10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______________ TO ____________.

Commission file number 033-80623

Achieve Life Sciences, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		95-4343413
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

22722 29th Drive SE, Suite 100, Bothell, WA 98021

1040 West Georgia Street, Suite 1030, Vancouver, British Columbia, Canada V6E 4H1

(Address of Principal Executive Offices)

(604) 210-2217

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $0.001 per share	ACHV	The Nasdaq Capital Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 9, 2023 there were 21,165,760 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

Achieve Life Sciences, Inc.

Index to Form 10-Q


		Page Number

Part I. Financial Information		5

Item 1	Consolidated Financial Statements (unaudited)	5

	Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	5

	Consolidated Statements of Loss and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2023 and September 30, 2022	6

	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2023 and September 30, 2022	7

	Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2023 and September 30, 2022	8

	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22


Item 4.	Controls and Procedures	33

Part II. Other Information		34

Item 1A.	Risk Factors	34

Item 6.	Exhibits	66

Items 2, 3, 4 and 5 are not applicable and therefore have been omitted.

Signatures		67

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties. We caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management and other statements that are not historical facts. You can find many of these statements by looking for words like “believes,” “expects,” “anticipates,” “estimates,” “may,” “should,” “will,” “could,” “plan,” “intend” or similar expressions in this Quarterly Report on Form 10-Q or in documents incorporated by reference into this Quarterly Report on Form 10-Q. We intend that such forward-looking statements be subject to the safe harbors created thereby. Examples of these forward-looking statements include, but are not limited to:

•

our ability to raise additional capital as needed to fund our planned development and commercialization efforts and repay our existing debt;

•

progress and preliminary and future results of any clinical trials;

•

anticipated regulatory filings and U.S. Food and Drug Administration responses, recommendations, requirements or additional future clinical trials;

•

the performance of, and our ability to obtain sufficient supply of cytisinicline in a timely manner from, third-party suppliers and manufacturers;

•

timing and plans for the expansion of our focus to address other methods of nicotine addiction;

•

timing and amount of future contractual payments, product revenue and operating expenses;

•

market acceptance of our products and the estimated potential size of these markets; and

•

our expectations regarding the impact of the macroeconomic and geopolitical environment, including inflation, rising interest rates, increased volatility in the debt and equity markets, instability in the global banking system, global health crises and pandemics and geopolitical conflict, and their potentially material adverse impact on our business and the execution of our preclinical studies and clinical trials.

These forward-looking statements are based on the current beliefs and expectations of our management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from current expectations and projections. Factors that might cause such a difference include those discussed in Item 1A “Risk Factors,” as well as those discussed elsewhere in the Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents.

All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as may be required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Summary of Risk Factors

An investment in our common stock involves various risks, and prospective investors are urged to carefully consider the matters discussed in the section titled “Risk Factors” prior to making an investment in our common stock. These risks include, but are not limited to, the following:

•

Substantial doubt exists as to our ability to continue as a going concern. Our ability to continue as a going concern is subject to material uncertainty and dependent on our success at raising additional capital sufficient to meet our obligations on a timely basis. If we fail to obtain additional financing when needed, we may be unable to complete the development, regulatory approval and commercialization of our product candidate.

•

We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position, and our business would be materially adversely affected if we are unable to service our debt obligations.

•

We have incurred losses since inception, have a limited operating history on which to assess our business and anticipate that we will continue to incur losses for the foreseeable future.

•

We have never generated any revenue from product sales and may never be profitable.

•

We are dependent upon a single company for the manufacture and supply of cytisinicline.

•

Cytisinicline is currently our sole product candidate and there is no guarantee that we will be able to successfully develop and commercialize cytisinicline.

•

We plan to submit an NDA to the FDA for approval of cytisinicline as an aid in treating nicotine dependence for smoking cessation, based largely on data from our recently completed Phase 3 ORCA-2 and ORCA-3 clinical trials; however, there can be no assurance that the FDA will grant marketing approval of cytisinicline without additional clinical or nonclinical studies.

•

The development of our product candidate is dependent upon securing sufficient quantities of cytisinicline from trees and other plants, which grow outside of the United States in a limited number of locations.

•

If we do not obtain the necessary regulatory approvals in the United States and/or other countries, we will not be able to sell cytisinicline.

•

Cytisinicline may cause undesirable side effects or have other properties that could delay or prevent regulatory approval, limit the commercial viability of an approved label, or result in significant negative consequences following marketing approval, if any.

•

It is difficult to evaluate our current business, predict our future prospects and forecast our financial performance and growth.

