UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
FOR THE QUARTERLY PERIOD ENDED
or
FOR THE TRANSITION PERIOD FROM ______________ TO ____________.
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
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Incorporation or Organization) |
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(Address of Principal Executive Offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class |
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Name of exchange on which registered |
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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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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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 August 13, 2024 there were
Achieve Life Sciences, Inc.
Index to Form 10-Q
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5 |
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Item 1 |
5 |
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Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 |
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6 |
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8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 |
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Item 4. |
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Item 1A. |
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Item 6. |
67 |
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Items 2, 3, 4 and 5 are not applicable and therefore have been omitted. |
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2
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:
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:
3
4
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)
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June 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents [note 6] |
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$ |
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$ |
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Short-term investments [note 6] |
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— |
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Grant receivable [note 3] |
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— |
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Prepaid expenses and other assets |
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Total current assets |
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Right-of-use assets [note 9] |
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Other assets and restricted cash [note 6] |
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License agreement [note 4 and note 5] |
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Goodwill |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities other |
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Contingent consideration [note 5 and note 6] |
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Accrued clinical liabilities |
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Accrued compensation |
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Current portion of long-term obligations [note 9] |
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Current portion of convertible debt [note 6 and note 7] |
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Total current liabilities |
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Non-current portion of convertible debt [note 6 and note 7] |
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— |
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Long-term obligations [note 9] |
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— |
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Total liabilities |
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[note 9] |
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Stockholders' equity: |
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Series A convertible preferred stock, $ |
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Series B convertible preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income |
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( |
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Total stockholders' equity |
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( |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying notes.
5
Achieve Life Sciences, Inc.
Consolidated Statements of Loss and Comprehensive Loss
(Unaudited)
(In thousands, except per share and share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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EXPENSES |
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Research and development |
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General and administrative |
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Total operating expenses |
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OTHER INCOME (EXPENSE) |
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Interest income |
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Interest expense [note 7] |
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( |
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( |
) |
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( |
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( |
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Change in fair value of contingent consideration [note 5 and note 6] |
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( |
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— |
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( |
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— |
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Other expense |
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( |
) |
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( |
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( |
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( |
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Total other expense |
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( |
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( |
) |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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( |
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( |
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OTHER COMPREHENSIVE LOSS |
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Net unrealized loss on securities |
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( |
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— |
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( |
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— |
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Total other comprehensive loss |
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( |
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— |
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( |
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— |
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Comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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( |
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( |
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Basic and diluted net loss per common share [note 8[d]] |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Weighted average shares used in computation of basic and diluted net loss per common share [note 8[d]] |
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\ |
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See accompanying notes.
6
Achieve Life Sciences, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
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Six Months Ended |
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June 30, |
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2024 |
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2023 |
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Operating Activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization [note 4] |
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Stock-based compensation [note 8[c], note 8[e], note 8[f] and note 8[g]] |
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Accrued interest on SVB convertible debt [note 7] |
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Accretion of discount on modification of debt |
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Change in fair value of contingent consideration [note 5 and note 6] |
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— |
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Changes in operating assets and liabilities: |
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Grant receivable [note 3] |
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( |
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Prepaid expenses and other assets |
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Accounts payable |
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( |
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( |
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Accrued liabilities other |
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Accrued clinical liabilities |
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( |
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Accrued compensation |
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( |
) |
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( |
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Lease obligation [note 9] |
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( |
) |
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( |
) |
Net cash used in operating activities |
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( |
) |
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( |
) |
Financing Activities: |
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Proceeds from exercise of warrants |
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— |
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Financing costs relating to November 2022 private placement |
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— |
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( |
) |
Taxes paid related to net share settlement of equity awards |
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( |
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( |
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Proceeds from May 2023 private placement, net of issuance costs |
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— |
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Proceeds from February 2024 private placement, net of issuance costs |
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— |
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Net cash provided by financing activities |
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Investing Activities: |
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Purchase of investments |
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( |
) |
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— |
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Net cash used in investing activities |
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( |
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— |
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Effect of exchange rate changes on cash |
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— |
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Net increase/(decrease) in cash, cash equivalents and restricted cash |
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( |
) |
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Cash, cash equivalents and restricted cash at beginning of the period |
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Cash, cash equivalents and restricted cash at end of the period |
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$ |
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$ |
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See accompanying notes.
7
Achieve Life Sciences, Inc.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
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Accumulated |
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Additional |
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Other |
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Total, |
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Common Stock |
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Preferred Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balance, December 31, 2023 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued - February 2024 registered direct offering |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance, March 31, 2024 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
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|||||
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Financing costs relating to February 2024 registered direct offering |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Restricted stock unit settlements |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Restricted stock unit settlements withheld and retired to treasury |
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( |
) |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance, June 30, 2024 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
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$ |
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||||
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Accumulated |
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Additional |
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Other |
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Total, |
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||||||||
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Common Stock |
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Preferred Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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||||||||
Balance, December 31, 2022 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
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|||||
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued on exercise of warrants |
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— |
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— |
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— |
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— |
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— |
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|||
Financing costs relating to November 2022 private placement |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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|
|
( |
) |
|
|
( |
) |
Balance, March 31, 2023 |
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$ |
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|
— |
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$ |
— |
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|
$ |
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$ |
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|
$ |
( |
) |
|
$ |
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|||||
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued on exercise of warrants |
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|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Shares issued - May 2023 registered direct offering |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
SVB convertible debt refinancing discount |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Restricted stock unit settlements |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Restricted stock unit settlements withheld and retired to treasury |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, June 30, 2023 |
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
See accompanying notes.
