AVXL filing — read by section

Item 1A. Risk Factors

ITEM 1A. RISK
FACTORS 

 

 Risk Factor Summary 

 

 The following is a summary of the risks and
uncertainties that could cause our business, financial condition or operating results to be harmed. We encourage you to carefully
review the full risk factors contained in this report in their entirety for additional information regarding these risks and uncertainties.

 

 
 ● Our
 history
 of
 losses
 and
 no
 revenue
 raises
 a
 risk
 regarding
 our
 ability
 to
 continue
 as
 a
 going
 concern
 in
 the
 future; 

 

 
 ● We
 have
 a
 very
 limited
 relevant
 operating
 history
 upon
 which
 an
 evaluation
 of
 our
 performance
 and
 prospects
 can
 be
 made.
 We
 may
 never
 be
 able
 to
 successfully
 develop
 marketable
 products
 or
 generate
 any
 revenue.
 If
 we
 cannot
 generate
 sufficient
 revenues,
 we
 may
 suspend
 or
 cease
 operations; 

 

 
 ● Our
 research
 and
 development
 plans
 will
 require
 substantial
 additional
 future
 funding.
 We
 may
 be
 unable
 to
 raise
 capital
 when
 needed,
 which
 would
 force
 us
 to
 delay,
 reduce
 or
 eliminate
 our
 research
 and
 development
 activities; 

 

 
 ● Even
 if
 our
 products
 are
 approved,
 we
 may
 not
 be
 able
 to
 generate
 significant
 revenues
 from
 or
 successfully
 commercialize
 them,
 which
 will
 adversely
 affect
 our
 financial
 results
 and
 financial
 condition
 and
 we
 will
 have
 to
 delay
 or
 terminate
 some
 or
 all
 of
 our
 research
 and
 development
 plans
 which
 may
 force
 us
 to
 cease
 operations; 

 

 
 ● If
 we
 or
 any
 companion
 diagnostic
 collaborator
 of
 ours
 are
 unable
 to
 timely
 develop
 and
 obtain
 regulatory
 approval
 for
 companion
 diagnostic
 tests
 for
 our
 drug
 candidates,
 we
 may
 not
 realize
 the
 commercial
 potential
 of
 our
 drug
 candidates; 

 

 
 ● Regulatory
 authorities
 may
 not
 accept
 data
 from
 our
 trials
 conducted
 outside
 the
 United
 States; 

 

 
 ● Fast
 Track
 designation
 or
 breakthrough
 therapy
 designation
 that
 we
 have
 received
 or
 may
 seek
 out
 may
 not
 actually
 lead
 to
 a
 faster
 FDA
 review
 and
 approval
 process; 

 

 

 
 32 

 

 

 

 

 
 ● We
 may
 be
 unable
 to
 maintain
 any
 benefits
 associated
 with
 orphan
 drug
 designation,
 including
 market
 exclusivity; 

 

 
 ● If
 we
 fail
 to
 demonstrate
 efficacy
 in
 our
 non-clinical
 studies
 and
 clinical
 trials
 our
 future
 business
 prospects,
 financial
 condition
 and
 operating
 results
 will
 be
 materially
 adversely
 affected; 

 

 
 ● If
 we
 do
 not
 obtain
 the
 support
 of
 qualified
 scientific
 collaborators,
 our
 revenue,
 growth
 and
 profitability
 will
 likely
 be
 limited,
 which
 would
 have
 a
 material
 adverse
 effect
 on
 our
 business; 

 

 
 ● We
 may
 not
 be
 able
 to
 develop,
 market
 or
 generate
 sales
 of
 our
 products
 to
 the
 extent
 anticipated.
 Our
 business
 may
 fail
 and
 investors
 could
 lose
 all
 their
 investment
 in
 our
 Company; 

 

 
 ● None
 of
 our
 potential
 drug
 compounds
 may
 reach
 the
 commercial
 market
 and
 our
 business
 may
 fail; 

 

 
 ● Our
 technologies
 and
 future
 products
 may
 be
 rendered
 undesirable
 or
 obsolete
 if
 our
 competitors
 succeed
 in
 developing
 products
 and
 technologies
 faster
 or
 that
 are
 more
 effective
 or
 with
 a
 better
 profile
 than
 our
 own,
 or
 if
 scientific
 developments
 change
 our
 understanding
 of
 the
 potential
 scope
 and
 utility
 of
 our
 potential
 products; 

 

 
 ● We
 have
 advanced
 our
 research
 and
 development
 efforts
 on
 the
 treatment
 of
 neurodegenerative
 and
 central
 nervous
 system,
 or
 CNS,
 disorders,
 a
 field
 that
 has
 seen
 very
 limited
 success
 in
 product
 development; 

 

 
 ● Our
 reliance
 on
 third
 parties
 may
 result
 in
 delays
 in
 completing,
 or
 a
 failure
 to
 complete,
 non-clinical
 testing
 or
 clinical
 trials
 if
 they
 fail
 to
 perform
 under
 our
 agreements
 with
 them
 or
 non-compliance
 with
 regulations; 

 

 
 ● If
 we
 fail
 to
 compete
 with
 respect
 to
 partnering,
 licensing,
 mergers,
 acquisitions,
 joint
 venture
 and
 other
 collaboration
 opportunities,
 our
 ability
 to
 research
 and
 develop
 our
 potential
 drug
 compounds
 may
 be
 limited; 

 

 
 ● The
 use
 of
 any
 of
 our
 products
 in
 clinical
 trials
 may
 expose
 us
 to
 liability
 claims,
 causing
 our
 business
 to
 suffer; 

 

 
 ● If
 we
 are
 unable
 to
 safeguard
 against
 security
 breaches
 with
 respect
 to
 our
 information
 systems,
 our
 business
 may
 be
 adversely
 affected; 

 

 
 ● Continuing
 regulatory
 obligations
 and
 ongoing
 regulatory
 review
 may
 result
 in
 additional
 expense.
 Our
 compounds
 could
 be
 subject
 to
 restrictions
 on
 marketing
 or
 withdrawal
 from
 the
 market,
 and
 we
 may
 be
 subject
 to
 penalties
 when
 and
 if
 any
 of
 them
 are
 approved; 

 

 
 ● We
 receive
 Australian
 government
 research
 and
 development
 income
 tax
 incentive
 refunds.
 Loss
 of
 access
 to
 such
 incentives
 could
 have
 a
 negative
 effect
 on
 our
 future
 cash
 flows
 and
 the
 funding
 of
 future
 research
 and
 development
 projects; 

 

 
 ● Operating
 our
 business
 internationally
 carries
 various
 risks
 which
 could
 materially
 adversely
 affect
 our
 business; 

 

 
 ● Our
 ability
 to
 use
 our
 net
 operating
 loss
 carryforwards
 and
 tax
 credit
 carryforwards
 may
 be
 subject
 to
 limitation; 

 

 
 ● Healthcare
 laws
 and
 regulations
 could
 expose
 us
 to
 criminal
 sanctions,
 civil
 and
 administrative
 penalties,
 contractual
 damages,
 reputational
 harm
 and
 diminished
 profits
 and
 future
 earnings,
 among
 other
 penalties; 

 

 
 ● We
 expect
 current
 and
 future
 legislation
 affecting
 the
 pharmaceutical
 industry,
 including
 drug
 pricing
 reform,
 to
 impact
 our
 business
 generally,
 which
 could
 adversely
 affect
 our
 business
 operations; 

 

 
 ● Failure
 to
 obtain
 or
 maintain
 adequate
 coverage
 and
 reimbursement
 for
 our
 product
 candidates,
 if
 approved,
 could
 limit
 our
 ability
 to
 market
 those
 products
 and
 decrease
 our
 ability
 to
 generate
 product
 revenue; 

 

 
 ● Issuing
 additional
 shares
 of
 common
 stock
 will
 result
 in
 the
 dilution
 of
 our
 existing
 stockholders
 and
 may
 cause
 our
 stock
 price
 to
 fall.
 A
 decline
 in
 our
 stock
 price
 could
 affect
 our
 ability
 to
 raise
 further
 working
 capital
 and
 adversely
 affect
 our
 operations.
 Raising
 funds
 at
 lower
 prices
 would
 severely
 dilute
 existing
 or
 future
 investors; 

 

 

 
 33 

 

 

 

 

 
 ● Our
 stock
 price
 has
 been
 volatile
 and
 may
 be
 volatile
 in
 the
 future
 and
 our
 common
 stock
 may
 become
 the
 target
 of
 a
 “short
 squeeze”; 

 

 
 ● If
 we
 fail
 to
 maintain
 an
 effective
 system
 of
 internal
 control
 over
 financial
 reporting,
 we
 may
 not
 be
 able
 to
 accurately
 report
 our
 financial
 results
 or
 prevent
 fraud.
 Our
 disclosure
 controls
 and
 procedures
 may
 not
 prevent
 or
 detect
 all
 errors
 or
 acts
 of
 fraud.
 As
 a
 result,
 stockholders
 could
 lose
 confidence
 in
 our
 financial
 and
 other
 public
 reporting,
 which
 would
 harm
 our
 business
 and
 the
 trading
 price
 of
 our
 common
 stock; 

 

 
 ● Patent
 terms
 may
 be
 inadequate
 to
 protect
 our
 competitive
 position
 on
 our
 product
 candidates.
 If
 we
 are
 unable
 to
 obtain
 and
 maintain
 sufficient
 intellectual
 property
 protection
 for
 our
 product
 candidates,
 our
 competitors
 could
 develop
 and
 commercialize
 product
 candidates
 similar
 or
 identical
 to
 ours,
 and
 our
 ability
 to
 successfully
 commercialize
 our
 product
 candidates
 may
 be
 impaired; 

 

 
 ● If
 we
 fail
 to
 comply
 with
 our
 obligations
 in
 intellectual
 property
 licensing
 agreements
 or
 experience
 disruptions
 to
 our
 business
 relationships
 with
 our
 licensors,
 we
 could
 lose
 important
 intellectual
 property
 rights.
 If
 we
 are
 unable
 to
 protect
 the
 confidentiality
 of
 our
 trade
 secrets,
 our
 business
 would
 be
 harmed; 

 

 
 ● Intellectual
 property
 infringement
 claims
 may
 adversely
 affect
 our
 development
 and
 commercialization
 efforts; 

 

 
 ● We
 may
 be
 subject
 to
 claims
 that
 our
 employees,
 consultants
 or
 independent
 contractors
 have
 wrongfully
 used
 or
 disclosed
 confidential
 information
 of
 third
 parties
 or
 that
 our
 employees
 have
 wrongfully
 used
 or
 disclosed
 alleged
 trade
 secrets
 of
 their
 former
 employers; 

 

 
 ● Obtaining
 and
 maintaining
 our
 patent
 protection
 depends
 on
 compliance
 with
 various
 requirements
 imposed
 by
 governmental
 patent
 agencies.
 Changes
 in
 patent
 law
 could
 impair
 our
 ability
 to
 protect
 our
 product
 candidates; 

 

 
 ● We
 may
 become
 involved
 in
 lawsuits
 to
 protect
 or
 enforce
 our
 patents
 or
 other
 intellectual
 property;
 and 

 

 
 ● We
 may
 fail
 to
 protect
 our
 intellectual
 property
 rights
 or
 the
 confidentiality
 of
 our
 trade
 secrets. 

