Achieve Life Sciences, Inc. (ACHV) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Achieve Life Sciences Fourth Quarter and Year-End 2020 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Jaime Xinos, Executive Vice President of Commercial at Achieve. Thank you. Please go ahead, ma'am.

Thank you, Shannon, and thanks, everyone, for joining us. On the call today from Achieve, we have John Bencich, Chief Executive Officer; Dr. Cindy Jacobs, President and Chief Medical Officer; Jerry Wan, Principal Accounting Officer; and Rick Stewart, Executive Chairman of the Board of Directors. 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 John.

Thank you, Jaime. Despite all of its unique challenges, 2020 was a pivotal year for Achieve. While navigating the new normal of conducting business virtually, we accomplished several key milestones, including multiple data announcements supporting cytisinicline's differentiated product profile, made significant progress on NDA-supporting studies and regulatory activities required by FDA and initiated the Phase III ORCA-2 study in U.S. smokers. Notably, we ended the year in the best capitalized position since the company's inception. Today, we will provide an update on the cytisinicline development program and discuss our key priorities for the coming months and year ahead. Let's begin with ORCA-2. As a reminder, ORCA-2 is a double-blind, randomized, placebo-controlled Phase III trial that is currently enrolling 750 adult smokers across 15 locations in the U.S. The trial is designed to evaluate the safety and efficacy of 3-milligram cytisinicline dosed 3 times a day over a period of 6 and 12 weeks versus placebo. This trial was launched during the fourth quarter of last year. Participants are being randomly assigned to 1 of 3 arms and receiving either 12 weeks of placebo, 12 weeks of cytisinicline or a combination of 6 weeks of cytisinicline followed by 6 weeks of placebo. Behavioral support is being provided throughout the study. And after the 12-week treatment period, subjects are followed monthly out to 24 weeks. There are 2 independent primary endpoints that will evaluate the rate of smoking abstinence of cytisinicline compared to placebo at the end of both 6 weeks and 12 weeks of treatment. ORCA-2 will be successful if either or both of the cytisinicline arms show an efficacy benefit over placebo. Importantly and unlike the design of our previous ORCA-1 trial, smoking abstinence here is defined as continuous abstinence during the last 4 weeks of treatment. One of the primary changes we made going into ORCA-2 was to extend the treatment period from 25 days to 6 and 12 weeks. This now allows us to measure the FDA approvable endpoint of 4 weeks continuous abstinence while patients are still on therapy. This was not possible with the prior administration over 25 days, and we know that quit rates are highest while subjects remain on treatment. We believe these changes have the ability to improve on quit rates that we have seen historically. Regarding enrollment, we initially estimated our projections based on the rapid enrollment of ORCA-1, which completed ahead of schedule. In this case, given the ongoing pandemic and more recently the winter storms that impacted numerous trial sites across the U.S., we are seeing slower weekly randomizations than originally projected by our clinical sites. We have implemented numerous recruitment initiatives to increase the pipeline of potential subjects to be screened and assist the centers in finding qualified subjects for the trial. Based on the current rate of randomizations, we expect enrollment of ORCA-2 to be completed by the middle of this year rather than by the end of March as we previously anticipated. Our entry criteria and pre-randomization screening process clearly outlines the trial's 6-month commitment and frequent in-clinic visits so that we enroll subjects who are motivated quitters willing to comply with study requirements and who are otherwise healthy. Ensuring these entry criteria are met and enrolling the most appropriate and motivated subjects remains our first priority over speed of enrollment. Overall, we are pleased with the conduct of the trial to date and the efforts being made by our clinical research centers across the U.S. As a reminder, the company will remain blinded until the completion of the trial and results have been analyzed. We look forward to providing further updates on ORCA-2 as we move forward, including on our next quarterly earnings call. As you may recall, the Society for Research on Nicotine and Tobacco Annual Meeting was held last month where we had the opportunity to present findings on smoker and e-cigarette user attitudes and perceptions on quitting. The data collected from recent surveys of over 1,100 smokers and 500 nicotine e-cigarette users further reinforced the need for effective new cessation treatment options. In the smoking population specifically, overall satisfaction and perceived efficacy of available treatments was low. Of the smokers who had previously tried using a prescription medication such as CHANTIX or Bupropion, only 26% stated they completed 1 month of treatment. This is consistent with prescription claims data we have reviewed that show 76% of CHANTIX users do not complete the full 3-month course of therapy. The survey also showed that side effects, risk of suicidal thoughts and perceptions about low treatment efficacy were among the stated reasons for discontinuation or lack of initiation of currently available medications. These insights are incredibly relevant as we think about the future product positioning of cytisinicline. We believe our tolerability profile with low levels of adverse events, a shorter course of treatment and a more selective mechanism of action will increase the number of quitters willing to try prescription therapy. We expect these product features will lead to improved compliance and potentially better outcomes. Moving on to the results of the data presented from vaping or e-cigarette users, we conducted an analysis from over 500 users of nicotine vape products, including roughly half of whom were former smokers and half considered dual users who both vape and continue to smoke. The key findings that were reported indicate that regardless of current vaping behavior, both segments expressed an interest in quitting. In total, 73% stated that they intend to quit vaping within the next 3 to 12 months. Of those who plan to quit within the next 3 months, more than half stated that they would be interested in trying a new prescription treatment to help them do so. These data are of particular interest given our desire to initiate a vaping cessation trial of cytisinicline in the future. As we have previously stated, we have applied for non-dilutive grant funding for a Phase II vaping study and expect to hear more on our application status in the second quarter. Also at SRNT, Dr. Natalie Walker provided a review of the previously presented RAUORA data. As a reminder, RAUORA was the first ever head-to-head trial of cytisinicline compared to CHANTIX that enrolled a total of 679 smokers in New Zealand. The RAUORA results showed that cytisinicline not only met the prespecified non-inferiority endpoint but was trending towards superior efficacy with numerically higher quit rates for cytisinicline. In addition, the trial showed that subjects on cytisinicline had significantly lower rates of adverse events compared to those subjects on CHANTIX. Dr. Walker commented that RAUORA results would be published in the near future. At this time, I'd like to turn the call over to Jerry to discuss our recent financial results. Jerry?