•

We expect to continue to rely on third parties to manufacture cytisinicline for use in clinical trials, and we intend to exclusively rely on Sopharma to produce and process cytisinicline, if approved, which may be impacted by the military conflict between Russia and Ukraine, including the possibility of expanded regional or global conflict and related economic sanctions.

•

Our commercialization of cytisinicline could be stopped, delayed or made less profitable if Sopharma fails to obtain approval of government regulators, fails to provide us with sufficient quantities of product, or fails to do so at acceptable quality levels or prices.

•

Sopharma may breach its supply agreement with us and sell cytisinicline into our territories or permit third parties to export cytisinicline into our territories and negatively affect our commercialization efforts of our products in our territories.

•

We face substantial competition, and our competitors may discover, develop or commercialize products faster or more successfully than us.

•

We may not be successful in obtaining or maintaining necessary rights to cytisinicline, product compounds and processes for our development pipeline through acquisitions and in-licenses.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Achieve Life Sciences, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share and share amounts)


	September 30,			December 31,
	2023			2022

ASSETS
Current assets:
Cash and cash equivalents [note 6]	$	19,919		$	24,771
Grant receivable [note 3]		83			105
Prepaid expenses and other assets		1,895			2,454
Total current assets		21,897			27,330
Right-of-use assets [note 9]		80			66
Other assets and restricted cash [note 6]		74			123
License agreement [note 4 and note 5]		1,252			1,418
Goodwill [note 5]		1,034			1,034
Total assets	$	24,337		$	29,971
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	638		$	1,660
Accrued liabilities other		693			403
Accrued clinical liabilities		990			1,729
Accrued compensation		1,700			1,678
Current portion of long-term obligations [note 9]		61			58
Convertible debt [note 6 and note 7]		—			16,071
Total current liabilities		4,082			21,599
Convertible debt [note 6 and note 7]		16,195			—
Long-term obligations [note 9]		22			69
Total liabilities		20,299			21,668
Commitments and contingencies [note 9]
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value, 9,158 shares designated, zero issued and outstanding at September 30, 2023 and zero issued and outstanding at December 31, 2022		—			—
Series B convertible preferred stock, $0.001 par value, 6,256 shares designated, zero issued and outstanding at September 30, 2023 and zero issued and outstanding at December 31, 2022		—			—
Common stock, $0.001 par value, 150,000,000 shares authorized, 21,165,760 issued and outstanding at September 30, 2023 and 17,897,029 issued and outstanding at December 31, 2022		90			87
Additional paid-in capital		164,219			144,148
Accumulated deficit		(160,275	)		(135,936	)
Accumulated other comprehensive income		4			4
Total stockholders' equity		4,038			8,303
Total liabilities and stockholders' equity	$	24,337		$	29,971
Going concern [note 1]

See accompanying notes.

Achieve Life Sciences, Inc.

Consolidated Statements of Loss and Comprehensive Loss

(Unaudited)

(In thousands, except per share and share amounts)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
EXPENSES
Research and development		3,581			9,869			13,700			21,464
General and administrative		2,991			2,770			9,164			8,474
Total operating expenses		6,572			12,639			22,864			29,938
OTHER INCOME (EXPENSE)
Interest income		262			73			617			81
Interest expense [note 7]		(781	)		(481	)		(2,066	)		(1,242	)
Other expense		(17	)		(30	)		(26	)		(19	)
Total other expense		(536	)		(438	)		(1,475	)		(1,180	)
Net loss and comprehensive loss	$	(7,108	)	$	(13,077	)		(24,339	)		(31,118	)
Basic and diluted net loss per common share [note 8[d]]	$	(0.34	)	$	(1.35	)	$	(1.26	)	$	(3.24	)
Weighted average shares used in computation of basic and diluted net loss per common share [note 8[d]]		21,127,281			9,693,788			19,376,316			9,600,947
										\

See accompanying notes.

