This management's discussion and analysis ("MD&A") is presented in order to provide the reader with an overview of the financial results and changes to our balance sheet as at June 30, 2022, and for the three-month period then ended. This MD&A also explains the material variations in our results of operations, balance sheet and cash flows for the three months ended June 30, 2022 and 2021.
Market data, and certain industry data and forecasts included in this MD&A were obtained from internal corporation surveys and market research and those conducted by third parties hired by us, publicly available information, reports of governmental agencies and industry publications, and independent third-party surveys. We have relied upon industry publications as our primary sources for third-party industry data and forecasts. Industry surveys, publications and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. We have not independently verified any of the data from third-party sources or the underlying economic assumptions they have made. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon our management's or contracted third parties' knowledge of our industry, have not been independently verified. Our estimates involve risks and uncertainties, including assumptions that may prove not to be accurate, and these estimates and certain industry data are subject to change based on various factors, including those discussed in this quarterly report and in our most recently filed annual report on Form 10-K.
This MD&A, approved by the Board of Directors on August 11, 2022, should be read in conjunction with our unaudited condensed consolidated interim financial statements for the three months ended June 30, 2022 and 2021 included elsewhere in this quarterly report. Our interim financial statements were prepared in accordance with U.S. GAAP.
All amounts appearing in this MD&A for the period-by-period discussions are in thousands of U.S. dollars, except share and per share amounts or unless otherwise indicated.
On August 27, 2021, we completed our acquisition of Grace via a merger following the approval of Acasti's shareholders and Grace's stockholders. Following completion of the merger, Grace became a wholly owned subsidiary of Acasti and was renamed Acasti Pharma U.S. Inc.
The successful completion of the merger positions Acasti to build a premier, late-stage specialty pharmaceutical company focused on developing and commercializing products for rare and orphan diseases that have the potential to improve clinical outcomes by using the Company's novel drug delivery technologies. We seek to apply new proprietary formulations to approved and marketed pharmaceutical compounds to achieve enhanced efficacy, faster onset of action, reduced side effects, and more convenient drug delivery and increased patient compliance; all of which could result in improved patient outcomes. The active pharmaceutical ingredients chosen by Acasti for further development may be already approved in a target indication or could be repurposed for use in new indications.
The existing well understood efficacy and safety profiles of these marketed compounds provides the opportunity for us to utilize the Section 505(b)(2) regulatory pathway under the Federal Food, Drug and Cosmetic Act (the "FFDCA") for the development of our reformulated versions of these drugs, and therefore may provide a potentially shorter path to regulatory approval. Under Section 505(b)(2), if sufficient support of a product's safety and efficacy either through previous FDA experience or sufficiently within the scientific literature can be established, it may eliminate the need to conduct some of the early studies that new drug candidates might otherwise require.
In connection with the merger, we acquired Grace's entire therapeutic pipeline, which has the potential to address critical unmet medical needs for the treatment of rare and orphan diseases. The pipeline consists of three unique clinical stage and multiple pre-clinical stage assets supported by an intellectual property portfolio of more than 40 granted and pending patents in various jurisdictions worldwide. These drug candidates aim to improve clinical outcomes by applying proprietary formulation and drug delivery technologies to existing pharmaceutical compounds to achieve improvements over the current standard of care, or to provide treatment for diseases with no currently approved therapies.
Rare disorders represent an attractive area for drug development, and there remains an opportunity for Acasti to utilize already approved drugs that have established safety profiles and clinical experience to potentially address significant unmet medical needs. A key advantage of pursuing therapies for rare disorders is the potential to receive orphan drug designation ("ODD") from the FDA. ODD provides for seven years of marketing exclusivity in the United States post-launch, provided certain conditions are met, and the potential for faster regulatory review. Rare diseases also allow for more manageably scaled clinical trials and provide market opportunities that may require a smaller, more targeted commercial infrastructure.
The specific diseases targeted for drug development by Acasti are well understood although these patient populations may remain poorly served by available therapies or in some cases approved therapies do not yet exist. We aim to effectively treat debilitating symptoms that result from these underlying diseases.
Our three most advanced programs are:
GTX-104, an IV formulation of nimodipine designed to treat Subarachnoid Hemorrhage ("SAH"), a rare brain disorder for which we have completed multiple pharmacokinetic ("PK") studies, most recently a successful PK bridging study was completed in May 2022. SAH is a central nervous system condition that causes acute bleeding on the surface of the brain as the result of a ruptured aneurysm and requires immediate medical attention to prevent long-term disability or death. GTX-104 could be administered to improve the management of hypotension and reduce the incidence of vasospasm in SAH patients and potentially lead to better patient outcomes.
