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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 June 30, 2024

or

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 August 13, 2024 there were 34,341,303 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 June 30, 2024 (unaudited) and December 31, 2023

5

 

 

 

 

Consolidated Statements of Loss and Comprehensive Loss (unaudited) for the three and six months ended June 30, 2024 and June 30, 2023

6

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2024 and June 30, 2023

7

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the six months ended June 30, 2024 and June 30, 2023

8

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

9

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

 

 

 

 

 

 

Item 4.

Controls and Procedures

33

 

 

Part II. Other Information

35

 

 

 

Item 1A.

Risk Factors

35

 

 

 

Item 6.

Exhibits

67

 

 

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

 

 

 

Signatures

68

 

 

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:

progress and preliminary and future results of any clinical trials;
anticipated regulatory filings and U.S. Food and Drug Administration, or FDA, responses, recommendations, requirements or additional future clinical trials;
our ability to raise additional capital as needed to fund our planned development and commercialization efforts and repay our existing debt;
the potential benefits and differentiated profile, FDA approval, commercialization and commercial market for cytisinicline;
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, increased volatility in interest rates and 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:

If we fail to obtain additional financing when needed, we may be unable to complete the development, regulatory approval and commercialization of our product candidates.

3


 

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.
Cytisinicline is currently our sole product candidate and there is no guarantee that we will be able to successfully develop and commercialize cytisinicline.
We are dependent upon a single company for the manufacture and supply of cytisinicline.
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.
We currently exclusively rely on Sopharma to manufacture cytisinicline for use in clinical trials and plan to engage other third parties for our manufacturing process, including to manufacture cytisinicline on a commercial scale, if approved. 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.
We plan to submit a New Drug Application, or NDA, to the FDA for approval of cytisinicline as an aid in treating nicotine dependence for smoking cessation, based largely on data from our completed Phase 3 ORCA-2 and ORCA-3 clinical trials and the ongoing ORCA-OL trial; however, there can be no assurance that the data from our clinical trials will ultimately support an NDA filing or that the FDA will grant marketing approval of cytisinicline without additional clinical or nonclinical studies, or at all.
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 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.

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)

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents [note 6]

 

$

14,756

 

 

$

15,546

 

Short-term investments [note 6]

 

 

46,557

 

 

 

 

Grant receivable [note 3]

 

 

 

 

 

111

 

Prepaid expenses and other assets

 

 

1,206

 

 

 

1,325

 

Total current assets

 

 

62,519

 

 

 

16,982

 

Right-of-use assets [note 9]

 

 

35

 

 

 

66

 

Other assets and restricted cash [note 6]

 

 

117

 

 

 

92

 

License agreement [note 4 and note 5]

 

 

1,086

 

 

 

1,197

 

Goodwill

 

 

1,034

 

 

 

1,034

 

Total assets

 

$

64,791

 

 

$

19,371

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

550

 

 

$

618

 

Accrued liabilities other

 

 

617

 

 

 

351

 

Contingent consideration [note 5 and note 6]

 

 

637

 

 

 

528

 

Accrued clinical liabilities

 

 

1,708

 

 

 

280

 

Accrued compensation

 

 

1,349

 

 

 

2,311

 

Current portion of long-term obligations [note 9]

 

 

37

 

 

 

63

 

Current portion of convertible debt [note 6 and note 7]

 

 

8,804

 

 

 

16,662

 

Total current liabilities

 

 

13,702

 

 

 

20,813

 

Non-current portion of convertible debt [note 6 and note 7]

 

 

8,804

 

 

 

 

Long-term obligations [note 9]

 

 

 

 

 

6

 

Total liabilities

 

 

22,506

 

 

 

20,819

 

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 June 30, 2024 and
zero issued and outstanding at December 31, 2023

 

 

 

 

 

 

Series B convertible preferred stock, $0.001 par value, 6,256 shares designated, zero
issued and outstanding at June 30, 2024 and
zero issued and outstanding at December 31, 2023

 

 

 

 

 

 

Common stock, $0.001 par value, 150,000,000 shares authorized, 34,341,303 issued and outstanding at June 30, 2024 and 21,165,760 issued and outstanding at December 31, 2023

 

 

103

 

 

 

90

 

Additional paid-in capital

 

 

222,895

 

 

 

164,209

 

Accumulated deficit

 

 

(180,706

)

 

 

(165,751

)

Accumulated other comprehensive income

 

 

(7

)

 

 

4

 

Total stockholders' equity

 

 

42,285

 

 

 

(1,448

)

Total liabilities and stockholders' equity

 

$

64,791

 

 

$

19,371

 

 

 

 

 

 

 

 

 

See accompanying notes.

