Why This Anavex Life Sciences Analyst Is Lifting Their Price Target

A Cantor Fitzgerald analyst is incrementally bullish on shares of Anavex Life Sciences, Corp (NASDAQ: AVXL) after the release of Phase 2 data for the company's lead candidate.

The Anavex Analyst: Charles Duncan, Ph.D. maintained an Overweight rating on Anavex Life Sciences and raised the price target from $31 to $40.

The Anavex Takeaways: Anavex released positive information Monday from Phase 2 clinical trials of its lead candidate drug ANAVEX 2-73 for treatment of Parkinson’s disease dementia (PDD), establishing proof-of-concept and enhancing the likelihood of the usage of the drug for treatment in neurodegenerative diseases and developmental disorders, Duncan said.

The Cantor analyst said his conviction has increased for the potential for use of ANAVEX 2-73, adding that he's now incorporating a PDD market model into his valuation of Anavex. Cantor's PDD model assumes a probability of success at 55%, a discount rate of 20% and a contribution margin of 70%. Additionally, Duncan projects ANAVEX 2-73 market penetration increasing from 0.5% in 2025 to 25% in 2037.

The model uses a net present value of revenue calculation to value Anavex by estimating free-cash-flows with the application of a 70% cash flow contribution margin on estimated sales. Annual sales are then ultimately discounted back to end-of-FY21, the analyst said. As a result, Cantor's Anavex price target is being raised from $31 to $40. 

The Cantor analyst’s model also projects the U.S. population of people over 45 years old with PDD will grow 0.7% annually from 244,000 adults in 2025 to 266,000 in 2037.

AVXL Price Action: Anavex shares were up 18.18% at $29.25 at last check Monday.