Alzheimer’s drug developer Annovis Bio shares have been on a wild ride but CFO Jeffrey McGroarty has remained focused on building the capital runway that the company needs to develop its drug and get it to market.
A former Safeguard Scientifics CFO who joined Annovis as its second employee in 2019, McGroarty wears many hats in his latest role, where he has tapped his early experience in large public company accounting with PricewaterhouseCoopers and his previous work with early-stage smaller companies at Safeguard.
So far he’s helped the company hit two capital milestones, including raising $13.8 million in the initial January 2020 public offering and a $50 million secondary public offering in May that will enable the company to fund the next Phase 3 drug trials. Still, the company could be back in the equity market to raise more capital opportunistically, depending how the stock performs, he said.
“There’s going to be volatility in any biotech space, certainly in Alzheimer’s, as we’ve seen in this past year,” McGroarty told CFO Dive. ”You just have to be prepared … and not get too high or too low based on what the stock price is doing on any given day but just focus on the task at hand … to make sure the company has the capital to get to the next stage.”
The most likely source of the next round of capital would be the equity markets again, he said. Annovis along with many in the surge of companies that filed shelf registrations last year, gained some breathing room when it filed a $250 million shelf registration statement in February 2021. It still has $200 million remaining on the shelf that it could access, he said.
Another option would be to find a big pharma partner, but the pandemic has led those firms to shift their focus to COVID-19 related products so that is unlikely, he said. Debt for companies like Annovis that don’t have cash flow would be prohibitively expensive. “It’s possible but it comes at a pretty high rate,” he said. The company had a cash balance of $47.5 million as of September 30 and no debt, according to a January 2022 company presentation.
Investor enthusiasm flip flops
Annovis’ stock debuted at an initial public offering price of $6 in January 2020 and rose above $100 last summer before falling to trade in the $17 range, where they are currently hovering. The volatility came as investor sentiment around the long-elusive Alzheimer’s treatment space flip-flopped last year. Enthusiasm was initially boosted by the U.S.Food and Drug Administration’s approval of Biogen’s Alzheimer’s disease therapy Aduhelm in June only to run headlong into a critical backlash as questions and skepticism rose in the ensuing months.
At the same time, the Berwyn, Pennsylvania-based company had its own challenges. CEO Maria Maccecchini, writing in a Dec. 20 letter to shareholders, maintained the drug had been validated as a promising candidate for the treatment of numerous neurodegenerative diseases but acknowledged the stock’s recent volatility and the fact that the company has faced two class action suits that have been dismissed. The two suits were about whether the company had adequately informed investors about its prospects.
“Due to the enormous need for a disease-modifying treatment, a failure rate of 99.6% in clinical trials, and data that can be easily questioned and misinterpreted, we witnessed an extremely volatile market segment,” she wrote. The company is now poised to seek guidance this year from the FDA to proceed with more trials but it's unclear exactly how far off going to market is, McGroarty said.
McGroarty was drawn to join Annovis because it was the type of early stage company with a potential to make a big impact that he would have invested in when at Safeguard. But in terms of going public, the company’s smaller size also presented some challenges.
For example, while in the process of preparing to go public McGroarty had to pivot his plans midstream to change the exchange that it would be listed on to NYSE American, a small-cap equity market, after a Nasdaq rule change meant that the firm in essence wasn’t raising enough money to meet Nasdaq’s listing requirement. More recently as the company's market cap grew McGroarty helped move its listing last fall to the New York Stock Exchange.
McGroarty said he’s hopeful the move can help the company attract more institutional investors as it grows, which will reduce the exposure to the volatility that often comes with smaller investors. He’d like to shift the mix from the current ratio of institutional to retail investor to 50/50 from its current 20/80. In addition, he’s also hopeful that 2022 will see the easing of the pandemic and usher in more willingness on the part of larger pharmaceutical companies to consider investing in more biotech companies like Annovis that are working outside of the COVID-19 space.
“So many companies have been chasing COVID,” he said. “Hopefully other diseases will get more attention.“