and women now leading Anavex in an effort to provide a medication to improve the plight of those who suffer from Alzheimer’s.

There are people who sold Anavex stock short and will make profits if the stock price goes down, as is their right. But when they write deceitful articles and social messages trying to force the price down by misleading readers, that’s wrong. Another person who claims not to be invested in Anavex at all posted on social media that Anavex stock was overvalued and that he was going to research it and write about it. He spent part of one weekend on his research and writing and posted an article attempting to validate his predetermined perspective, and his article focused on old issues that, even if he had gotten them correct, would be irrelevant to the company today. That’s wrong.

Now we have an article attacking Anavex by Jean Fonteneau, and nowhere could I find a statement by him as to whether or not he has a conflict of interest. I am writing now to rebut his article point-by-point, and I’ll start with my disclaimer that the following is my opinion, based on my knowledge and understanding, and that I have been invested in Anavex since 2011. I also have Mild Cognitive Impairment, which may be a precursor to Alzheimer’s, and I am therefore personally and keenly interested in anything and everything that might treat it.

There have been many spurious attacks against Anavex in social media, going so far as to claim that Anavex is a scam. The truth is, in my judgement, as of the evidence presented in conference on November 7th, 2015 and publicly on November 9th, 2015, that Anavex Life Sciences now has the most promising drug candidate to treat Alzheimer’s.

In the following rebuttal, I will focus on one issue: Is Anavex 2–73 likely to eventually get FDA approval? Because for prospective investors, little else matters. If Anavex 2–73 gets FDA approval, Anavex stock will be worth a fortune. If Anavex 2–73 does not get FDA approval, it will be worth relatively little. I find it more than a little curious how so many people, Fonteneau included, have written articles about Anavex without focusing on this all-important issue.

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Let’s start with Fonteneau’s title, “The Secret to Making 2000% in Stocks Overnight, the Anavex story.” Some people and companies have heralded the financial prospects of investing in Anavex and gone way overboard. Anavex has not. It is patently unfair to blame Anavex for things other people say as Fonteneau does, starting with his title.

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Fonteneau’s tagline: “The rise, fall and rebirth of Anavex Life Sciences, a ghost from the past preying on people’s hope.”

This begins with a baseless, ad hominem attack accusing Anavex of “preying” on people. Nowhere in his lengthy article does he provide any evidence to support this assertion.

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Fonteneau then starts his actual article with a red herring. An article which is supposed to be about the “Anavex story” starts with a long attack on an ad by Agora Financial, a company that sells expensive subscriptions to their investment advice newsletters, and which Anavex has no control over. I doubt Mr. Fonteneau would be pleased if someone he doesn’t know wrote an article about him, and then others try to hold Mr. Fonteneau responsible for that 3rd party’s article. Fonteneau’s willingness to condemn Anavex for another company’s actions seem to be the basis of the “secret to make 2000% overnight” part of his title.

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Fonteneau then attacks Anavex for the small number of personnel it employs, making it clear he thinks that is suspicious, and he tries to tie it back to his problem with Agora.

Anavex is not Agora. Anavex is not responsible for Agora. Anavex has nothing to do with Agora.

As for the number of personnel, that is irrelevant to whether or not Anavex is a good investment, and irrelevant as to whether or not the drug Anavex 2–73 will be effective in treating Alzheimer’s. Anavex has successfully used contractors in lieu of employees to accomplish it’s clinical trials of Anavex 2–73, which is a normal business practice.

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Then Fonteneau brings Axovant into his argument. Hello? The title referred to the Anavex story, not the Axovant story. Axovant is irrelevant to Anavex.

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Next Fonteneau wastes more words talking about how the biotech sector has/had many pump and dump scams, where he again tries to falsely condemn Anavex merely by association with the financial sector Anavex happens to belong to. He even tries to bolster this argument by bringing up the fact that some gold mining companies have been scams — again, he is attempting condemnation by association, and in this case there is no association whatsoever.

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Now Mr. Foneneau turns his attention to actual Anavex history, where he goes back to its formation, as another misleading author recently did. The actual story is interesting, if told fully and objectively, and could be entertaining, but it is 100% irrelevant to the circumstances of the company today, and the critical issue of whether or not Anavex 2–73 can be an effective treatment for Alzheimer’s. It isn’t even relevant to Anavex’s current management, since there has been a complete turnover long ago.

