Grace Therapeutics, Inc. quarterly report, Q1 FY2024

Business context and reporting period

Filing identity: The supplied filing is Acasti Pharma Inc.’s Form 10-Q, not a filing under the name Grace Therapeutics, Inc. Acasti acquired Grace in 2021. The quarter ended June 30, 2023 is Acasti’s first fiscal quarter of fiscal 2024; amounts below are U.S. dollars unless stated otherwise.

Acasti is a development-stage biopharmaceutical company with no product-sales revenue. Following a May 2023 strategic realignment, it is concentrating resources on GTX-104, an investigational intravenous nimodipine formulation for aneurysmal subarachnoid hemorrhage (aSAH). GTX-101 and GTX-102 development is deferred pending additional funding or partnerships.

Financial performance and position

Amounts in the table are in thousands, except per-share data.

Net loss narrowed by $501, while operating cash use increased by $814. Lower R&D and other operating expenses were partly offset by $1.485 million of restructuring costs. Interest income was $134,000, versus $32,000 a year earlier. No gross margin or product-sales margin is applicable because the company reported no product revenue.

At June 30, 2023, cash and cash equivalents were $21.633 million, down $6.242 million from March 31, 2023; short-term investments were $15,000. Current assets were $23.612 million and current liabilities $1.966 million, yielding reported working capital of $21.646 million. Total liabilities were $9.023 million, including a $7.057 million deferred tax liability. The filing reports no long-term debt or committed financing. Total assets were $73.033 million and shareholders’ equity was $64.010 million.

Material changes versus the prior comparable period

• R&D expense fell $1.495 million, with spending concentrated on GTX-104; reported R&D costs for GTX-102 and GTX-101 also declined.
• G&A expense fell $156,000 and sales and marketing expense fell $110,000, primarily reflecting lower staffing and stock-based compensation. G&A professional fees increased.
• The quarter included $1.485 million of restructuring charges, primarily severance. By June 30, $274,000 remained unpaid.
• Operating cash use rose despite the lower net loss, in part because changes in operating assets and liabilities used $2.026 million of cash.
• Total assets were $73.033 million versus $124.931 million in the year-earlier comparison, principally reflecting the prior-year impairment of pipeline intangible assets and goodwill. No impairment was recorded in this quarter.

Outlook, risks and unusual items

Management expects the realignment to extend available cash resources through the second calendar quarter of 2025. The company says it will need additional capital beyond that point and plans to raise capital beforehand; financing may not be available on acceptable terms or at all. It does not expect product revenue unless and until development is completed and regulatory approval is obtained, a process expected to take several years and subject to significant uncertainty.

After the quarter, Acasti reported FDA alignment on the proposed GTX-104 STRIVE-ON Phase 3 safety trial and expected first-patient enrollment in calendar Q4 2023. The planned randomized trial is approximately 100 aSAH patients at about 25 U.S. hospitals, with a safety comparison against oral nimodipine and follow-up through 90 days. Management estimated approximately 18 months to complete the trial after enrollment begins and described it as the final clinical step expected before seeking approval under the 505(b)(2) pathway. These are forward-looking expectations, not assured outcomes.

Key risks include dependence on GTX-104; clinical, regulatory, manufacturing and financing uncertainty; competition and reimbursement; and Nasdaq listing requirements. Acasti implemented a 1-for-6 reverse stock split effective July 10, 2023 and subsequently regained compliance with Nasdaq’s minimum bid-price requirement. The filing states that the June 30 share count was 7,435,533, adjusted in the statements to reflect the split.

Acasti disputes a supplier’s claim for $2.8 million under a raw krill oil agreement related to former candidate CaPre. It recorded no liability, and the dispute remained unresolved at quarter-end; payment or loss exposure is uncertain. Quebec research tax-credit receivables are subject to government audit. The company reported no accrued legal liabilities at June 30 and said it was not then party to a legal proceeding management believed likely to have a material adverse effect.

Other subsequent events included the sale of laboratory equipment for $109,000 net proceeds, against a June 30 net book value of $54,000, and a new short-term headquarters lease. The existing Sherbrooke lease was expected to end March 31, 2024 after Acasti elected not to take its renewal term.

Most important facts for investors to verify

• Whether GTX-104 enrollment began as expected, whether the trial proceeds on the disclosed design and timeline, and what regulatory steps remain.
• Actual cash burn and whether the stated runway through Q2 2025 remains achievable, including the timing and terms of any financing.
• The outcome and potential cash impact of the $2.8 million Aker supply-contract dispute, and whether the company can recover value from any product delivered.
• Whether deferred GTX-101 and GTX-102 programs attract funding or partners, or face further delay, impairment or disposition.
• Collection and audit outcomes for government tax-credit receivables, and the post-split share count and any subsequent equity issuance or dilution.