GTX-102, an oral-mucosal betamethasone spray for the treatment of Ataxia Telangiectasia ("A-T"), a complex orphan pediatric genetic neurodegenerative disorder usually diagnosed in young children, for which no FDA approved treatment exists.
GTX-101, a topical bioadhesive film-forming bupivacaine spray for Postherpetic Neuralgia ("PHN"), which is persistent and often causes debilitating pain following infection by the shingles virus. We believe that GTX-101 could be administered to patients with PHN to treat pain associated with the disease.
Our management team possesses significant experience in drug formulation and drug delivery research and development, clinical and pharmaceutical development and manufacturing, regulatory affairs, and business development, as well as being well-versed in late-stage drug development and commercialization. The Acasti team has been collectively involved in the development and approval of numerous successfully marketed drugs, including TORADOL™, NAPROSYN™, ANDROGEL™, SUBSYS™, MARINOL™, KEPPRA XR™, CLARITIN®, EUFLEX®, EFFEXOR®, SONATA®, ATIVAN®, RD-HEPARIN®, RAPAMUNE®, ETODOLAC, ARICEPT®, CARDIZEM®, DEFLAZACORT®, AND MACIMORELIN®.
The table below summarizes planned key fiscal 2023 milestones for our three clinical drug candidates:
Nimodipine was granted FDA approval in 1988, and is the only drug approved to improve neurological outcomes in SAH. It is only available in the United States as a generic oral capsule and as a branded oral liquid solution called NYMALIZE™, which is manufactured and sold by Arbor Pharmaceuticals (acquired in September 2021 by Azurity Pharmaceuticals). Nimodipine has poor water solubility and high permeability characteristics as a result of its high lipophilicity. Additionally, orally administered nimodipine has dose-limiting side-effects such as hypotension, poor absorption and low bioavailability resulting from high first-pass metabolism, and a narrow administration window as food effects lower bioavailability significantly. Due to these issues, blood levels of orally administered nimodipine can be highly variable, making it difficult to manage blood pressure in SAH patients. Nimodipine capsules are also difficult to administer, particularly to unconscious patients or those with impaired ability to swallow. Concomitant use with CYP3A inhibitors is contraindicated (NIMODIPINE Capsule PI).
NIMOTOP™ is an injectable form of nimodipine that is manufactured by Bayer Healthcare. It is approved in Europe and in other regulated markets (but not in the United States), but it has limited utility for SAH patients because of its high organic solvent content, namely 23.7% ethanol and 17% polyethylene glycol 400 (NIMOTOP SmPC).
GTX-104 is a clinical stage, novel formulation of nimodipine for IV infusion in SAH patients. It uses surfactant micelles as the drug carrier to solubilize nimodipine. This unique nimodipine injectable formulation is composed of a nimodipine base, an effective amount of polysorbate 80, a non-ionic hydrophilic surfactant, and a pharmaceutically acceptable carrier for injection. GTX-104 is an aqueous solution substantially free of organic solvents, such that the nimodipine is contained in a concentrated injection solution, suspension, emulsion or complex as a micelle, a colloidal particle or an inclusion complex, and the formulation is stable and clear.
Key Benefits: Novel nanoparticle technology facilitates aqueous formulation of insoluble nimodipine and enables a safe, standard peripheral IV infusion:
Potential for better management of hypotension
Eliminates food effects that impact the absorption of the oral form of nimodipine
Lower inter and intra-subject variability
GTX-104 could provide a more convenient mode of administration as compared to generic nimodipine capsules or NYMALIZE™ GTX-104 is peripherally infused every four hours as compared to oral administration via a nasogastric tube in unconscious patients every two to four hours for both NYMALIZE™ solution and nimodipine capsules. Therefore, GTX-104 could be considered as a major contribution to patient care by potentially reducing the dosing frequency, and the associated nursing burden. More convenient and less frequent dosing can also reduce the risk of medication errors. In addition, two PK studies conducted with GTX-104 have shown that it has the potential to provide improved bioavailability and lower intra-subject variability compared to oral administration (see chart below). Because of its IV formulation, we also expect it to reduce certain drug-drug interactions and food effects.