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Another irrelevant item from Anavex history that Fonteneau brings up is that there actually was a criminal pump and dump of Anavex stock years ago. Again, Anavex was not responsible for those actions, but Fonteneau, like others, tries to blame the victim in this case.

Fonteneau takes time to cast aspersions on the fact that Anavex was issuing press releases during that time period. Of course, that’s in the normal course of business for public companies, but Fonteneau tries to make something normal sound sinister.

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Fonteneau, like another writer before him, makes much of the original, long-gone company president, and claims that he has been linked to other companies that were scams. Again, even if that were true, it is totally irrelevant to today’s Anavex, totally irrelevant to the current management team, and totally irrelevant as to whether or not Anavex 2–73 will effectively treat Alzheimer’s.

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For someone supposedly telling the story of Anavex, Foneneau seems oddly uninformed about the fact that Anavex ran perilously low on operating funds years ago and basically went dormant until a new Chairman of the Board recruited Dr. Chris Missling to be the new CEO.

Under these circumstances, Fonteneau finds it suspicious that the first major accomplishment of Dr. Missling was to raise $10M in operating capital. Without that capital, we would not have had our phase 2a trial of Anavex 2–73 for Alzheimer’s with it’s extremely promising results. How promising? Among many other jewels is this: Professor Paul Maruff, Chief Science Officer of Cogstate, said, “To my knowledge, we have not yet seen a drug that has improved quantitatively working memory to such an extent as seen with Anavex 2–73.”

Some people condemn the $10M capital-raising deal because they dislike the financing company. I celebrate it. Because they hate the company that put up the $10M, they seem to assume that Anavex got a bad deal. I have a little knowledge of such deals from when I worked for a venture capital company, and I studied the terms of this deal and found them to be perfectly normal and acceptable. Some assert that the financier was a bad company for Anavex to deal with, but the only relevant issue is firmly settled: They provided the funds, Anavex has been using the funds to great success, and the terms of the deal have not harmed Anavex in any way, other than the attempts by people like Fonteneau to try to make it sound bad.

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Now Fonteneau fusses about the fact that the Anavex stock price had the nerve to rise this year, and that Dr. Missling successfully got Anavex uplisted from OTC-QX to NASDAQ Global Markets. Seriously?! Fonteneau sees uplisting as a nefarious effort to boost the stock price before, he expects, the insiders illegally dump all their stock at a peak and leave everyone else holding the empty bag. Most sane people see an uplist from OTC to NASDAQ as a positive thing, for many reasons.

And as for the fears of insiders building an empty dream to cash out and run, we now have the top-level results of the phase 2a Part A trial, and they are spectacular! That’s the opposite of worthless! 12 of 12 metrics showed improvements. The results weren’t negative, they weren’t mixed, and they weren’t uncertain — they all showed improvements. 11 of the 12 improvements were after only 23 doses of A2–73. Fonteneau has little interest in facts like that, which may be very revealing as to his true purpose.

Tangent: Another misleading author today posted that the trials results are meaningless. Isn’t it curious that an author who has admitted a vested interest in driving the stock price down didn’t mention that some of the results are already known to be statistically significant? Or that when he brushed off the results as merely placebo-effect, he didn’t mention that one set of brain-wave metrics is entirely objective and impossible to fake?

Fonteneau again finds evil in the fact that Dr. Missling secured an effective line of credit for future operating capital on very favorable terms for Anavex. He points out the $50M part of the deal with Lincoln Park, but curiously he does not mention the other $100M part of the deal without LP. I don’t find it evil, I see it as an expert CEO wisely planning ahead and taking care of business to assure they can get the trials of Anavex 2–73 to the point where they prove that Anavex 2–73 is good enough or not good enough for FDA approval. Isn’t that what Fonteneau should really care about?

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Mr. Fonteneau next attacks Anavex because, brace yourselves, a lot of people are talking about Anavex on social media. He seems quite concerned about that, and sees it as reflecting very poorly on Anavex management. Perhaps he expects Anavex management to prevent the public from discussing Anavex on social media? Fonteneau seems to have forgotten to mention that a lot of the chatter on social media about Anavex is by… Fonteneau… and other writers like him attacking Anavex, together with their social media minions. Then he makes the laughable claim that such social media attention could only have been accomplished by Anavex using paid promotions.

