Achieve Life Sciences, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed March 13, 2020. Achieve is a clinical-stage pharmaceutical company developing cytisinicline for smoking cessation and nicotine addiction. It had no approved products or product-sales revenue.
Financial results and liquidity
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $9.674 million | $5.868 million |
| General and administrative expense | $6.854 million | $6.945 million |
| Total operating expenses | $16.528 million | $12.813 million |
| Net loss | $16.395 million | $12.687 million |
| Basic and diluted loss per share | $1.99 | $3.61 |
| Net cash used in operating activities | $15.216 million | $10.623 million |
- At year-end, cash and cash equivalents were $16.664 million; short-term investments were zero. Working capital was positive at $14.5 million.
- Total assets were $21.078 million, total liabilities $3.028 million, and stockholders’ equity $18.050 million. The filing reports no material borrowings; liabilities were primarily operating accruals and lease obligations.
- Operating cash use increased, mainly due to cytisinicline development and the ORCA-1 trial. Financing activities provided $17.325 million, including $12.334 million net proceeds from the December public offering and $4.199 million from warrant exercises.
- There is no meaningful revenue or gross-margin trend to assess. The filing reports continuing operating losses and an accumulated deficit of $45.7 million.
Material changes and quarterly results
- R&D expense increased 65% year over year to $9.674 million, largely reflecting ORCA-1. G&A expense was broadly unchanged.
- Annual net loss increased about 29% from 2018. Loss per share narrowed because the weighted-average share count rose substantially, not because the company became profitable.
- For Q4 2019, operating expenses were $3.209 million and net loss was $3.194 million, compared with $3.709 million and $3.637 million, respectively, in Q4 2018. Q4 R&D expense was $1.763 million versus $2.081 million.
- Common shares outstanding rose from 6.72 million at year-end 2018 to 29.49 million at year-end 2019. The December offering included warrants and convertible preferred stock, creating potential additional dilution.
Development, outlook, and key risks
- ORCA-1, a 254-person Phase 2b trial, supported selection of 3.0 mg cytisinicline three times daily. In that arm, reported abstinence was 54% at week 4 versus 16% for placebo; continuous abstinence during weeks 5–8 was 30% versus 8%. No serious adverse events were reported in the trial; commonly reported events included abnormal dreams, insomnia, upper respiratory infections, and nausea.
- The FDA agreed that the 3.0 mg three-times-daily schedule was acceptable. Management planned to begin a U.S. Phase 3 trial in mid-2020, subject to obtaining capital and submitting interim chronic-toxicology data. Planned endpoints included abstinence during the final four weeks of 6- and 12-week treatment periods, with follow-up endpoints out to 24 weeks.
- Management stated that available resources were insufficient to fund planned operations for the next 12 months and that substantial additional capital was required. The auditor’s report also highlighted substantial doubt about the company’s ability to continue as a going concern. Failure to raise funds could delay, scale back, or stop development.
- Supply is exclusively dependent on Sopharma and cytisinicline derived from Laburnum seeds. The filing cites supply, agricultural, weather, and supplier-continuity risks. Cytisinicline itself is naturally occurring and not patentable in the United States; protection relies on licenses, supply arrangements, regulatory exclusivity, and patents covering derivatives or methods.
- The company disclosed a Nasdaq minimum-bid-price deficiency notice and a deadline of July 22, 2020 to regain compliance. It also identified COVID-19 as a potential source of clinical, supply-chain, and operational disruption; the impact was uncertain as of filing.
- Other risks include dependence on a single product candidate, clinical and regulatory uncertainty, competition, future financing dilution, and reimbursement and pricing pressure. No material legal proceedings were reported. Management assessed disclosure controls and internal control over financial reporting as effective at year-end.
Important facts for investors to verify
- Whether financing was secured in time to fund planned operations and launch Phase 3, and whether the going-concern uncertainty was resolved.
- Actual Phase 3 start date, protocol, enrollment, toxicology-data status, and subsequent efficacy and safety results.
- Cash burn and liquidity after year-end, including any later equity issuance, warrant exercise, or other financing and the resulting dilution.
- Nasdaq bid-price compliance and the status and terms of outstanding warrants and convertible securities.
- Sopharma’s ability to supply compliant clinical and commercial quantities, and the strength and duration of the company’s regulatory and intellectual-property protections.