Despite the positive impact it has on recovery, physicians often must discontinue their patients on oral nimodipine, primarily as a result of hypotensive episodes that cannot be controlled by titrating the oral form of drug. Such discontinuation could potentially be avoided by administering GTX-104, which because of its IV administration, may obviate the complexity that results from the need for careful attention to the timing of nimodipine administration at least one hour before or two hours after a meal. Administration of GTX-104 via a peripheral vein is often much more comfortable for the patients compared to administration by central venous access, which can often be a difficult and invasive procedure. Also, unconscious patients will likely receive more consistent concentrations of nimodipine when delivered by the IV route as compared to oral gavage or a nasogastric tube. More consistent dosing is expected to result in a reduction of vasospasm and a better, more consistent management of hypotension. As summarized in the table below, we anticipate reduced use of rescue therapies, such as vasopressors, and expensive hospital resources, such as the angiography suite, are possible by more effectively managing blood pressure with GTX-104. Reduced incidences of vasospasm could result in shorter length of stay and better outcomes.
SAH is bleeding over the surface of the brain in the subarachnoid space between the brain and the skull, which contains blood vessels that supply the brain. A primary cause of such bleeding is rupture of an aneurysm. The result is a relatively uncommon type of stroke that accounts for about 5% of all strokes and has an incidence of six per 100,000 person years (Becske, 2018).
In contrast to more common types of stroke in elderly individuals, SAH often occurs at a relatively young age, with approximately half the affected patients younger than 60 years old (Becske, 2018). Particularly devastating for patients younger than 45, around 10% to 15% of aneurysmal SAH ("aSAH") patients die before reaching the hospital (Rinkel, 2016), and those who survive the initial hours post hemorrhage are admitted or transferred to tertiary care centers with high risk of complications, including rebleeding and delayed cerebral ischemia ("DCI"). Systemic manifestations affecting cardiovascular, pulmonary, and renal function are common and often complicate management of DCI. Approximately 70% of aSAH patients experience death or a permanent dependence on family members, and half die within one month after the hemorrhage. Of those who survive the initial month, half remain permanently dependent on a caregiver to maintain daily living (Becske, 2018).
We estimate that approximately 53,596 individuals experience aSAH each year. The total addressable market for SAH is approximately $300 million in the U.S., and an estimated 50,000 patients in the European Union based on annual inpatient admissions and the average length-of-stay.
GTX-104 Near Term Milestones: Conduct Phase 3 Safety Study
In September 2021, we initiated our pivotal PK bridging study to evaluate the relative bioavailability of GTX-104 compared to currently marketed oral nimodipine capsules in approximately 50 healthy subjects. The PK study was the next required step in our proposed 505(b)(2) regulatory pathway for GTX-104.
Final results from this pivotal PK study were reported on May 18, 2022, and showed that the bioavailability of IV GTX-104 compared favorably with the oral formulation of nimodipine in all subjects, and no serious adverse events were observed for GTX-104.
All three endpoints indicated that statistically there was no difference in exposures between IV GTX-104 and oral nimodipine over the defined time periods for both maximum exposure and total exposure. Plasma concentrations obtained following IV administration showed significantly less variability between subjects as compared to oral administration of capsules, since IV administration is not as sensitive to some of the physiological processes that affect oral administration, such as taking the drug with and without meals, variable gastrointestinal transit time, variable drug uptake from the gastrointestinal tract into the systemic circulation, and variable hepatic blood flow and hepatic first pass metabolism. Previous studies have shown these processes significantly affect the oral bioavailability of nimodipine, and therefore cause oral administration to be prone to larger within and between-subject variability.
The bioavailability of oral nimodipine capsules observed was only 8% compared to 100% for IV GTX-104. Consequently, about one-twelfth the amount of nimodipine is delivered with GTX-104 to achieve the same blood levels as with the oral capsules.
No serious adverse events and no adverse events leading to withdrawal were reported during the study.
Next Step - Initiate Phase 3 Safety Study for GTX-104
We plan to submit the final PK bridging study report to the FDA in calendar Q3, 2022. We also intend to request a Type C meeting with the FDA to get the agency's guidance on our proposed phase 3 study design. We expect to receive that guidance by the end of 2022 or early in the first calendar quarter of 2023. This should allow us to initiate the Phase 3 Safety Study and enroll the first patient in the first half of 2023. The study is expected to take about 18 months to complete, and we expect this safety study to be the final clinical step required to seek approval under the 505(b)(2) regulatory pathway. Before submitting a New Drug Application to the FDA, Acasti plans to hold a pre-NDA meeting to enhance the likelihood of market approval.
GTX-102 is a novel, concentrated oral-mucosal spray of betamethasone intended to improve neurological symptoms of Ataxia Telangiectasia ("A-T") for which there are currently no FDA-approved therapies. GTX-102 is a stable, concentrated oral spray formulation comprised of the glucocorticoid betamethasone, that together with other excipients can be sprayed conveniently over the tongue of the A-T patient.