8
Achieve Life Sciences, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY RISK
Achieve Life Sciences, Inc. (referred to as “Achieve,” “we,” “us,” or “our”) is a clinical-stage pharmaceutical company committed to the global development and commercialization of cytisinicline for smoking cessation and nicotine addiction. We were incorporated in the state of Delaware, and operate out of Seattle, Washington and Vancouver, British Columbia.
The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required to be presented for complete financial statements. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The accompanying consolidated Balance Sheet at December 31, 2023 has been derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year then ended. The unaudited consolidated financial statements and related disclosures have been prepared with the assumption that users of the interim financial information have read or have access to the audited consolidated financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023 and filed with the U.S. Securities and Exchange Commission, or the SEC, on March 28, 2024.
The consolidated financial statements include the accounts of Achieve and our wholly owned subsidiaries, Achieve Life Sciences Technologies Inc., Achieve Life Science, Inc., Extab Corporation, and Achieve Pharma UK Limited. All intercompany balances and transactions have been eliminated.
Liquidity
We have historically experienced recurring losses from operations and have incurred an accumulated deficit of $
2. ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our audited financial statements for the year ended December 31, 2023 in our Annual Report on Form 10-K filed with the SEC, on March 28, 2024. Since December 31, 2023, there have been no material changes to our critical
9
accounting policies or the methodologies or assumptions we apply under them other than the ones noted below under "Significant Accounting Policies" .
Significant Accounting Policies
Short-Term Investments
Short-term investments consist of financial instruments purchased with an original maturity of greater than three months and less than one year. We consider our short-term investments as available-for-sale and carry them at fair value, with unrealized gains and losses, if any, reported as accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. Realized gains and losses on the sale or impairment, if any, of these securities, are recognized in net income or loss. The cost of investments sold is based on the specific identification method.
Fair value of financial instruments
The fair value of our marketable securities is based on quoted market prices and trade data for comparable securities.
3. GOVERNMENT GRANT
In July 2021, we announced that we were awarded a grant from the National Institute on Drug Abuse, or NIDA, of the National Institutes of Health, or NIH, to evaluate the use of cytisinicline as a treatment for cessation of nicotine e-cigarette use. This initial grant award, in the amount of $
In November 2021, we announced that the FDA had completed their review and accepted the Investigational New Drug Application to investigate cytisinicline as a cessation treatment in this population. In June 2022, following NIH review of completed milestones, we announced that we were awarded the next grant funding from the NIDA in the amount of approximately $
In June 2022, we announced the initiation of the ORCA-V1 Phase 2 clinical trial. ORCA-V1 will evaluate the efficacy and safety of 3 mg cytisinicline dosed three times daily compared to placebo in approximately 160 adult e-cigarette users at five clinical trial locations in the United States. Participants were randomized to receive cytisinicline or placebo for 12 weeks in combination with standard cessation behavioral support.
The NIDA/NIH grant for ORCA-V1 was fully utilized as of the first quarter of 2024 and we have received the full amount of approximately $
The grant award covered approximately half of the total ORCA-V1 clinical study costs. The Primary Investigators for the grant were our Chief Medical Officer, Dr. Cindy Jacobs, and Dr. Nancy Rigotti, Professor of Medicine at Harvard Medical School and Director, Tobacco Research and Treatment Center, Massachusetts General Hospital.
4. INTANGIBLES
All of our intangible assets are subject to amortization and are amortized using the straight-line method over their estimated useful life.
We acquired license and supply agreements in relation to cytisinicline upon the acquisition of Extab Corporation, or Extab, on May 18, 2015. The agreements were determined to have a fair value of $
The components of intangible assets were as follows:
10
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
||||||
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
||||||
License Agreements |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
For the three and six months ended June 30, 2024, we recorded license agreement amortization expense of $
Year Ending December 31, |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
We evaluate the carrying amount of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful life or that indicate the asset may be impaired. We conducted an analysis of potential impairment indicators for long lived assets, including the license and supply agreements for the active pharmaceutical ingredient cytisinicline, and concluded that there were
5. LICENSE AGREEMENTS
Sopharma License and Supply Agreements
We are party to a license agreement, or the Sopharma License Agreement, and a supply agreement, or the Sopharma Supply Agreement, with Sopharma, AD, or Sopharma. Pursuant to the Sopharma License Agreement, we were granted access to all available manufacturing, efficacy and safety data related to cytisinicline, as well as a granted patent in several European countries related to new oral dosage forms of cytisinicline providing enhanced stability. Additional rights granted under the Sopharma License Agreement include the exclusive use of, and the right to sublicense, certain cytisinicline trademarks in all territories described in the Sopharma License Agreement. Under the Sopharma License Agreement, we agreed to pay a nonrefundable license fee. In addition, we agreed to make certain royalty payments equal to a mid-single digit percentage of all net sales of cytisinicline products in our territory during the term of the Sopharma License Agreement, including those sold by a third party pursuant to any sublicense which may be granted by us. To date, any amounts paid to Sopharma pursuant to the Sopharma License Agreement have been immaterial.
