Achieve Life Sciences, Inc. (ACHV) Q1 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Achieve Life Sciences First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's program is being recorded. And now, I’d like to introduce your host for today's program, Jaime Xinos, Executive Vice President of Commercial at Achieve. Please go ahead.

Thank you, Jonathan, and thanks everyone for joining us. With me today from Achieve are Rick Stewart, Chief Executive Officer; Dr. Anthony Clarke, Chief Scientific Officer; and Dr. Cindy Jacobs, Chief Medical Officer. John Bencich, our CFO and our Chief Financial and Operating Officer is unavailable to join today due to a family emergency. Before we begin, I'd like to remind everyone that today's conference call contains forward-looking statements, based on current expectations. These statements are only predictions, and actual results may vary materially from those projected. Please refer to Achieve documents filed with the SEC concerning factors that could affect the Company, copies of which are available on our website. I'll now turn the call over to Rick.

Thank you, Jaime. On today’s call, we’ll provide an update regarding Achieve’s recent progress on the cytisinicline development program, plus upcoming clinical milestones. Following that discussions, I will provide a review of our first quarter financial results. Beginning with ORCA-1, which is our Phase 2b dose optimization trial comparing the efficacy and safety of cytisinicline versus placebo. We're evaluating both 1.5 and 3-milligram doses using the established declining titration schedule in addition to three times daily dosing over a 25-day period. Participants in the trial are monitored for four weeks post treatment and are provided face-to-face behavioral support over the full course of this study. ORCA-1 has enrolled a total of 254 smokers at eight centers across the U.S. Since the beginning of the year, subjects were recruited in record time with approximately 90% enrollment within seven weeks. We announced on April 24th that a last subject in the ORCA-1 trial had completed their last study visit. Our clinical research organization is now focused on monitoring data from the sites and data base finalization. We expect to announce top-line data results by the end of this quarter. I want to provide further clarity about the objective of this trial and the potential outcomes. To do that, we have to revisit the results of the cytisinicline repeat dose study that was presented at the Society for Research on Nicotine and Tobacco in February. As a reminder, this was not a smoking cessation trial but rather a small study intended to evaluate the pharmacokinetic and pharmacodynamics of 1.5 and 3-milligram doses using that downward titration schedule. There were no formal quick dates set and only minimal smoking cessation counseling was provided. The data gave us a clear signal about two findings. Firstly, the level of reduction in number of cigarettes smoked. On average, subjects in both groups smoked 17 cigarettes a day at baseline. Within 48 hours of initiating treatment, they had reduced the number of cigarettes smoked by 75% and this was sustained throughout the course of treatment. Secondly, subjects taking a higher 3-milligram dose showed a trend towards better efficacy. This arm demonstrated a 54% quit rate of the under treatment versus 39% on the 1.5 milligram dose. This is a dose that is currently marketed in Central and Eastern Europe and has already treated over 21 million patients. This trend is worth investigating further to see if we can improve on both, reduction in cigarettes smoked and quit rates. At our meeting with the FDA in May of 2018 we were given clearance in principal on our Phase 3 clinical trial design. Based on the outcome of this meeting, Achieve chose to derisk the Phase 3 trial program by further exploring the optimum dosing schedule. We are currently evaluating whether the 1.5 milligram titration dose over 25 days can be improved by using either a 3-milligram titration dose or dosing three times daily with 1.5 or 3 milligrams. For the ORCA-1 trial, the key elements that will be assessed are efficacy, dosing administration and confirmation of the safety profile cytisinicline. The primary efficacy endpoint is reduction in cigarettes smoked over the course of treatment. Secondary endpoints that will be evaluated include the smoking cessation rate, which is the approval of Phase 3 endpoint, as well as safety and compliance. The ORCA-1 trial is designed to show a statistically significant difference in reduction of cigarettes smoked versus placebo. However, given the small number of participants per group, it is not powered to show statistically significant difference in overall quit rates. As discussed, dosing and scheduling will be evaluated across full treatment arms for a treatment period of 25 days. The 1.5-milligram dose administered three times daily, giving a total of 103.5 milligrams