Thanks, John. I would like to provide an update on our cash balance as of December 31, 2020, and also our operating expenses for the fourth quarter of 2020. As of December 31, 2020, the company's cash, cash equivalents and restricted cash were $35.9 million compared to $16.7 million as of December 31, 2019. The increase in cash over the prior year was largely a result of capital raises during the second half of 2020. In December, we closed an underwritten public offering with gross proceeds of approximately $17.3 million, which included the full exercise of the underwriter's over-allotment option. We received net proceeds of approximately $15.8 million after deducting commissions and offering expenses. We believe our current cash balance is sufficient to provide runway into the middle of 2022. Turning to our statement of operations. The company incurred a net loss of $4.7 million for the quarter ended December 31, 2020, as compared to a net loss of $3.2 million for the same quarter of 2019. Total operating expenses in the fourth quarter of 2020 increased to $4.7 million as compared to $3.2 million for the same quarter of 2019. Operating expenses increased in line with the initiation of the ORCA-2 trial in the fourth quarter of 2020. We anticipate our operating expenses to remain elevated during 2021 as we continue to execute on the ORCA-2 trial. That concludes a summary of our financial results. I will now turn the call back over to John.

Thank you, Jerry. Over the past year, the management and Board have worked extremely hard to position the company for success. As Jerry discussed, we are now well positioned to not only complete ORCA-2, but to operate in a truly strategic fashion as we advance towards becoming the leader in smoking cessation and work towards realizing the value that we see in cytisinicline. We will continue to explore opportunities for partnerships and additional ways to expand the potential for cytisinicline, including the expansion into e-cigarette and vaping cessation, which we continue to believe is especially compelling. In closing, I'd like to remind everyone, if you haven't had a chance, to encourage you to listen to our highly esteemed key opinion leaders discuss the cytisinicline program and their personal viewpoints on its potential, which were expressed during our virtual roundtable event last November. The link is available on the Events page of our Investor Relations website. We are appreciative and continue to be humbled by the caliber of experts who are helping us to move cytisinicline forward and continue to believe in cytisinicline's potential to help people quit smoking. That concludes our prepared remarks. Thank you again for joining us. We will now open the line for questions. Operator?