A-T is a rare genetic progressive autosomal recessive neurodegenerative disorder that affects children, with the hallmark symptoms of cerebellar ataxia and other motor dysfunction, and dilated blood vessels (telangiectasia) that occur in the sclera of the eyes. A-T is caused by mutations in the ataxia telangiectasia gene, which is responsible for modulating cellular response to stress, including breaks in the double strands of DNA.
Children with A-T begin to experience balance and coordination problems when they begin to walk (toddler age), and ultimately become wheelchair-bound in their second decade of life. In pre-adolescence (between ages 5 and 8), patients experience oculomotor apraxia, dysarthria, and dysphagia. They also often develop compromised immune systems and are at increased risk of developing respiratory tract infections and cancer (typically lymphomas and leukemia) (U.S. National Cancer Institute A-T, 2015).
A-T is diagnosed through a combination of clinical assessment (especially neurologic and oculomotor deficits), laboratory analysis, and genetic testing. There is no known treatment to slow disease progression, and treatments that are used are strictly aimed at controlling the symptoms (e.g., physical, occupational or speech therapy for neurologic issues), or conditions secondary to the disease (e.g., antibiotics for lung infections, chemotherapy for cancer, etc.) (U.S. National Cancer Institute A-T, 2015). There are no FDA-approved therapeutic options currently available. Patients typically die by age 25 from complications of lung disease or cancer. According to a third-party report commissioned by Acasti Pharma US, A-T affects approximately 4,300 patients per year in the United States and has a potential total addressable market of $150 million, based on the number of treatable patients in the United States.
GTX-102 - R&D and Clinical Studies to Date
In a multicenter, double-blind, randomized, placebo-controlled crossover trial conducted in Italy, Zannolli et al. studied the effect of an oral liquid solution of betamethasone on the reduction of ataxia symptoms in 13 children (between ages 2 to 8 years) with A-T. The primary outcome measure was the reduction in ataxia symptoms as assessed by the International Cooperative Ataxia Rating Scale ("ICARS").
In the trial, oral liquid betamethasone reduced the ICARS total score by a median of 13 points in the intent-to-treat ("ITT") population and 16 points in the per-protocol ("PP") population (the median percent decreases of ataxia symptoms of 28% and 31%, respectively). Adverse events in the trial were minimal, with no compulsory withdrawals and only minor side effects that did not require medical intervention. Clinical study results in A-T patients administered oral betamethasone indicated that betamethasone significantly reduced ICARS total score relative to placebo (P = 0.01). The median ICARS change score (change in score with betamethasone minus change in score with placebo) was -13 points (95% confidence interval for the difference in medians was -19 to -5.5 points).
Based on the Zannolli data, we believe GTX-102 concentrated oral spray has the potential to provide clinical benefits in decreasing A-T symptoms, including assessments of posture and gait disturbance and kinetic, speech and oculomotor functions. In addition, GTX-102 may ease drug administration for patients experiencing A-T given its application of 1-3x/day of 140µL of concentrated betamethasone liquid spray onto the tongue using a more convenient metered dose spray, as these A-T patients typically have difficulty swallowing (lefton-greif 2000).
GTX-102 PK Data to Date:
GTX-102 administered as a concentrated oral spray achieves similar blood levels at only 1/70th the volume of an oral solution of betamethasone. This is important for A-T patients who have difficulties swallowing large volumes of liquids, and it could help to reduce the side effects common with chronic use of a glucocorticosteroid drug.
GTX-102 Near-Term Milestones: Conduct PK Bridging and Confirmatory Phase 3 Clinical Trials
Acasti Pharma US has licensed the data from the multicenter, double-blinded, randomized, placebo-controlled crossover trial from Azienda Ospedaliera Universitaria Senese, Siena, Italy, where Dr. Zannolli et. al. studied the effect of oral liquid solution of betamethasone to reduce ataxia symptoms in patients with A-T. Note that this oral liquid solution is not approved in the United States, and therefore is not available for clinical use. Betamethasone is only available in the United States as an injectable or as a topical cream. However, this license gives Acasti Pharma US the right to reference the study's data in its NDA filing. On November 12, 2015, Acasti Pharma US submitted the data from the Zannolli study to the FDA's Division of Neurology at a pre-Investigational New Drug ("IND") meeting and received guidance from the agency on the regulatory requirements to seek approval.
