Achieve Life Sciences, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Achieve is a clinical-stage pharmaceutical company developing cytisinicline for smoking cessation and nicotine addiction. It has no approved products and has not generated product-sale revenue.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $5.5 million | $4.4 million |
| General and administrative expense | $3.0 million | $2.8 million |
| Total operating expenses | $8.6 million | $7.2 million |
| Net loss | $9.0 million | $7.6 million |
| Net loss per share | $0.50 | $0.80 |
| Net cash used in operating activities | $8.3 million | $6.8 million |
| Cash and cash equivalents at quarter-end | $16.5 million | $24.8 million at December 31, 2022 |
| Current assets / current liabilities | $18.2 million / $20.3 million | Negative working capital of $2.1 million |
| Convertible debt carrying value | $16.4 million, all classified as current | $15.0 million principal; matures December 22, 2023, with a possible extension subject to lender approval |
There is no meaningful product gross margin because the company has no product sales. Management identifies substantial doubt about the company’s ability to continue as a going concern. It says existing resources are insufficient for planned operations over the next 12 months and estimates cash will fund current expenses and capital expenditures into late 2023. Additional financing is necessary.
Material changes and operating developments
- Operating expenses increased year over year, primarily due to continued activity in the Phase 3 ORCA-3 smoking-cessation trial and Phase 2 ORCA-V1 vaping-cessation trial. R&D costs rose by $1.1 million.
- Operating cash use increased by $1.5 million year over year, mainly reflecting the clinical-trial activity. Financing activities provided only $47,000 in Q1 2023; no ATM shares were sold during the quarter.
- Interest expense rose to $573,000 from $357,000, partly offset by higher interest income of $162,000 versus $4,000.
- Cash, cash equivalents and restricted cash decreased by $8.3 million during the quarter. The balance sheet reported $16.5 million of cash and cash equivalents at March 31.
- Stockholders’ equity declined to $443,000 from $8.3 million at year-end, principally reflecting the quarterly net loss.
Outlook, clinical programs and key risks
- Clinical outlook: ORCA-3 completed its last subject’s last visit in March 2023; management expected topline results in Q2 2023. In April 2023, after quarter-end, the company reported positive topline ORCA-V1 results: weeks 9–12 vaping abstinence was 31.8% with cytisinicline versus 15.1% with placebo. Results remain subject to further analysis and regulatory review.
- Smoking-cessation evidence: The completed ORCA-2 Phase 3 trial reported statistically significant results for both six- and twelve-week cytisinicline treatment versus placebo. ORCA-3 is the confirmatory Phase 3 trial. Additional pharmacokinetic and QT-interval studies are ongoing or planned, with results anticipated by year-end 2023.
- Funding and debt: The company may need equity, debt, partnering, grant or other financing. Failure to raise funds could force delays, reductions or cancellation of development activities. The $10 million term-loan availability expired April 30, 2023, with no amount drawn. Convertible debt bears cash interest plus 7% annual compounding PIK interest and is secured by substantially all assets, including intellectual property.
- Financing and dilution: Approximately $23.5 million remained available under the $25 million ATM as of March 31, 2023. The November 2022 private placement generated approximately $17.8 million net proceeds and included warrants exercisable beginning May 18, 2023. Further equity issuance, warrant exercise or debt conversion could dilute existing shareholders.
- Concentration and execution risks: Cytisinicline is the company’s sole product candidate, and Sopharma is its sole supplier and manufacturer. Supply, quality, regulatory, geopolitical and regional-conflict risks could disrupt development or commercialization. The company also cites clinical, regulatory, competition, intellectual-property and market-acceptance risks.
- Banking: Substantially all cash was required to be held with SVB under debt covenants. Following SVB’s closure, the company reported full access to its cash and cash equivalents; First Citizens assumed SVB deposits and loans effective March 27, 2023.
Important facts for investors to verify
- Current cash balance, subsequent financing activity and updated cash-runway estimate relative to management’s late-2023 projection.
- Status and terms of the convertible debt after the December 2023 maturity date, including any extension, repayment or conversion arrangements.
- Final ORCA-3 results and the completeness and regulatory relevance of the ORCA-V1 results.
- Progress, cost and timing of the remaining NDA-supporting studies, and any FDA requirements for additional trials.
- Sopharma’s ability to supply cytisinicline reliably and meet applicable manufacturing and quality requirements.
- Potential dilution from ATM sales, outstanding warrants, equity financing or convertible debt; the filing reports 18,040,760 common shares outstanding as of May 9, 2023.