[Operator Instructions]. Our first question comes from Michael Higgins with Ladenburg Thalmann.

A couple of questions, if I could, on ORCA-2. You mentioned slightly slower than expected. Just hoping a little more color on that, if that's related to, for example, higher screening failure rate. Obviously, COVID underway may be affected by that. And also, any characteristics of the patients so far that are notable when you compare to the work on one population?

Yes. Thanks, Michael. I'm going to hand that over to Cindy to provide more color.

Sure. The slower enrollment than expected actually occurred in January where we had positioned -- if you remember, we had slow enrollment gauged at the very beginning and then to open up in January. The clinical sites actually said that the slower enrollment was really based on hesitancy of participants to come into the clinics on a weekly basis. This is probably more COVID-related as well. And obviously, having the winter weather storms down in the southeast certainly didn't help as well. We're now seeing here in March definitely a pickup. I think the fears of COVID with vaccinations and the better weather is starting to help on enrollment. So we're actually seeing our increased enrollment in March where we were hoping to see it in January.

Interesting, yes.

So as far as the screen fails, they are a little higher than ORCA-1, but not a huge issue. And our -- so right now, we're predicting full enrollment by the middle of this year.

Yes. I think we're looking more of Q2. So by middle of the year, it's maybe a month or so delay. Interesting to hear that it actually is highest in March. And obviously, you're expecting the big bolus to come back in January. So it looks like you're trending in the right direction in any case.

Absolutely. In fact, we're working with the sites. We have media and interviews with the PIs and the local areas have actually really been quite successful as well over the last month.

Interesting. I don't want to gobble up too much time. I think another area of interest is in vaping. It's gotten a lot of attention from AHRQ, NIH, FDA, a lot of governmental bodies that really seem encouraging. You have the survey work as well. But are there others like AHA, American Cancer Society that could support the funding of a vaping study? And any feedback you can give us on the surveys as you're looking to fund this trial would be helpful, too.

Yes. Thanks, Michael. Yes. I mean I think this is an area that we continue to remain really interested in, one that really expanded quite substantially over the last 3 or 4 years and really over the last decade. Latest estimates show that there's near 14 million e-cigarette users in the U.S. That compares to 34 million combustible cigarette smokers. That number has remained flat over the last 3 years, which is a bit surprising as well. I think this is an area that we see a real opportunity. We are looking at various ways to fund this Phase II trial that we've designed. We think grant funding that we've identified currently is the right approach for us at the moment. We don't have control over the review process. We put our best foot forward, but we'll have an update on that here in the second quarter. I think regardless of where that goes in terms of grant funding, I think this is an area that we will plan on expanding into in the future when the timing is right. And I think if there's opportunities with other organizations, we'll continue to tease those out as well.

That's great feedback. So just to clarify, it looks like in Q2, you should hear back on the grant funding request. Is that right?

Correct.

Okay. Great. Last one, and maybe a brief answer, but just trying to be complete here. I know there's other NDA enabling activities underway. And then past core presentations, you've listed the study and the status and so forth. This may be a bit dated, there were 15 or so in here. I think you've checked off a lot of these boxes. So what other NDA enabling studies are underway now that may include here in the next several months and quarters?

Yes. Cindy, you want to touch on that?

Yes. Many of them are in the nonclinical programs. So we just submitted the 9-month chronic tox study required for the NDA. We are also will be completing here over the next few months the 1 carcinogenicity study. And we are currently -- we submitted our second carcinogenicity protocol for FDA to review as a SPA. We should be hearing back on that in the next month. And then after their agreement, we would initiate that carcinogenicity study, which would be the second and final nonclinical study really that's required at this point. We are looking at also starting abuse liability studies that are required for the NDA, and that would also start within the next quarter.

Our next question comes from Thomas Flaten with Lake Street Capital.

So just, John, if you could maybe explain to what extent ORCA-2 would inform ORCA-3? Just doing some back of the envelope math, if let's call it, you're done by June, you probably won't have data until early first quarter of '22. How dependent was ORCA-3 on whatever learnings you took from ORCA-2?

