Achieve Life Sciences, Inc. — 2018 Form 10-K Summary
Business context and reporting period
Fiscal year ended December 31, 2018; the Form 10-K was filed March 14, 2019. Achieve is a clinical-stage pharmaceutical company developing cytisinicline, a plant-derived smoking-cessation treatment. It had no products approved for sale and generated no product revenue. Cytisinicline is marketed by Sopharma in certain territories outside Achieve’s licensed markets.
Financial and operating metrics
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | None from product sales | None from product sales |
| Research and development expense | $5.9 million | $3.1 million |
| General and administrative expense | $6.9 million | $3.5 million |
| Total operating expenses | $12.8 million | $6.6 million |
| Net loss | $12.7 million | $10.6 million |
| Basic and diluted loss per share | $3.61 | $22.07 |
| Net cash used in operating activities | $10.6 million | $9.1 million |
| Cash, cash equivalents and short-term investments at year-end | $14.6 million | $5.3 million |
| Working capital at year-end | $12.3 million | Not stated here |
| Total liabilities at year-end | $3.3 million | $2.0 million |
Profitability and margins are not meaningful because the company had no product sales and incurred operating losses. Cash and cash equivalents were $9.5 million, with $5.1 million of short-term investments. Total liabilities included $3.3 million in current liabilities and $12,000 in long-term obligations; the filing does not indicate material funded debt.
In fourth-quarter 2018, operating expenses were $3.7 million and net loss was $3.6 million, or $0.55 per share. Fourth-quarter 2017 operating expenses were $3.8 million and net loss was $3.7 million.
Material changes versus prior periods
- FY 2018 net loss increased to $12.7 million from $10.6 million, while operating expenses rose to $12.8 million from $6.6 million. Management attributed higher costs to a full year of combined-company operations, expanded clinical development, and ORCA-1 trial activity.
- Operating cash use increased by $1.5 million year over year. Financing activities provided $19.8 million, primarily from the June public offering, October registered direct offering, warrant exercises, and Lincoln Park Capital sales.
- Year-end cash, cash equivalents and short-term investments increased by $9.3 million to $14.6 million, largely from equity financings. The June 2018 offering generated $12.2 million net and the October offering generated $5.0 million net.
- Comparisons are affected by the August 2017 reverse merger: 2017 includes Achieve for the full year but OncoGenex only after the transaction closed; 2016 reflects Achieve alone. A one-for-ten reverse stock split took effect in May 2018, and share figures were adjusted retrospectively.
Outlook, commentary, risks and unusual items
- Management said available resources were insufficient to fund planned operations for the next 12 months and disclosed substantial doubt about the company’s ability to continue as a going concern. Additional financing is required; without it, development or operations may be delayed, reduced or suspended.
- ORCA-1, a randomized Phase 2b dose-and-schedule optimization trial, enrolled 254 U.S. smokers; top-line results were expected in mid-2019. The filing also reports a maximum-tolerated-dose study initiated in March 2019. These are forward-looking statements, not assurances of outcome.
- The FDA had agreed to a full pediatric-study waiver. Management’s development plans included further safety and regulatory work, including chronic toxicology, carcinogenicity, renal impairment, QT interval and longer-term exposure studies, as well as adequate Phase 3 evidence.
- Clinical evidence cited includes earlier investigator-led Phase 3 studies. In TASC, 12-month sustained abstinence was 8.4% with cytisinicline versus 2.4% with placebo; in CASCAID, continuous six-month abstinence was 22% versus 15% with nicotine-replacement therapy. These historical studies do not establish the outcome of Achieve’s planned trials.
- Key risks include dependence on Sopharma for all cytisinicline supply; crop, weather, geographic and manufacturing risks; clinical-trial, regulatory and commercialization uncertainty; competition and reimbursement/pricing pressure; and dilution or unfavorable financing terms. Cytisinicline itself is naturally occurring and not patentable in the U.S., increasing reliance on regulatory exclusivity, licensed rights, supply arrangements and patents covering derivatives or uses.
- The company discontinued apatorsen development in 2017, recording an $8.6 million intangible-asset write-off and a $2.9 million deferred-tax recovery that affected prior-year results. No material legal proceedings were reported. The auditor issued an unqualified opinion on the financial statements but highlighted substantial doubt about going concern; management reported effective disclosure controls and internal control over financial reporting.
Important facts for investors to verify
- Current cash runway, cash burn and the amount and terms of any financing completed after the filing date.
- ORCA-1 results and the status, design and funding needs of subsequent Phase 3 and required safety studies.
- FDA requirements and timing for an NDA, including completion of toxicology, renal, QT and longer-term exposure work.
- Sopharma’s ability to provide compliant, adequate supply and the protection and geographic scope of Achieve’s license and exclusivity rights.
- Potential dilution from outstanding warrants, convertible preferred stock, equity plans and further capital raises.
- The comparability of reported periods given the 2017 reverse merger and the 2018 reverse stock split.