Share Purchase Agreement
On May 14, 2015, we entered into a Share Purchase Agreement with Sopharma to acquire
As of June 30, 2024, the fair value of the contingent consideration was estimated to be $
6. FAIR VALUE MEASUREMENTS
Assets and liabilities recorded at fair value in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. For certain of our financial instruments including amounts receivable and accounts payable the carrying values approximate fair value due to their short-term nature.
ASC 820 “Fair Value Measurements and Disclosures” specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820, these inputs are summarized in the three broad levels listed below:
11
As quoted prices in active markets are not readily available for certain financial instruments, we obtain estimates for the fair value of financial instruments through third-party pricing service providers.
In determining the appropriate levels, we performed a detailed analysis of the assets and liabilities that are subject to ASC 820.
We invest our excess cash in accordance with investment guidelines that limit the credit exposure to any one financial institution other than securities issued by the U.S. Government. These securities are not collateralized and mature within
A description of the valuation techniques applied to our financial instruments measured at fair value on a recurring basis follows.
Financial Instruments
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value (in thousands):
June 30, 2024 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market securities (cash equivalents) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
US government securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Corporate bonds |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible debt |
|
$ |
— |
|
|
|
|
|
$ |
— |
|
|
$ |
|
||
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Money Market Securities
Money market securities are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities.
Cash equivalents consist of the following (in thousands):
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
June 30, 2024 |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
Money market securities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Money market securities (restricted cash) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total restricted cash |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
We only invest in A (or equivalent) rated securities. All securities included in cash and cash equivalents had maturities of
Corporate and Other Debt Corporate Bonds and Commercial Paper
The fair value of corporate bonds and commercial paper is estimated using recently executed transactions, market price quotations (where observable), bond spreads or credit default swap spreads adjusted for any basis difference between cash and derivative instruments. The spread data used are for the same maturity as the bond. If the spread data does not reference the issuer, then data that reference a comparable issuer are used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default swap spreads and recovery rates based on collateral values as
12
significant inputs. Corporate bonds and commercial paper are generally categorized in Level 2 of the fair value hierarchy; in instances where prices, spreads or any of the other aforementioned key inputs are unobservable, they are categorized in Level 3 of the hierarchy.
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
June 30, 2024 |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
US government securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Corporate bonds |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Commercial paper |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total short term investments |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Concentration of Cash and Cash Equivalents Risk
We place our cash in a custodial account and in commercial checking and sweep accounts with various financial institutions.
As of June 30, 2024, approximately $
Our commercial bank balances exceed federal insurance limits. We have not experienced any losses in our cash and cash equivalents for the six months ended June 30, 2024 and 2023.
Fair Value of Debt
December 2021 Convertible Debt
The principal amount, carrying value and related estimated fair value of our convertible debt reported in the consolidated balance sheets as of June 30, 2024 and December 31, 2023 was as follows (in thousands).
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Principal |
|
|
Carrying |
|
|
Fair |
|
|
Principal |
|
|
Carrying |
|
|
Fair |
|
||||||
|
|
Amount |
|
|
Value |
|
|
Value |
|
|
Amount |
|
|
Value |
|
|
Value |
|
||||||
December 2021 Convertible Debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Fair Value of Sopharma Share Purchase Agreement Contingent Consideration
We determine the fair value of the contingent consideration using a probability based whereby we forecast the timing of the cash flow of the related future payment based on cytisinicline’s current clinical development phase and the remaining requirements for regulatory approval. We then discount the expected payment amount to calculate the present value and then apply a probability of success in obtaining regulatory approval as of the valuation date. We evaluate the underlying projection used in determining the fair value each period and make updates as necessary.
The significant assumptions we use to value the contingent consideration are the forecasted timing of the future payment, the risk-adjusted discount rate and the probability of success which are all considered significant unobservable inputs, and as such, the liability is classified as a Level 3 measurement. The risk-adjusted discount rate is adjusted for credit risk.
An increase in the discount rate and decrease in the probability of success will result in a decrease in the fair value of the contingent consideration. Conversely, a decrease in the discount rate and increase in the probability of success will result in an increase in the fair value of the contingent consideration. At June 30, 2024 the risk adjusted discount rate was
The following table presents the changes in fair value of our total Level 3 financial liabilities for the six months ended June 30, 2024:
|
|
Balance at |
|
|
Change in |
|
|
Balance at |
|
|||
(in thousands) |
|
December 31, 2023 |
|
|
Fair Value |
|
|
June 30, 2024 |
|
|||
Contingent consideration |
|
$ |
|
|||||||||