Achieve Life Sciences, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. This is an annual report, not a standalone fourth-quarter report, and the supplied filing text does not provide a clear Q4-only financial breakdown.
Business context and development
Achieve is a clinical-stage pharmaceutical company focused on developing cytisinicline for smoking cessation and nicotine addiction, including vaping cessation. It has no products approved for sale and has never generated product-sales revenue. Cytisinicline is its sole product candidate; Sopharma is its exclusive supplier and manufacturer under the company’s arrangements.
- Phase 3 ORCA-2 reported positive topline results in 2022: six- and 12-week treatments produced abstinence rates of 25.3% and 32.6%, respectively, versus 4.4% and 7.0% for placebo during the relevant treatment periods; both comparisons had p<0.0001.
- Confirmatory Phase 3 ORCA-3 completed last-subject dosing in January 2023. The company expected topline results in Q2 2023.
- Phase 2 ORCA-V1 is studying cytisinicline for e-cigarette cessation. The company expected topline results in Q2 2023; an NIH/NIDA grant of approximately $2.8 million was expected to cover about half of study costs.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $30.1 million | $24.0 million |
| General and administrative expense | $10.7 million | $9.1 million |
| Total operating expenses | $40.8 million | $33.1 million |
| Interest expense | $1.8 million | None |
| Net loss | $42.4 million | $33.2 million |
| Net loss per share, basic and diluted | $4.00 | $4.08 |
| Cash used in operating activities | $37.5 million | $29.4 million |
| Cash and cash equivalents at year-end | $24.8 million | $43.0 million |
| Working capital at year-end | $5.7 million | Not stated here |
Gross margin and operating margin are not meaningful because the company had no product sales. R&D expense increased primarily with the start-up and conduct of ORCA-3 and ORCA-V1; G&A rose mainly from employee and stock-based compensation, clinical-trial communications, NDA preparation, legal work and insurance. Net loss increased, including due to convertible-debt interest expense.
At year-end, total assets were $30.0 million, total liabilities $21.7 million and stockholders’ equity $8.3 million. Convertible debt of $16.1 million was classified as current and matured December 22, 2023, subject to possible extension with lender approval. The company had an undrawn commitment for up to $10.0 million in term loans, but disclosed uncertainty about access to that facility following SVB’s March 2023 closure.
Material changes, financing and other notable items
- Cash declined by $18.3 million during 2022, reflecting $37.5 million of operating cash use and $19.3 million of financing cash inflows; there were no investing activities.
- A November 2022 private placement generated approximately $17.9 million net proceeds. The offering issued approximately 8.2 million common shares and warrants to purchase approximately 4.1 million additional shares. The company also raised $1.5 million gross through its ATM offering in 2022.
- Common shares outstanding increased from 9.45 million at December 31, 2021 to 17.90 million at December 31, 2022. Warrants, options and potential debt conversion create further dilution risk.
- On March 13, 2023, the company reported full access to its cash and cash equivalents held at SVB after the bank’s closure. This subsequent event does not resolve the company’s stated funding needs or uncertainty regarding future loan availability.
- The company reported no material legal proceedings. PwC issued an unqualified opinion on the financial statements and highlighted substantial doubt about the company’s ability to continue as a going concern. Management reported effective disclosure controls and internal control over financial reporting as of year-end; the auditor did not audit internal control.
Outlook, risks and contingencies
Management stated that year-end resources were insufficient to fund planned operations for the next 12 months and that substantial additional capital would be required. The company expects significant expenses and operating losses for at least the next several years. It may seek equity or debt financing, partnerships, grants or other funding; failure to raise capital could force it to delay, scale back or suspend development. No formal financial guidance was provided.
- Key execution risks include regulatory approval, clinical-trial outcomes, safety and impurity requirements, and the ability to complete remaining studies and prepare an NDA.
- Supply is concentrated in Sopharma and depends on plant-derived raw material and manufacturing in Bulgaria. The filing cites geopolitical, supply-chain, quality, climate and facility-disruption risks, including the Russia-Ukraine conflict.
- The company has no product revenue, a history of losses, substantial debt and a going-concern uncertainty. Additional financing may dilute shareholders or carry restrictive terms.
- Cytisinicline itself is naturally occurring and is not patentable as a compound in the United States, according to the filing; protection relies on licenses, supply arrangements, regulatory exclusivity and patents covering derivatives, formulations, salts or dosing methods.
- Other risks include competition, reimbursement and pricing uncertainty, potential adverse effects, intellectual-property disputes, and possible dilution from warrants, the ATM and convertible debt.
Important facts for investors to verify
- Whether the company obtained sufficient financing to fund operations beyond the disclosed 12-month period, and whether the going-concern uncertainty changed.
- ORCA-3 and ORCA-V1 results, subsequent regulatory feedback, and the actual timing and requirements for an NDA.
- Whether SVB or a successor lender made the $10.0 million term-loan facility available and how the convertible debt was managed before maturity.
- Current cash runway, operating cash burn, debt balances and financing-related dilution since year-end 2022.
- Sopharma’s manufacturing capacity, supply commitments, regulatory readiness and any changes to the supply relationship.