Business context and reporting period
The supplied filing is Acasti Pharma Inc.’s Form 10-Q for the three months ended June 30, 2022, its fiscal first quarter—not a filing under Grace Therapeutics, Inc. Grace was acquired in August 2021 and operates as Acasti Pharma U.S. The unaudited statements are prepared under U.S. GAAP; amounts below are in U.S. dollars, in thousands unless stated otherwise.
Acasti is a development-stage biopharmaceutical company focused on rare and orphan diseases. Its principal programs are GTX-104, GTX-102 and GTX-101. It reported no product revenue and expects continued operating losses while developing its candidates.
Financial results and position
| Metric | Quarter ended June 30, 2022 | Comparable 2021 period / reference |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense, net | $2,590 | $469 |
| General and administrative expense | $1,919 | $2,676 |
| Sales and marketing expense | $221 | None reported |
| Operating loss | $4,730 | $3,145 |
| Net loss | $4,524 | $3,118 |
| Basic and diluted loss per share | $0.10 | $0.12 |
| Cash used in operating activities | $5,426 | $3,401 |
Net loss increased by $1.406 million year over year as spending shifted to the three Grace-acquired programs; lower G&A, including reduced merger-related professional fees, partly offset higher R&D. The per-share loss was lower despite the larger net loss, alongside a higher weighted-average share count (44.3 million versus 26.0 million). Profit margins are not meaningful because the company reported no revenue.
At June 30, 2022, cash and cash equivalents were $38.377 million, short-term investments $16,000, current assets $41.248 million, current liabilities $3.707 million and working capital $37.541 million. Total assets were $124.931 million, total liabilities $20.528 million and shareholders’ equity $104.403 million. The balance sheet reports no conventional borrowings; lease liabilities totaled $819,000. Intangible assets and goodwill totaled $82.774 million.
Cash rose $8.038 million during the quarter from $30.339 million at March 31, principally because $13.281 million of short-term investments matured, producing net investing cash inflow of $13.258 million. Operating activities used $5.426 million; ATM share sales generated $195,000 net. Cash at June 30, 2021 was $40.975 million. Acasti sold 206,010 shares under its ATM program at an average price of approximately $0.97. The filing does not provide a clear quantified cash-runway estimate.
Material changes versus the prior comparable period
- R&D expense rose $2.121 million, mainly reflecting development activity for GTX-104, GTX-102 and GTX-101; the 2021 quarter primarily included costs to complete the CaPre Phase 3 program.
- G&A expense fell $757,000, largely because the 2021 period included higher merger-related and ATM-program professional fees.
- Assets increased substantially versus June 2021 following the Grace acquisition; the comparison is therefore affected by a significant change in the business and asset base.
- On April 1, 2022, Acasti changed its functional currency from the Canadian dollar to the U.S. dollar, prospectively.
Outlook, risks and unusual items
- Development plans: Following favorable GTX-104 PK bridging results reported in May 2022, Acasti planned to submit the final report to the FDA in calendar Q3 2022, seek FDA feedback on a Phase 3 safety-study design, and target first-patient enrollment in the first half of 2023. The study was expected to take about 18 months. These are forward-looking plans, not guarantees.
- Other pipeline milestones: A GTX-102 PK bridging study was planned for Q3 2022, with a confirmatory Phase 3 study targeted for the second half of 2023 if results support it. A GTX-101 single-dose PK study began in July 2022, after quarter-end; results were expected before year-end 2022, followed by a multiple-dose study in 2023.
- Funding: Management expects significant expenses and losses for the foreseeable future and says additional financing will be required before meaningful product revenue, if any. Financing may be unavailable on acceptable terms and may dilute shareholders or require relinquishing rights.
- Aker supply dispute: Acasti disputes Aker’s demand for $2.8 million under a krill-oil supply contract tied to discontinued CaPre, has recorded no liability, and says the dispute remains unresolved. The filing identifies uncertainty over payment and whether the product would retain recoverable value.
- Other unusual items: CaPre development was discontinued; related krill oil and production equipment, with a combined reported held-for-sale value of $352,000, were being marketed for sale. No impairment trigger was reported for the acquired pipeline intangibles or goodwill during the quarter.
- Listing and litigation: After quarter-end, Nasdaq notified Acasti that its share price had failed the $1.00 minimum bid requirement; the initial compliance period ran to January 23, 2023. Merger-related shareholder litigation remained pending, with Acasti’s motion to dismiss filed in February 2022. The company reported no accrued legal reserves and noted an unfavorable resolution could be material.
- Operational and market risks: The company relies on third-party manufacturers and research organizations, faces clinical and regulatory uncertainty, and has exposure to foreign exchange movements. It reported no significant COVID-19 disruption to date.
Most important facts for investors to verify
- Confirm the issuer and reporting period: this is Acasti Pharma Inc.’s quarter ended June 30, 2022, not a standalone Grace Therapeutics filing.
- Track cash burn, financing needs and any subsequent ATM issuance; the filing gives no clear runway estimate.
- Check FDA interactions and actual timelines for the GTX-104, GTX-102 and GTX-101 studies against management’s stated plans.
- Monitor resolution and potential financial impact of the $2.8 million Aker dispute and the merger-related litigation.
- Verify the status of Nasdaq minimum-bid compliance and the potential effect of share issuance and stock options on dilution.