Acasti Pharma Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and nine months ended December 31, 2023. The filing is by Acasti Pharma Inc.; Grace Therapeutics, Inc. is its acquired predecessor business, not the registrant named on this 10-Q. Financial amounts below are in U.S. dollars; financial statement amounts are in thousands unless stated otherwise.
Business context and reporting period
Acasti is a development-stage biopharmaceutical company focused on rare and orphan diseases. Following a May 2023 strategic realignment, it prioritized GTX-104, an investigational intravenous formulation of nimodipine for aneurysmal subarachnoid hemorrhage (aSAH), and deferred development of GTX-102 and GTX-101 pending funding or partnerships. The first patient entered the GTX-104 STRIVE-ON Phase 3 safety trial on October 23, 2023. Acasti has no product-sales revenue and expects no such revenue until development and regulatory approval, if achieved.
Financial performance, cash flow and liquidity
| Metric | Three months ended Dec. 31, 2023 | Nine months ended Dec. 31, 2023 | Comparison |
|---|---|---|---|
| Revenue | No product-sales revenue reported | No product-sales revenue reported | Company remains pre-commercial |
| Research and development expense, net | $1.443 million | $2.998 million | Down $1.007 million and $5.334 million, respectively, year over year |
| General and administrative expense | $1.570 million | $4.922 million | Down $0.019 million and $0.265 million, respectively |
| Operating loss | $3.043 million | $9.589 million | Improved from $4.245 million and $14.082 million |
| Net loss | $2.391 million | $9.687 million | Improved from $3.889 million and $13.342 million |
| Basic and diluted loss per share | $0.21 | $1.09 | Improved from $0.52 and $1.80 |
| Net cash used in operating activities | Not presented for quarter | $10.245 million | Compared with $12.587 million used |
At December 31, 2023, cash and cash equivalents were $18.545 million and short-term investments were $6.569 million, totaling $25.114 million, versus $27.890 million at March 31, 2023. Current assets were $26.884 million and current liabilities $1.770 million. Total liabilities were $11.505 million, including a $3.332 million derivative warrant liability; the company reported no long-term debt. Total assets were $76.185 million and shareholders’ equity was $64.680 million. No meaningful operating margin is available because the company reported no product revenue.
Operating cash use decreased year over year. Investing activities used $6.444 million, principally for short-term investments, while financing activities provided $7.359 million, principally from the September private placement. Cash and cash equivalents decreased by $9.330 million over the nine-month period; the decline in cash plus short-term investments from March 31 was smaller because funds were placed in short-term investments.
Material changes versus prior comparable periods
- Lower R&D spending reflected the focus on GTX-104 and deferral of GTX-102 and GTX-101; reduced headcount also lowered salary, sales and marketing, and stock-based compensation costs.
- Net loss improved year over year, but the nine-month period included a $1.701 million noncash expense from revaluing warrant liabilities. Higher interest income partly benefited results.
- A September 2023 private placement generated approximately $7.338 million net proceeds. The company issued 1,951,371 common shares, pre-funded warrants for 2,106,853 shares, and common warrants for 2,536,391 shares. Common shares outstanding increased from 7,435,533 at March 31 to 9,399,404 at December 31.
- A 1-for-6 reverse stock split took effect July 10, 2023. Acasti also settled the CaPre supply dispute with Aker BioMarine: Aker retained or acquired the CaPre materials, equipment, data and intellectual property, and released potential claims; the transferred assets had no carrying value at March 31, 2023.
Outlook, risks and unusual items
- Management estimates existing cash, cash equivalents and short-term investments will fund operations into the second calendar quarter of 2026. This is an estimate, not a guarantee; Acasti expects to need additional capital thereafter and says financing may not be available on acceptable terms or at all.
- The STRIVE-ON trial plans to enroll approximately 100 patients at about 25 U.S. hospitals, with safety as the primary endpoint. Management estimates approximately 18 months to complete from first enrollment and expects it to be the final clinical step before seeking FDA approval under the 505(b)(2) pathway, subject to FDA requirements and a planned pre-NDA meeting.
- Acasti reported $7.670 million of CRO commitments for the next 12 months and no CMO commitments. Its remaining operating lease was expected to terminate March 31, 2024.
- The May 2023 restructuring cost $1.485 million, primarily severance and legal fees. GTX-102 and GTX-101 development is deferred; future development depends on additional funding or strategic partnerships, and either asset may be licensed or sold.
- Key risks include dependence on GTX-104, uncertain clinical and regulatory outcomes, financing needs, competition and reimbursement, intellectual-property protection, and reliance on third-party manufacturers and service providers. Government R&D tax-credit receivables are subject to audit. Management reported no accrued legal liabilities at December 31, 2023; it cautioned that an unfavorable resolution of legal matters could nevertheless be material.
- The filing reports effective disclosure controls as of December 31, 2023 and no material changes to internal control over financial reporting during the quarter. Ernst & Young was dismissed and KPMG LLP (U.S.) engaged as auditor in December 2023; the prior auditor’s report was not described as adverse or qualified.
Important facts for investors to verify
- Whether the reported liquidity and management’s projected runway remain adequate as GTX-104 trial spending and CRO commitments progress.
- STRIVE-ON enrollment, completion timing, safety results, and the FDA’s eventual NDA requirements and decision.
- Potential dilution from the pre-funded warrants and common warrants, including the warrant liability’s sensitivity to share price and valuation assumptions.
- Whether GTX-102 and GTX-101 receive funding or partners, and the strategic and financial consequences of their continued deferral.
- Realizability of government tax-credit receivables and any material developments in legal or contractual matters.