Filing identity and reporting period
Issuer mismatch: The supplied filing is Acasti Pharma Inc.’s Form 10-Q, not a filing by Grace Therapeutics, Inc. It covers the three months ended June 30, 2020, Acasti’s fiscal first quarter of 2021. Financial amounts below are in U.S. dollars; dollar figures are in thousands unless stated otherwise.
Acasti is a clinical-stage biopharmaceutical company developing CaPre, a krill-oil-derived omega-3 candidate initially intended to treat severe hypertriglyceridemia. The interim financial statements are unaudited and prepared under U.S. GAAP.
Financial results and position
| Metric | Quarter ended June 30, 2020 | Prior-year quarter |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $1,756 | $6,190 |
| General and administrative expense | $1,649 | $1,116 |
| Sales and marketing expense | $716 | $700 |
| Operating loss | $(4,121) | $(8,006) |
| Net loss | $(4,666) | $(8,846) |
| Basic and diluted loss per share | $(0.05) | $(0.11) |
| Net cash used in operating activities | $(4,309) | $(6,824) |
No gross margin was reported; the filing reports no revenue. Non-GAAP operating loss was $2,941, compared with $7,186 a year earlier.
- At June 30, 2020, cash and cash equivalents were $12,122; current assets $13,964; current liabilities $5,979; and working capital $7,985.
- Total assets were $20,142, total liabilities $9,106, and shareholders’ equity $11,036. Derivative warrant liabilities were $3,071; the filing says these are expected to be settled in common shares. Lease liabilities totaled $135. No convertible debenture balance was reported at quarter-end.
- Cash declined $2,118 from March 31, 2020. Operating cash use of $4,309 was partly offset by $1,775 of net ATM proceeds; investing activities used $36.
Changes versus the prior comparable period
- Net loss narrowed by $4,180 year over year, primarily as R&D expense fell $4,434 while the TRILOGY Phase 3 program moved closer to completion. Operating cash use also decreased by $2,515.
- G&A expense increased, mainly due to consulting, accounting, and legal costs associated with the transition from IFRS to U.S. GAAP. Stock-based compensation rose to $632 from $250.
- Sales and marketing expense was broadly stable overall; management said pre-launch marketing activity was deliberately delayed pending TRILOGY 2 results.
- Comparative 2019 figures were adjusted for U.S. GAAP presentation. The company also changed its reporting currency to U.S. dollars effective March 31, 2020.
Outlook, risks, and notable items
- Clinical and regulatory uncertainty: TRILOGY 1 did not achieve statistical significance on its primary analysis, despite a meaningful triglyceride-lowering result in the CaPre arm; an unusually large placebo response was cited. The FDA said pivotal efficacy analyses must use the full Intent-to-Treat population, while post-hoc analyses are exploratory. The FDA’s feedback did not rule out a need for an additional clinical study before an NDA.
- At the time of the filing, Acasti expected TRILOGY 2 topline results on or about August 31, 2020, remained blinded to the data, and had submitted the study’s finalized statistical analysis plan to the FDA on July 31.
- Going concern: Management stated that substantial doubt existed about the company’s ability to continue as a going concern. It estimated existing cash would fund operating expenses and capital needs through the first calendar quarter of 2021, but expected additional capital to pursue an NDA, manufacturing scale-up, and pre-commercialization if trial results were positive. Financing or strategic partnerships were not assured.
- Financing and dilution: During the quarter, Acasti sold 2.3 million shares through its ATM for net proceeds of about $1.8 million. The amended ATM permits sales of up to $75 million, but is conditional and not a guaranteed funding source. A $200 million shelf registration became effective July 7, 2020. After quarter-end and through the filing date, the company sold 4,404,152 additional shares for about $3.4 million net.
- Commitments: Acasti had a remaining $2.8 million take-or-pay raw krill oil supply commitment, with delivery expected to be completed in the fourth quarter of 2021. Remaining operating lease obligations were $140.
- Management said COVID-19 had not significantly disrupted operations or R&D to date, but warned that pandemic-related market volatility could impair access to capital and that any additional clinical work could be affected. Other risks include trial outcomes, FDA requirements, manufacturing and raw-material supply, competition, and the company’s history of losses and negative operating cash flow.
- Acasti reported no material legal proceedings, no material change to the risk factors in its latest Form 10-K, and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Confirm the issuer and period: this filing is Acasti Pharma Inc. for the quarter ended June 30, 2020, not Grace Therapeutics.
- Review TRILOGY 2 results and subsequent FDA communications, including whether additional clinical evidence is required for an NDA.
- Assess cash burn, the stated runway, the going-concern warning, and whether additional financing or partnerships were secured.
- Track ATM and other share issuance, dilution, and the remaining capacity and conditions under the financing programs.
- Verify the timing and funding implications of the $2.8 million krill-oil commitment and CaPre’s manufacturing and regulatory requirements.