We plan to initiate a PK bridging study of our proprietary concentrated oral spray as compared to the oral liquid solution of betamethasone used in the Zannolli study and against the injectable form of betamethasone that is approved in the U.S. in the third calendar quarter of 2022. We expect to report the results of this study before the end of 2022. Assuming the PK bridging study meets its primary endpoint, we plan to conduct a confirmatory Phase 3 safety and efficacy trial in A-T patients, and plan to seek guidance from the FDA on the study design at a Type B meeting. The Phase 3 study is expected to be initiated in the second half of 2023. If both studies meet their primary endpoints, a Pre-NDA meeting and an NDA filing under Section 505(b)(2) would follow.
GTX-101 is a non-narcotic, topical bio-adhesive film-forming bupivacaine spray designed to ease the symptoms of patients suffering with postherpetic neuralgia ("PHN"). GTX-101's metered-dose of bupivacaine spray forms a thin bio-adhesive topical film on the surface of the patient's skin, which enables a touch-free, non-greasy application. It also comes in convenient, portable 30 ml plastic bottles. Unlike oral gabapentin and lidocaine patches, we believe that the biphasic delivery mechanism of GTX-101 has the potential for rapid onset and continuous pain relief for up to eight hours. No skin sensitivity was reported in a Phase 1 study.
PHN is neuropathic pain due to damage caused by the varicella zoster virus ("VZV"). Infection with the VZV causes two distinct clinical conditions. Primary VZV infection causes varicella (i.e., chickenpox), a contagious rash illness that typically occurs among young children. Secondary VZV can reactivate clinically, decades after initial infection, to cause herpes zoster ("HZ"), otherwise known as shingles. Acute HZ arises when dormant virus particles, persisting within an affected sensory ganglion from the earlier, primary infection with VZV become reactivated when cellular immunity to varicella decreases. Viral particles replicate and may spread to the dorsal root, into the dorsal horn of the spinal cord, and through peripheral sensory nerve fibers down to the level of the skin. Viral particles also may circulate in the blood. This reactivation is accompanied by inflammation of the skin, immune response, hemorrhage, and destruction of peripheral and central neurons and their fibers. Following such neural degeneration, distinct types of pathophysiological mechanisms involving both the central and peripheral nervous systems may give rise to the severe nerve pain associated with PHN.
While the rash associated with HZ typically heals within two to four weeks, the pain may persist for months or even years, and this PHN manifestation is the most common and debilitating complication of HZ. There is currently no consensus definition for PHN, but it has been suggested by the Centers for Disease Control and Prevention ("CDC") that PHN is best defined as pain lasting at least three months after resolution of the rash.
PHN is associated with significant loss of function and reduced quality of life, particularly in the elderly. It has a detrimental effect on all aspects of a patients' quality of life. The nature of PHN pain varies from mild to excruciating in severity, constant, intermittent, or triggered by trivial stimuli. Approximately half of patients with PHN describe their pain as "horrible" or "excruciating," ranging in duration from a few minutes to constant on a daily or almost daily basis (Katz, 2004). The pain can disrupt sleep, mood, work, and activities of daily living, adversely impacting the quality of life and leading to social withdrawal and depression. PHN is the number-one cause of intractable, debilitating pain in the elderly, and has been cited as the leading cause of suicide in chronic pain patients over the age of 70 (Hess, 1990).
Current treatment of PHN most often consists of oral gabapentin (first line) and prescription lidocaine patches or antidepressants (second line), and refractory cases may be prescribed opioids to address persistent pain. Gabapentin and opioid abuse have continued to proliferate, and lidocaine patches are suboptimal for many reasons. An independent third party market research firm commissioned by Acasti interviewed more than 250 physicians who regularly treat PHN patients, and found that approximately 40% of patients using lidocaine patches experience insufficient pain relief. Lidocaine patches are difficult to use, fall off, and look unsightly with possible skin sensitivity and irritation. Additionally, it can take up to two weeks for an optimal analgesic effect to be achieved. Prescription lidocaine patches are only approved for PHN, and the market is currently made up of both branded and generic offerings. It is estimated that PHN affects approximately 120,000 patients per year in the United States. According to the third-party report commissioned by Acasti, the total addressable market for GTX-101 could be as large as $2.5 billion, consisting of approximately $200 million for PHN pain and $2.3 billion for non-PHN pain.
GTX-101 R&D History and Clinical Studies Completed to Date
To date, Acasti Pharma US has conducted three Phase I studies in healthy volunteers to assess the PK, safety and tolerability of GTX-101 and to determine the plasma levels of bupivacaine HCl administered as a single dose in various concentrations, namely 30 mg (three sprays), 50 mg (five sprays), 70 mg (seven sprays) or 100 mg (ten sprays).
