ANAVEX LIFE SCIENCES CORP. (AVXL)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking
statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements
regarding our anticipated future clinical and regulatory milestone events, future financial position, business strategy and plans and
objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,”
“continue,” “anticipate,” “intend,” “expect” “should,” “forecast,”
“potential,” “predict”, “could,” “would,” “will,” “suggest,” “plan”
and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such forward-looking statements include,
without limitation, statements regarding:

We have based these forward-looking statements largely
on our current expectations and projections about future events, including the responses we expect from the FDA, EMA and other regulatory
authorities and financial trends that we believe may affect our financial condition, results of operations, business strategy, preclinical
studies and clinical trials, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and
assumptions including without limitation the risks described in “Risk Factors” in Part I, Item 1A of our Annual Report on
Form 10-K filed with the Securities and Exchange Commission on November 25, 2025. These risks are not exhaustive. Other sections of this
Quarterly Report on Form 10-Q include additional factors which could adversely impact our business and financial performance. Moreover,
we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for
our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should
not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected
in the forward-looking statements will be achieved or occur and actual results could differ materially from those projected in the forward-looking
statements. Except as required by applicable laws including the securities laws of the United States, we assume no obligation to update
or supplement forward-looking statements.

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As used in this Quarterly Report on Form 10-Q, the
terms “we,” “us,” “our,” “Company”, and “Anavex” mean Anavex Life Sciences
Corp., unless the context clearly indicates otherwise.

Overview and Strategy

Anavex Life Sciences Corp. is a clinical stage biopharmaceutical
company engaged in the development of differentiated therapeutics by applying precision medicine to central nervous system (“CNS”)
diseases with high unmet need. We analyze genomic data from clinical trials to identify biomarkers, which we use in the analysis of our
clinical trials.

The Company’s focus is on developing innovative
treatments for Alzheimer’s disease, Parkinson’s disease, schizophrenia, neurodevelopmental, neurodegenerative, and rare diseases,
including Rett syndrome, and other central nervous system (CNS) disorders.

Our research and development pipeline includes ANAVEX®2-73
currently in three different clinical trial indications, and ANAVEX®3-71 currently in one clinical trial and several other
compounds in different stages of clinical and pre-clinical development.

The following table summarizes key information about our programs:

* = Orphan Drug Designation by the FDA

Anavex has a portfolio of compounds varying in sigma-1
receptor (SIGMAR1) binding activities. Sigma receptors may be targets for therapeutics to combat many human diseases, both of neurodegenerative
nature, including Alzheimer’s disease, as well as of neurodevelopmental nature, like Rett syndrome. When bound by the appropriate
ligands, sigma receptors influence the functioning of multiple biochemical signals that are involved in the pathogenesis (origin or development)
of disease. Multiple viruses including SARS-CoV-2 (COVID-19) induce cellular stress by intrinsic mitochondrial apoptosis and other related
cellular processes, in order to ensure survival and replication. Hence, it is possible that SIGMAR1 could also play a role in modulating
the cellular response to viral infection and ameliorate pathogenesis.

The SIGMAR1 gene encodes the SIGMAR1 protein, which
is an intracellular chaperone protein with important roles in cellular communication. SIGMAR1 is also involved in transcriptional regulation
at the nuclear envelope and restores homeostasis and stimulates recovery of cell function when activated. In order to validate the ability
of our compounds to activate quantitatively the SIGMAR1, we performed, in collaboration with Stanford University, a quantitative Positron
Emission Tomography (PET) imaging scan in mice, which demonstrated a dose-dependent ANAVEX®2-73 (blarcamesine) target engagement
or receptor occupancy with SIGMAR1 in the brain.

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Source: Reyes S et al., Sci Rep. 2021 Aug 25; 11(1):17150

Cellular Homeostasis

Many diseases are possibly directly caused by chronic
homeostatic imbalances or cellular stress of brain cells. In pediatric diseases, such as Rett syndrome or infantile spasms, chronic cellular
stress is possibly caused by the presence of a constant genetic mutation. In neurodegenerative diseases, such as Alzheimer’s and
Parkinson’s diseases, chronic cellular stress is possibly caused by age-correlated buildup of cellular insult and hence chronic
cellular stress. Specifically, defects in homeostasis of protein or ribonucleic acid (“RNA”) lead to the death of neurons
and dysfunction of the nervous system. The spreading of protein aggregates resulting in a proteinopathy, a characteristic found in Alzheimer’s
and Parkinson’s diseases that results from disorders of protein synthesis, trafficking, folding, processing or degradation in cells.
The clearance of macromolecules in the brain is particularly susceptible to imbalances that result in aggregation and degeneration in
nerve cells. For example, Alzheimer’s disease pathology is characterized by the presence of amyloid plaques, and neurofibrillary
tangles, which are aggregates of hyperphosphorylated Tau protein that are a marker of other diseases known as tauopathies as well as inflammation
of microglia. With the SIGMAR1 activation through SIGMAR1 agonists like ANAVEX®2-73 (blarcamesine), our approach is to
restore cellular balance (i.e. homeostasis). Therapies that correct defects in cellular homeostasis might have the potential to halt or
delay neurodevelopmental and neurodegenerative disease progression.