Achieve Life Sciences, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2023			2022
Operating Activities:
Net loss	$	(24,339	)	$	(31,118	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization [note 4]		171			171
Stock-based compensation [note 8[c], note 8[e], note 8[f] and note 8[g]]		3,449			2,492
Shares issued as settlement with trade vendor		273			26
Accrued interest on SVB convertible debt [note 7]		910			863
Accretion of discount on modification of debt		268			—
Changes in operating assets and liabilities:
Grant receivable [note 3]		22			8
Prepaid expenses and other assets		618			(1,256	)
Accounts payable		(1,022	)		(429	)
Accrued liabilities other		310			171
Accrued clinical liabilities		(739	)		3,200
Accrued compensation		22			(550	)
Lease obligation [note 9]		(58	)		(4	)
Net cash used in operating activities		(20,115	)		(26,426	)
Financing Activities:
Proceeds from exercise of warrants		227			24
Proceeds from ATM, net of issuance costs		—			1,499
Financing costs relating to November 2022 private placement		(30	)		—
Proceeds from employee stock purchase plan [note 8[g]]		—			126
Taxes paid related to net share settlement of equity awards		(220	)		(47	)
Proceeds from May 2023 private placement, net of issuance costs		15,301			—
Net cash provided by financing activities		15,278			1,602
Investing Activities:
Purchase of property and equipment		(15	)		—
Net cash used in investing activities		(15	)		—
Effect of exchange rate changes on cash		—			(1	)
Net decrease in cash, cash equivalents and restricted cash		(4,852	)		(24,825	)
Cash, cash equivalents and restricted cash at beginning of the period		24,821			43,072
Cash, cash equivalents and restricted cash at end of the period	$	19,969		$	18,247

See accompanying notes.

Achieve Life Sciences, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)


													Accumulated
										Additional			Other					Total,
	Common Stock					Preferred Stock				Paid-in			Comprehensive		Accumulated			Stockholders’
	Shares			Amount		Shares		Amount		Capital			Income (Loss)		Deficit			Equity
Balance, December 31, 2022		17,897,029		$	87		—	$	—	$	144,148		$	4	$	(135,936	)	$	8,303
Stock-based compensation expense		—			—		—		—		1,085			—		—			1,085
Shares issued on exercise of warrants		33,333			—		—		—		77			—		—			77
Financing costs relating to November 2022 private placement		—			—		—		—		(30	)		—		—			(30	)
Net loss		—			—		—		—		—			—		(8,992	)		(8,992	)
Balance, March 31, 2023		17,930,362		$	87		—	$	—	$	145,280		$	4	$	(144,928	)	$	443
Stock-based compensation expense		—			—		—		—		1,190			—		—			1,190
Shares issued on exercise of warrants		65,000			—		—		—		150			—		—			150
Shares issued - May 2023 private placement		3,000,000			3		—		—		15,298			—		—			15,301
SVB convertible debt refinancing discount		—			—		—		—		1,074			—		—			1,074
Restricted stock unit settlements		139,750			—		—		—		—			—		—			—
Restricted stock unit settlements withheld and retired to treasury		(29,352	)		—		—		—		(220	)		—		—			(220	)
Net loss		—			—		—		—		—			—		(8,239	)		(8,239	)
Balance, June 30, 2023		21,105,760		$	90		—	$	—	$	162,772		$	4	$	(153,167	)	$	9,699
Stock-based compensation expense		—			—		—		—		1,174			—		—			1,174
Shares issued as settlement with trade vendor		60,000			—		—		—		273			—		—			273
Net loss		—			—		—		—		—			—		(7,108	)		(7,108	)
Balance, September 30, 2023		21,165,760		$	90		—	$	—	$	164,219		$	4	$	(160,275	)	$	4,038


													Accumulated
										Additional			Other					Total,
	Common Stock					Preferred Stock				Paid-in			Comprehensive		Accumulated			Stockholders’
	Shares			Amount		Shares		Amount		Capital			Income (Loss)		Deficit			Equity
Balance, December 31, 2021		9,453,542		$	79		—	$	—	$	121,545		$	4	$	(93,586	)	$	28,042
Stock-based compensation expense		—			—		—		—		823			—		—			823
Shares issued on exercise of warrants		3,709			—		—		—		24			—		—			24
Shares issued from purchase agreement with Virtu		12,742			—		—		—		91			—		—			91
Shares issued as settlement with trade vendor		3,584									26								26
Net loss		—			—		—		—		—			—		(7,573	)		(7,573	)
Balance, March 31, 2022		9,473,577		$	79		—	$	—	$	122,509		$	4	$	(101,159	)	$	21,433
Stock-based compensation expense		—			—		—		—		840			—		—			840
Shares issued from purchase agreement with Virtu		187,258			—		—		—		1,408			—		—			1,408
Restricted stock unit settlements		26,625			—		—		—		—			—		—			—
Restricted stock unit settlements withheld and retired to treasury		(5,605	)		—		—		—		(47	)		—		—			(47	)
Net loss		—			—		—		—		—			—		(10,468	)		(10,468	)
Balance, June 30, 2022		9,681,855