Achieve Life Sciences, Inc. — Q1 2018 Form 10-Q
Business context and reporting period
Quarter ended March 31, 2018. Achieve is a clinical-stage pharmaceutical company developing cytisine for smoking cessation; it has no products approved for commercial sale and has generated no product revenue. The 2018 results include the combined company following the August 2017 OncoGenex transaction, while Q1 2017 results include only Achieve’s historical operations, limiting direct comparability.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / prior date |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.201 million | $0.061 million |
| General and administrative expense | $1.813 million | $0.260 million |
| Operating expenses | $3.014 million | $0.321 million |
| Net loss | $3.022 million | $0.205 million |
| Net loss per share | $0.24 | $9.66 |
| Cash used in operating activities | $2.233 million | $0.011 million |
| Cash and cash equivalents, March 31 | $4.165 million | $5.284 million at December 31, 2017 |
| Working capital, March 31 | $2.2 million | Not stated for prior date |
| Total assets / liabilities / equity, March 31 | $8.460 million / $2.318 million / $6.142 million | $9.892 million / $2.013 million / $7.879 million at December 31, 2017 |
No meaningful gross margin is reported because the company had no revenue. The filing reports no long-term obligations at March 31, 2018; the $27,000 current portion reported at year-end was no longer outstanding. Cash, cash equivalents and restricted cash totaled $4.437 million at quarter-end. The net loss per share comparison is affected by the transaction and share-count changes, so it should not be read as an uncomplicated year-over-year trend.
Material changes and management commentary
R&D expense rose primarily with cytisine clinical-development activity, including the repeat-dose pharmacokinetics study and toxicology work, as well as added employee and facility costs following the OncoGenex transaction. G&A increased with higher headcount, consulting, legal and professional costs related to the transaction and integration. Operating cash use increased with these activities. Financing provided $1.105 million in Q1 through the Lincoln Park Capital (LPC) purchase agreement. Assets declined mainly as cash funded operations; liabilities increased mainly with clinical-development payables.
Outlook, risks and unusual items
- Management states that current capital resources are insufficient to fund planned operations for the next 12 months and that substantial doubt exists about the company’s ability to continue as a going concern. Additional financing is required; failure to obtain it could force delays, scaling back or suspension of development.
- Management expected R&D spending and operating losses to increase as cytisine advances, with results likely to fluctuate. The company intended to begin a Phase 3 program in mid-2018, subject to FDA guidance and available capital; an FDA pre-Phase 3 meeting was scheduled for Q2 2018. No formal financial guidance was provided.
- Preliminary results in 24 smokers aged 18–65 in the repeat-dose study showed 58% achieved biochemically verified abstinence by day 26 despite no required quit date; adverse events were mostly mild, with no serious adverse events reported. Enrollment of participants over 65 was ongoing. These early findings do not establish Phase 3 or approval outcomes.
- The company depends on Sopharma for cytisine supply under an exclusive supply arrangement. Development, regulatory approval, clinical-trial execution, supply continuity, and future financing remain key risks. Cytisine is the company’s sole product candidate.
- Under the LPC agreement, approximately $7.6 million of share-sale capacity remained at March 31; by May 9, the company had sold 160,000 additional shares for about $0.2 million gross and reported approximately $7.4 million remaining. Further equity sales could dilute shareholders.
- The January 2018 University of Bristol license amendment expanded exclusive rights to human medicinal uses of cytisine and added up to $1.7 million in milestone payments, in addition to up to $3.2 million under the original agreement. The filing reports $50,000 paid to date.
Important facts for investors to verify
- Whether the company secured enough financing to fund operations and clinical plans beyond the stated 12-month shortfall, and the resulting dilution or financing terms.
- FDA feedback from the scheduled pre-Phase 3 meeting, the actual timing and design of Phase 3, and the funding available to execute it.
- Complete results from the ongoing cytisine studies, including the older-participant cohort and planned supporting studies.
- Reliability and capacity of Sopharma’s supply chain, and the company’s ability to maintain required supply and quality.
- Share issuance under the LPC facility and other potential sources of dilution. The filing also says disclosure controls were effective at quarter-end.