Achieve Life Sciences, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Achieve is a clinical-stage pharmaceutical company developing cytisinicline for smoking cessation and nicotine addiction. It has no approved products and has generated no product revenue.
Financial results and position
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.4 million | $5.6 million |
| General and administrative expense | $2.8 million | $2.3 million |
| Total operating expenses | $7.2 million | $8.0 million |
| Interest expense | $0.4 million | None reported |
| Net loss | $7.6 million | $8.0 million |
| Net loss per share, basic and diluted | $0.80 | $1.30 |
| Operating cash used | $6.8 million | $6.5 million |
| Cash and cash equivalents at period end | $36.3 million | $43.0 million at December 31, 2021 |
| Working capital at period end | $33.7 million | Not stated for the comparison date |
| Convertible debt carrying value | $15.2 million | $14.9 million at December 31, 2021 |
Amounts are rounded. The company reported an accumulated deficit of $101.2 million and stockholders’ equity of $21.4 million at March 31, 2022. No operating margin is meaningful because the company reported no revenue.
Material changes and operating developments
- R&D expense declined by $1.3 million year over year, primarily reflecting the timing of trial activity: ORCA-2 spending had ramped up in Q1 2021, while ORCA-3 began in January 2022.
- G&A expense rose by $0.5 million, mainly from higher clinical-trial media and awareness spending, employee-related stock compensation, and patent legal costs.
- Net loss narrowed by $0.4 million, while operating cash use increased by $0.3 million; management attributed the cash-use increase primarily to employee performance-based compensation.
- Cash and cash equivalents fell by $6.7 million from year-end. Financing cash inflow was only $0.1 million, from ATM sales and warrant exercises.
Outlook, financing, and risks
- Management expects existing cash, cash equivalents, and restricted cash to fund current operating expenses and capital expenditures into 2023. It also states that continued operations and clinical development will require additional funding; no revenue-based profitability outlook is provided.
- ORCA-2 topline results, announced in April 2022 after quarter-end, showed statistically significant improvement over placebo in the primary abstinence measures: 12-week treatment abstinence was 32.6% versus 7.0%, and 6-week treatment abstinence was 25.3% versus 4.4%. The company reported no treatment-related serious adverse events. These are topline trial results, not regulatory approval.
- ORCA-3, the confirmatory Phase 3 trial, began in January 2022. The company expected to complete enrollment in Q3 2022; timing and outcome remain subject to clinical execution and regulatory requirements.
- The company expected to initiate the Phase 2 ORCA-V1 vaping-cessation study in Q2 2022, subject to NIH review of milestones and funding availability. The $2.8 million grant was expected to cover about half the study costs.
- On April 26, 2022, after quarter-end, SVB committed up to $10 million in term loans; no amounts had been drawn as of the filing. Borrowings would carry a floating rate, include a 6% final payment, and be subject to covenants. The existing $15 million convertible debt has a $9.34 conversion price, 7% monthly-compounding PIK interest plus a floating cash-interest component, and is secured by substantially all assets, including intellectual property.
- Principal risks include continued losses and the need for capital; dependence on cytisinicline as the sole product candidate; clinical and regulatory uncertainty; reliance on Sopharma as the sole cytisinicline supplier, with supply exposure to geopolitical disruption, including the Russia-Ukraine conflict; and potential trial, manufacturing, or supply-chain delays, including from COVID-19.
Important facts for investors to verify
- Whether ORCA-2’s full results support the topline findings and whether ORCA-3 enrolls and reports results on the anticipated schedule.
- Cash burn, cash runway, and the amount and terms of any additional financing or ATM share sales; 9,681,855 common shares were outstanding as of May 12, 2022.
- Whether the company draws the $10 million term-loan facility and can meet applicable covenants, alongside the repayment, interest, security, and dilution terms of its convertible debt.
- Whether Sopharma can maintain sufficient, compliant cytisinicline supply, and whether NIH funding and milestones support the planned ORCA-V1 study.
- Regulatory requirements and the strength and scope of intellectual-property or exclusivity protections, particularly given the filing’s discussion of cytisinicline as a naturally occurring substance.