ACHIEVE LIFE SCIENCES, INC. quarterly report, Q2 FY2015

Business context and reporting period

The supplied filing is OncoGenex Pharmaceuticals, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2015—not a filing under the requested company name, Achieve Life Sciences, Inc. OncoGenex was a clinical-stage cancer therapeutics company developing custirsen, apatorsen and OGX-225; it had no product sales.

Financial results and liquidity

Amounts below are in millions of U.S. dollars except per-share data. Operating margins are not meaningful for this clinical-stage company, which reported collaboration revenue but no product revenue.

MetricQ2 2015Q2 2014Six months 2015Six months 2014
Collaboration revenue$4.0$4.9$5.4$16.7
Research and development expense$6.5$9.9$10.2$26.8
General and administrative expense$3.1$2.7$5.8$5.4
Net loss$(6.0)$(7.0)$(10.5)$(15.7)
Basic and diluted loss per share$(0.26)$(0.47)$(0.46)$(1.05)
Operating cash flowNot provided for quarter$10.2 provided$4.6 used
  • At June 30, cash and cash equivalents were $48.0 million and short-term investments were $12.2 million; combined liquidity was $60.2 million, versus $47.1 million at December 31, 2014. Current assets were $62.7 million and current liabilities $35.0 million.
  • Total assets were $63.4 million, total liabilities $35.2 million and stockholders’ equity $28.2 million. Long-term obligations, including current portion, totaled $184,000; the filing also reported a $1.25 million current lease termination liability.
  • Six-month investing cash flow provided $6.7 million and financing cash flow provided $3.2 million. The increase in operating cash flow principally reflected Teva’s advance reimbursement, not product sales.

Material changes versus prior comparable periods

  • Revenue fell 18% for the quarter and 68% for the six-month period, primarily because clinical trial costs eligible for reimbursement were lower, including as patients came off treatment. Teva-funded collaboration revenue ended following the collaboration termination.
  • R&D expense declined 34% for the quarter and 62% for the six months, mainly from lower AFFINITY and Borealis-1 trial costs, partly offset by OncoGenex taking responsibility for ENSPIRIT costs. G&A increased, principally due to professional fees.
  • Net loss narrowed year over year. The quarterly comparison also reflected a $429,000 warrant revaluation loss in 2015 versus a $615,000 gain in 2014; six-month warrant revaluation was a $35,000 gain in 2015 versus a $106,000 loss in 2014.
  • Balance-sheet cash increased following the Teva payment and LPC equity financing. Deferred collaboration revenue was $17.8 million at quarter-end, reflecting unrecognized advance reimbursement.

Outlook, management commentary, risks and unusual items

  • In April 2015, OncoGenex terminated its Teva collaboration and regained custirsen rights. Teva paid approximately $23.2 million net of specified deductions, with a $3.0 million holdback subject to later release after eligible costs. The advance is recognized as revenue as related R&D costs are incurred; $17.8 million remained deferred at June 30. OncoGenex assumed future custirsen costs and does not owe Teva development milestones or sales royalties.
  • Management expected available capital, including subsequent LPC proceeds, to fund currently planned operations late into Q4 2016. This estimate depends on clinical-trial timing and cost assumptions; additional funding may be needed if trials extend, costs rise, or development expands. The filing gives no assurance that financing or a new partner will be available on acceptable terms.
  • From July 1 through August 13, OncoGenex sold 5.36 million shares to LPC for approximately $14.7 million gross, with $0.3 million in offering expenses; no further amount remained available under the purchase agreement. This followed $1.3 million gross proceeds from LPC sales through June 30.
  • Custirsen’s SYNERGY Phase 3 trial did not meet its primary overall-survival endpoint. Exploratory analyses suggested potential benefit in patients at higher risk of poor outcomes. FDA agreed to a proposed AFFINITY protocol and analysis amendment; the poor-prognosis subgroup analysis was projected by year-end 2015 and the full-population analysis in the second half of 2016, subject to the amendment and trial events.
  • ENSPIRIT continued after an interim futility review; final survival results were projected for the second half of 2016. Rainier top-line survival data were expected by year-end 2015 and Spruce primary progression-free-survival data in the first half of 2016. These are estimates, not guaranteed outcomes.
  • The company recorded a $1.3 million contingent lease termination fee as a liability, conditional on meeting the custirsen Phase 3 endpoint and securing at least $20 million of funding. It also disclosed an unresolved Isis payment request: Isis sought 30% of Teva termination proceeds, while OncoGenex maintained no payment was due on R&D reimbursement.
  • Key risks include clinical failure, regulatory or enrollment delays, reliance on third-party manufacturers and trial operators, the end of Teva funding, future financing needs, potential dilution, and intellectual-property and product-liability exposure. Management reported disclosure controls effective at quarter-end and no material change in internal control over financial reporting.

Most important facts for investors to verify

  1. Confirm the issuer identity: the supplied 10-Q is for OncoGenex Pharmaceuticals, Inc., not Achieve Life Sciences, Inc.
  2. Track AFFINITY and ENSPIRIT protocol status, interim and final analyses, and whether results support the proposed survival claims—especially given SYNERGY’s missed primary endpoint.
  3. Reconcile Teva’s payment, holdback deductions and releases, remaining deferred revenue, and OncoGenex’s resulting custirsen spending obligations.
  4. Verify the cash runway assumptions against actual trial spending and any further financing; account for LPC share issuance and dilution.
  5. Follow the Isis dispute and contingent $1.3 million lease payment, including whether either becomes an additional cash obligation.