“There are none so blind as they who will not see.”

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And Mr. Fonteneau also resorts to the tired attack that Anavex is a company without revenue, gasp! Well, for any potential investors still reading, he’s right about that. Anavex has no revenue, has never had revenue, and doesn’t expect any revenue until after it gets its first FDA approval, if that happens. If that’s a problem for you, there’s a very simple, free solution: Don’t invest in Anavex. But don’t condemn Anavex as guilty of trying to cheat investors by having the gall to not have revenue yet. As evidenced by their steady progress, they’re working diligently toward attaining that goal.

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This is getting really tedious, isn’t it? But Fonteneau had a lot more accusations, so I’ll go on with a lot more rebuttal.

Next he finds Anavex guilty of “peculiar recruitment practices” and some irrelevant biography bullets for some hires. I don’t care if they read tea leaves and hire acrobats as long as the people they hire do their jobs well. Speaking of which, I notice that nowhere in his looong article did he mention Anavex’s superlative Scientific Advisers (http://www.anavex.com/about-us/scientific_advisors). Could it be because their world-leading expertise in Alzheimer’s research doesn’t fit his agenda of discrediting Anavex? Any potential Anavex investors should start their due diligence there.

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Again, Fonteneau tries to attack the optional $50M part of the recent capital funding arrangements, while totally ignoring the $100M part not associated with a financier. Again, the only issue that should be of concern is, do the funding arrangements help or hurt the ability of Anavex to see A2–73 through to a final determination by the FDA. It’s painfully clear that they help, in major way.

Yak, yak, yak, he goes on and on about this. If he finds the financing terms so unpalatable, perhaps he will call Anavex and connect them to a financier he finds more to his liking.

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More rehashing complaints about funding, but Fonteneau adds an assertion that Anavex “has virtually NO assets.” Perhaps Fonteneau is not aware that intellectual property can be an asset. It can even be a company’s primary asset. Perhaps he’d rather go to their office and perform an inventory of their office furniture and see how much that’s worth. Personally, I think the research conducted on Anavex 2–73 to date might have some value to someone.

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Fonteneau also makes the very unoriginal attack on the compensation plan of the CEO, as he thinks it is too generous. As someone heavily invested in Anavex, I think it’s at an appropriate level. It’s true the Chairman probably could have hired a high school dropout for a lot less, but it’s possible that person might not have some of the experience, knowledge, abilities, or connections of Dr. Missling, MS, PhD, MBA. The biggest compensation for Dr. Missling, by the way, is in stock — up to 1.5M shares if he meets all the performance criteria to earn it, and the shares are locked up for a long time, meaning he can’t sell them any old time he wants to. Some people might think all that gives Dr. Missling a little incentive to create long-term value in the company. The Chairman of the Board apparently did.

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Now Fonteneau makes his most ignorant attack, on the data Anavex presented in Barcelona on November 7th. Again he faults Anavex for the claims of other parties regarding those results, prior to their release. For anyone who’s actually taken the time to read and study Anavex presentations (and press releases), they are carefully and skillfully written, with precise terminology, so as to avoid hype.

After all his long bogus arguments, Fonteneau now says he will “refrain from commenting at length” on the single most important issue of the day, that of the potential for Anavex 2–73 to provide an effective treatment for Alzheimer’s. Instead, he provides this empty snippet, “…from what I can gather it appears to have shown insignificant results and a flawed trial.”

Well from what I can gather, Fonteneau is either remarkably ignorant, or intentionally misleading his readers. There are world-class Alzheimer’s experts who think the results are exciting, not insignificant, and his totally unsupported allegation of a flawed trial may be legally libelous. To make it clear, he offers not a single suggestion as to why he thinks the results are insignificant or the trial is flawed. No reasonable person should care what his unsubstantiated opinion is against the great minds of Anavex’s Science Advisers.

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Lastly before his bogus conclusions, he gives his opinion that the purpose of the current trial is to do nothing more than increase the stock price. What a cynical perspective. Is he not aware that Dr. Missling had 2 grandparents who suffered and died from Alzheimer’s? Has Fonteneau known no one personally with dementia and can’t relate to people who actually care about finding a treatment for this disease? Does he think all those world-leaders on the Anavex Science Advisory Board are part of a grand conspiracy and willing to ruin their careers and reputations?

