Achieve Life Sciences(ACHV) - 2024 Q1 - Quarterly Report

Part I. Financial Information Consolidated Financial Statements The company reported a net loss of $6.5 million for Q1 2024, an improvement from the prior year, with a February 2024 financing boosting cash to $66.4 million and turning stockholders' equity positive Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $66,398 | $15,546 | | Total current assets | $67,709 | $16,982 | | Total assets | $70,029 | $19,371 | | Convertible debt | $17,141 | $16,662 | | Total liabilities | $20,573 | $20,819 | | Total stockholders' equity | $49,456 | $(1,448) | Consolidated Statement of Loss (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Research and development expense | $2,799 | $5,534 | | General and administrative expense | $3,183 | $3,044 | | Total operating expenses | $5,982 | $8,578 | | Net loss | $(6,494) | $(8,992) | | Net loss per share (basic & diluted) | $(0.26) | $(0.50) | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,288) | $(8,303) | | Net cash provided by financing activities | $56,110 | $47 | | Net increase/(decrease) in cash | $50,822 | $(8,257) | - In February 2024, the company completed a registered direct offering and concurrent private placement, selling 13,086,151 shares of common stock and issuing warrants, resulting in net proceeds of approximately $56.1 million[61][62][63] - The company has a contingent convertible debt agreement with a principal amount of $15.0 million, maturing on December 22, 2024, but potentially accelerating to August 1, 2024, if an NDA for cytisinicline is not accepted by the FDA by certain deadlines[51][52][56] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on cytisinicline development, with an NDA submission now anticipated in the first half of 2025 following an agreement with the FDA for a single open-label safety study, while a February 2024 financing significantly enhanced liquidity to fund operations into the second half of 2025, despite potential early convertible debt maturity - The company reached an agreement with the FDA that a single, open-label study (ORCA-OL) evaluating long-term safety will be sufficient to complete requirements for an NDA submission, now anticipated in the first half of 2025[105] - The planned ORCA-OL trial will initiate in Q2 2024, enrolling up to 650 subjects who previously participated in ORCA-program studies to gather long-term safety data for up to one year[106] Comparison of Operating Expenses (in thousands) | Expense Category | Q1 2024 | Q1 2023 | Change Driver | | :--- | :--- | :--- | :--- | | Research & Development | $2,799 | $5,534 | Decrease due to completion of Phase 3 ORCA-3 and Phase 2 ORCA-V1 trials in 2023 | | General & Administrative | $3,183 | $3,044 | Increase due to higher stock-based compensation and consulting costs | - As of March 31, 2024, the company had $66.4 million in cash and cash equivalents, which management believes are sufficient to support operating expenses and capital expenditures into the second half of 2025[138] - The company's convertible term loan is expected to mature on August 1, 2024, due to the revised NDA submission timeline, unless a waiver or renegotiation is secured, with the company exploring alternative financing options[142] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[156] - No changes were made to the company's internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[157] Part II. Other Information Risk Factors The company faces significant financial risks including substantial debt with an accelerated maturity and the need for additional financing, alongside operational dependencies on its sole product candidate, cytisinicline, and a single supplier, Sopharma, compounded by regulatory uncertainties, supply chain vulnerabilities, and intellectual property limitations - Financial Risk: The company has substantial debt, and its convertible term loan is expected to mature on August 1, 2024, due to the revised NDA submission timeline, unless a waiver or new terms are negotiated, with failure to service this debt potentially leading to default[165] - Operational Dependency: The company's success is entirely dependent on its sole product candidate, cytisinicline, and it relies on a single company, Sopharma in Bulgaria, for its manufacture and supply[176][178] - Regulatory Risk: The FDA has advised that long-term safety data is needed for an NDA submission, and while an agreement on the ORCA-OL trial has been reached, there is no guarantee the data will be sufficient for approval or that the FDA won't require additional studies[179][182] - Supply Chain Risk: Cytisinicline is derived from plants that grow in limited locations outside the U.S., with the supply exclusively from Sopharma in Bulgaria, and any disruption, including from regional geopolitical instability, could adversely affect the business[184][185] - Intellectual Property Risk: Cytisinicline is a naturally occurring substance and is not patentable in the U.S., meaning the company relies on patents for novel formulations and trade secrets, which may not provide sufficient protection against competitors[269][300] - Commercialization Risk: The company faces substantial competition from major pharmaceutical companies with greater resources, and the commercial success of cytisinicline will depend on market acceptance and securing adequate reimbursement from third-party payors[257][261] Exhibits This section lists the exhibits filed with the Form 10-Q, including the Form of Common Stock Purchase Warrant, the associated Securities Purchase Agreement from the February 2024 Private Placement, and certifications from the Chief Executive Officer