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, the European Medicines
Agency (“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:

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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 U.S., we assume no obligation to update or supplement
forward-looking statements.

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

We are a clinical stage biopharmaceutical company
engaged in the development of novel therapeutics for the treatment of central nervous system (“CNS”) diseases with high unmet
medical needs. Our primary focus is on advancing our lead compound ANAVEX 2-73 (blarcamesine) for the treatment of mild cognitive impairment
(“MCI”) due to Alzheimer’s disease (“AD”) and mild AD (collectively known as “early AD”), and
for Rett syndrome and Fragile X syndrome, both of which are neurodevelopmental rare diseases. Under new leadership, we are currently prioritizing
engagement with the U.S. FDA to align on a clear, data-driven regulatory and clinical development strategy for ANAVEX 2-73 for the above
indications.

We do not have any products approved for commercial
sale and have not generated any revenue to date. We have a portfolio of compounds in various stages of development targeting different
sigma-1 receptor (“SIGMAR1”) binding activities. 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. SIGMAR1 may be a target for therapeutics to combat many
human diseases, both of a neurodegenerative nature, including AD, as well as of a neurodevelopmental nature, like Rett syndrome and Fragile
X syndrome. When bound by the appropriate ligands, we believe SIGMAR1 influences the functioning of multiple biochemical signals that
are involved in the pathogenesis (origin or development) of disease.

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Clinical Development Pipeline

Our lead compound is ANAVEX 2-73 (blarcamesine). Below
is our clinical development pipeline for ANAVEX 2-73 (blarcamesine) across CNS indications:

Progress bars show the most advanced phase per
indication for ANAVEX 2-73 (blarcamesine), an investigational oral SIGMA-1 receptor agonist. Regulatory goals are planned and are subject
to change, including as a result of ongoing and future discussions with the FDA.

Following a review of our clinical development strategy
under new leadership, we have de-prioritized our other assets, including ANAVEX®3-71, currently in the clinical stage,
and ANAVEX®1-41 and ANAVEX®1066, currently in preclinical development. Development work on these de-prioritized
assets has been paused, and future development work will be contingent on additional funding for such assets or the signing of a strategic
partnership for such assets. It is also possible that we may license or sell one or more of our assets.

Following the previously disclosed termination of
our former CEO in April 2026, management has determined that our disclosure controls and procedures and our internal controls over financial
reporting were not effective as of September 30, 2025, December 31, 2025, March 31, 2026 and June 30, 2026, which is further described
in Part II, Item 4 of this Quarterly Report on Form 10-Q. As we align with the FDA on a clear, data-driven regulatory and clinical development
strategy for ANAVEX 2-73 for early AD, Rett syndrome and Fragile X syndrome, we will obtain guidance from the FDA on the extent to which
the efficacy data from our past clinical trials can be applied to our clinical development strategy, and, to the extent such guidance
is relevant to our ongoing development plans, we expect to provide information on how this efficacy data is viewed by the FDA. In light
of the foregoing, investors should rely only on the descriptions of our clinical trials, including for our de-prioritized assets, contained
in this Quarterly Report on Form 10-Q (including the description below of the CHMP’s Withdrawal Assessment Report on our submission
to the EMA relating to ANAVEX 2-73 as an add-on therapy for early Alzheimer’s disease) and on any future updated information.

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We will seek to identify potential strategic and commercial
partners to most effectively advance our programs and increase shareholder value. Further, we may acquire or develop new intellectual
property and assign, license, or otherwise transfer our intellectual property to further our business strategy.

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 an oral once-daily
capsule formulation for early AD, and in an oral liquid formulation for Rett syndrome and Fragile X syndrome.

We plan to prioritize the advancement of our ANAVEX
2-73 clinical development pipeline in early AD, Rett syndrome and Fragile X syndrome in the U.S.

EMA

In November 2024, we announced the submission of

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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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