Filing summary
Period and entity: This is Acasti Pharma Inc.’s Form 10-K for the fiscal year ended March 31, 2022, filed June 21, 2022—not a Grace Therapeutics, Inc. 10-K for calendar 2021 Q4. Acasti acquired Grace on August 27, 2021; Grace became its wholly owned subsidiary, Acasti Pharma U.S. Inc. Unless noted, financial amounts below are U.S. dollars in millions.
Business context and pipeline
Following the merger, Acasti’s focus shifted to developing reformulated medicines for rare and orphan diseases, primarily through the FDA’s 505(b)(2) pathway. Its leading programs are GTX-104, an IV nimodipine candidate for subarachnoid hemorrhage (SAH); GTX-102, an oral-mucosal betamethasone spray for ataxia-telangiectasia; and GTX-101, a topical bupivacaine spray for postherpetic neuralgia. The company has no approved products and expects no meaningful product revenue until development and regulatory approval are achieved.
Financial results and liquidity
| Metric | FY ended March 31, 2022 | FY ended March 31, 2021 |
|---|---|---|
| Revenue | $0 | $0.196 |
| Operating loss | $15.589 | $16.419 |
| Net loss | $9.819 | $19.678 |
| Basic and diluted loss per share | $0.27 | $1.33 |
| Cash used in operating activities | $17.234 | $14.319 |
| Cash and cash equivalents at year-end | $30.339 | $50.942 |
| Cash, cash equivalents and short-term investments | $43.661 | $60.731 |
| Working capital | $42.271 | $60.793 |
Revenue in FY2021 came from temporary sales of COVID-19 viral transport medium tubes; no such sales occurred in FY2022. Net loss narrowed by $9.859 million, but the improvement was driven largely by a $5.197 million non-cash gain from the change in fair value of warrant liabilities, versus a $2.426 million expense in FY2021. Operating expenses were $15.589 million, compared with $16.419 million.
Research and development expense rose to $5.559 million from $4.173 million, reflecting the acquired pipeline and increased R&D activity. General and administrative expense rose to $9.263 million from $5.521 million, including $3.2 million of Grace acquisition-related expenses and higher professional fees. The company reported no debt; total liabilities were $20.350 million, including a $16.889 million deferred tax liability and $3.260 million in current liabilities. Profit margins are not meaningful given negligible revenue and ongoing losses.
Operating cash use exceeded the prior year, while investing activities used $3.522 million. There were no financing proceeds in FY2022; FY2021 included $59.3 million of net ATM proceeds. Management said existing cash was expected to fund operations beyond completion of GTX-104 Phase 3, but additional capital would be needed to file an NDA, scale manufacturing, pursue pre-commercialization and fund operations beyond the following 12 months.
Material changes, outlook and risks
- Grace acquisition: Acasti issued 18.24 million shares, valued at $60.824 million, as consideration. It recognized $69.810 million of acquired in-process R&D intangible assets and $12.964 million of goodwill. The acquired IPR&D valuation depends on uncertain assumptions, including clinical success, approval probabilities, forecast sales and discount rates.
- GTX-104: The pivotal PK bridging study reported in May 2022 met its planned endpoints. IV/oral exposure ratios were 92% for Day 1 Cmax, 106% for Day 3 AUC and 92% for Day 3 Cmax; no serious adverse events were reported. The company planned to submit results to FDA and start a Phase 3 safety study in the second half of 2022. These are development plans, not assurance of approval.
- GTX-102 and GTX-101: Management planned a GTX-102 PK bridging study in Q2 2022, with results expected before year-end and a confirmatory Phase 3 trial targeted for the first half of 2023, subject to study results and FDA guidance. For GTX-101, planned 2022 work included a minipig skin-sensitivity study and single- and multiple-ascending-dose studies; a program in PHN patients was anticipated in early 2023.
- Funding and dilution: The company had an ATM facility permitting up to $75 million in share sales and may need further financing. Equity issuance could dilute shareholders; debt or collaborations could impose restrictions or require surrendering rights. No ATM shares were sold during FY2022; after year-end, 151,575 shares were sold for approximately $0.146 million net.
- Legacy CaPre exposure: Acasti discontinued CaPre development after its Phase 3 TRILOGY studies failed their primary endpoint. It continued to classify related equipment and krill oil as held for sale. A remaining $2.8 million RKO supply commitment was not recorded as a liability because product had not been delivered; Acasti had no planned use for it and said recovery of value was uncertain, with a potential near-term loss.
- Legal and other risks: Merger-related shareholder litigation remained pending; Acasti was defending the consolidated case and had filed a motion to dismiss. The filing identifies clinical and regulatory uncertainty, dependence on third-party manufacturers and CROs, intellectual-property disputes, competition, foreign-exchange exposure and potential financing needs as material risks. Management reported no material COVID-19 disruption to date, while noting possible future effects.
Acasti reported effective disclosure controls and internal control over financial reporting as of March 31, 2022. KPMG issued an unqualified opinion on the consolidated financial statements; it did not provide an auditor attestation on internal control, as Acasti was a non-accelerated filer. The filing provides no financial earnings guidance.
Important facts for investors to verify
- Confirm the filing and reporting period: this is Acasti Pharma Inc.’s FY2022 10-K, notwithstanding the request metadata identifying Grace Therapeutics and “2021 Q4.”
- Review the full audited statements and cash-flow detail, particularly the warrant fair-value gain’s effect on the lower net loss and the pace of operating cash use.
- Track cash and short-term investments against clinical, NDA, manufacturing and pre-commercialization spending, and confirm the timing and terms of any financing.
- Check subsequent FDA interactions and actual progress of the GTX-104 safety study, GTX-102 bridging work and GTX-101 studies against the stated timelines.
- Assess the assumptions and impairment sensitivity of acquired IPR&D and goodwill, and potential recovery or loss on the RKO commitment and sale of CaPre-related assets.
- Monitor the merger litigation, dilution from the ATM or other financings, and the company’s disclosure of PFIC status for U.S. tax purposes.