ACHIEVE LIFE SCIENCES, INC. quarterly report, Q2 FY2014

Filing summary

Entity note: The request identifies Achieve Life Sciences, Inc., but the supplied Form 10-Q is for OncoGenex Pharmaceuticals, Inc. This summary reflects the filing provided, for the quarter ended June 30, 2014; it does not establish that this filing belongs to Achieve Life Sciences.

Business context and reporting period

OncoGenex was a clinical-stage biopharmaceutical company developing cancer therapies. It reported results for the three and six months ended June 30, 2014, compared with the corresponding 2013 periods. It had no product-sales revenue; reported revenue came from its Teva collaboration, including reimbursement of development costs.

Financial results and liquidity

Amounts below are in millions of U.S. dollars, except per-share data.

MetricQ2 2014Q2 2013Six months 2014Six months 2013
Collaboration revenue$4.9$6.3$16.7$11.4
Research and development expense$9.9$13.3$26.8$24.1
General and administrative expense$2.7$2.5$5.4$5.0
Net loss$7.0$8.4$15.7$15.1
Basic and diluted net loss per share$0.47$0.57$1.05$1.03

At June 30, cash and cash equivalents were $40.6 million; short-term investments were nil, versus $24.6 million at year-end 2013. Current assets were $47.9 million and current liabilities $20.2 million. Total liabilities were $23.3 million, including $4.2 million of long-term obligations and a $3.5 million excess-facility lease liability. The filing does not report conventional interest-bearing borrowings separately from these obligations. No product gross margin was reported; the company remained loss-making.

For the first half, operating cash use was $4.6 million, compared with $18.2 million in 2013. Financing provided $6.1 million, including $2.9 million net proceeds from at-the-market share sales and $3.2 million received in advance toward the July offering. Investing activities provided $24.6 million, primarily reflecting investment maturities. Management estimated available resources would fund currently planned operations into the third quarter of 2016, subject to assumptions and risks.

Material changes and operating developments

  • Quarterly revenue declined 22% year over year, primarily because Q2 2013 included higher reimbursed combination-drug costs for the AFFINITY trial. First-half revenue increased 46%, mainly from higher Teva collaboration activity.
  • Quarterly R&D expense fell 25%, mainly reflecting lower AFFINITY drug purchases and Borealis-1 costs. First-half R&D increased 11%, including higher AFFINITY and investigator-sponsored trial costs.
  • Cash and cash equivalents rose from $14.6 million at year-end to $40.6 million, while total assets declined from $55.7 million to $49.7 million. Equity fell from $37.2 million to $26.5 million, reflecting the accumulated loss and other activity.
  • In July, the company completed an offering with approximately $22.4 million in net proceeds, including common shares and warrants. The $3.2 million advance received by June 30 was recorded as a current liability. The offering and outstanding equity programs create potential dilution.

Outlook, commentary, and key risks

  • Clinical setback: Top-line SYNERGY results showed custirsen plus first-line docetaxel/prednisone did not meet the primary overall-survival endpoint. Median survival was 23.4 months versus 22.2 months; hazard ratio 0.93 and one-sided p-value 0.207. Further analysis was underway, with results expected to be presented at an oncology congress in September 2014.
  • Development plans: AFFINITY enrollment was expected to finish in the second half of 2014, with results anticipated in late 2015 or early 2016. The ENSPIRIT Phase 3 lung-cancer trial had an interim futility analysis expected in 2014. Borealis-1 apatorsen survival results were expected in Q1 2015. Other apatorsen Phase 2 trials were ongoing or planned; OGX-225 remained in preclinical toxicology work.
  • Funding and collaboration dependence: Teva held exclusive worldwide custirsen development and commercialization rights and funded clinical-plan costs beyond OncoGenex’s completed $30 million contribution. The company depended on Teva reimbursements and potential milestones and royalties; no milestone or royalty payments were received in 2013 or the first half of 2014.
  • Contingencies: OncoGenex disclosed uncertainty over whether Isis was entitled to 30% of Teva milestone payments, and stated that a lesser obligation might apply. It also described a potential remaining $10 million Isis payment following a qualifying change of control and first U.S. commercial sale.
  • Other risks: The filing highlights clinical-trial failure, adverse events, regulatory and manufacturing uncertainty, reliance on third parties, future financing needs, equity dilution, and potential patent and collaboration disputes. A large Bothell office lease was in excess of requirements; sublease assumptions could affect the related liability.

Important facts for investors to verify

  • Confirm the issuer: the supplied filing is OncoGenex, not Achieve Life Sciences.
  • Review the full SYNERGY analysis and any subsequent development decisions concerning custirsen.
  • Check progress and results for AFFINITY, ENSPIRIT, and the apatorsen trials against the stated timelines.
  • Verify the July offering’s final share and warrant terms, dilution, and resulting cash runway.
  • Assess Teva’s continuing participation and the resolution of the disputed Isis milestone-payment obligation.