These studies confirmed that bupivacaine delivered as a topical spray (GTX-101) is well absorbed through the skin, as demonstrated in the graph below, while very little is absorbed systemically.
In all three studies, the administration of GTX-101 to healthy volunteers was safe and well tolerated. In addition, no evidence of skin irritation was observed at the application site following the spray administrations.
GTX-101 Near-Term Milestones: Conduct Dose Ranging Phase 1 Clinical Trials of GTX-101
We believe that the PHN pain market will continue to grow, and non-opioid products like GTX-101 that can relieve PHN pain more quickly and in a sustained manner by means of a more efficient delivery system, will be an attractive therapy option for patients and physicians. GTX-101 is administered by spraying our proprietary bupivacaine formulation over the affected area, which we believe has the potential to provide several advantages over currently marketed products such as the lidocaine patch, including faster onset of action, sustained pain relief, possibly lower dosing requirements and improved dosing convenience, all which could lead to increased patient satisfaction and compliance.
GTX-101: The data from the single dose Phase 1 clinical trial for topical bupivacaine spray was submitted to the FDA's Division of Anesthesiology and feedback was received at the pre-IND meeting on April 18, 2018, that informed the design of preclinical toxicology studies and a clinical and regulatory
pathway to approval under section 505(b)(2). We completed a minipig skin sensitivity study in the second calendar quarter of 2022, and we initiated a single dose PK study in healthy human volunteers on July 26th, 2022. This single dose PK study is expected to report out before the end of 2022 and will be followed by the multiple ascending dose study in 2023. Results from the these non-clinical and clinical studies are required before the initiation of our Phase 2 program in PHN patients.
We plan to retain our worldwide commercialization rights for some of our key drug candidates, while for other drug candidates we might consider collaboration opportunities to maximize market penetration and returns. If we receive regulatory approval, we expect to build a small and focused commercial organization in the United States to market and sell GTX-104 and GTX-102. We believe the patient populations and medical specialists for these indications are sufficiently concentrated to allow us to cost-effectively promote these drug products following approval for commercial sale. Given that GTX-101 will be targeted to a larger primary care and pain specialist market, if GTX-101 receives regulatory approval, it is likely we will seek commercial partnerships to fully exploit the market potential of this drug product.
As product candidates advance through the pipeline, our commercial plans may change. Clinical data, the size of the development programs, the size of the target market, the size of a commercial infrastructure and manufacturing needs may all have influence on U.S., European Union, and rest-of-world strategies.
On June 22, 2022, we announced the annual grant of stock options to our employees and executives. An aggregate of 1,212,500 options to purchase common shares of the Company were granted under our stock option plan. The stock options were granted by the board of directors as part of the annual performance review in accordance with our Long-Term Incentive Program. Subject to the terms and conditions of the Stock Option Plan, each stock option will entitle the holder to purchase one common share of Acasti at an exercise price of CDN 1.15 and will expire after ten years. In accordance with the Stock Option Plan, options granted to executives and employees will vest in equal quarterly instalments over a period of 36 months.
Initiation of Pharmacokinetic Study for GTX-101
On July 27, 2022, we announced the initiation of our planned pharmacokinetic (PK) bridging study to evaluate the relative bioavailability of GTX-101, our drug candidate for the treatment of Postherpetic Neuralgia compared to the reference listed drug bupivacaine in 48 healthy subjects.
On July 27, 2022, we received written notification from the Nasdaq Listing Qualifications Department ("Nasdaq") for failing to maintain a minimum bid price of $1.00 per common share for the last 30 consecutive business days, as required by Nasdaq Listing Rule 5550(a)(2) - bid price (the "Minimum Bid Price Rule"). The Nasdaq notification has no immediate effect on the listing of the our common shares, and we have 180 calendar days, or until January 23, 2023, to regain compliance. If at any time over this period the bid price of our common shares closes at $1.00 per share or more for at least a minimum of ten (10) consecutive business days, Nasdaq will provide written confirmation of compliance and the matter will be closed.
If the we do not regain compliance within the initial 180-day period, but otherwise meets the continued listing requirements for market value of publicly-held shares and all other initial listing standards for the Nasdaq Listing Rule 5505 - Capital Market criteria, except for the Minimum Bid Price Rule, we may be eligible for an additional 180 calendar days to regain compliance. If we are not granted additional time, then our common shares will be subject to delisting, at which time we may appeal the delisting determination to a Nasdaq Hearings Panel.