of cytisinicline, the 1.5-milligram dose on a downward titration schedule over -- for total of 150 milligrams, the 3-milligram dose, three times a day for a total of 207 milligrams, and finally, the 3-milligram on a downward titration schedule for total of 300 milligrams. Three out of four of these arms delivered total dosage of cytisinicline at or above what is currently marketed in Central and Eastern Europe. This increases our confidence in having one or more arms that will demonstrate an efficacy benefit. This comparison also allows us to evaluate whether a higher dose of cytisinicline can improve efficacy while maintaining safety and tolerability. In addition, the three times daily dosing may provide a more convenient administration option for smokers. We believe the historical safety profile of cytisinicline is a key point of differentiation compared to currently available treatment for smoking cessation. As previously announced this quarter, an independent data safety monitoring committee or DSMC, has conducted two evaluations of the ORCA-1 trial and concluded that there are no safety or conduct issues and that the trial should continue to completion. After conducting a thorough analysis of the efficacy and safety data across the four arms evaluated in ORCA-1, we will be better informed to select the Phase 3 dose and administration schedule as well as confirm our Phase 3 development plans with the FDA. In addition to the exciting ORCA-1 progress, we have an important update on another critical NDA-enabling study. In March, we initiated a trial to assess dose limiting effect -- events, and to define a maximum tolerated dose or MTD for a single administrated oral dose of cytisinicline in smokers. The study design had a starting dose of 6 milligrams in a single administration to be increased in 3-milligram increments over -- until dose-limiting adverse events occurred. Six dose levels were planned with 21-milligram as defined as the highest level of cytisinicline to be evaluated. Following each dose level, a safety review was conducted by an independent DSMC before escalation to next dose. To-date, a single 21-milligram dose of cytisinicline has been evaluated without evidence of dose limiting toxicity. DSMC has recommended that a protocol be amended to evaluate higher doses, up to 30-milligram of cytisinicline pending ethics committee approval. This study further supports the safety profile of cytisinicline and its potential to provide a differentiated treatment option for smokers with a better side effect profile from the currently available prescription smoking cessation treatments. I’d now like to provide an update on our cash balance as of March 31, 2019 and also our operating expenses for the first quarter of 2019. As of March 31, 2019, the Company's cash, cash equivalents, short-term investments, and restricted cash were $9.7 million. Our cash balance allows us to execute on our near-term development plan, including the completion of the ORCA-1 trial by the end of the second quarter. Turning to our statement of operations. The Company incurred a net loss of $5.9 million for the quarter ended 31st of March, 2019 as compared to a net loss of $3 million for the quarter ended March 31, 2018. Research and develop expenses in the first quarter of 2019 increased to a total of $4.1 million, compared to $1.2 million in the first quarter of 2018. General and administrative expenses for the quarter ended March 31, 2019 were $1.9 million, compared to $1.8 million in the quarter ended March 31, 2018. As expected and highlighted during our call in March, operating expenses were elevated in the first quarter as we reached full enrollment in our ORCA-1 trial. We expect our quarterly operating expenses to decline over the next two quarters, in line with the completion of the ORCA-1 trial by the end of the second quarter. So, in summary, we continue to make tremendous progress in driving forward this critically important therapy for smoking cessation and nicotine addiction. We expect our upcoming ORCA-1 results to inform our Phase 3 trial plans and also to provide robust clinical data that will be critical for strategic discussions with potential commercial partners in the U.S. and the rest of the world. We look forward to maintaining our momentum and providing you with continued updates in the near future. Thank you again for your ongoing interest in Achieve. We will now open the line for questions.

[Operator instructions] Our first question comes from the line of Michael Higgins from Ladenburg Thalmann. Your question, please?

Thanks, operator. Congratulations, guys. Thanks for taking my questions. Couple of questions for you, if I could, on ORCA-1. Let me step back for a moment on MTD, the max dose tolerated study. When will be DSMC and the agency decision on the higher dose? And considering safety, do you want to see it tested at a higher dose or the agency listed as is and that’d be okay with you as well?

