Achieve Life Sciences, Inc. — Q1 2019 Form 10-Q
Business context and reporting period
Quarter ended March 31, 2019. Achieve is a clinical-stage pharmaceutical company developing cytisinicline for smoking cessation. It has no products approved for sale and reported no product revenue.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.1 million | $1.2 million |
| General and administrative expense | $1.9 million | $1.8 million |
| Total operating expenses | $5.9 million | $3.0 million |
| Net loss | $5.9 million | $3.0 million |
| Net loss per share, basic and diluted | $0.88 | $2.43 |
| Cash used in operations | $4.9 million | $2.2 million |
Margins are not meaningful because the company generated no revenue. The higher R&D expense and operating cash use primarily reflected the ramp-up and enrollment of the ORCA-1 trial. The lower reported loss per share versus 2018 reflects a substantially larger weighted-average share count in 2019 (6.72 million versus 1.24 million), despite the higher net loss.
At March 31, 2019, cash and cash equivalents were $7.3 million and short-term investments were $2.3 million, totaling $9.7 million; working capital was $6.5 million. Total assets were $14.5 million, total liabilities $4.3 million, and stockholders’ equity $10.2 million. The filing reports no material conventional debt; obligations were $40,000, in addition to lease liabilities. Operating lease liabilities were recognized following adoption of the lease accounting standard.
Material changes and capital position
Cash, cash equivalents and short-term investments declined from $14.6 million at December 31, 2018 to $9.7 million at March 31, 2019, principally to fund operations. Total liabilities increased from $3.3 million to $4.3 million, mainly due to higher clinical-related payables. The company had no financing cash inflows during Q1 2019; investing cash inflows of $2.7 million primarily reflected investment maturities.
Management stated that existing resources were insufficient to fund planned operations for the next 12 months and that substantial doubt existed about the company’s ability to continue as a going concern without additional financing. It expects significant expenses and losses for at least the next several years and may need to raise capital through securities sales, partnerships, or other financing. Failure to obtain funding could force reductions or delays in development activities.
After quarter-end, through May 15, 2019, 330,500 warrants from the June 2018 financing had been exercised for approximately $1.3 million, and all Series A convertible preferred shares had converted into common shares. The filing reported 6,865,950 common shares outstanding on May 15, 2019.
Outlook, clinical progress, and risks
- ORCA-1, a Phase 2b cytisinicline dose-and-schedule optimization trial, completed enrollment of 254 participants in February; the last subject visit was completed in April. Top-line results were expected by the end of Q2 2019.
- A single-dose maximum-tolerated-dose study began in March. The 21 mg dose had been evaluated without dose-limiting toxicity, and the independent safety committee recommended amending the protocol to test higher doses.
- Management expects R&D spending to rise as clinical development and regulatory-enabling work continue. The filing does not provide specific financial guidance or a quantified cash runway.
- Key risks include dependence on additional financing, clinical and regulatory uncertainty, reliance on Sopharma as the exclusive cytisinicline supplier, and the fact that cytisinicline is naturally occurring and not patentable in the United States. Supply may also be exposed to agricultural, weather, and geographic risks.
- In a prior small pharmacokinetic/pharmacodynamic study, 46% of 26 participants achieved biochemically verified abstinence by day 26; adverse events were mostly mild and no severe or serious events were reported. These findings are not a substitute for results from larger controlled trials.
Most important facts for investors to verify
- Whether ORCA-1 results were released as expected and what the full efficacy and safety data show.
- How much additional financing is required, on what terms, and whether it is sufficient to address the stated going-concern uncertainty.
- Current cash, operating burn, and runway, including any post-quarter financing or warrant proceeds.
- Progress and safety findings from the higher-dose study and the regulatory studies needed to support a future application.
- Sopharma’s ability to supply clinical and potential commercial quantities, and the status of manufacturing and supply-chain contingency plans.