5


 

Achieve Life Sciences, Inc.

Consolidated Statements of Loss and Comprehensive Loss

(Unaudited)

(In thousands, except per share and share amounts)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,113

 

 

 

4,585

 

 

 

7,912

 

 

 

10,119

 

General and administrative

 

 

3,318

 

 

 

3,129

 

 

 

6,501

 

 

 

6,173

 

Total operating expenses

 

 

8,431

 

 

 

7,714

 

 

 

14,413

 

 

 

16,292

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

833

 

 

 

193

 

 

 

1,201

 

 

 

355

 

Interest expense [note 7]

 

 

(804

)

 

 

(712

)

 

 

(1,617

)

 

 

(1,285

)

Change in fair value of contingent consideration [note 5 and note 6]

 

 

(57

)

 

 

 

 

 

(109

)

 

 

 

Other expense

 

 

(2

)

 

 

(6

)

 

 

(17

)

 

 

(9

)

Total other expense

 

 

(30

)

 

 

(525

)

 

 

(542

)

 

 

(939

)

Net loss

 

$

(8,461

)

 

$

(8,239

)

 

 

(14,955

)

 

 

(17,231

)

OTHER COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized loss on securities

 

 

(11

)

 

 

 

 

 

(11

)

 

 

 

Total other comprehensive loss

 

 

(11

)

 

 

 

 

 

(11

)

 

 

 

Comprehensive loss

 

$

(8,472

)

 

$

(8,239

)

 

 

(14,966

)

 

 

(17,231

)

Basic and diluted net loss per common share [note 8[d]]

 

$

(0.25

)

 

$

(0.43

)

 

$

(0.50

)

 

$

(0.93

)

Weighted average shares used in computation of basic and diluted net loss per common share [note 8[d]]

 

 

34,318,709

 

 

 

19,048,627

 

 

 

29,683,422

 

 

 

18,486,322

 

 

 

 

 

 

 

 

 

 

 

 

\

 

See accompanying notes.

 

6


 

Achieve Life Sciences, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2024

 

 

2023

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(14,955

)

 

$

(17,231

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization [note 4]

 

 

114

 

 

 

113

 

Stock-based compensation [note 8[c], note 8[e], note 8[f] and note 8[g]]

 

 

2,742

 

 

 

2,275

 

Accrued interest on SVB convertible debt [note 7]

 

 

624

 

 

 

606

 

Accretion of discount on modification of debt

 

 

322

 

 

 

107

 

Change in fair value of contingent consideration [note 5 and note 6]

 

 

109

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Grant receivable [note 3]

 

 

111

 

 

 

(245

)

Prepaid expenses and other assets

 

 

61

 

 

 

1,517

 

Accounts payable

 

 

(68

)

 

 

(1,299

)

Accrued liabilities other

 

 

266

 

 

 

369

 

Accrued clinical liabilities

 

 

1,428

 

 

 

(689

)

Accrued compensation

 

 

(962

)

 

 

(444

)

Lease obligation [note 9]

 

 

(1

)

 

 

(58

)

Net cash used in operating activities

 

 

(10,209

)

 

 

(14,979

)

Financing Activities:

 

 

 

 

 

 

Proceeds from exercise of warrants

 

 

 

 

 

227

 

Financing costs relating to November 2022 private placement

 

 

 

 

 

(30

)

Taxes paid related to net share settlement of equity awards

 

 

(114

)

 

 

(220

)

Proceeds from May 2023 private placement, net of issuance costs

 

 

 

 

 

15,301

 

Proceeds from February 2024 private placement, net of issuance costs

 