This is Cindy. So, we're in the process of amending the protocol to go up to 30 milligrams, and that’s more cohorts. And once we complete that, we will actively be submitting to FDA our plans and obviously the amendment. If we reach to 30 milligrams, we do not have dose limiting toxicity, that’s when we would actually have inputs from the agency on whether we need to go higher or if we see max and the PK, we’ve already reached a super therapeutic dose that we will be able to use in our QT study. So, it’s kind of connected with dose limiting toxicity as well as what we need to do in a QT study.

Okay. It seems that back half of my question maybe a bit premature, it looks like you can go up to 30 milligrams but here right before [ph] you need to request a change in protocol from the agency, is that right?

So, we’ll already be changing with protocol going up to 30, and back then if we haven't reached dose limiting toxicity, then we would have FDA’s input on whether to continue or whether we receive a super therapeutic dose. So, right now, we're in the process of amending the protocol and then by July, everything would be in place to continue and then include those additional three cohorts.

Okay. That’s helpful. Thanks. Can you give us any feed back as to what adverse events may have been seen at this point or what at point should we look for that feedback from you?

I think right now we are not seeing any dosing limiting toxicity or any really adverse events that are dosed proportional to as we go up in dose. So, right now we don’t know what adverse events are really being caused by increasing cytisinicline. So, we don’t really know yet.

I think, Michael, what we’re seeing at the moment is a very clean profile. We’re currently at 21-milligram single dose, if we take that up to 30-milligram single dose, that is 10 times our proposed commercial dose. So, again, I think it shows the robust safety profile of cytisinicline.

I guess, I should add one thing for this MTD study, so everybody is aware. It is blinded to us. So, every cohort of eight subjects, six are treated at the dose of cytisinicline and two of placebo. So, until the study is absolutely completed, we really don’t know where the adverse events are lying as far as treated or on placebo. So, data monitoring committee actually, when they review the safety data they are unblinded.

Right. Okay. That’s helpful. Thanks, guys. A couple then, if I could on ORCA-1. We noticed the primary and the secondary endpoints would be flipped ORCA-1 and the pivotal. What’s most important to you guys? Obviously, you want both, but is there one versus another that you’re looking at when we see the ORCA-1 results?

Well, the primary endpoint is important to us, so we can actually see the sensitivity of the various dosing regimens. So, the primary endpoint is important, so we can see that effect. But, as far as a Phase 3 endpoint for market approval or commercialization, it needs to be a smoking cessation endpoint. And that is the secondary endpoint for ORCA-1. The problem is, the study is not powered for statistical significance. I mean, if we had powered the study for that, it would have been just another Phase 3 study. So, that’s why we're going to be looking at the efficacy data, smoking reduction as well as cessation rate as well as then looking at complaisance and obviously the safety profile. So, it really will be the totality of the data that we will be looking at when we make a decision on how we're going to move forward.

Okay. That’s helpful. Thanks. Then, just one last one for me. If we look ahead to potential partnerships for cytisinicline, is that something that is likely before or after the Phase 3, or do you need for those Phase 2 results and consider discussions before answering? Thanks.

Yes. I think, the key here is going to be the strength of the Phase 2b data. We must know the fact, this is drug, this has already been in the market for 20 odd years and has already treated 21 million patients. So, our expectation is that as soon as we’ve got the Phase 2b data, we will start to initiate discussions with potential commercialization partners. My expectation is that they would want to have some inputs in to the Phase 3 program itself. So, I would think that over the coming -- as soon as we got the Phase 2b data, we would start the discussions, how long it will take to conclude is unknown. But I would think they’d like to have some kind of input into that process.

Thank you. Our next question comes from the line of John Vandermosten from Zacks Small Cap Research. Your question please.

I wanted to ask about just anticipated response to dose increases. I mean, would it be more of a linear response or one of diminishing returns? And obviously, I know the data isn’t there. But just based on observations so far and how the science works, any thought on that side of things?

So, I think actually if we're going up in 30 milligrams and the pharmacokinetics is showing the Cmax is kind of leveling off because you don’t have then dose proportionality with the pharmacokinetics. That means you’re going to get into diminishing returns, and that further means need to have to discussions with FDA as far as how far do we go to really meet dose limiting toxicity for an MTD, given the pharmacokinetics. And so, that’s why we will have to then summarize the entire data at that point to FDA to move forward with what would be the best.