Yes. Thanks, Thomas. I think in terms of ORCA-2 informing future trials, including ORCA-3, I think the way we've always looked at this is that ORCA-3 would look largely similar to what we're running currently. So we don't think there's a need to read it out on ORCA-2 first if we were to get going on ORCA-3. Obviously, every additional data point you have is going to be beneficial, but I think we have in hand what we need to appropriately power and initiate that. So I think overall, our focus currently will remain on executing on the ORCA-2 trial, but no real impact on our thinking on ORCA-3 at the moment.

Got it. And then across the sites, was the slowdown or the -- maybe the slower-than-expected enrollment uniform across the sites? Or were there particular geographies that contributed most to this slowdown?

Yes. Cindy, do you want to touch on that?

Sure. It did vary with the sites. I mean a lot of the slowdowns were in the southeastern part, especially with the winter storm. But there are some sites that are doing very well and others that were a little slower. In each area, it's a little different as far as the COVID infections and rates and concerns. So we did see a bit of a difference per site.

Got it. And then maybe if you could just provide some additional color on those strategies and tactics that were put in place to maybe get some acceleration in those enrollment rates, what they were? And then how long you are planning on continuing those? I mean, you might be continuing to move through enrollment, I'm not sure, but just wanted to ask.

Do you want me to take that, John?

Yes, please, Cindy.

Yes. So the -- actually, the biggest help has been with the interviews, radio interviews with the PIs in the local areas. That has brought a lot of participants into the study as just an acknowledgment as far as the trial and awareness of the trial. We also have the website ads driving traffic to the various sites, and those are actually picking up as well and being beneficial and a lot of the participants are just coming in. And I think it's mainly the awareness of the trials. It's quite helpful. And those -- all the websites and continued media interviews are planned over the next few months.

Our next question comes from Ted Yu with Zacks Small-Cap Research.

Good afternoon, everyone. My name is Ted Yu. I'm in for John Vandermosten today. As Achieve reported in the results from the surveys presented at SRNT, some smokers that attempted to quit by vaping ended up unfortunately doing both and consuming almost double the nicotine. Would the dosing regimen being evaluated in ORCA-2 be suitable for quitters of all use levels?

Yes. Our thinking at the moment, it would be the same dosage and administration. So that's currently 3 milligrams 3 times a day. So when we think about kind of moving into e-cigarette users and dual users, we would look at the same dose and administration.

Okay. And to piggyback off the previous question regarding the vaping trial, any hypothesis regarding whether cytisinicline might be more effective in vapers or smokers?

Well, I think if you look at the mechanism of action for the products, we specifically target the nicotine receptors in the brain. So I think the product should have broad applicability across nicotine addiction, whether that's cigarette consumption via cigarettes or through vapes or electronic cigarettes. So I think our belief is that it should work in this area as well.

Okay. It sounds like it's got broad efficacy in that regard. Also if you -- as you guys kind of approach or at least pursue a vaping trial, would the carbon monoxide-based endpoint be useful? Or would another be required?

Yes, it's a great question. So typically, in our smoking cessation trials, we do look at expired carbon monoxide, and we look for below 10 parts per million. That doesn't hold true in the vaping setting. So in that, we would be looking for cotinine, which is a nicotine metabolite, as a proxy for continued usage.

Our next question comes from Chen Lin with Lin Asset Management.

Most of my question has been answered. Just curious about the NIH grant. If you get the money, how soon can you start the Phase II trial? Do you expect the grant will cover the full Phase II? Or is there any possibility to beyond Phase II?

Yes. Thanks, Chen. So I think like we indicated, we'll get further guidance in the second quarter. I think any funding on that, the soonest it would occur is the back half of this year. And I think as we move forward and get better clarity on if we are getting some funding on this, we'll be able to narrow in on timing. But I think, overall, you can look at this as more of a 2022 sort of activity at the moment.

And I'm currently showing no further questions at this time. I'd like to turn the call back over to John Bencich for closing remarks.

Great. Thanks, Shannon. Thanks, everyone, for joining us today. I think as we talked about, we had a very productive 2020. And I think we're off to a great start here in 2021 with the kickoff of the ORCA-2 trial. I look forward to providing additional updates as we move forward. Thanks again for joining us today.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.