After an impressive 48.8% gain last week by Achieve Life Sciences (NASDAQ:ACHV) stock, ACHV stock has given up nearly all of its gains this week. To figure out if the shares can regain their momentum, investors need to assess the company’s fundamentals.
The Catalyst Behind Last Week’s ACHV Stock Price Gains
ACHV stock price jumped on Sept. 27 after the company reported the results of a clinical study, but the shares went on to lose practically all of their gains by Oct. 1. ACHV stated that a new formulation of its smoking cessation aid – cytisine – showed similar bioavailability when the subjects were fed and when they fasted. (Bioavailablity is the amount of the drug that enters circulation.) The news sparked the rally in ACHV stock. ACHV believes that the new formulation of cystine will have a longer shelf life.
For more than two decades, cystine has been used to help smokers quit in Central and Eastern Europe. Over 20 million people have used it to help fight their nicotine addiction. For the upcoming Phase 3 study in Europe and in New Zealand, the company will enroll over 2,000 patients.
Second Quarter Results
On Aug. 8, the company reported a second-quarter loss of $1.82 per share. It ended the quarter with $15.33 million in cash and equivalents. Most of the cash came from a public offering during the period, which brought in $13.8 million. Since ACHV has no product on the market, the company made no sales. But its expenses jumped sharply year-over-year as it spent much more money on research and development. Achieve’s R&D expenses jumped to $1.045 million, up from just $62,000 last year. Its operating expenses rose to $1.751 million, versus $93,000. With a quarterly expense rate of nearly $3 million, the company will likely have to raise cash from the capital markets after five more quarters.
ACHV Stock Remains Risky
Buying Achieve Life Sciences stock at this time will prove costly for the speculative investor who thinks that ACHV stock will rally again. The trading patterns suggest that ACHV stock price, which fell back to its pre-run-up levels yesterday, may even hit new 52-week lows in the days ahead. Chances are very high that the company will sell more shares of ACHV stock as its expenses rise. Even if ACHV’s Phase 3 trial results are positive, the company will most likely need more money to launch and market its new product. On its conference call, the company said:
“Our recent conversations with the FDA concluded that we could proceed with our Phase 3 program, but they suggested that we also assess alternative dosing strategies that might enhance patient compliance. Consistent with this dialogue we have chosen to conduct a 250-patient optimization trial in the U.S. that will evaluate overall treatment efficacy, safety and compliance profiles of various cytosine dosing regimens compared to placebo.”
When ACHV initiates a Phase 2b trial this quarter and a Phase 3 trial in Q4, it will need more cash from investors.
The 91% drop in ACHV stock price since May creates another problem: those who held ACHV stock during that time may sell into the latest rally to recoup some of their losses.
Bottom Line on ACHV Stock
Be wary of ACHV stock. There are no analysts covering this stock and determining the fair value of the company is not possible. Moreover, ACHV stock does not have enough momentum or buyers to prevent ACHV stock price from falling further.
The author does not hold shares in any of the companies mentioned.