 

 In addition to other information in this Annual
Report on Form 10-K, the following risk factors should be carefully considered in evaluating our business because such factors
may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors
set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks
and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating
results, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition
could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline,
and you may lose all or part of your investment.

 

 Risks Related to our Company 

 

 We have had a history of losses and no
revenue, which raises a risk regarding our ability to continue as a going concern in the future. 

 

 Since inception through September 30, 2023,
we have accumulated a deficit of approximately $293 million. We can offer no assurance that we will ever operate profitably or
that we will generate positive cash flow in the future. To date, we have not generated any revenues from our operations. Our history
of losses and no revenues creates a greater risk of our continued ability to continue as a going concern in the future. As a result,
our management expects the business to continue to experience negative cash flows for the foreseeable future and cannot predict
when, if ever, our business might become profitable. We will need to raise additional funds, and such funds may not be available
on commercially acceptable terms, if at all. If we are unable to raise funds on acceptable terms, we may not be able to execute
our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This
may seriously harm our business, financial condition and results of operations.

 

 

 
 34 

 

 

 

 

 We are an early clinical stage pharmaceutical
research and development company and may never be able to successfully develop marketable products or generate any revenue. We
have a very limited relevant operating history upon which an evaluation of our performance and prospects can be made. There is
no assurance that our future operations will result in profits. If we cannot generate sufficient revenues, we may suspend or cease
operations. 

 

 We are an early clinical stage company and
have not generated any revenues to date and have no operating history. Moreover, we cannot be certain that our research and development
efforts will be successful or, if successful, that our potential drug compounds will ever be approved for sale to pharmaceutical
companies or generate commercial revenues. We have no relevant operating history upon which an evaluation of our performance and
prospects can be made. We are subject to all of the business risks associated with a new enterprise, including, but not limited
to, risks of unforeseen capital requirements, failure of potential drug compounds either in non-clinical testing or in clinical
trials, failure to establish business relationships and competitive disadvantages against larger and more established companies.
If we fail to become profitable, we may suspend or cease operations.

 

 We will need additional funding and may
be unable to raise additional capital when needed, which would force us to delay, reduce or eliminate our research and development
activities. 

 

 To date, we have funded our operations primarily
through private placement of our equity securities, and grants or draws under our “at the market offering” in connection
with an Amended and Restated Sales Agreement, dated May 1, 2020, with Cantor Fitzgerald & Co. and SVB Leerink LLC (the “Sales
Agents”), pursuant to which we may offer and sell shares of common stock registered under an effective registration statement
from time to time through the Sales Agents or the through the Purchase Agreement with Lincoln Park Capital Fund, LLC (“Lincoln
Park”) pursuant to which the Company may direct Lincoln Park to purchase shares of common stock registered under an effective
registration statement. The Company currently does not have access to sell shares under the Sales Agreement. We will need to raise
additional funding and the current economic conditions may have a negative impact on our ability to raise additional needed capital
on terms that are favorable to our Company or at all. We may not be able to generate significant revenues for several years, if
at all. Until we can generate significant revenues, if ever, we expect to satisfy our future cash needs through equity or debt
financing. We cannot be certain that additional funding will be available on acceptable terms, or at all. If adequate funds are
not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research and development activities.

 

 Risks Related to our Business 

 

 Even if we are able to develop our potential
drug compounds, we may not be able to receive regulatory approval, or if approved, we may not be able to generate significant revenues
or successfully commercialize our products, which will adversely affect our financial results and financial condition and we will
have to delay or terminate some or all of our research and development plans which may force us to cease operations. 

 

 All of our potential drug compounds are exclusively
focused on SIGMAR1 which has not previously been the subject of any approved drug products and will require extensive additional
research and development, including non-clinical testing and clinical trials, as well as regulatory approvals, before we can market
them. In particular, human therapeutic products are subject to rigorous non-clinical and clinical testing and other approval procedures
of the FDA and similar regulatory authorities in other countries. Various federal statutes and regulations also govern or influence
testing, manufacturing, safety, labeling, storage, and record-keeping related to such products and their marketing. We cannot predict
if or when any of the potential drug compounds we intend to develop will be approved for marketing. There are many reasons that
we may fail in our efforts to develop our potential drug compounds. These include:

 

 

 
 
 
 ● 
 the
 possibility that non-clinical testing or clinical trials may show that our potential drug compounds are ineffective and/or
 cause harmful side effects; 

 

 

 
 35 

 

 

 

 

 
 
 
 ● 
 regulators
 may not authorize us to commence or continue a clinical trial or may impose a clinical hold or may limit the conduct of a
 clinical trial through the imposition of a partial clinical hold; 

 

 
 
 
 ● 
 the
 number of patients required for clinical trials for our drug candidates may be larger than we anticipate, enrollment in these
 clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than
 we anticipate or the duration of these clinical trials may be longer than we anticipate; 

 

 
 
 
 ● 
 our
 third-party contractors, including investigators, may fail to meet their contractual obligations to us in a timely manner,
 or at all, or may fail to comply with regulatory requirements; 

 

 
 
 
 ● 
 our
 potential drug compounds may prove to be too expensive to manufacture or administer to patients; 

 

 
 
 
 ● 
 our
 potential drug compounds may fail to receive necessary regulatory approvals from the United States Food and Drug Administration
 or foreign regulatory authorities in a timely manner, or at all; 

 

 
 
 
 ● 
 even
 if our potential drug compounds are approved, we may not be able to produce them in commercial quantities or at reasonable
 costs; 

 

 
 
 
 ● 
 even
 if our potential drug compounds are approved, they may not achieve commercial acceptance; 

 

 
 
 
 ● 
 regulatory
 or governmental authorities may apply restrictions to any of our potential drug compounds, which could adversely affect their
 commercial success; and 

 

 
 
 
 ● 
 the
 proprietary rights of other parties may prevent us or our potential collaborative partners from marketing our potential drug
 compounds. 

 

 

 If we fail to develop our potential drug compounds,
our financial results and financial condition will be adversely affected, we will have to delay or terminate some or all of our
research and development plans and may be forced to cease operations.

 

 Our research and development plans will
require substantial additional future funding which could impact our operations and financial condition. 

 

 It will take several years before we can develop
potentially marketable products, if at all. Our research and development plans will require substantial additional capital, arising
from costs to:

 

 

 
 
 
 ● 
 conduct
 research, non-clinical testing and human clinical trials; 

 

 
 
 
 ● 
 establish
 pilot scale and commercial scale manufacturing processes and facilities; and 

 

 
 
 
 ● 
 establish
 and develop quality control, regulatory, marketing, sales, finance and administrative capabilities to support these programs. 

 

 

 Our future operating and capital needs will
depend on many factors, including:

 

 

 
 
 
 ● 
 the
 pace of scientific progress in our research and development programs and the magnitude of these programs; 

 

 
 
 
 ● 
 the
 scope and results of pre-clinical testing and human clinical trials; 

 

 

 
 36 

 

 

 

 

 
 
 
 ● 
 the
 time and costs involved in obtaining regulatory approvals; 

 

 
 
 
 ● 
 the
 time and costs involved in preparing, filing, prosecuting, securing, maintaining and enforcing patents; 

 

 
 
 
 ● 
 competing
 technological and market developments; 

 

 
 
 
 ● 
 our
 ability to establish additional collaborations; 

 

 
 
 
 ● 
 changes
 in our existing collaborations; 

 

 
 
 
 ● 
 the
 cost of manufacturing scale-up; and 

 

 
 
 
 ● 
 the
 effectiveness of our commercialization activities. 

 

 

 We base our outlook regarding the need for
funds on many uncertain variables. Such uncertainties include the success of our research initiatives, regulatory approvals, the
timing of events outside our direct control such as negotiations with potential strategic partners and other factors. Any of these
uncertain events can significantly change our cash requirements as they determine such one-time events as the receipt or payment
of major milestones and other payments.

 

 Additional funds may be required to support
our operations and if we are unable to obtain them on favorable terms, we may be required to cease or reduce certain further research
and development programs of our drug product platform, sell some or all our intellectual property, merge with another entity or
scale back operations.

 

 If we or any companion diagnostic collaborator
of ours are unable to successfully develop and obtain regulatory approval for companion diagnostic tests for our drug candidates,
or experience significant delays in doing so, we may not realize the commercial potential of our drug candidates. 

 

 We analyze genomic data from clinical trials
to identify biomarkers, which we use in the analysis of our clinical trials.

 

 Identification of these patients will require
the use and development of companion diagnostics. According to the FDA’s 2014 guidance document on In Vitro Companion Diagnostic
Devices, for novel therapeutic products that depend on the use of a diagnostic test and where the diagnostic device could be essential
for the safe and effective use of the corresponding therapeutic product, the premarket application for the companion diagnostic
device should be developed and approved or cleared contemporaneously with the therapeutic.

 

 We do not have experience or capabilities in
developing or commercializing diagnostics. It may be necessary to resolve issues such as selectivity/specificity, analytical validation,
reproducibility, or clinical validation of companion diagnostics during the development and regulatory approval processes. Moreover,
even if data from preclinical studies and early clinical trials appear to support development of a companion diagnostic for a drug
candidate, data generated in later clinical trials may fail to support the analytical and clinical validation of the companion
diagnostic. We and our future collaborators may encounter difficulties in developing, obtaining regulatory approval for, manufacturing
and commercializing companion diagnostics similar to those we face with respect to our drug candidates, including issues with achieving
regulatory clearance or approval, production of sufficient quantities at commercial scale and with appropriate quality standards,
and in gaining market acceptance. If we are unable to successfully develop companion diagnostics for our drug candidates, or experience
delays in doing so, the development of these drug candidates may be adversely affected, these drug candidates may not obtain marketing
approval, and we may not realize the full commercial potential of any of these therapeutics that have or may obtain marketing approval.
We may not be able to enter into arrangements with another diagnostic company to develop and obtain regulatory approval for of
an alternative diagnostic test for use in connection with the development and commercialization of our drug candidates or do so
on commercially reasonable terms, which could adversely affect and/or delay the development or commercialization of our therapeutic
candidates or therapeutics.

