Achieve Life Sciences, Inc. — Q3 2023 Form 10-Q
Business and period: Clinical-stage pharmaceutical company developing cytisinicline for smoking cessation and nicotine addiction. This unaudited report covers the three and nine months ended September 30, 2023. The company has no approved products and has generated no product-sale revenue.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development expense | $3.6 million | $9.9 million | $13.7 million | $21.5 million |
| General and administrative expense | $3.0 million | $2.8 million | $9.2 million | $8.5 million |
| Total operating expenses | $6.6 million | $12.6 million | $22.9 million | $29.9 million |
| Net loss | $7.1 million | $13.1 million | $24.3 million | $31.1 million |
| Basic and diluted loss per share | $0.34 | $1.35 | $1.26 | $3.24 |
| Cash used in operating activities | Not presented by quarter | $20.1 million | $26.4 million |
At September 30, 2023, cash and cash equivalents were $19.9 million, working capital was $17.8 million, total assets were $24.3 million, and stockholders’ equity was $4.0 million. Accumulated deficit was $160.3 million. Gross margin is not applicable because the company reported no product revenue.
Convertible debt had a $15.0 million principal amount and a $16.2 million carrying value, including accrued paid-in-kind interest and accounting adjustments. The debt is secured by substantially all assets other than intellectual property. Cash, cash equivalents and restricted cash totaled $20.0 million at September 30, versus $24.8 million at the start of the year. The company raised $15.3 million net in a May 2023 registered direct offering; it did not sell shares through its ATM during the period.
Changes versus prior comparable periods
- Q3 operating expenses fell about 48% and net loss improved about 46% year over year; nine-month operating expenses fell about 24% and net loss improved about 22%.
- R&D expense declined as Phase 3 ORCA-3 and Phase 2 ORCA-V1 completed and wound down. The reduction was partly offset by NDA-supporting studies, manufacturing and FDA-readiness work.
- G&A expense increased, primarily from employee stock-based compensation and legal costs. Interest expense also rose, partly offset by higher interest income.
- Common shares outstanding increased from 17.9 million at December 31, 2022 to 21.2 million at September 30, 2023, primarily reflecting the May offering and other issuances.
Development, outlook and principal risks
- The company reported positive topline Phase 3 results from ORCA-2 and ORCA-3 for smoking cessation. In late October 2023, it held a constructive pre-NDA meeting with the FDA; discussions to finalize requirements and meeting minutes were ongoing. FDA approval is not assured, and additional studies could be required.
- Three NDA-supporting studies—renal impairment, pharmacokinetics and cardiac QT safety—were underway, with results anticipated in early 2024. ORCA-V1 reported positive topline results for vaping cessation; the company planned to request an FDA end-of-Phase-2 meeting in 2024.
- Management said existing cash was expected to fund current operating expenses and capital expenditures into the second half of 2024. However, the filing also states resources are insufficient to fund planned operations for the next twelve months and concludes substantial doubt exists about the company’s ability to continue as a going concern. Additional financing is required; failure to obtain it could force reductions or delays in development.
- The convertible term loan matures December 22, 2024, but may mature earlier depending on FDA NDA filing-acceptance events in 2024. It bears cash interest at a floating rate and 7% compounded monthly; lenders may convert at $9.34 per share, and mandatory conversion can occur after specified share-price conditions. These terms create repayment, interest-rate and potential dilution risks.
- Cytisinicline is the company’s sole product candidate and is not FDA-approved. Supply depends on Sopharma, a single supplier based in Bulgaria, and on plant-derived raw materials. The filing identifies supply, manufacturing-quality, geopolitical and commercialization risks, as well as competition and limited patent protection for the naturally occurring compound.
Investor verification points
- Confirm the company’s cash runway assumptions and reconcile the stated runway into the second half of 2024 with the going-concern warning and financing need.
- Track FDA feedback, final pre-NDA meeting outcomes, the planned NDA timeline, and completion and results of the three supporting studies.
- Review available financing capacity, potential dilution from the ATM, warrants and convertible debt, and the debt’s early-maturity and conversion provisions.
- Assess Sopharma’s ability to provide adequate, compliant supply and whether alternative manufacturing capacity can be established.
- Monitor cash burn, clinical and pre-commercial spending, and the risk that additional FDA requirements could increase costs or delay development.