Company: ACHV
Filing Date: 2025-03-11
Form Type: 10-K
Source: 0000950170-25-036831
Chunk: 139

Company: ACHIEVE LIFE SCIENCES, INC.
Filing Date: 2025-03-11
Form: 10-K
Item: Item 8
Chunk 139
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 the Federal Drug Administration or the European Medicines Agency. As of December 31, 2024, the fair value of the contingent consideration was estimated to be $1.1 million. Management determined the fair value of the contingent consideration using a probability based discounted cash flow model whereby management forecasted 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. Management then discounted the expected payment amount to 

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calculate the present value and then applied a probability of success in obtaining regulatory approval as of the valuation date. Management’s significant assumptions include the forecasted timing of the future payment, the probability of success and the risk-adjusted discount rate. The discount rate is adjusted for credit risk. 

The principal considerations for our determination that performing procedures relating to the contingent consideration arising from the Sopharma share purchase agreement is a critical audit matter are (i) the significant judgments required by management in determining the fair value of the contingent consideration and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions relating to the probability of success, the risk-adjusted discount rate, and forecasted timing of the future payment. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) reading the agreement related to the contingent consideration, (ii) evaluating the appropriateness of the probability based discounted cash flow model, (iii) testing the completeness and accuracy of underlying data used in the model, and (iv) evaluating the reasonableness of the significant assumptions used by management related to the probability of success, the risk-adjusted discount rate and the forecasted timing of the future payment. Evaluating management’s significant assumptions related to the probability of success and the forecasted timing of the future payment involved evaluating whether these assumptions were reasonable by considering the agreement associated with the transaction, industry information regarding clinical trial success rates and drug development timelines, and whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist with the evaluation of the appropriateness of the probability based discounted cash flow model and the reasonableness of the risk-adjusted discount rate.

/s/PricewaterhouseCoopers LLP

Chartered Professional Accountants

    Vancouver, CanadaMarch 11, 202