 

 

 
 37 

 

 

 

 

 Companion diagnostics are subject to regulation
by the FDA and comparable foreign regulatory authorities as medical devices and will likely require separate regulatory approval
prior to commercialization. If we or third parties are unable to successfully develop companion diagnostics for our drug candidates,
or experience delays in doing so:

 

 

 
 
 
 ● 
 the
 development of these drug candidates may be delayed because it may be difficult to identify patients for enrollment in our
 clinical trials in a timely manner; 

 

 
 
 
 ● 
 these
 drug candidates may not receive marketing approval if their safe and effective use depends on a companion diagnostic; and 

 

 
 
 
 ● 
 we
 may not realize the full commercial potential of these drug candidates that receive marketing approval if, among other reasons,
 we are unable to appropriately identify patients or types of tumors targeted by these drug candidates. 

 

 Even if our drug candidates and any associated
companion diagnostics are approved for marketing, the need for companion diagnostics may slow or limit adoption of our drug candidates.
Our drug candidates may be perceived negatively compared to alternative treatments that do not require the use of companion diagnostics,
either due to the additional cost of the companion diagnostic or the need to complete additional prior to administering our drug
candidates.

 

 If any of these events were to occur, our business
and growth prospects would be harmed materially.

 

 All but one of our clinical
trials to date have been conducted outside the United States, 
 and the FDA and other foreign 
 regulatory authorities may not accept 
 data from such trials. 

 

 The acceptance 
 of study data from 
 clinical trials conducted 
 outside the United 
 States by the FDA may 
 be subject to certain conditions 
 or may not be accepted at all. 
 In cases where data from 
 foreign clinical trials 
 are intended to serve 
 as the sole basis 
 for regulatory approval in the 
 United States, the 
 FDA will generally 
 not approve the application 
 on the basis of foreign 
 data alone unless (i) 
 the data are 
 applicable to the United 
 States population and United 
 States medical practice; 
 (ii) the trials 
 were performed by clinical investigators 
 of recognized competence and pursuant 
 to good clinical practice regulations;
and (iii) the data 
 may be considered valid 
 without the need for 
 an on-site inspection by the 
 FDA, or if the 
 FDA considers such inspection to be
necessary, the FDA 
 is able to validate 
 the data through 
 an on-site inspection or other 
 appropriate means. Many foreign 
 regulatory bodies have similar 
 approval requirements. In addition, 
 such foreign trials would be subject 
 to the applicable local 
 laws of the foreign jurisdictions 
 where the trials are conducted. 
 There can be no assurance that 
 the FDA or any other 
 foreign regulatory authority 
 will accept data from 
 trials conducted outside 
 of the United States 
 or the applicable jurisdiction. 
 If the FDA 
 or any comparable foreign regulatory authority 
 does not accept such data, it 
 would result in the need for 
 additional trials, which would be costly 
 and time-consuming and delay aspects 
 of our business plan, and which
may result in our product candidates 
 not receiving approval or clearance 
 for commercialization in the 
 applicable jurisdiction.

 

 We have received Fast Track designation
for one of our compounds and may seek such designation or breakthrough therapy and priority review for other compounds in the future.
Fast Track designation or breakthrough therapy designation may not actually lead to a faster FDA review and approval process. 

 

 

 
 38 

 

 

 

 

 For some of our compounds, including ANAVEX ® 2-73,
we hope to benefit from the FDA’s fast track and priority review programs. In February 2020, the FDA granted Fast Track designation
for the ANAVEX ® 2-73 clinical development program for the treatment of Rett syndrome. Programs with Fast Track designation
may benefit from early and frequent communications with the FDA, potential priority review and the ability to submit a rolling
application for regulatory review. Fast Track designation applies to both the product candidate and the specific indication for
which it is being studied. If any of our compounds receive Fast Track designation but do not continue to meet the criteria for
Fast Track designation, or if our clinical trials are delayed, suspended or terminated, or put on clinical hold due to unexpected
adverse events or issues with clinical supply, we will not receive the benefits associated with the Fast Track program. Furthermore,
Fast Track designation does not change the standards for approval. The receipt of Fast Track designation for a compound may not
result in a faster development or regulatory review or approval process compared to products considered for approval under conventional
FDA procedures and does not assure ultimate approval by the FDA. In addition, even if any product candidate qualifies for Fast
Track designation, the FDA may later decide that the product candidates no longer meet the conditions for qualification or decide
that the time period for FDA review or approval will not be shortened. Fast Track designation alone does not guarantee qualification
for the FDA’s priority review procedures.

 

 Under FDA policies, a compound is eligible
for priority review, or review within a six-month time frame from the time a complete NDA is accepted for filing, if the compound
provides a significant improvement compared to marketed drugs in the treatment, diagnosis or prevention of a disease. The FDA determines
whether a drug qualifies for Priority Review after an NDA for such drug is submitted to the FDA. Therefore, until NDAs are submitted
for our compounds, we cannot be assured that they will be granted Priority Review. Additionally, even if Priority Review is granted
for one of our compounds, the FDA does not always meet its six-month PDUFA goal date for Priority Review and the review process
is often extended by FDA requests for additional information or clarification.

 

 We may seek Breakthrough Therapy designation
for one or more of our current or future compounds. Designation as a Breakthrough Therapy is largely within the discretion of the
FDA. Accordingly, even if we believe that a compound meets the criteria for designation as a Breakthrough Therapy, the FDA may
disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy designation for
a product candidate may not result in a faster development process, review or approval compared to candidate products considered
for approval under non-expedited FDA review procedures and does not assure ultimate approval by the FDA. In addition,
even if one or more compounds qualify as breakthrough therapies, the FDA may later decide that the product no longer meets the
conditions for qualification and revoke the designation.

 

 Fast track or breakthrough therapy designation
for our compounds may not actually lead to a faster review process, and a delay in the review process or in the approval of our
compounds will delay revenue from their potential sales and will increase the capital necessary to fund these compound development
programs.

 

 We have received orphan drug designation for several of our
compounds, but we may be unable to maintain any benefits associated with orphan drug designation, including market exclusivity. 

 

 Under the Orphan Drug Act, the FDA may grant
orphan designation to a drug intended to treat a rare disease or condition or for which there is no reasonable expectation that
the cost of developing and making available in the United States a drug for a disease or condition will be recovered from sales
in the United States for that drug. If a product that has orphan drug designation subsequently receives the first FDA approval
for the indication for which it has such designation, the product is entitled to orphan product exclusivity, which means that the
FDA may not approve any other applications, including a full NDA, to market the same drug or biologic for the same indication for
seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.

 

 

 
 39 

 

 

 

 

 We have received orphan drug designation for
several of our compounds, but we may not be able to obtain or maintain orphan drug exclusivity in the United States for hose compounds.
We may not be the first to obtain marketing approval of any compound for which we have obtained orphan drug designation for the
orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive
marketing rights in the United States may be limited if we seek FDA marketing approval for an indication broader than the orphan
designated indication. Additionally, any compound with orphan drug designation may lose such designation if the FDA later determines
that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the
product to meet the needs of patients with the rare disease or condition. Even after an orphan drug is approved, the FDA can subsequently
approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically
superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In addition, others
may obtain orphan drug exclusivity for products addressing the same diseases or conditions as products we are developing, thus
limiting our ability to compete in the markets addressing such diseases or conditions for a significant period of time. Orphan
drug designation neither shortens the development time or regulatory review time of a drug nor gives the product candidate any
advantage in the regulatory review or approval process or entitles the product candidate to priority review. 

 

 If we fail to demonstrate efficacy in
our non-clinical studies and clinical trials our future business prospects, financial condition and operating results will be materially
adversely affected. 

 

 The success of our research and development
efforts will be greatly dependent upon our ability to demonstrate potential drug compound efficacy in non-clinical studies, as
well as in clinical trials. Non-clinical studies involve testing potential drug compounds in appropriate non-human disease models
to demonstrate efficacy and safety. Regulatory agencies evaluate these data carefully before they will approve clinical testing
in humans. If certain non-clinical data reveals potential safety issues or the results are inconsistent with an expectation of
the potential drug compound’s efficacy in humans, the regulatory agencies may require additional more rigorous testing before
allowing human clinical trials. This additional testing will increase program expenses and extend timelines. We may decide to suspend
further testing on our potential drug compounds if, in the judgment of our management and advisors, the non-clinical test results
do not support further development.

 

 Moreover, success in non-clinical testing and
early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of
later clinical trials will replicate the results of prior clinical trials and non-clinical testing. The clinical trial process
may fail to demonstrate that our potential drug compounds are safe for humans and effective for indicated uses. This failure would
cause us to abandon a drug candidate and may delay development of other potential drug compounds. Any delay in, or termination
of, our non-clinical testing or clinical trials will delay the filing of an IND and NDA with the FDA or the equivalent applications
with pharmaceutical regulatory authorities outside the United States and, ultimately, our ability to commercialize our potential
drug compounds and generate product revenues. In addition, we expect that our early clinical trials will involve small patient
populations. Because of the small sample size, the results of these early clinical trials may not be indicative of future results.
Also, the IND process may be extremely costly and may substantially delay the development of our potential drug compounds. Moreover,
positive results of non-clinical tests will not necessarily indicate positive results in subsequent clinical trials.

 

 Following successful non-clinical testing,
potential drug compounds will need to be tested in a clinical development program to provide data on safety and efficacy prior
to becoming eligible for product approval and licensure by regulatory agencies. From the first human trial through to regulatory
approval can take many years and 10-12 years is not unusual for certain compounds.