 

56,071

 

 

 

 

Net cash provided by financing activities

 

 

55,957

 

 

 

15,278

 

Investing Activities:

 

 

 

 

 

 

Purchase of investments

 

 

(46,568

)

 

 

 

Net cash used in investing activities

 

 

(46,568

)

 

 

 

Effect of exchange rate changes on cash

 

 

 

 

 

1

 

Net increase/(decrease) in cash, cash equivalents and restricted cash

 

 

(820

)

 

 

300

 

Cash, cash equivalents and restricted cash at beginning of the period

 

 

15,596

 

 

 

24,821

 

Cash, cash equivalents and restricted cash at end of the period

 

$

14,776

 

 

$

25,121

 

See accompanying notes.

 

7


 

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, 2023

 

 

21,165,760

 

 

$

90

 

 

 

 

 

$

 

 

$

164,209

 

 

$

4

 

 

$

(165,751

)

 

$

(1,448

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,288

 

 

 

 

 

 

 

 

 

1,288

 

Shares issued - February 2024 registered direct offering

 

 

13,086,151

 

 

 

13

 

 

 

 

 

 

 

 

 

56,097

 

 

 

 

 

 

 

 

 

56,110

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,494

)

 

 

(6,494

)

Balance, March 31, 2024

 

 

34,251,911

 

 

$

103

 

 

 

 

 

$

 

 

$

221,594

 

 

$

4

 

 

$

(172,245

)

 

$

49,456

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,454

 

 

 

 

 

 

 

 

 

1,454

 

Financing costs relating to February 2024 registered direct offering

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(39

)

 

 

 

 

 

 

 

 

(39

)

Restricted stock unit settlements

 

 

113,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock unit settlements withheld and retired to treasury

 

 

(23,733

)

 

 

 

 

 

 

 

 

 

 

 

(114

)

 

 

 

 

 

 

 

 

(114

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,461

)

 

 

(8,461

)

Balance, June 30, 2024

 

 

34,341,303

 

 

$

103

 

 

 

 

 

$

 

 

$

222,895

 

 

$

(7

)

 

$

(180,706

)

 

$

42,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 registered direct offering

 

 

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

 

 

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 $180.7 million through June 30, 2024. As of June 30, 2024, we had cash, cash equivalents and short-term investments of $61.3 million and a positive working capital balance of $48.8 million. For the six months ended June 30, 2024, we incurred a net loss of $15.0 million and net cash used in operating activities was $10.2 million. We have historically financed our operations through equity and debt financings. While we believe that we will be able to settle our commitments and liabilities in the normal course of business as they fall due during the next 12 months, as a development-stage company with no current sources of revenue, we are dependent on our ability to raise funds (through public or private securities offerings, debt financings, government funding or grants, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements) to support the ongoing advancement of our clinical trials and corporate activities.

 

 

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 $0.3 million, commenced on August 1, 2021, and was utilized to complete critical regulatory and clinical operational activities, such as protocol finalization, clinical trial site identification, drug packaging, and submission of a new Investigational New Drug Application, or IND, to the U.S. Food and Drug Administration, or FDA, for investigating cytisinicline in nicotine e-cigarette users.

 

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 $2.5 million, which we have used to conduct the ORCA-V1 Phase 2 clinical trial.

 

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 $2.5 million in reimbursements from NIDA/NIH. We do not expect to receive any further reimbursements from this grant. For the six months ended June 30, 2024, we incurred $16,000 in qualifying research and development, or R&D, expenditures, all of which were incurred in the first quarter of 2024, under the NIDA/NIH grant, which has been recorded as a reduction in R&D expense.

 

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 $3.1 million with an estimated useful life of 14 years.

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

 

$

3,117

 

 

$

(2,031

)

 

$

1,086

 

 

$

3,117

 

 

$

(1,920

)

 

$

1,197

 

 

For the three and six months ended June 30, 2024, we recorded license agreement amortization expense of $0.1 million and $0.1 million, respectively. For the three and six months ended June 30, 2023, we recorded license agreement amortization expense of $0.1 million and $0.1 million, respectively. The following table outlines the estimated future amortization expense related to intangible assets held as of June 30, 2024:

 

Year Ending December 31,

 

 

 

2024

 

 

112

 

2025

 

 

223

 

2026

 

 

223

 

2027

 

 

223

 

Thereafter

 

 

305

 

Total

 

$

1,086

 

 

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 no indicators of impairment identified as of June 30, 2024.