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Fonteneau finally gets to his spurious conclusions. He thinks Anavex is nothing more than a stock promotion scam, a “very risky” venture with “no, to little, chances of success.”

Perhaps if he put his time into studying the science of the mechanisms of action of sigma-1 receptor agonists and related science, or actually studying the trial results in detail until he understands every aspect of them, instead of wasting time on things like what other companies the long-gone original Anavex President was associated with, he might see what Professor Maruff sees. He might see what I see, that the amazing results of the phase 2a trial so far give strong reason to think that Anavex 2–73 might end up being more effective in treating Alzheimer’s than any drug currently on the market. He might see what the trial experts believed justified their statement that “Anavex 2–73 Reverses Cognitive Deficits Measured by Standard ERP Methods at Week 5.”

Fonteneau says his opinion is there are a lot of red flags “that would normally repulse any reasonable investor doing the smallest amount of due diligence.” Well, I guess that explains why he seems to have done so little due diligence into the science behind Anavex 2–73 or focus on issues that are actually relevant and important.

Fonteneau says his opinion is that Anavex is “worth a very small fraction of the valuation it is currently trading at; or at the worst an operation setup for the sole and unique purpose of enriching insiders at the expense of unsuspecting retail investors… toxic and worthless for investors… in my opinion… the only business Anavex Life Sciences has really ever been in, has been the business of filing, issuing and selling new shares of little to no value to the unsuspecting public…”

Well, my opinion is that Fonteneau’s opinion is worth less than nothing. I think it has a negative value. I think anyone who gives any weight to his opinion is doing themselves a great disservice. If he worked for me as a researcher, I’d fire him for incompetence.

Meanwhile, on Monday, November 9, 2015, an actual professional corporate valuation by Maxim Group has issued an updated BUY recommendation for AVXL with a 12-month price target of $15 per share. These objective professionals have come to the opposite conclusion of Fonteneau and friends.

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Here are my conclusions:

I have studied Anavex A2–73 and over a hundred other drugs that were/are candidates to treat Alzheimer’s and maintain extensive notes on their mechanisms of action and their progress, successes, and failures in clinical trials. Based on all that, including the results Anavex presented in Barcelona, I believe at this time that Anavex 2–73 has the best chance of providing a useful treatment for Alzheimer’s.

For potential Anavex investors, the decisive question should be this: Is Anavex 2–73 likely to eventually get FDA approval for Alzheimer’s? From an investor’s perspective, and from a potential patient’s perspective, nothing else really matters.

Alzheimer’s is a miserable, expensive death sentence. There are currently 4 medications approved by the FDA to treat Alzheimer’s symptoms. They only treat symptoms. They do not reverse it, they do not stop it, they do not even slow it down. For many patients, they do not help at all. For the patients they do help, they only help a little, and only for a short while, due to their very dangerous side effects.

What will it take for Anavex 2–73 to gain FDA approval? It needs to be safe, and it needs to be at least a little more effective than donepezil (aka Aricept), which is the official Standard of Care (SoC) for Alzheimer's right now. The safety of Anavex 2–73 has already proven to be excellent. The current phase 2a trial has validated that safety and indicated that the effectiveness may be far superior to donepezil. The next trial will be a randomized, double-blind, donepezil-controlled phase 2/3 trial which will determine if Anavex 2–73 meets the threshold for FDA approval. That is what matters. That is all that matters.

If Anavex 2–73 earns FDA approval, Anavex stock will be worth a fortune. If Anavex 2–73 does not get FDA approval, it will be worth relatively little. What the stock is worth in the meantime depends on how confident people and companies are that A2–73 will work and want to buy it now, while it’s cheap, or wait until the final FDA outcome when they will have to pay very high prices and will have missed all the price increases from now until then.

My confidence, based on relevant science, including the Anavex phase 2a trial of A2–73, has led me to invest all of my riskable assets on AVXL. After these latest trial results, I think eventual FDA approval is very likely, and I expect to ultimately make a large fortune. I expect that people who listen to Forteneau and others like him will miss a fortune, and in the years to come, their regrets will be like the people who had the chance to buy Apple or Google for a few dollars per share. And if A2–73 does work better than donepezil, it could literally save many millions of lives.