 

 If any of our future clinical development potential
drug compounds become the subject of problems, our ability to sustain our development programs will become critically compromised.
For example, efficacy or safety concerns may arise, whether or not justified, that could lead to the suspension or termination
of our clinical programs. Examples of problems that could arise include, among others:

 

 
 
 
 ● 
 efficacy
 or safety concerns with the potential drug compounds, even if not justified; 

 

 
 
 
 ● 
 manufacturing
 difficulties or concerns; 

 

 
 
 
 ● 
 regulatory
 proceedings subjecting the potential drug compounds to potential recall; 

 

 

 
 40 

 

 

 

 

 
 
 
 ● 
 publicity
 affecting doctor prescription or patient use of the potential drug compounds; 

 

 
 
 
 ● 
 pressure
 from competitive products; or 

 

 
 
 
 ● 
 introduction
 of more effective treatments. 

 

 

 Each clinical phase is designed to test attributes
of the drug and problems that might result in the termination of the entire clinical plan can be revealed at any time throughout
the overall clinical program. The failure to demonstrate efficacy in our clinical trials would have a material adverse effect on
our future business prospects, financial condition and operating results.

 

 If we do not obtain the support of qualified
scientific collaborators, our revenue, growth and profitability will likely be limited, which would have a material adverse effect
on our business. 

 

 We will need to establish relationships with
leading scientists and research institutions. We believe that such relationships are pivotal to establishing products using our
technologies as a standard of care for various indications. Additionally, although in discussion, there is no assurance that our
current research partners will continue to work with us or that we will be able to attract additional research partners. If we
are not able to establish scientific relationships to assist in our research and development, we may not be able to successfully
develop our potential drug compounds. If this happens, our business will be adversely affected.

 

 We may not be able to develop, market
or generate sales of our products to the extent anticipated. Our business may fail and investors could lose all their investment
in our Company. 

 

 Assuming that we are successful in developing
our potential drug compounds and receiving regulatory clearances to market our products, our ability to successfully penetrate
the market and generate sales of those products may be limited by a number of factors, including the following:

 

 

 
 
 
 ● 
 If
 our competitors receive regulatory approvals for and begin marketing similar products in the United States, the European Union,
 Japan and other territories before we do, greater awareness of their products as compared to ours will cause our competitive
 position to suffer; 

 

 
 
 
 ● 
 Information
 from our competitors or the academic community indicating that current products or new products are more effective or offer
 compelling other benefits than our future products could impede our market penetration or decrease our future market share;
 and 

 

 
 
 
 ● 
 The
 pricing and reimbursement environment for our future products, as well as pricing and reimbursement decisions by our competitors
 and by payers, may have an effect on our revenues. 

 

 

 If this happens, our business will be adversely
affected.

 

 None of our potential drug compounds
may reach the commercial market for a number of reasons and our business may fail. 

 

 Successful research and development of pharmaceutical
products is high risk. Most products and development candidates fail to reach the market. Our success depends on the discovery
of new drug compounds that we can commercialize. It is possible that our products may never reach the market for a number of reasons.
They may be found ineffective or may cause harmful side-effects during non-clinical testing or clinical trials or fail to receive
necessary regulatory approvals. We may find that certain products cannot be manufactured at a commercial scale and, therefore,
they may not be economical to produce. Our potential products could also fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. Our patents, patent applications, trademarks and other intellectual property
may be challenged, and this may delay or prohibit us from effectively commercializing our products. Furthermore, we do not expect
our potential drug compounds to be commercially available for a number of years, if at all. If none of our potential drug compounds
reach the commercial market, our business will likely fail and investors will lose all of their investment in our Company. If this
happens, our business will be adversely affected.

 

 

 
 41 

 

 

 

 If our competitors succeed in developing
products and technologies faster or that are more effective or with a better profile than our own, or if scientific developments
change our understanding of the potential scope and utility of our potential products, then our technologies and future products
may be rendered undesirable or obsolete. 

 

 We face significant competition from industry
participants that are pursuing technologies in similar disease states to those that we are pursuing and are developing pharmaceutical
products that are competitive with our products. Nearly all of our industry competitors have greater capital resources, larger
overall research and development staffs and facilities, and a longer history in drug discovery and development, obtaining regulatory
approval and pharmaceutical product manufacturing and marketing than we do. With these additional resources, our competitors may
be able to respond to the rapid and significant technological changes in the biotechnology and pharmaceutical industries faster
than we can. Our future success will depend in large part on our ability to maintain a competitive position with respect to these
technologies. Rapid technological development, as well as new scientific developments, may result in our products becoming obsolete
before we can recover any of the expenses incurred to develop them. For example, changes in our understanding of the appropriate
population of patients who should be treated with a targeted therapy like we are developing may limit the drug’s market potential
if it is subsequently demonstrated that only certain subsets of patients should be treated with the targeted therapy.

 

 We have advanced our research and development
efforts on the treatment of neurodegenerative and central nervous system, or CNS, disorders, a field that has seen very limited
success in product development. 

 

 We have advanced our
research and development efforts on addressing neurodegenerative, neurodevelopmental and CNS disorders. Collectively, efforts by
pharmaceutical companies in the field of neurodegenerative, neurodevelopmental and CNS disorders have seen very limited
successes in product development. The development of neurodegenerative and CNS therapies presents unique challenges, including
an imperfect understanding of the biology, the presence of the blood brain barrier, or BBB, that can restrict the flow of drugs
to the brain, a frequent lack of translatability of preclinical study results in subsequent clinical trials and dose selection,
and the product candidate having an effect that may be too small to be detected using the outcome measures selected in clinical
trials or if the outcomes measured do not reach statistical significance.

 

 Our reliance on third parties, such as
university laboratories, contract manufacturing organizations and contract or clinical research organizations, may result in delays
in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform under our agreements with
them or non-compliance with regulations. 

 

 In the course of product development, we may
engage university laboratories, other biotechnology companies or contract or clinical manufacturing organizations to manufacture
drug material for us to be used in non-clinical and clinical testing and contract research organizations to conduct and manage
non-clinical studies and clinical trials. If we engage these organizations to help us with our non-clinical and clinical programs,
many important aspects of this process have been and will be out of our direct control. If any of these organizations we may engage
in the future fail to perform their obligations under our agreements with them or fail to perform non-clinical testing and/or clinical
trials in a satisfactory manner, we may face delays in completing our clinical trials, as well as commercialization of any of our
potential drug compounds. Furthermore, any loss or delay in obtaining contracts with such entities may also delay the completion
of our clinical trials, regulatory filings and the potential market approval of our potential drug compounds.

 

 

 
 42 

 

 

 

 

 In addition, any of these third parties may
engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements. Misconduct
by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that
violate the regulations of any regulatory authorities, including those laws requiring the reporting of true, complete and accurate
information to such authorities; healthcare fraud and abuse laws and regulations in the United States and abroad; or laws that
require the reporting of financial information or data accurately. It is not always possible to identify and deter misconduct by
employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling
unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming
from a failure to comply with these laws or regulations.

 

 If we fail to compete successfully with
respect to partnering, licensing, mergers, acquisitions, joint venture and other collaboration opportunities, we may be limited
in our ability to research and develop our potential drug compounds. 

 

 Our competitors compete with us to attract
established biotechnology and pharmaceutical companies or organizations for partnering, licensing, mergers, acquisitions, joint
ventures or other collaborations. Collaborations include contracting with academic research institutions for the performance of
specific scientific testing. If our competitors successfully enter into partnering arrangements or license agreements with academic
research institutions, we will then be precluded from pursuing those specific opportunities. Since each of these opportunities
is unique, we may not be able to find a substitute. Other companies have already begun many drug development programs, which may
target diseases that we are also targeting, and have already entered into partnering and licensing arrangements with academic research
institutions, reducing the pool of available opportunities.

 

 Universities and public and private research
institutions also compete with us. While these organizations primarily have educational or basic research objectives, they may
develop proprietary technology and acquire patent applications and patents that we may need for the development of our potential
drug compounds. In some instances, we will attempt to license this proprietary technology, if available. These licenses may not
be available to us on acceptable terms, if at all. If we are unable to compete successfully with respect to acquisitions, joint
venture and other collaboration opportunities, we may be limited in our ability to develop new products.

 

 The use of any of our products in clinical
trials may expose us to liability claims, which may cost us significant amounts of money to defend against or pay out, causing
our business to suffer. 

 

 The nature of our business exposes us to potential
liability risks inherent in the testing, manufacturing and marketing of our products. We currently have one drug compound in clinical
trials, however, when any of our products enter clinical trials or become marketed products, they could potentially harm people
or allegedly harm people possibly subjecting us to costly and damaging product liability claims. Some of the patients who participate
in clinical trials are already ill when they enter a trial or may intentionally or unintentionally fail to meet the exclusion criteria.
The waivers we obtain may not be enforceable and may not protect us from liability or the costs of product liability litigation.
Although we intend to obtain product liability insurance, which we believe is adequate, we are subject to the risk that our insurance
will not be sufficient to cover claims. The insurance costs along with the defense or payment of liabilities above the amount of
coverage could cost us significant amounts of money and management distraction from other elements of the business, causing our
business to suffer.

 

 If our information systems or data, or
those of third parties upon whom we rely, are or were compromised, our business may be adversely affected. 

 

 In the course of our business, we, or third
parties upon which we rely, may gather, collect, receive, use, transmit, store/retain or dispose of data and confidential information
(such as confidential employee information or health-related data), sensitive data, intellectual property and trade secrets.

 

 Cyberattacks,
malicious internet-based activity, online and offline fraud and other similar activities threaten the confidentiality, integrity,
and availability of our sensitive information and information technology systems, and those of the third parties upon which we
rely. We, and the third parties upon which we may rely, may be subject to a variety of these evolving threats.

 

 

 
 43 

 

 

 

 

 Although we
endeavor to protect confidential information through the implementation of security technologies, processes and procedures, it
is possible that an individual or group could defeat security measures and access sensitive information about our business and
employees. The existence of a remote workforce also poses increased risks to our information technology
systems and data, as more of our employees work from home, utilizing network connections outside our premises. 

 

 Any misappropriation, loss or other unauthorized
disclosure of confidential information gathered, stored or used by us or by third parties on our behalf, could have a material
impact on the operation of our business, including damaging our reputation with our employees, third parties and investors. We
could also incur significant costs implementing additional security measures and organizational changes, implementing additional
protection technologies, training employees or engaging consultants.

 

 Our
contracts with third parties upon which we may rely, may not contain limitations of liability, and even where they do, there can
be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims
related to our data privacy and security obligations. In addition, we could incur increased litigation as a result of any
potential cyber-security breach and our insurance coverage may not be adequate or sufficient in type
or amount to protect us from or to mitigate liabilities arising out of our privacy and security practices. 