 

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 75% of the outstanding shares of Extab for $2.0 million in cash and $2.0 million in a deferred payment, contingent on regulatory approval of cytisinicline by the FDA or the European Medicines Agency. The fair value of the contingent consideration on the acquisition date was nil. The contingent consideration liability is measured at fair value in our financial statements.

As of June 30, 2024, the fair value of the contingent consideration was estimated to be $0.6 million. We recognized a loss of $0.1 million and $0.1 million for the three and six months ended June 30, 2024, respectively.

 

 

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:

Level 1 – Quoted prices in active markets for identical securities.

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Level 2 – Other significant inputs that are observable through corroboration with market data (including quoted prices in active markets for similar securities).
Level 3 – Significant unobservable input that reflects management’s best estimate of what market participants would use in pricing the asset or liability.

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 one year.

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)

 

$

14,466

 

 

$

 

 

$

 

 

$

14,466

 

Restricted cash

 

 

20

 

 

 

 

 

 

 

 

 

20

 

US government securities

 

 

 

 

 

27,093

 

 

 

 

 

 

27,093

 

Corporate bonds

 

 

 

 

 

18,478

 

 

 

 

 

 

18,478

 

Commercial paper

 

 

 

 

 

986

 

 

 

 

 

 

986

 

Total assets

 

$

14,486

 

 

$

46,557

 

 

$

 

 

$

61,043

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Convertible debt

 

$

 

 

 

17,585

 

 

$

 

 

$

17,585

 

Contingent consideration

 

 

 

 

 

 

 

 

637

 

 

 

637

 

Total liabilities

 

$

 

 

$

17,585

 

 

$

637

 

 

$

18,222

 

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

 

$

14,466

 

 

$

 

 

$

 

 

$

14,466

 

Total cash equivalents

 

$

14,466

 

 

$

 

 

$

 

 

$

14,466

 

Money market securities (restricted cash)

 

$

20

 

 

$

 

 

$

 

 

$

20

 

Total restricted cash

 

$

20

 

 

$

 

 

$

 

 

$

20

 

We only invest in A (or equivalent) rated securities. All securities included in cash and cash equivalents had maturities of 90 days or less at the time of purchase.

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

 

$

27,100

 

 

$

 

 

$

(7

)

 

$

27,093

 

Corporate bonds

 

 

18,482

 

 

 

 

 

 

(4

)

 

 

18,478

 

Commercial paper

 

 

986

 

 

 

 

 

 

 

 

 

986

 

Total short term investments

 

$

46,568

 

 

$

 

 

$

(11

)

 

$

46,557

 

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 $58.8 million in cash equivalents and short-term investments is held in a custodial account with U.S. Bank, for which SVB Asset Management is the advisor; and approximately $0.1 million of our cash and $1.7 million of our cash equivalents is held in a single financial institution, SVB, as required by the covenants of the Debt Agreement (Note 7 – Convertible Debt).

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). The aggregate fair value of the principal amount of the convertible debt is a Level 2 fair value measurement.

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

Principal

 

 

Carrying

 

 

Fair

 

 

Principal

 

 

Carrying

 

 

Fair

 

 

 

Amount

 

 

Value

 

 

Value

 

 

Amount

 

 

Value

 

 

Value

 

December 2021 Convertible Debt

 

$

15,000

 

 

$

17,608

 

 

$

17,585

 

 

$

15,000

 

 

$

16,662

 

 

$

16,652

 

Fair Value of Sopharma Share Purchase Agreement Contingent Consideration

We determine the fair value of the contingent consideration using a probability based discounted cash flow model 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 38.0% and the probability of success was 67.2%. Adjustments to the fair value of the contingent liabilities, other than payments, are recorded as a gain or loss in the Consolidated Statements of Loss and Comprehensive Loss.

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

 

$

528