We intend to monitor the closing bid price of its common shares and, if necessary, evaluate all available options to resolve the deficiency and regain compliance with the Minimum Bid Price Rule.
To date, the ongoing COVID-19 pandemic has not caused significant disruptions to our business operations and research and development activities.
The extent to which the COVID-19 pandemic impacts our business and prospects and the timing and completion of future clinical trials for our new drug candidates will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others. Basis of Presentation of the Financial Statements
Our condensed consolidated interim financial statements, which include the accounts of our wholly owned subsidiaries, Acasti Innovations AG and Acasti Pharma U.S., have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC related to quarterly reports filed on Form 10-Q. All intercompany transactions and balances are eliminated on consolidation.
Our assets as at June 30, 2022, include cash and cash equivalents and short-term investments totaling $38.4 million and intangible assets and goodwill totaling $82.8 million. Our current liabilities total $3.7 million as at June 30, 2022 and are comprised primarily of amounts due to or accrued for creditors.
Comparative Financial Information for the Three Months ended June 30, 2022 and 2021
1 Working capital is calculated by subtracting current liabilities from current assets. Because there is no standard method endorsed by U.S. GAAP requirements, the results may not be comparable to similar measurements presented by other public companies.
Results of Operations for the Three Months ended June 30, 2022 and 2021
The net loss of $4,524 or $0.10 per share for the three months ended June 30, 2022, increased by $1,406 from the net loss of $3,118 or $0.12 per share for the three months ended June 30, 2022.
Research and development expenses consist primarily of:
fees paid to external service providers such as clinical research organizations and contract manufacturing organizations related to clinical trials, including contractual obligations for clinical development, clinical sites, manufacturing and scale-up, and formulation of clinical drug supplies;
fees paid to contract service providers related to drug discovery efforts, including chemistry and biology services;
salaries and related expenses for personnel, including expense related to stock options.
We record research and development expenses as incurred.
Our research and development during the three months ended June 30, 2022 was focused primarily on our clinical development programs GTX-104, GTX-102, and GTX-101 drug candidates, which were acquired in the Grace merger on August 27, 2021. Research and development expenses during the three months ended June 30, 2021, related to the completion of our TRILOGY Phase 3 clinical program for our former drug candidate, CaPre.
The following table summarizes our research and development expenses:
1 Total third-party research and development expenses is calculated before salaries, depreciation, amortization and stock-based compensation. Because there is no standard method endorsed by GAAP, the results may not be comparable to similar measurements presented by other public companies.
Total third-party research and development expenses before salaries and benefits, depreciation, amortization and stock-based compensation expenses for the three months ended June 30, 2022, totalled $1,822 compared to $125 for the three months ended June 30, 2021. This increase of $1,697 related mostly to the initiation of clinical development programs GTX 104, GTX 102 and GTX 101, which we acquired through the merger with Grace.
Third-party contract research expenses related to GTX-104 amounted to $323 for the three months ended June 30, 2022, as our PK bridging study progressed. Third party contract research expenses of $567 for GTX-102 are a related to the progression of our CMC Phase 1 work for the manufacturing of clinical trial materials. Third party contract research expenses of $637 for GTX-101 were mostly related to the planning and initiation of the phase 1 single dose study. Other third-party contract research expenses of $154 increased by $78 from $76 for the three months ended June 30, 2021, due to increased IP legal costs to support and maintain our patents that support our three drug candidates GTX-104, GTX-102 and GTX-101. Other expenses for the three months ended June 30, 2021, related to third-party contract research expenses incurred through the completion and termination of the TRILOGY Phase 3 clinical program for CaPre. Professional fees of $243, increased by $227 from $16 for the three months ended June 30, 2021, related to increased specialized consultants supporting our clinical programs for GTX-104, GTX-102 and GTX-101. Third-party research and development expenses were reduced by $190 for the three months ended June 30, 2022, by the increased government credit eligible research activities related to our clinical programs for GTX-104, GTX-102 and GTX-101.
Salaries and benefits increased by $195 to $489 for the three months ended June 30, 2022, from $294 for the three months ended June 30, 2021. The increase is related to additional R&D headcount since the date of the Grace merger, as well as the renewed accruals for our employee incentive bonus program.
General and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, related to our executive, finance, legal, and support functions and other general and administrative expenses include professional fees for auditing, tax, consulting, rent and utilities and insurance.