Clinical Program Overview

ANAVEX®2-73 (blarcamesine)

We believe ANAVEX®2-73 may offer a
disease-modifying approach in neurodegenerative and neurodevelopmental diseases by activation of SIGMAR1. ANAVEX®2-73 is
being developed as well as an oral once-daily capsule formulation for diseases such as Alzheimer’s disease and Parkinson’s
disease, and in an oral liquid once-daily formulation for rare diseases such as Rett syndrome and Fragile X.

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Alzheimer’s Disease

In November 2016, we completed a Phase 2a clinical
trial, consisting of Part A and Part B, which lasted a total of 57 weeks, for ANAVEX®2-73 in mild-to-moderate Alzheimer’s
patients. This open-label randomized trial in Australia met both primary and secondary endpoints and was designed to assess the safety
and exploratory efficacy of ANAVEX®2-73 in 32 patients. ANAVEX®2-73 targets sigma-1 and muscarinic receptors,
which have been shown in preclinical studies to reduce stress levels in the brain believed to restore cellular homeostasis and to reverse
the pathological hallmarks observed in Alzheimer’s disease. In October 2017, we presented positive pharmacokinetic (“PK”)
and pharmacodynamic (“PD”) data from the Phase 2a clinical trial, which established a concentration-effect relationship between
ANAVEX®2-73 and trial measurements. These measures obtained from all patients who participated in the entire 57 weeks include
exploratory cognitive and functional scores as well as biomarker signals of brain activity. Additionally, the clinical trial appeared
to show that ANAVEX®2-73 activity was enhanced by its active metabolite (ANAVEX19-144), which also targets the SIGMAR1
receptor and has a half-life approximately twice as long as the parent molecule.

Two consecutive trial extensions for the Phase 2a
trial have allowed participants who completed the 52-week Part B of the trial to continue taking ANAVEX®2-73, providing
an opportunity to gather extended safety data for a cumulative period of five years. In August 2020, patients completing these Phase 2a
trial extensions were granted continued access to treatment with ANAVEX®2-73 through the Austra

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ITEM 7 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction
with our consolidated financial statements and related notes thereto included elsewhere in this report. Past operating results are not
necessarily indicative of results that may occur in future periods. This discussion contains forward-looking statements, which involve
a number of risks and uncertainties. See “Forward Looking Statements” included elsewhere in this report. For discussion and
analysis pertaining to 2024 overview and highlights as compared to 2023, please refer to the Company’s Annual Report on Form 10-K,
filed with the Securities and Exchange Commission (“SEC”) on December 23, 2024.

Financial Operations Overview

We are in
the pre-revenue stage and have not earned any revenues since our inception in 2004. We do not anticipate earning any revenues until we
can establish an alliance with other companies to develop, co-develop, license, acquire or market our products.

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Our operating costs consist primarily of research and development
activities including the cost of clinical studies and clinical supplies as well as clinical drug manufacturing and formulation. Research
and development expenses also include personnel related costs such as salaries and wages, and third-party contract research organization
(CRO) expenses in support of these clinical studies. Personnel costs include salaries and wages, benefits, and non-cash share-based compensation
charges associated with options and other equity awards granted to employees and consultants who are directly engaged in support of our
research and development activities.

General and administrative expenses consist of personnel costs,
expenses for outside professional services and expenses associated with operating as a public company. Personnel costs consist of salaries
and wages, benefits and share-based compensation for general and administrative personnel. Outside professional services and public company
expenses include expenses related to compliance and reporting, additional insurance expenses, audit and SOX compliance, expenses associated
with patent research, applications and filings, investor and stockholder relations activities and other administrative expenses and professional
services.

Comparison of fiscal year 2025 to fiscal years 2024

Operating Expenses

Our operating expenses for fiscal 2025 decreased to $51.4 million,
from $52.9 million in fiscal 2024. The decrease is attributable to research and development expenses, as more fully described below.

The following table summarizes our research and development expenses for
the years ended September 30, 2025, 2024, and 2023 (in thousands):

External service provider cost by product candidate
was as follows (in thousands):

During fiscal 2025, we experienced an overall decrease
in total research and development expenses over the comparable fiscal 2024 financial year. The main factors driving this decrease were
as follows:

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The above decreases were partially offset by an increase
of approximately $3.0 million related to completion of Part B of the ANAVEX®3-71-SZ-001
trial during fiscal 2025, which was substantially larger in size than the preceding Part A during fiscal 2024.