 

 We are not aware that we have experienced any
material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result
of a cyber-security breach or other act, however, a cyber-security breach or other act and/or disruption to our information technology
systems could have a material adverse effect on our business, prospects, financial condition or results of operations.

 

 Even if we receive regulatory approval
for one or more compounds, we will be subject to continuing regulatory obligations and ongoing regulatory review, which may result
in significant additional expense. Additionally, our compounds, if approved, could be subject to labeling and other restrictions
on marketing or withdrawal from the market, and we may be subject to penalties, if we fail to comply with regulatory requirements
or if we experience unanticipated problems with our compounds, when and if any of them are approved. 

 

 Following potential approval of any our compounds,
the FDA may impose significant restrictions on a drug’s indicated uses or marketing or require potentially costly and time-consuming
post-approval studies, post-market surveillance or clinical trials to monitor the safety and efficacy of the drug. The FDA may
also require a Risk Evaluation and Mitigation Strategy (“REMS”) as a condition of approval of one or more of our compounds,
which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use
of the drug. Additional REMS elements may include restricted distribution methods, patient registries and other risk minimization
tools.

 

 In addition, if the FDA or a comparable foreign
regulatory authority approves one or more of our compounds, the manufacturing processes, labeling, packaging, distribution, adverse
event reporting, storage, advertising, promotion, import, export and recordkeeping for the approved drug will be subject to additional
and potentially extensive ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing
information and reports, establishment registration, as well as continued compliance with cGMPs and GCP requirements for any clinical
trials that we conduct post-approval. Later discovery of previously unknown problems with our products, including adverse events
of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply
with regulatory requirements, may result in, among other things:

 

 

 
 
 
 ● 
 restrictions
 on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product
 recalls; 

 

 

 
 44 

 

 

 

 

 
 
 
 ● 
 fines,
 restitutions, disgorgement of profits or revenues, warning letters, untitled letters or holds on clinical trials; 

 

 
 
 
 ● 
 restrictions
 on product distribution or use, or requirements to conduct post-marketing studies or clinical trials; 

 

 
 
 
 ● 
 product
 seizure or detention, or refusal to permit the import or export of our products; 

 

 
 
 
 ● 
 injunctions
 or the imposition of civil or criminal penalties; and 

 

 
 
 
 ● 
 refusal
 by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation
 of approvals. 

 

 

 The occurrence of any event or penalty described
above may limit our ability to commercialize our compounds and generate revenue, and could require us to expend significant time
and resources in response or generate negative publicity.

 

 If any of our compounds are approved, our product
labeling, advertising and promotion will also be subject to regulatory requirements and ongoing regulatory review. The FDA strictly
regulates the promotional claims that may be made about drug products. In particular, a drug may not be promoted for uses that
are not approved by the FDA as reflected in the drug’s approved labeling. If we receive marketing approval for a compound,
physicians may nevertheless lawfully prescribe it to their patients in a manner that is inconsistent with the approved label. While
the FDA recently clarified that mere knowledge that a physician is prescribing an approved drug for off label use is not sufficient
to constitute unlawful off-label promotion, if we are found to have actively promoted such off label uses, we may become subject
to significant liability under the FDCA. The federal government has levied large civil and criminal fines against companies for
alleged improper promotion and has enjoined several companies from engaging in off-label promotion. Additionally, promotion for
off label uses could result in significant liability under the False Claims Act. The FDA has also requested that companies enter
into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

 

 The FDA’s and other regulatory authorities’
policies are subject to change at any time, and additional government regulations may be enacted that could prevent, limit or delay
regulatory approval of our compounds. If we are unable to timely adapt to changes in existing requirements or the adoption of new
requirements or policies, or if we are not able to maintain regulatory compliance post-marketing, we may lose any marketing approval
that we may have obtained, and we may not achieve or sustain profitability.

 

 Finally, we cannot predict the likelihood,
nature or extent of government regulation that may arise from future legislation or administrative or executive action, either
in the United States or abroad. It is difficult to predict how any such legislative, administrative or executive actions will be
implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these legislative
or executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the
normal course, our business may be negatively impacted.

 

 We receive Australian government
research and development income tax incentive refunds. If our research and development expenditures are not deemed to
be eligible for the refund, proposed modifications to the tax incentive program are enacted, or the tax incentive
program is discontinued by the Australian government, it could have a negative effect on our future cash flows and the
funding of future research and development projects. 

 

 Our subsidiary, Anavex Australia Pty Ltd.,
is incorporated in Australia where we are currently engaged in research and development activities for ANAVEX ® 2-73
and ANAVEX ® 3-71. Our subsidiary is eligible to participate in the Australian Federal Government’s
Research and Development Tax Incentive program, under which the government provides a cash refund for a portion of eligible
research and development expenditures (currently 43.5% to 48.5% depending on the entity’s corporate tax rate) by small Australian entities,
which are defined as Australian entities with less than $20 million (Australian) in revenue.

 

 

 
 45 

 

 

 

 

 The Research and Development Tax Incentive
refund is offered by the Australian federal government for eligible research and development purposes based on the filing
of an annual application. As part of this program, our subsidiary applied for and received cash refunds from the Australian Taxation
Office, or the ATO, for a percentage of the research and development costs expended by our subsidiary in Australia. Since the fiscal
year ended September 30, 2015, we have been receiving Research and Development Tax Incentive refunds related to research
and development expenditures made.

 

 Certain research and development expenses incurred
outside of Australia are also eligible for the Australian research and development tax incentive program, provided
we obtain an Advance Overseas Finding from AusIndustry, a division of the Australian Government’s Department of Industry,
Innovation and Science (“AusIndustry”). To receive an Advance Overseas Finding, the expenses must have been for
eligible research and development activities, as determined by AusIndustry, and the expenditures must have a scientific link to
the Australian activities, be unable to be conducted in Australia and the total actual and reasonably anticipated overseas
costs must be expected to be less than the total actual and reasonably anticipated expenditures for activities conducted within
Australia, as determined by AusIndustry at the time of application for an Advance Overseas Finding (“OSF”).

 

 This OSF binds both
AusIndustry and the Commissioner of Taxation for three income years. However, for compliance purposes, specific issue guidance
jointly issued by AusIndustry and the ATO in 2014 provides that an OSF can apply for the duration of the overseas activity provided
the activities are not new or materially different then the activities described in the OSF. Currently, the Company is outside
of the binding three-year period with respect to OSF applicable to some of its programs being claimed in Australia.

 

 To the extent that some or all of our research
and development expenditures are deemed to be “ineligible,” then our refunds may decrease or be eliminated. In addition,
the Australian government may in the future modify the requirements of, reduce the amounts of the refunds available under,
or discontinue the Research and Development Tax Incentive program. Any such change to our anticipated refunds or change
to the Research and Development Tax Incentive program would have a negative effect on our future cash flows.

 

 A variety of risks are associated with
operating our business internationally which could materially adversely affect our business. 

 

 We are presently
conducting clinical development solely in Australia, United Kingdom, The Netherlands, Germany and Canada 
and may choose to conduct additional international and U.S. clinical trials in the future. Additionally, while we have not taken
any steps to enter into any non-U.S. markets, we may do so in the future. Accordingly, we are subject to risks related to operating
in foreign countries, including: 

 

 

 
 
 
 ● 
 different
 standards of care in various countries that could complicate the evaluation of our product candidates; 

 

 
 
 
 ● 
 different
 United States and foreign drug import and export rules; 

 

 
 
 
 ● 
 reduced
 protection for intellectual property rights in certain countries; 

 

 
 
 
 ● 
 unexpected
 changes in tariffs, trade barriers and regulatory requirements; 

 

 
 
 
 ● 
 economic
 weakness, including inflation, or political instability in particular foreign economies and markets; 

 

 
 
 
 ● 
 compliance
 with tax, employment, immigration, and labor laws for employees living or traveling abroad; 

 

 
 
 
 ● 
 compliance
 with the FCPA and other anti-corruption and anti-bribery laws; 

 

 

 
 46 

 

 

 

 

 
 
 
 ● 
 foreign
 taxes, including withholding of payroll taxes; 

 

 
 
 
 ● 
 foreign
 currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident
 to doing business in another country; 

 

 
 
 
 ● 
 workforce
 uncertainty in countries where labor unrest is more common than in the United States; 

 

 
 
 
 ● 
 production
 shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; 

 

 
 
 
 ● 
 different payor
 reimbursement regimes, governmental payors or patient self-pay systems and price controls; 

 

 
 
 
 ● 
 potential liability
 resulting from development work conducted by foreign partners; 

 

 
 
 
 ● 
 business interruptions
 resulting from natural disasters, outbreaks of contagious diseases, such as COVID-19, or geopolitical actions, including war
 and terrorism, or systems failure including cybersecurity breaches; and 

 

 
 
 
 ● 
 compliance with
 evolving and expansive foreign regulatory requirements, including data privacy laws (such as the GDPR). 

 

 

 Additionally, in connection with the ongoing
conflict between Russia and Ukraine, the U.S. government and European Union countries have imposed enhanced export controls on
certain products and sanctions on certain industry sectors and parties in Russia. The U.S. government has also indicated it will
consider imposing additional sanctions and other similar measures in the near future. Although we do not currently conduct any
clinical trials in Russia or Ukraine, further escalation of geopolitical tensions could have a broader impact that expands into
other markets where we do business or conduct certain research and development operations, which could adversely affect our business,
our supply chain for our product candidates, our collaborators or our ability to carry out our clinical trials.

 

 Our
ability to use our net operating loss (“NOL”) carryforwards and certain tax credit carryforwards may be subject to
limitation. 

 

 As of September 30, 2023, we had approximately
$126.3 million of U.S. federal and $192.0 million of state and local NOL carryforwards. We had approximately $12.9 million of NOL
carryforwards in Australia as of the same period. Our NOL carryforwards are subject to review and possible adjustment by the U.S.
and state tax authorities. In addition, under Sections 382 and 383 of the Code and corresponding provisions of state law, if a
corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change (by value) in
its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and research
and development credits to offset its post-change income may be limited. This could limit the amount of NOLs or research and development
credit carryforwards that we can utilize annually to offset future taxable income or tax liabilities. Subsequent ownership changes
and changes to the U.S. tax rules in respect of the utilization of NOLs and research and development credits carried forward may
further affect the limitation in future years. In addition, at the state level, there may be periods during which the use of NOLs
is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

 

 We conducted a Section 382 study during the
year ended September 30, 2021 and determined that, during the year ended September 30, 2015, there was a change in ownership which
resulted in $25.8 million of federal NOLs being subject to an annual limitation. During the year ended September 30, 2021, we reduced
our federal NOLs by $12.1 million and our research and development tax credit carryforwards by $0.8 million, which are the amount
of tax assets that will expire unutilized pursuant to the Section 382 study. This resulted in a reduction of $2.5 million of NOLs
and $0.8 million of research and development credits and a corresponding reduction in the valuation allowance of $3.3 million,
which was recorded in the 2021 fiscal year. Subsequent ownership changes in future years could trigger additional limitations of
our NOLs. During the year ended September 30, 2023 and 2022, we determined that there were no changes in ownership pursuant to
Section 382.

