Business context and reporting period
Achieve Life Sciences, Inc. is a clinical-stage pharmaceutical company developing cytisinicline for smoking cessation and nicotine addiction. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2020. The company had no approved products or product-sales revenue.
Financial results and liquidity
Amounts below are in millions of U.S. dollars, except per-share data.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $1.891 | $1.824 | $4.535 | $7.911 |
| General and administrative expense | $1.863 | $1.893 | $5.494 | $5.408 |
| Net loss | $(3.764) | $(3.673) | $(10.006) | $(13.201) |
| Basic and diluted loss per share | $(1.14) | $(9.07) | $(4.55) | $(35.96) |
Cash and cash equivalents were $22.393 million at September 30, 2020, compared with $16.664 million at year-end 2019; restricted cash was $0.050 million. Working capital was $22.2 million. Total assets were $27.617 million, total liabilities $1.942 million, and stockholders’ equity $25.675 million. Long-term obligations, including current portions, totaled $0.223 million. The company reported no off-balance-sheet financing arrangements. As a pre-revenue company, operating and profit margins are not meaningful.
For the nine months, operating cash use was $10.994 million, versus $11.802 million in 2019. Financing activities provided $16.740 million, primarily from equity offerings and warrant exercises; investing activities used $0.017 million. Ending cash, cash equivalents, and restricted cash were $22.443 million.
Material changes versus prior periods
- Q3 net loss increased to $3.764 million from $3.673 million; R&D expense rose modestly in preparation for ORCA-2.
- Nine-month net loss narrowed to $10.006 million from $13.201 million, mainly as R&D spending declined after completion of the ORCA-1 Phase 2b study in June 2019.
- Nine-month financing cash inflow rose to $16.740 million from $4.622 million, supporting higher cash and equity. The July registered direct offering and August public offering generated net proceeds of approximately $5.3 million and $6.8 million, respectively; the April private placement generated approximately $1.6 million net.
- Common shares outstanding increased to 3,616,414 at September 30, 2020 from 1,474,258 at December 31, 2019. A 1-for-20 reverse stock split took effect July 31, 2020; Nasdaq confirmed minimum-bid-price compliance on August 14.
Outlook, management commentary, and risks
- Going concern: Management states substantial doubt exists about the company’s ability to continue as a going concern. Resources were insufficient to fund planned operations for the next 12 months; substantial additional capital is needed. No assurance is given that financing will be available on acceptable terms. Without it, development or operations may be delayed, reduced, or suspended.
- Management expects significant expenses and increasing operating losses for at least the next several years, including as clinical development advances. R&D costs are expected to increase; the filing provides no quantified earnings or revenue guidance.
- In October 2020, the company initiated Phase 3 ORCA-2, planned to evaluate 3 mg cytisinicline three times daily against placebo in 750 adult smokers, with six- and twelve-week treatment arms.
- The investigator-sponsored Phase 3 RAUORA trial met its prespecified non-inferiority endpoint versus varenicline: six-month continuous abstinence was 12.1% for cytisinicline versus 7.9% for varenicline. Overall adverse events were significantly fewer with cytisinicline. These results do not establish the outcome of Achieve’s own Phase 3 program or regulatory approval.
- COVID-19 could disrupt trials, supply, regulatory timelines, and access to financing. Other principal risks include dependence on Sopharma as the sole cytisinicline supplier, clinical and regulatory uncertainty, competition, and potential dilution from future capital raises and outstanding equity awards and warrants.
- The company terminated its unused H.C. Wainwright at-the-market offering agreement effective October 20, 2020; related deferred offering costs were to be expensed in Q4.
Important facts for investors to verify
- Cash runway assumptions and the amount, timing, and terms of financing required beyond the stated 12-month funding shortfall.
- ORCA-2 enrollment, execution, safety, and efficacy milestones, including any impact from COVID-19; distinguish the company-sponsored trial from RAUORA.
- Potential dilution from equity financing, the LPC facility, pre-funded warrants, other warrants, options, and restricted stock units.
- Sopharma’s ability to supply sufficient quality cytisinicline and the regulatory, manufacturing, and natural-resource risks tied to that sole-source arrangement.
- Whether subsequent filings update the company’s going-concern assessment, clinical plans, financing needs, or the accounting for ATM termination costs.