General and administrative expenses were $13.8 million
for the fiscal 2025 financial year, as compared to $11.0 million in fiscal 2024. The primary reason for the increase in general and administrative
expenses was an increase in legal fees of $1.7 million, related to legal/regulatory matters, a new shelf registration statement, and various
class action lawsuits.

We expect to see our research and development expenditures increase
from current levels as we continue to advance our pipeline compounds.

Other income (net)

Net other income for the year ended September 30, 2025 was $5.0
million as compared to $9.9 million for fiscal 2024. The primary reason for the decrease in other income was due to a decrease of $2.6
million in interest income as a result of withdrawals in principal balance applied to excess funds invested in a money market as well
as a market wide decrease in interest rates.

During fiscal 2025, we recorded $0.6 million in research and development incentive
income, consisting of the Australian research and development incentive credit administered through the ATO, in connection with fiscal
2025 eligible expenditures. In comparison, research and development incentive income for fiscal 2024 was $2.3 million in connection with
fiscal 2024 eligible expenditures. This income is driven by the clinical trial expenditures incurred in Australia, and the decrease year
over year is a result of the completion of eligible R&D clinical trials in Australia. We expect to continue to receive support from
the Australian government for future clinical trials which we plan to conduct, in part, within Australia.

Net loss

Net loss for fiscal 2025 was $46.4 million, or $0.54
per share, compared to a net loss of approximately $43.0 million, or $0.52 per share for fiscal 2024.

Liquidity and Capital Resources

Working Capital (in thousands)

At September 30, 2025, we had $102.6 million in cash and cash
equivalents, a decrease from $132.2 million at September 30, 2024.

We intend to continue to use our capital resources to advance
our clinical trials for ANAVEX®2-73 and ANAVEX®3-71, and to perform work necessary to prepare for future
development of our pipeline compounds.

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Cash Flows

Following is a summary
of sources of cash flows for the years ended September 30, 2025, 2024 and 2023 (in thousands):

Cash flow used in operating activities

There was an increase in cash used in operating activities of
$8.2 million during fiscal 2025. The principal reason for this is due to a large decrease in accounts payable during the year, as compared
to a large increase in the comparable financial year, principally due to timing of payments for a large manufacturing campaign of ANAVEX®2-73.

Cash flow provided by financing activities

Cash provided by financing activities in fiscal 2025 was $9.4
million, comprised primarily of net cash received of $9.2 million related to the issuance of common shares pursuant to the at-the-market
offering and $2.9 million in cash from the exercise of stock options by our employees. We utilized $2.7 million to satisfy tax withholding
obligations associated with the net exercise of two expiring employee stock options to our CEO, in exchange for the withholding of shares.

Cash provided by financing activities in fiscal 2024 was $12.0
million, comprised of $11.3 million attributable to cash received from the issuance of common shares under the 2023 Purchase Agreement
and $0.7 million received pursuant to the exercise of stock options.

Other Financings

Sales Agreement

On July 25, 2025, we entered into a Sales Agreement
(the “Sales Agreement”) with TD Securities (USA) LLC (the “Sales Agent”). Pursuant to the Sales Agreement, the
Company may offer and sell up to an aggregate offering price of $150 million (the “Offering”) in shares of common stock from
time to time through the Sales Agent.

Upon delivery of a placement notice based on our instructions
and subject to the terms and conditions of the Sales Agreement, the Sales Agent may sell shares of common stock by methods deemed to be
an “at the market offering”, in negotiated transactions at market prices prevailing at the time of sale or at prices related
to such prevailing market prices, or by any other method permitted by law, including negotiated transactions, subject to our prior written
consent. We are not obligated to make any sales of shares under the Sales Agreement. We or the Sales Agent may suspend or terminate the
Offering upon notice to the other party, subject to certain conditions. The Sales Agent will act as sales agent on a commercially reasonable
efforts basis consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations and the
rules of Nasdaq.

We have agreed to pay the Sales Agent commissions
for its services of up to 3.0% of the gross proceeds from the sale of shares of Common Stock pursuant to the Sales Agreement. We have
also agreed to provide the Sales Agent with customary indemnification and contribution rights.

During the year ended September 30, 2025, the Company
issued an aggregate of 927,910 shares of Common Stock under the Sales Agreement for net proceeds of $9.2 million, after deducting commissions
and offering expenses.

At September 30, 2025, there was an unused amount
of $140.4 million under the Sales Agreement.

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2023 Purchase Agreement

On February 3, 2023, we entered into a $150,000,000
purchase agreement (the “2023 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant
to which we have the right to sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase, up to $150.0 million in value
of our shares of Common Stock from time to time over a three-year period until February 3, 2026.

On any business day and subject to having an effective
registration statement and subject to certain customary conditions, we may direct Lincoln Park to purchase up to 200,000

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