 

 

 
 47 

 

 

 

 

 We are subject to healthcare laws and
regulations which may require substantial compliance efforts and could expose us to criminal sanctions, civil and administrative
penalties, contractual damages, reputational harm and diminished profits and future earnings, among other penalties. 

 

 Healthcare providers, physicians and others
will play a primary role in the recommendation and prescription of our products, if approved. Our arrangements with such persons
and third-party payors and our general business operations will expose us to broadly applicable fraud and abuse and other healthcare
laws and regulations that may constrain the business or financial arrangements and relationships through which we research, market,
sell and distribute our drugs, if we obtain marketing approval. Restrictions under applicable U.S. federal, state and foreign healthcare
laws and regulations include, but are not limited to, the following:

 

 

 
 
 
 ● 
 the U.S. federal
 Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering,
 receiving or providing remuneration, including any kickback, bribe or rebate, directly or indirectly, in cash or in kind,
 to induce or reward, or in return for, either the referral of an individual for, or the purchase or lease, order or recommendation
 of, any item, good, facility or service, for which payment may be made under federal healthcare programs such as Medicare
 and Medicaid; 

 

 
 
 
 ● 
 U.S. federal civil
 and criminal false claims laws and civil monetary penalties laws, including the civil False Claims Act, which impose criminal
 and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for, among
 other things, knowingly presenting, or causing to be presented, claims for payment that are false or fraudulent or making
 a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government; 

 

 
 
 
 ● 
 The Stark Law prohibits
 a physician from making referrals for certain “designated health services” payable by Medicare to an entity in
 which the physician or an immediate family member of such physician has an ownership or investment interest or with which
 the physician has entered into a compensation arrangement, unless a statutory exception applies. There are a number of exceptions
 to the Stark Law. Such exceptions permit certain payments and arrangements that, although they would otherwise potentially
 implicate the Stark Law, are not treated as a violation under the same if the requirements of the specific exceptions are
 met. 

 

 
 
 
 ● 
 HIPAA, which among
 other things, created additional federal criminal statutes that impose criminal and civil liability for, such actions as executing
 or attempting to execute a scheme to defraud any healthcare benefit program or knowingly and willingly falsifying, concealing
 or covering up a material fact or making false statements relating to healthcare matters; 

 

 
 
 
 ● 
 The privacy and
 security provisions of HIPAA, which impose certain requirements on covered entities and their business associates, including
 mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable
 health information; 

 

 
 
 
 ● 
 U.S. federal transparency
 requirements under the Physician Payments Sunshine Act, enacted as part of the Affordable Care Act that require applicable
 manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid
 or the Children’s Health Insurance Program, with specific exceptions, to track and annually report to CMS payments and
 other transfers of value provided to physicians, certain other healthcare providers (such as physicians assistants and nurse
 practitioners),and teaching hospitals, as well as ownership and investment interests held by physicians or their immediate
 family members; and 

 

 

 
 48 

 

 

 

 

 
 
 
 ● 
 analogous state
 or foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to items or services reimbursed
 by any third-party payor, including commercial insurers, state marketing and/or transparency laws applicable to manufacturers
 that may be broader in scope than the federal requirements, state laws that require biopharmaceutical companies to comply
 with the biopharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated
 by the federal government and state laws governing the privacy and security of health information in certain circumstances,
 many of which differ from each other in significant ways and may not have the same effect as HIPAA, thus complicating compliance
 efforts. 

 

 

 Ensuring that our business arrangements with
third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities
will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable
fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws
or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative
penalties, damages, fines, disgorgement, imprisonment, possible exclusion from government funded healthcare programs, such as Medicare
and Medicaid, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations,
any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to
do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,
including exclusions from government funded healthcare programs. We may incur significant costs achieving and maintaining compliance
with applicable federal and state privacy, security, and fraud laws. Any action against us for violation of these laws, even if
we successfully defend against it, could cause us to incur significant legal expenses and divert our attention from the operation
of our business.

 

 We expect current and future legislation
affecting the pharmaceutical industry, including drug pricing reform, to impact our business generally, which could adversely affect
our business operations. 

 

 In the United States, there have been, and
continue to be proposed and enacted legislation at the federal and state levels designed to, among other things, bring more transparency
to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare,
and reform government program reimbursement methodologies for drugs. For example, in July 2021, the Biden administration released
an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription
drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High
Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress
could pursue as well as potential administrative actions HHS can take to advance these principles. In addition, the IRA, among
other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2)
imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions
will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently
unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. If any of our
products are subject to such negotiation, we may lose a significant amount of the revenues expected during the full life cycle
of these products. Further, the Biden administration released an additional executive order on October 14, 2022, directing HHS
to submit a report within 90 days on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models
for lowering drug costs for Medicare and Medicaid beneficiaries. We expect that additional U.S. federal healthcare reform
measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare
products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

 

 The coverage and reimbursement status
of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates,
if approved, could limit our ability to market those products and decrease our ability to generate product revenue. 

 

 

 
 49 

 

 

 

 

 Significant uncertainty exists as to the coverage
and reimbursement status of any compound for which we may seek regulatory approval. Sales in the United States will depend in part
on the availability of sufficient coverage and adequate reimbursement from third-party payors, which include government health
programs such as Medicare, Medicaid, CHIP, TRICARE and the Veterans Administration, as well as managed care organizations and private
health insurers. Prices at which we or our customers seek reimbursement for our therapeutic compounds can be subject to challenge,
reduction or denial by payors.

 

 The process for determining whether a payor
will provide coverage for a product is typically separate from the process for setting the reimbursement rate that the payor will
pay for the product. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate
will be available. Additionally, in the United States there is no uniform policy among payors for coverage or reimbursement. Third-party
payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies,
but also have their own methods and approval processes. Therefore, coverage and reimbursement for products can differ significantly
from payor to payor. If coverage and adequate reimbursement are not available, or are available only at limited levels, successful
commercialization of, and obtaining a satisfactory financial return on, any product we develop may not be possible.

 

 Third-party payors
are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services,
in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might be approved
for marketing, we may need to conduct expensive studies in order to demonstrate the medical necessity and cost-effectiveness of
any products, which would be in addition to the costs expended to obtain regulatory approvals. Third-party payors may not consider
our compounds to be medically necessary or cost-effective compared to other available therapies, or the rebate percentages required
to secure favorable coverage may not yield an adequate margin over cost or may not enable us to maintain price levels sufficient
to realize an appropriate return on our investment in drug development. Additionally, we or our collaborators may develop
companion diagnostic tests for use with our product candidates. Companion diagnostic tests require coverage and reimbursement separate
and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to
obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics.
 Our inability to promptly obtain coverage and adequate reimbursement from third-party payors for the
product candidates, and for us or our collaborators to obtain coverage and adequate reimbursement for related companion diagnostic
tests that may be developed, could have a material and adverse effect on our business, financial condition, results of operations
and prospects. 

 

 Risks Related to our Common Stock 

 

 A decline in the price of our common
stock could affect our ability to raise further working capital and adversely impact our operations and would severely dilute existing
or future investors if we were to raise funds at lower prices. 

 

 A prolonged decline in the price of our common
stock could result in a reduction in our ability to raise capital. Because our operations have been financed through the sale of
equity securities, a decline in the price of our common stock could be especially detrimental to our continued operations. Any
reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would
have a significant negative effect on our business plans and operations, including our ability to develop new products and continue
our current operations. If our stock price declines, there can be no assurance that we can raise additional capital or generate
funds from operations sufficient to meet our obligations. We believe the following factors could cause the market price of our
common stock to continue to fluctuate widely and could cause our common stock to trade at a price below the price at which you
purchase your shares of common stock:

 

 

 
 
 
 ● 
 actual or anticipated
 variations in our quarterly operating results; 

 

 
 
 
 ● 
 announcements of
 new services, products, acquisitions or strategic relationships by us or our competitors; 

 

 

 
 50 

 

 

 

 

 
 
 
 ● 
 changes in accounting
 treatments or principles; 

 

 
 
 
 ● 
 changes in earnings
 estimates by securities analysts and in analyst recommendations; and 

 

 
 
 
 ● 
 general political,
 economic, regulatory and market conditions. 

 

 

 The market price for our common stock may also
be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even
if minor, could materially adversely affect the market price of our common stock.

 

 If we issue additional shares of common
stock in the future, it will result in the dilution of our existing stockholders and may cause the share price of our common stock
to fall. 

 

 We have 200,000,000 shares of common stock
authorized for issuance and we also have 10,000,000 shares of preferred stock authorized. Our Board of Directors has the authority
to issue additional shares of preferred and common stock up to the authorized capital stated in the articles of incorporation.
Our Board of Directors may choose to issue some or all such shares of common stock to acquire one or more businesses or to provide
additional financing in the future. The issuance of any such shares of common stock will result in a reduction of the book value
or market price of the outstanding shares of our common stock. If we do issue any such additional shares of common stock, such
issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. Further, any such
issuance may result in a change of control of our corporation. In the event we do issue or sell additional shares of common or
preferred stock, it may result in stockholder dilution and may cause our share price to fall.

 

 Our stock price has been volatile and
may be volatile in the future. 

