Filing summary
Registrant: Acasti Pharma Inc. (NASDAQ: ACST), which acquired Grace Therapeutics, Inc. in August 2021; Grace became a wholly owned subsidiary. The filing is a Form 10-Q for the quarter ended December 31, 2021, Acasti’s fiscal third quarter. Amounts below are in U.S. dollars, in thousands, except per-share data.
Business context and reporting period
Following the Grace merger, Acasti shifted its focus to developing specialty drugs for rare and orphan diseases. Its lead programs are GTX-104 for subarachnoid hemorrhage, GTX-102 for ataxia telangiectasia, and GTX-101 for postherpetic neuralgia. Acasti discontinued development of its former lead candidate, CaPre, after Phase 3 studies failed to meet their primary endpoints; it decided not to file an NDA.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2021 | Three months ended Dec. 31, 2020 | Nine months ended Dec. 31, 2021 | Nine months ended Dec. 31, 2020 |
|---|---|---|---|---|
| Revenue | $0 | $81 | $0 | $81 |
| Operating loss | $4,474 | $1,964 | $11,186 | $14,119 |
| Net loss | $3,778 | $3,220 | $5,915 | $14,032 |
| Basic and diluted loss per share | $0.09 | $0.26 | $0.23 | $1.18 |
| Cash used in operations | $4,584 | $4,214 | $14,089 | $12,559 |
- At December 31, 2021, cash and cash equivalents were $33.013 million and short-term investments were $13.312 million. Working capital was $46.1 million; total assets were $114.227 million.
- Total liabilities were $3.165 million, including $2.843 million in trade and other payables and $300,000 in derivative warrant liabilities. The filing reports no conventional debt balance. The company expects continued operating losses and says it will need additional financing; it does not provide a specific cash-runway estimate.
- Quarterly net loss increased by $558,000 year over year, primarily as higher R&D, general and administrative expenses, and a $249,000 impairment charge outweighed improved financial income. Nine-month net loss fell by $8.117 million, mainly reflecting lower impairment charges and a favorable change in warrant valuation; these valuation gains are not operating revenue.
- Quarterly R&D expense was $2.179 million, up from $678,000, reflecting development work on Grace’s programs and higher staffing. Nine-month R&D was $3.233 million, down from $3.720 million. Nine-month general and administrative expense rose to $7.441 million from $4.078 million, including merger-related and other professional fees. No meaningful operating margin is available because product revenue was nil.
Material changes, outlook, and risks
- Grace acquisition: Completed August 27, 2021, in a share-for-share transaction. Acasti issued 18,241,233 shares valued at approximately $60.824 million. The preliminary purchase accounting included $65.208 million of acquired in-process R&D intangible assets; the valuation was not finalized at quarter-end.
- GTX-104: The company reported interim results from the first 20 of 50 subjects in its pivotal PK bridging study, stating that both primary endpoints were met and the study could continue under the existing protocol. It expected final results in the first half of calendar 2022 and, subject to results and FDA review, anticipated starting a Phase 3 safety study in the second half of 2022. These are management expectations, not completed milestones in this filing.
- Other pipeline: The filing describes planned PK bridging and confirmatory clinical work for GTX-102 and further Phase 1 dose-ranging work for GTX-101, but does not give a firm near-term completion date for those programs.
- Funding and dilution: Acasti renewed an at-the-market (ATM) prospectus supplement with capacity of up to $75 million. No shares were sold under the ATM during the nine months ended December 31, 2021. The company may need further financing, which could dilute shareholders or require concessions on product rights.
- Legacy CaPre commitments: Acasti held CaPre-related assets for sale and recorded a $249,000 impairment on krill oil assets. It disclosed a remaining $2.8 million commitment under a krill oil supply agreement, with no product delivered as of February 14, 2022. The company said recovery of value is uncertain and a near-term loss may result absent an amended arrangement.
- Legal and operating risks: Four shareholder suits challenged disclosures related to the Grace merger; two were dismissed without prejudice and the other two were consolidated. No legal reserves were accrued at December 31, 2021. Other key risks include clinical and regulatory uncertainty, dependence on third-party manufacturers and research organizations, intellectual-property disputes, currency exposure, and the need for additional capital. Management said COVID-19 had not significantly disrupted operations to date, but future effects remained uncertain.
Important facts for investors to verify
- Whether final GTX-104 PK results and FDA discussions support the planned Phase 3 safety study, and whether the stated timelines were met.
- The final purchase-price allocation for Grace and the assumptions supporting the $65.208 million in-process R&D valuation.
- Cash and short-term investment balances, operating cash burn, and the timing and terms of any future financing or ATM sales.
- How the $2.8 million krill oil supply commitment is resolved and whether additional impairment or loss is recorded.
- Developments in the consolidated merger litigation and any resulting costs or liabilities.