Achieve Life Sciences, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; the filing also provides unaudited quarterly results. Achieve is a clinical-stage pharmaceutical company developing cytisinicline for smoking cessation and nicotine addiction. It had no approved products and generated no product-sales revenue.
Financial results and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Product revenue | None | None |
| Research and development expense | $6.9 million | $9.7 million |
| General and administrative expense | $7.9 million | $6.9 million |
| Total operating expenses | $14.75 million | $16.53 million |
| Net loss | $14.73 million | $16.40 million |
| Net cash used in operations | $13.47 million | $15.22 million |
| Net cash provided by financing | $32.68 million | $17.33 million |
| Cash and cash equivalents at year-end | $35.85 million | $16.66 million |
| Working capital at year-end | $34.0 million | Not stated here |
At December 31, 2020, total liabilities were $3.01 million, including $169,000 of current and long-term obligations; the filing identifies office leases and a small amount of equipment under capital lease. No product margins are reported because the company had no product sales.
Q4 2020: Net loss was $4.72 million, compared with $3.19 million in Q4 2019. Operating expenses were $4.72 million versus $3.21 million; R&D expense was $2.35 million versus $1.76 million, and G&A expense was $2.37 million versus $1.45 million.
Changes and notable developments
- Full-year net loss and operating cash use declined from 2019, primarily reflecting completion of the ORCA-1 trial; spending began rising again as ORCA-2 started in October 2020.
- G&A expense increased, mainly due to employee costs, patent development, market research and public relations, and insurance premiums.
- The company raised substantial equity capital during 2020. Financing activities generated $32.7 million net cash, while common shares outstanding increased to 6.11 million at year-end from 1.47 million at year-end 2019. A 1-for-20 reverse split took effect in July 2020; share and per-share figures are presented on a split-adjusted basis.
- Management reported a $60.4 million accumulated deficit. The independent auditor identified liquidity as a critical audit matter; management said it expected to meet commitments over the next 12 months but remains dependent on raising funds.
Pipeline, outlook and risks
- ORCA-2, a U.S. Phase 3 trial planned to enroll 750 adult smokers, began in October 2020 and compares 3 mg cytisinicline three times daily for six or 12 weeks with placebo. COVID-19-related enrollment delays led the company to expect enrollment completion in mid-2021.
- In investigator-sponsored Phase 3 RAUORA, cytisinicline met the prespecified non-inferiority endpoint versus varenicline: six-month continuous abstinence was 12.1% versus 7.9%. The filing reports fewer overall adverse events with cytisinicline, while noting these results are from an investigator-sponsored study.
- The company is considering a Phase 2 study of cytisinicline for vaping cessation and is seeking non-dilutive funding to support it. No formal financial guidance or product-revenue forecast is provided.
- Key risks include clinical-trial and regulatory uncertainty; continued losses and need for additional financing, potentially dilutive; reliance on Sopharma as the sole supplier and manufacturer; dependence on a plant-derived ingredient; and limited U.S. patent protection for naturally occurring cytisinicline. COVID-19 could further disrupt trials, supply and regulatory timelines.
- The company reported no material legal proceedings. The auditor gave an unqualified opinion on the financial statements; the filing states that the company was not required to obtain, and the auditor did not provide, an audit opinion on internal control effectiveness.
Important facts for investors to verify
- Current cash, spending pace, committed trial costs and the timing and terms of any additional financing.
- ORCA-2 enrollment progress, trial completion timing and eventual efficacy and safety results.
- FDA requirements and remaining toxicology, carcinogenicity and clinical work needed to support a future application.
- Sopharma’s ability to supply adequate, compliant cytisinicline and the company’s practical alternatives if supply is interrupted.
- Potential dilution from future equity issuance, warrants and other outstanding securities; the filing reports 6,149,917 common shares outstanding as of March 11, 2021.