Filing identity and reporting period
Important mismatch: The supplied filing is Acasti Pharma Inc.’s Form 10-Q, not a filing for Grace Therapeutics, Inc. It covers the three and six months ended September 30, 2020, rather than a quarter identified as 2020 Q2. Financial amounts below are in U.S. dollars, thousands, unless otherwise stated.
Business context and financial results
Acasti was developing CaPre, a krill-oil-derived drug candidate. Both Phase 3 TRILOGY studies failed to meet their primary endpoints; the company decided not to submit an FDA application or conduct further CaPre trials. It substantially curtailed research, development and commercialization and began a strategic alternatives review.
- Revenue and margins: The filing provides no clear revenue figure; it reports operating expenses and losses, with no meaningful margin measure provided.
- Three months ended September 30, 2020: Net loss was $6.146 million, or $0.06 per share, versus $21.158 million, or $0.25 per share, in the comparable 2019 period. Operating loss was $8.034 million. Expenses included $3.706 million of intangible-asset impairment and $1.584 million of equipment impairment.
- Six months ended September 30, 2020: Net loss was $10.812 million, or $0.11 per share, versus $30.004 million, or $0.37 per share, in 2019. Operating loss was $12.155 million.
- Cash flow: Six-month operating cash use was $8.345 million, compared with $12.942 million in 2019. Investing used $0.069 million; financing provided $5.067 million, primarily through ATM share sales. Cash and cash equivalents were $11.552 million at September 30, down from $14.240 million at March 31, 2020.
- Liquidity and liabilities: Current assets were $13.713 million and current liabilities $3.751 million, implying working capital of about $9.962 million. Total liabilities were $4.959 million. The filing reports no conventional funded debt balance; liabilities include $1.170 million of derivative warrant liabilities and lease obligations.
- Equity financing: The company sold 6.7 million shares under its ATM program during the six months for approximately $5.2 million net proceeds, at an average price of about $0.81 per share. It said it did not intend to use the ATM in the coming period.
Changes, outlook, risks and unusual items
- Research and development expense fell to $3.042 million for the six months from $10.144 million, mainly as CaPre clinical work wound down. Sales and marketing expense fell to $0.850 million from $1.446 million. General and administrative expense rose to $2.973 million from $2.671 million, including higher legal and professional fees.
- Reported losses improved substantially year over year, largely because the prior-year period included much larger non-cash warrant fair-value expense. The current period’s $1.343 million six-month financial income included a $1.518 million warrant fair-value gain; these valuation changes can make net results volatile.
- The company disclosed substantial doubt about its ability to continue as a going concern. Management estimated existing cash would fund operating and capital requirements into the third calendar quarter of 2021; continuation depends on a successful strategic alternative and/or other resources. No transaction is assured, and the board could consider dissolution and liquidation if none is achieved.
- A $3.706 million impairment reduced intangible assets to zero; a $1.584 million equipment impairment was also recorded. Assets held for sale totaled $1.047 million. The company warned that recovery of its krill-oil inventory is uncertain.
- A take-or-pay supply agreement with Aker had $2.8 million remaining, due by the fourth quarter of 2021, with no termination provisions. Management warned of a potential significant loss if value cannot be recovered.
- Subsequent to quarter-end, workforce reductions included $329,000 of severance. Retention arrangements provided for a $100,000 CEO retention payment and potential milestone payments of up to $125,000 each for the CEO and COO tied to CaPre asset monetization.
- COVID-19 had not significantly disrupted operations to date, but the company said pandemic-related market volatility could hinder its strategic review. Other risks include failure to complete a transaction, further cash depletion, foreign-exchange exposure, dilution, and Nasdaq listing compliance. The filing noted the share-price requirement extension through May 10, 2021, but said compliance had not yet been regained.
Most important facts for investors to verify
- Confirm the issuer and reporting period: the source text is Acasti Pharma Inc., quarter ended September 30, 2020, despite the request metadata.
- Check subsequent filings for the outcome of the strategic alternatives process, any asset sale or liquidation decision, and updated cash runway.
- Verify recoverability and ultimate proceeds for assets held for sale and the $2.8 million Aker commitment.
- Review subsequent ATM activity, share-count changes, warrant dilution, and Nasdaq listing status.
- Note that the reported period’s lower net loss was materially affected by non-cash warrant remeasurement and impairment charges, not operating revenue growth.