 

 Our stock price has been volatile at certain
times historically, and may be volatile in the future. We may incur rapid and substantial increases or decreases in our stock price
in the foreseeable future that are do not coincide in timing with the disclosure of news or developments by us. The stock market
in general, and the market for biotechnology and pharmaceutical companies in particular, has experienced extreme volatility that
has often been unrelated to the operating performance of particular companies. The market price for our common stock may be influenced
by many factors, including the following:

 

 

 
 
 
 ● 
 announcements of
 new data, clinical trial results or those of companies that are perceived to be similar to us; 

 
 
 
 

 
 
 ● 
 announcements related
 to any delays in any preclinical or clinical trials related to our products; 

 
 
 
 

 
 
 ● 
 announcements related
 to our products’ ability to demonstrate efficacy or an acceptable safety profile of our product candidates or similar
 announcements by companies that are perceived to be similar to us; 

 
 
 
 

 
 
 ● 
 our ability to meet
 or exceed expectations of analysts or investors; 

 
 
 
 

 
 
 ● 
 news that the number
 of patients required for clinical trials for our drug candidates may be larger than we anticipate, enrollment in these clinical
 trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate
 or the duration of these clinical trials may be longer than we anticipate; 

 
 
 
 

 
 
 ● 
 actions taken by
 regulatory agencies with respect to our product candidates or the progress of our clinical trials, including with respect
 to any fast track or orphan drug designations; 

 

 

 
 51 

 

 

 

 

 
 
 
 ● 
 announcements of
 significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic collaboration
 partners or our competitors; 

 
 
 
 

 
 
 ● 
 grants awarded to
 us or companies that are perceived to be similar to us from outside entities; 

 
 
 
 

 
 
 ● 
 variations in our
 financial results or those of companies that are perceived to be similar to us; 

 
 
 
 

 
 
 ● 
 trading volume of
 our common stock; 

 
 
 
 

 
 
 ● 
 developments concerning
 our collaborations or partners; 

 
 
 
 

 
 
 ● 
 the impact of the
 COVID-19 outbreak and its effect on us; 

 
 
 
 

 
 
 ● 
 the perception of
 the biotechnology or pharmaceutical industries by the public, legislatures, regulators and the investment community; 

 
 
 
 

 
 
 ● 
 developments or
 disputes concerning intellectual property rights; 

 
 
 
 

 
 
 ● 
 significant lawsuits,
 including patent or stockholder litigation; 

 
 
 
 

 
 
 ● 
 our ability or inability
 to raise additional capital and the terms on which we raise it; 

 
 
 
 

 
 
 ● 
 sales of our common
 stock by us or our stockholders; 

 
 
 
 

 
 
 ● 
 declines in the
 market prices of stocks generally or of companies that are perceived to be similar to us; and 

 
 
 
 

 
 
 ● 
 general economic,
 industry and market conditions. 

 

 

 In addition, companies trading in the stock
market in general, and The Nasdaq Capital Market in particular, have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors
may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods
of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if
instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could
materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no
guarantee that our stock price will remain at current prices.

 

 Our common stock may become the target
of a “short squeeze.” 

 

 Securities of certain companies have experienced
significant and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short squeeze.”
These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of
those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors
who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original
investment as the price per share has declined steadily as interest in those stocks have abated. There can be no assurance that
we will not, in the future be, a target of a short squeeze, and you may lose a significant portion or all of your investment if
you purchase our shares at a rate that is significantly disconnected from our underlying value.

 

 

 
 52 

 

 

 

 

 If we fail to maintain an effective system
of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As
a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the
trading price of our common stock. 

 

 Pursuant to Section 404 of the Sarbanes-Oxley
Act, our management is required to report upon the effectiveness of our internal control over financial reporting. We cannot assure
you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in
the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately
report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over
financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness
or significant deficiency in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness
of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations
by the Nasdaq Stock Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control
over financial reporting, or to implement or maintain other effective control systems required of public companies, could also
restrict our future access to the capital markets.

 

 Our disclosure controls and procedures
may not prevent or detect all errors or acts of fraud. 

 

 We are subject to the periodic reporting requirements
of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose
in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures
or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers
could inadvertently fail to disclose a new relationship or arrangement causing us to fail to make a required related party transaction
disclosure. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people
or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements
due to error or fraud may occur and not be detected.

 

 Risks Related to our Intellectual Property
 

 

 If we are unable to obtain and maintain
sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection
obtained is not sufficiently broad, our competitors could develop and commercialize product candidates similar or identical to
ours, and our ability to successfully commercialize our product candidates that we may pursue may be impaired. 

 

 Our success depends in large part on our ability
to obtain and maintain protection of our intellectual property, particularly patents, in the United States and other countries
with respect to our product candidates and technology. We seek to protect our proprietary position by filing patent applications
in the United States and abroad related to our product candidates or by in-licensing intellectual property. U.S. patents related
to ANAVEX ® 2-73 are directed to ANAVEX®2-73 in its various optical or crystal forms, its therapeutic indications,
and dosage forms comprising certain doses of ANAVEX ® 2-73 combined with another therapeutic agent. We may not be
able to obtain broader scope patent protection for ANAVEX ® 2-73 as a single drug or in other jurisdictions.

 

 

 
 53 

 

 

 

 

 The patent position of biotechnology and pharmaceutical
companies generally is highly uncertain, involves complex legal, technological and factual questions and has in recent years been
the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the
laws of the United States, or vice versa. Further, we may not be aware of all third-party intellectual property rights potentially
relating to and/or interfering with our product candidates. Publications of discoveries in the scientific literature often lag
behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published
until 18 months after filing or, in some cases, not at all. Therefore, we cannot know with certainty whether we were the first
to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection
of such inventions. As a result, the issuance, scope, validity, enforceability and/or commercial value of our patent rights are
highly uncertain. Our pending and future patent applications may not result in patents being issued that protect our product candidates,
in whole or in part, or which could effectively prevent others from commercializing competitive product candidates. Even if our
patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent
competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent
our patents by developing similar or alternative product candidates in a non-infringing manner.

 

 Moreover, we may be subject to a third-party
pre-issuance submission of prior art to the United States Patent and Trademark Office, or the USPTO, or become involved in opposition,
derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or
the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of,
or invalidate, our patent rights, allow third parties to commercialize our product candidates and compete directly with us, without
payment to us, or result in our inability to manufacture or commercialize drugs without infringing on third-party patent rights.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless
of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product
candidates.

 

 In addition, the issuance of a patent is not
conclusive as to its inventorship, scope, validity and/or enforceability, and our patents may be challenged in the courts or patent
offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims
being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using
or commercializing similar or identical product candidates, or limit the duration of the patent protection of our product candidates.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting
such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may
not provide us with sufficient rights to exclude others from commercializing drugs similar or identical to ours.

 

 We hold ownership or exclusive rights to twenty-two
U.S. patents, twenty-three U.S. patent applications, and various PCT or ex-U.S. patent applications relating to our drug candidates,
methods associated therewith, and to our research programs. Neither patents nor patent applications ensure the protection of our
intellectual property for a number of reasons, including the following:

 

 

 
 
 
 1. 
 Competitors may
 interfere with our patenting process in a variety of ways. Competitors may claim that Anavex is not entitled to an issued
 patent for a variety of legal reasons. Competitors may also claim that we are infringing their patents and restrict our freedom
 to operate. If a court or, in some circumstances, a board of a national patent authority, agrees, we would lose some or all
 of our patent protection. As a company, we have no meaningful experience with competitors interfering with our patents or
 patent applications. 

 
 
 
 

 
 
 2. 
 Because of the time,
 money and effort involved in obtaining and enforcing patents, our management may spend less time and resources on developing
 potential drug compounds than they otherwise would, which could increase our operating expenses and delay product programs. 

 
 
 
 

 
 
 3. 
 Issuance of a patent
 may not provide significant practical protection. If we receive a patent of narrow scope, then it may be possible for competitors
 to design products that do not infringe our patent(s). 

 
 
 
 

 
 
 4. 
 Anavex is seeking
 patent protection for a number of indications, combination products and drug regimens. The lack of patent protection in global
 markets for a specific end product or indication may inhibit our ability to advance our compounds and may make Anavex less
 attractive to potential partners. 

 

 

 
 54 

 

 

 

 

 
 
 
 5. 
 Defending a patent
 lawsuit takes significant time and can be very expensive. 

 
 
 
 

 
 
 6. 
 If a court decides
 that an Anavex compound, its method of manufacture or use, infringes on a competitor’s patent, we may have to pay substantial
 damages for infringement. 

 
 
 
 

 
 
 7. 
 A court may prohibit
 us from making, selling or licensing the potential drug compound unless the patent holder grants a license. A patent holder
 is not required to grant a license. If a license is available, we may have to pay substantial royalties or grant cross licenses
 to our patents, and the license terms may be unacceptable. 

 
 
 
 

 
 
 8. 
 Redesigning our
 potential drug compounds so that they do not infringe on other patents may not be possible or could require substantial funds
 and time. 

 

 

 It is also unclear whether our trade secrets
are adequately protected. While we use reasonable efforts to protect our trade secrets, our employees or consultants may unintentionally
or willfully disclose our information to competitors. Enforcing a claim that someone illegally obtained and is using our trade
secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside
the United States are sometimes less willing to protect trade secrets. Our competitors may independently develop equivalent knowledge,
methods and know-how.

 

 We may also support and collaborate in research
conducted by government organizations, hospitals, universities or other educational institutions. These research partners may be
unable or unwilling to grant us exclusive rights to technology or products derived from these collaborations.

 

 If we do not obtain required intellectual property
licenses or rights, we could encounter delays in our product development efforts while we attempt to design around other patents
or even be prohibited from developing, manufacturing or selling potential drug compounds requiring these rights or licenses. There
is also a risk that legal disputes may arise as to the rights to technology or potential drug compounds developed in collaboration
with other parties, all with attendant risk, distraction, expense, and lack of predictability.

 

 Patent terms may be inadequate to protect
our competitive position on our product candidates for an adequate amount of time. 

 

 Patents have a limited lifespan. In the United
States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S.
non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited.
Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from
competitive products, including generics or biosimilars. Given the amount of time required for the development, testing and regulatory
review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.
As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing
products similar or identical to ours.

 

 Depending upon the timing, duration and specifics
of FDA marketing approval of product candidates that we identify, one of the U.S. patents covering such product candidate or the
use thereof may be eligible for up to five years of patent term extension under the Hatch-Waxman Act. The Hatch-Waxman Act allows
a maximum of one patent to be extended per FDA approved product as compensation for the patent term lost during the FDA regulatory
review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of
product approval and only those claims covering such approved drug product, a method for using it or a method for manufacturing
it may be extended. Patent term extension also may be available in certain foreign countries upon regulatory approval of our product
candidates. Nevertheless, we may not be granted patent term extension either in the United States

 

 

 
 55 

 

 

 

or in any foreign country because of, for example, failing to exercise due diligence during the testing phase or regulatory review
process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing
to satisfy applicable requirements. Moreover, the term of extension, as well as the scope of patent protection during any such
extension, afforded by the governmental authority could be less than what we request. If we are unable to obtain patent term extension
or restoration, or the term of any such extension is less than we request, the period during which we will have the right to exclusively
market our product may be shortened and our competitors may obtain approval of competing products following our patent expiration
sooner, and our revenue could be reduced, possibly materially.