And I think, John, as far as the Phase 2b is concerned, that’s exactly what we are exploring. Because as I mentioned before, out of the four arms, three of those arms have got dose level of cytisinicline at our above what is commercially available in Central and Eastern Europe. So, if you look at dose loading in terms of cytisinicline, that is what we're going to be exploring to see both the higher dose and whether it’s a titration dose as currently used or whether the three times daily will have an equal effect as well.

Also, there was the RAUORA trial, and I know that’s still underway. I did a quick search to see if I could find anything, updates there. I don’t think I saw anything, although I think it might be closed at this point. But I was wondering if you had any news on that and kind of how that was coming along.

Yes. We don’t have an update at the present time. We have an investigator led study down in New Zealand, it’s led by Natalie Walker, who actually ran the CASCADE trial in 1,310 patients, which is cytisinicline versus nicotine replacement. But, we don’t have an update at the present time.

Thank you. Our next question comes from the line of [indiscernible] from Maxim Group. Your question, please?

Do you mind -- could you walk us through the ORCA-1 study results, how this might inform the study design for ORCA-2 and ORCA-3? If you see great efficacy with the 3-milligram dosing, could you potentially see lesser, smaller study size for the Phase 3 studies?

I mean, that is possible. Obviously this is secondary endpoint of smoking cessation, but again, we’re going to have to be cautious because it is a small trial, when you take that result and look at sample sizing but that’s a possibility. I think, as I said, the totality of the data is going to be what’s important is those increased efficacy also mean and you do not change the safety profile. If you then increase the safety profile, then maybe we don’t want to go that higher dose. And then, compliance between the two schedules will be looked as well. That's why I keep coming back to the totality of all the data that we’ll have. We’ll have to look at the story carefully to then decide which way we're going to proceed.

I think, the trial design that we have agreed in principal with the FDA is actually two studies. The first one is a two-arm study of placebo versus a chosen dose of cytisinicline; and the second one is a three-arm study, and that was placebo at the time versus 1.5 milligrams versus 3 milligrams. Our expectation is that the Phase 2b will solve which is ultimate. So, we could well end up with two two-arm studies. Approximate size, 800 patients per trial, but then that informs again another decision that we would have to make, that is we will be short in terms of safety, which would anyway. But, that would then lead us to a probably a redosing study as well. The two two-arm studies that we may end up doing will be quicker and potentially cheaper than we had currently budgeted for. But, that is all speculation until we've actually sat down with the FDA with the results of ORCA-1.

Got it. That’s very helpful. And in your deck you have and you also mentioned today, there will be a QT elevation study that will be needed to be completed as well. Can you perhaps talk about the timelines when you’d be doing that. Would that be towards the end of this year in parallel with the first Phase 1 or in parallel with the second and you see it as a 2020 event?

Not a 2020 event because obviously that is for the ascending dose we need to complete, and then our plan for the QT study would be into ‘20, certainly after the first Phase 3 study has gotten started.

And just to be clear, we haven't seen any cardiovascular effect in any of the data that we’ve seen including safety data base in Europe, which is currently about 15 million cases in that and non-clinical studies haven’t shown any cardiovascular effect at all.

That’s helpful one last question for me. With regards to your R&D expense for the quarter, you mentioned that it went up significantly as you are completing the ORCA-1 enrollment. Should we see to assume that as the base for the rest of the year and quarter for each quarter or would it go down?

No. It will be going down. Once we run through the second quarter, there will be some kind of residual additional expense as a result of ORCA-1. But the remainder will go down until we initiate the Phase 3 trial, which we’re still expecting to start towards the end of the year. So, you will see a decrease in the quarter two and quarter three with a potential increase coming up toward the end of the year.

Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to Rick Stewart for any further remarks.

Well, once again, I would like to thank you for your continued interest in Achieve. We look forward to updating you with the results of the ORCA-1 study toward the end of the quarter. Thank you very much.

Thank you, ladies and gentleman for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.