1 General and administrative sub-total expenses is calculated before stock-based compensation and depreciation. Because there is no standard method endorsed by GAAP, the results may not be comparable to similar measurements presented by other public companies.
General and administrative expenses totaled $1,591 before stock-based compensation and depreciation expense for the three months ended June 30, 2022, a decrease of $982 from $2,573 for the three months ended June 30, 2021. This decrease was a result of decreased legal, tax, accounting and other professional fees related to the Grace merger, and the renewal of our at-the-market program that took place during the three months ended June 30, 2021. The decrease in professional fees was partially offset by an increase in salaries and benefits of $205 due to the renewed accrual for our employee incentive bonus program.
Sales and marketing expenses consist primarily of salaries and benefits, including share-based compensation, related to our commercial functions.
1 Sales and marketing sub-total expenses is calculated before stock-based compensation. Because there is no standard method endorsed by GAAP, the results may not be comparable to similar measurements presented by other public companies.
Sales and marketing expenses before stock-based compensation expense were $197 for the three months ended June 30, 2022 compared to nil for the three months ended June 30, 2021. The increase of $197 was mostly due to an increase in salaries of $182 associated with added personnel.
Aggregate stock-based compensation expense increased by $311 to $464, for the three months ended June 30, 2022, as compared to $1,174 for the three months ended June 30, 2021. This increase was due to the timing of the stock options granted during the year ended March 31, 2022 and year ended March 31, 2021.
Aggregate depreciation expense increased by $167 for the three months ended June 30, 2022, from nil for the three months ended June 30, 2021. This increase is due to the impact of certain equipment being reclassified from held for sale to held for use during the three months ended June 30, 2022 resulting in additional depreciation being recognized. Liquidity and Capital Resources
Our authorized share capital consists of an unlimited number of Class A, Class B, Class C, Class D and Class E shares, without par value. Issued and outstanding fully paid shares, stock options, and warrants, were as follows for the periods ended (after giving effect to our 8:1 share consolidation, which became effective on August 31, 2021):
Class A shares, voting, participating and without par value
December 2017 U.S. public offering broker warrants exercisable at US$10.10 until December 27, 2022
Cash Flows and Financial Condition for the three months ended June 30, 2022 and 2021
As at June 30, 2022, cash and cash equivalents totaled $38,377, a net decrease of $2,598 compared to cash and cash equivalents totaling $40,975 at June 30, 2021.
During the three months ended June 30, 2022 and 2021, our operating activities used cash of $5,426 and $3,401, respectively.
During the three months ended June 30, 2022, our investing activities generated cash of $13,258, compared to cash used of $6,927for the three months ended June 30, 2021. The increase in cash generated was a function of an increase in proceeds from maturity of short term investments.
During the three months ended June 30, 2022, our financing activities provided cash totaling $195, compared to cash generated of nil during the three months ended June 30, 2021, due to proceeds from the sale of shares under our ATM program.
On June 29, 2020, we entered into an amended and restated sales agreement (the "Sales Agreement") with B. Riley, Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC (collectively, the "Agents") to amend our ATM program. Under the terms of the Sales Agreement, which has a three-year term, we may issue and sell from time-to-time common shares having an aggregate offering price of up to $75,000,000 through the Agents. Subject to the terms and conditions of the Sales Agreement, the Agents will use their commercially reasonable efforts to sell the common shares from time to time, based upon our instructions. We have no obligation to sell any of the common shares and may at any time suspend sales under the Sales Agreement. We and the Agents may terminate the Sales Agreement in accordance with its terms. Under the terms of the Sales Agreement, we have provided the Agents with customary indemnification rights and the Agents will be entitled to compensation at a commission rate equal to 3.0% of the gross proceeds from each sale of the common shares.
On November 10, 2021, we filed a prospectus supplement relating to our ATM program to restore available capacity to $75,000,000, with B. Riley, Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC continuing to act as Agents. Under the terms of the Sales Agreement and the prospectus supplement, we may issue and sell from time-to-time common shares having an aggregate offering price of up to $75,000,000 through the Agents. The common shares will be distributed at market prices prevailing at the time of the sale and, as a result, prices may vary between purchasers and during the period of distribution. The volume and timing of sales under the ATM program, if any, will be determined at the sole discretion of our board of directors and management. Costs incurred relating to prospectus supplement were $198 and are included in General and administrative expenses.
During the three months ended June 30, 2022, 206,010 common shares were sold for total net proceeds of approximately $195, with commissions, legal expenses and costs related to the share sale amounting to $6. The common shares were sold at the prevailing market prices, which resulted in an average price of approximately $0.97 per share.
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