 

 Also, there are detailed rules and requirements
regarding the patents that may be submitted to the FDA for listing in the Approved Drug Products with Therapeutic Equivalence Evaluations,
or the Orange Book. We may be unable to obtain patents covering our product candidates that contain one or more claims that satisfy
the requirements for listing in the Orange Book. Even if we submit a patent for listing in the Orange Book, the FDA may decline
to list the patent, or a manufacturer of generic drugs may challenge the listing. If one of our product candidates is approved
and a patent covering that product candidate is not listed in the Orange Book, a manufacturer of generic drugs would not have to
provide advance notice to us of any abbreviated new drug application filed with the FDA to obtain permission to sell a generic
version of such product candidate.

 

 If we fail to comply with our obligations
in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to
our business relationships with our licensors, we could lose intellectual property rights that are important to our business. 

 

 We are party to an exclusive license agreement
with Life Science Research Israel Ltd., with respect to certain in-licensed intellectual property related to our ANAVEX ® 3-71
product candidate, and we may need to obtain additional licenses from others in the future. Our license agreement with Life Science
Research Israel Ltd. imposes, and we expect that future license agreements will impose, various development, diligence, commercialization,
and other obligations on us. In spite of our efforts, our licensors might conclude that we have materially breached our obligations
under such license agreements and might therefore terminate the license agreements, thereby removing or limiting our ability to
develop and commercialize products and technology covered by these license agreements. If these in-licenses are terminated, or
if the underlying patents fail to provide the intended exclusivity, competitors or other third parties would have the freedom to
seek regulatory approval of, and to market, products identical to ours and we may be required to cease our development and commercialization
of ANAVEX ® 3-71 or other product candidates covered by any such future licenses. Any of the foregoing
could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

 

 Moreover, disputes may arise regarding intellectual
property subject to a licensing agreement, including:

 

 

 
 
 
 ● 
 the
 scope of rights granted under the license agreement and other interpretation-related issues; 

 

 
 
 
 ● 
 the
 extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is
 not subject to the licensing agreement; 

 

 
 
 
 ● 
 the
 sublicensing of patent and other rights under our collaborative development relationships; 

 

 
 
 
 ● 
 our
 diligence obligations under the license agreement and what activities satisfy those diligence obligations; 

 

 
 
 
 ● 
 the
 inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by
 our licensors and us and our partners; and 

 

 
 
 
 ● 
 the
 priority of invention of patented technology. 

 

 

 
 56 

 

 

 

 

 In addition, the agreements under which we
currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements
may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could
narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe
to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on
our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that
we have licensed prevent or impair our ability to maintain our licensing arrangements on commercially acceptable terms, we may
be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect
on our business, financial conditions, results of operations, and prospects.

 

 If we do not obtain required intellectual property
licenses or rights, we could encounter delays in our product development efforts while we attempt to design around other patents
or even be prohibited from developing, manufacturing or selling potential drug compounds requiring these rights or licenses. There
is also a risk that legal disputes may arise as to the rights to technology or potential drug compounds developed in collaboration
with other parties, all with attendant risk, distraction, expense, and lack of predictability.

 

 Third-party claims of intellectual property
infringement may prevent or delay our development and commercialization efforts. 

 

 Our success will also depend in part on our
ability to commercialize our compounds without infringing the proprietary rights of others. However, our research, development
and commercialization activities may be subject to claims that we infringe or otherwise violate patents or other intellectual property
rights owned or controlled by third parties. We have not conducted extensive freedom of use patent searches and no assurance can
be given that patents do not exist or could be issued which would have an adverse effect on our ability to market our technology
or maintain our competitive position with respect to our technology. Because patent applications can take many years to issue,
there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe.
In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.
If our compounds or other subject matter are claimed under other United States patents or other international patents or are otherwise
protected by third party proprietary rights, we may be subject to infringement actions. In such event, we may challenge the validity
of such patents or other proprietary rights, or we may be required to obtain licenses from such companies in order to develop,
manufacture or market our technology. There can be no assurances that we would be successful in a challenge or be able to obtain
such licenses or that such licenses, if available, could be obtained on commercially reasonable terms. Furthermore, the failure
to succeed in a challenge, develop a commercially viable alternative or obtain needed licenses could be materially adverse. Adverse
consequences include delays in marketing some or all of our potential drug compounds based on our drug technology or the inability
to proceed with the development, manufacture or sale of potential drug compounds requiring such licenses. If we defend ourselves
against charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred
regardless of whether we are successful. Such proceedings are typically protracted with no certainty of success. An adverse outcome
could subject us to significant liabilities to third parties and force us to curtail or cease the research and development of our
technology.

 

 Parties making claims against us may obtain
injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize ANAVEX ® 2-73
or our other product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense
and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement
against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement,
pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require
substantial time and monetary expenditure. Additionally, parties making claims against us may be able to sustain the costs of complex
patent litigation more effectively than we can because they have substantially greater resources. Furthermore, because of the substantial
amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk
that some of our confidential information could be compromised by disclosure. In addition, any uncertainties resulting from the
initiation and continuation of any litigation could have material adverse effect on our ability to raise additional funds or otherwise
have a material adverse effect on our business, results of operations, financial condition and prospects.

 

 

 
 57 

 

 

 

 

 If we are unable to protect the confidentiality
of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed. 

 

 While we use reasonable efforts to protect
our trade secrets, our employees or consultants may unintentionally or willfully disclose our information to competitors. Enforcing
a claim that someone illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming,
and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets.
Our competitors may independently develop equivalent knowledge, methods and know-how.

 

 We seek to protect our confidential proprietary
information, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific
advisors, contractors and collaborators. These agreements are designed to protect our proprietary information. However, we cannot
be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets
and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our
trade secrets or independently develop substantially equivalent information and techniques. For example, any of these parties may
breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate
remedies for such breaches. We also seek to preserve the integrity and confidentiality of our confidential proprietary information
by maintaining physical security of our premises and physical and electronic security of our information technology systems, but
it is possible that these security measures could be breached. If any of our confidential proprietary information were to be lawfully
obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology
or information to compete with us, which could harm our competitive position.

 

 We may be subject to claims that our
employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or
that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. 

 

 As is common in the biotechnology and pharmaceutical
industry, we employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies,
including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors
do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees,
consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade
secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may
be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we
may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful
in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

 We may become involved in lawsuits to
protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful and could
harm our business. 

 

 Competitors may infringe our patents or other
intellectual property. Although we are not currently involved in any litigation, if we were to initiate legal proceedings against
a third party to enforce a patent covering ANAVEX ® 2-73 or our other product candidates, the defendant could counterclaim
that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant
counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged
failure to meet any of several statutory requirements, including lack of novelty, obviousness, written description or non-enablement.
Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld
relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions
of invalidity and unenforceability is unpredictable.

 

 

 
 58 

 

 

 

 

 Interference or derivation proceedings provoked
by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect
to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt
to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license
on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same
technology. Our defense of litigation or interference or derivation proceedings may fail and, even if successful, may result in
substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could
have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research
programs, license necessary technology from third parties, or enter into development partnerships that would help us bring ANAVEX ® 2-73
or our other product candidates to market.

 

 We may be subject to claims challenging
the inventorship of our patents and other intellectual property. 

 

 We or our licensors may be subject to claims
that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets,
or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes arise
from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. Litigation
may be necessary to defend against these and other claims challenging inventorship or our or our licensors’ ownership of
our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership
of, or right to use, intellectual property that is important to our product candidates. Even if we are successful in defending
against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of
the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

 Obtaining and maintaining our patent
protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental
patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. 

 

 Periodic maintenance fees, renewal fees, annuity
fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental
patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems
in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to
non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and
other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other
means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment
or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect
on our business.

 

 We may not be able to protect our intellectual
property rights throughout the world. 

 

 Filing, prosecuting and defending patents on
our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights
in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some
foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.
Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States,
or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors
may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also
export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United
States. These products may compete with our products and our patents or other intellectual property rights may not be effective
or sufficient to prevent them from competing.

 

 

 
 59 

 

 

 

 

 Changes in patent law could diminish
the value of our patents and patent applications in general, thereby impairing our ability to protect our product candidates. 

 

 Changes in either the patent laws or interpretation
of the patent laws in the United States and other countries could increase the uncertainties and costs surrounding the prosecution
of patent applications and the enforcement or defense of issued patents. After March 2013, under the Leahy-Smith America Invents
Act, or the America Invents Act, enacted in September 2011, the United States transitioned to a first inventor to file system in
which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled
to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party
that files a patent application in the USPTO after March 2013, but before us could therefore be awarded a patent covering an invention
of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant of the time
from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential
for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i)
file any patent application related to our product candidates or (ii) invent any of the inventions claimed in our or our licensor’s
patents or patent applications. The America Invents Act also includes a number of significant changes that affect the way patent
applications will be prosecuted and also may affect patent litigation. Therefore, the America Invents Act and its implementation
could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the
enforcement or defense of our owned or in-licensed issued patents, all of which could have a material adverse effect on our business,
financial condition, results of operations, and prospects.

 

 In addition, the patent positions of companies
in the development and commercialization of pharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have
narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain
situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once
obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing
patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability
to protect and enforce our intellectual property in the future.

 

 The risk factors disclosed in this Annual Report
on Form 10-K could materially and adversely affect our business, financial condition and results of operations. The risks described
herein are not the only risks we face. Our operations could also be affected by additional factors that are not presently known
to us or by factors that we currently consider immaterial to our business.

 

 ITEM 1B. UNRESOLVED
STAFF COMMENTS 

 

 None.

 

 ITEM 2. PROPERTIES 

 

 We do not own any real property. We maintain
a corporate head office at 630 5th Avenue, 20th Floor, New York, NY, USA. Our lease costs for this office are approximately $10,000
per month. We believe our offices are suitable and adequate to operate our business currently, as they provide us with sufficient
space to conduct our operations.
ANAVEX LIFE SCIENCES CORP. 10-K

Item 1A. Risk Factors
