Business context and reporting period
Achieve Life Sciences, Inc. is a clinical-stage pharmaceutical company developing cytisine for smoking cessation. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2018. The company has no products approved for sale and reported no product revenue.
Comparisons with 2017 are materially affected by the August 2017 reverse merger: 2018 results include the combined company, while 2017 results include only the legacy Achieve business. The company also effected a 1-for-10 reverse stock split in May 2018; per-share and share figures were retrospectively adjusted.
Financial results and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $1.045m | $0.062m | $2.246m | $0.123m |
| General and administrative expense | $1.751m | $0.093m | $3.564m | $0.352m |
| Net loss | $2.788m | $0.166m | $5.810m | $0.371m |
| Basic and diluted loss per share | $1.82 | $78.66 | $4.18 | $175.22 |
Operating expenses rose substantially, which management attributed to cytisine development activity, including clinical and toxicology work, as well as increased headcount, consulting, legal, professional and facility costs following the merger. Profit margins are not meaningful because the company had no revenue.
At June 30, 2018, cash and cash equivalents were $15.280m, working capital was $12.8m, total assets were $19.220m, total liabilities were $2.778m and stockholders’ equity was $16.442m. Accumulated deficit was $18.504m. Long-term obligations were $0.029m, including the current portion; the filing reports no material conventional debt balance.
For the first six months, operating activities used $4.101m; financing activities provided $13.901m, primarily from the June public offering and Lincoln Park Capital (LPC) sales; investing activities used $0.026m. Cash, cash equivalents and restricted cash increased to $15.330m, including $0.050m restricted cash.
The June 2018 public offering raised $13.8m gross and $12.2m net. The LPC purchase agreement had approximately $7.4m of available capacity as of June 30. These financings strengthened reported cash, but management stated that current resources were insufficient for planned operations over the next 12 months and that substantial doubt existed about the company’s ability to continue as a going concern without additional financing.
Material changes, outlook and risks
- Management reported sharply higher R&D and G&A expenses versus 2017, while cautioning that the periods are not directly comparable because of the merger.
- Management planned to start a roughly 250-person U.S. Phase 2b cytisine optimization study in Q4 2018, with top-line results expected in Q2 2019. The study was intended to inform Phase 3 design.
- Management expected final results from the older-smoker portion of an ongoing pharmacokinetic/pharmacodynamic study in Q1 2019, and results from a food-effect study of a new tablet formulation in Q3 2018. These are stated expectations, not guarantees.
- At a May 2018 end-of-Phase-2 meeting, the FDA discussed the planned Phase 3 program and additional development needs, including chronic toxicology, carcinogenicity, renal impairment, QT interval and longer-term exposure studies. Regulatory approval and the timing of trials remain uncertain.
- Management expects increasing losses and R&D spending as development advances. If additional capital is unavailable, the company may delay, scale back or stop development. Key risks include clinical and regulatory failure, dependence on Sopharma as the exclusive cytisine supplier, financing and dilution, competition, and intellectual-property limitations; cytisine is naturally occurring and is not patentable as a substance.
- Other notable items: the company discontinued apatorsen development in 2017 and terminated its related licenses; the 2018 quarter includes no stated unusual gain comparable to the 2017 deferred-tax recovery. The filing reports effective disclosure controls and no material change to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Funding runway: reconcile the stated cash balance and recent financing with management’s warning that resources do not cover the next 12 months, and track the timing and terms of any new financing.
- Clinical execution: verify actual start, enrollment, safety and results for the planned Phase 2b study and other cytisine studies, and assess whether FDA feedback changes the Phase 3 plan or required studies.
- Capitalization and dilution: review outstanding and exercisable warrants, preferred-stock conversions, LPC sales and remaining capacity, and the impact of further equity issuance.
- Preferred-stock figures: the filing’s balance sheet reports 3,283 preferred shares outstanding at June 30, while its offering note says 2,531 remained after conversions through June 30; verify the correct period-end amount and subsequent conversion activity.
- Supply and commercial rights: monitor Sopharma’s ability to supply cytisine and the strength and scope of Achieve’s licensing, exclusivity and intellectual-property protections.