Achieve Life Sciences, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2021; comparative periods are the three and nine months ended September 30, 2020. Amounts are in U.S. dollars; financial statement amounts below are in millions unless stated otherwise.
Business context and reporting period
Achieve is a clinical-stage pharmaceutical company developing cytisinicline for smoking cessation and nicotine addiction. It has no products approved for sale and has generated no product revenue. Its principal program is the ORCA clinical development program.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $4.6 | $1.9 | $19.5 | $4.5 |
| General and administrative expense | $2.1 | $1.9 | $6.5 | $5.5 |
| Net loss | $6.7 | $3.8 | $26.0 | $10.0 |
| Basic and diluted loss per share | $0.71 | $1.14 | $3.39 | $4.55 |
| Operating cash used | Not provided for the quarter | Not provided for the quarter | $24.2 | $11.0 |
At September 30, 2021, cash and cash equivalents were $33.3 million, working capital was $31.7 million, total assets were $37.8 million, and total liabilities were $3.1 million. Long-term obligations were $0.023 million, with a further $0.069 million current portion; disclosed lease commitments totaled $0.091 million. The company reported no off-balance-sheet financing arrangements. As a pre-commercial development company, operating margins are not meaningful.
Financing activities provided $21.7 million in the first nine months of 2021, principally from the May public offering ($21.3 million net) and warrant exercises. Cash and cash equivalents declined $2.5 million from December 31, 2020. The company had 9.45 million common shares outstanding at September 30, up from 6.11 million at year-end 2020, primarily reflecting the May offering.
Material changes versus the prior comparable period
- Nine-month R&D expense rose to $19.5 million from $4.5 million, primarily due to enrollment and increased activity in the Phase 3 ORCA-2 trial. Q3 R&D expense more than doubled year over year.
- Nine-month net loss increased to $26.0 million from $10.0 million, and operating cash use increased to $24.2 million from $11.0 million.
- G&A expense increased to $6.5 million from $5.5 million for the nine-month period, attributed primarily to employee and stock-based compensation costs, higher insurance premiums, and clinical-trial media and awareness expenses.
- The May 2021 public offering raised approximately $21.3 million net and materially increased the share count. Loss per share was lower year over year despite the greater total loss, alongside a substantially higher weighted-average share count.
Outlook, management commentary, and risks
- Management estimated that existing cash, cash equivalents, and restricted cash would fund current operating expenses and capital expenditures into 2023. This estimate includes anticipated ORCA-2 costs and Achieve’s portion of ORCA-V1 costs, but excludes other future trials such as ORCA-3. The company expects to need additional funding to advance development and corporate activities.
- ORCA-2 enrolled 810 adult smokers and closed enrollment in 2021; topline results were expected in the first half of 2022. Management planned to initiate the second Phase 3 trial, ORCA-3, in early 2022.
- A $320,000 NIH/NIDA grant supports preparations for a Phase 2 e-cigarette cessation study, ORCA-V1. The filing states that further grant funding of approximately $2.5 million is conditional on milestone review and available NIH funds; the full $2.8 million award was expected to cover approximately half the study costs. The FDA accepted the relevant IND in November 2021, after quarter-end.
- The company reported an accumulated deficit of $86.4 million and expects continuing losses and increased R&D spending. It cautioned that financing may not be available on acceptable terms and that equity financing may dilute existing shareholders.
- Key risks include reliance on Sopharma as the sole cytisinicline supplier, clinical-trial execution and regulatory approval uncertainty, possible COVID-19-related disruptions, competition, and the limitations of intellectual-property protection for a naturally occurring compound. The company also identified potential supply and manufacturing risks, including contamination or nitrosamine issues.
- The filing reported no material impact from COVID-19 on financial condition, operations, or guidance as of filing, while warning that later impacts could disrupt trials, supply, or regulatory timelines. Management stated disclosure controls and procedures were effective at quarter-end.
Important facts for investors to verify
- Whether ORCA-2 results met the trial’s efficacy and safety objectives, and whether the planned ORCA-3 timeline and costs changed.
- Actual cash burn, clinical-program spending, and the assumptions supporting management’s runway estimate, especially its exclusion of ORCA-3 costs.
- Whether additional NIH funding for ORCA-V1 was approved and whether the study proceeded as planned.
- Future financing needs, available funding sources, and the potential dilution from further equity issuance or warrant exercises.
- Sopharma’s ability to provide sufficient, compliant cytisinicline supply and any developments concerning manufacturing quality, contamination, or regulatory requirements.