Achieve Life Sciences, Inc. (ACHV) Q2 2021 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Achieve Life Sciences Second Quarter 2021 Earnings Conference Call. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to turn the call over to Jamie Xinos, Executive Vice President of Commercial at Achieve. Please go ahead.

Thank you, Tiffany, and thanks, everyone, for joining us today. On the call, 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 would 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 would now like to turn the call over to John.

Thank you, Jamie. On today's call, we will discuss the exciting progress we have made on the cytisinicline development program, including key milestones that we have reached so far in 2021 and provide an update on our second quarter financial results. Let's begin with our Phase III ORCA-2 trial that is evaluating the efficacy and safety of 3 milligrams cytisinicline dosed 3 times daily over a period of 6 and 12 weeks versus placebo. ORCA-2 is being conducted at 17 clinical sites in the United States, and as announced in June, we have reached the key milestone of enrollment completion. As you may recall, the original enrollment target was 750 smokers. However, we allowed additional subjects that were in screening at the time of our cutoff date to participate in the study, resulting in a total of 810 subjects randomized. All subjects have now been assigned to 1 of 3 arms to receive either 12 weeks of placebo, 12 weeks of cytisinicline or a combination of 6 weeks of cytisinicline followed by 6 weeks of placebo. Following the 12-week treatment period, subjects are being followed monthly out to 24 weeks. The study has 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. Achieve will remain blinded until their completion of all study follow-up evaluations and the database has been finalized and locked. We expect last patient, last visit in the ORCA-2 study to occur at the end of 2021 and top line data results to be announced in the first half of 2022. We also recently announced an update regarding our plans to expand the evaluation of cytisinicline into nicotine e-cigarette or vaping cessation. In July, we were notified that we received a federal grant award from the NIH to begin preparations for the Phase II ORCA-V1 study. As part of this process to secure nondilutive funding to offset costs related to this important trial, we applied for the maximum allowable funding of $2.8 million under the NIH Small Business Technology Transfer grant. The NIH grant is awarded in 2 phases and requires that Achieve meet specific milestones in order to receive the second tranche. The first approved grant amount of $320,000 commenced on August 1 and is being used to complete critical regulatory and clinical operational activities such as protocol finalization, clinical trial site identification and the submission of a new IND to FDA for this specific population. Upon completion of these milestones, as assessed by NIH, Achieve expects to receive the next stage of the grant award of approximately $2.5 million that will enable execution of the Phase II ORCA-V1 clinical study in approximately 150 adult nicotine e-cigarette users in the United States. The NIH funding is expected to cover approximately 50% of the total ORCA-V1 trial costs. We are delighted to have Dr. Nancy Rigotti, Professor of Medicine at Harvard Medical School and Director of the Tobacco Research & Treatment Center at Massachusetts General Hospital, along with Achieve's President and Chief Medical Officer, Dr. Cindy Jacobs, leading the efforts on the ORCA-V1 trial as co-primary investigators. Dr. Rigotti is also the primary investigator in our ORCA-2 Phase III study. Recent data indicates there are more than 11 million adult users of nicotine e-cigarettes in the United States alone. While e-cigarettes have historically been viewed as less harmful than combustible cigarettes, their long-term safety remains controversial. Since these products also sustain addiction, many vapers are now seeking to quit nicotine completely. And research conducted by Achieve, roughly 73% of e-cigarette users expressed a desire to quit within 12 months. Of those with a more urgent interest in quitting, more than half indicated they would be interested in a new prescription cessation therapy. Currently, there are no treatments specifically indicated to help e-cigarette users quit. So we see this as an unmet commercial opportunity. If our development efforts proved to be successful, cytisinicline may offer a new cessation option for this growing population of e-cigarette users who seek to quit nicotine for good. Moving on to another important milestone that we just announced yesterday, the issuance of 2 new patents by the U.S. Patent and Trademark Office. These patents include claims covering the expected 3-milligram commercial dose of cytisinicline administered 3 times daily. The claims have been granted under these patents stem from the results we obtained in our ORCA-1 clinical study that evaluated various doses and administrations of cytisinicline. Not including any patent term extensions to which we may be entitled, these patents will expire in the third quarter of 2040. With this new issuance, we now have 7 granted patents, 5 patent families and 34 pending patent applications. We expect to continue to expand our patent portfolio in the future as we seek additional ways to protect our cytisinicline franchise. Aggressively protecting the IP for cytisinicline in the U.S. and beyond is key to our commercial success, and we continue to make excellent progress on this front. That concludes the overview of our recent highlights. Now I'd like to turn the call over to Jerry to discuss our financial results.

Thanks, John. I would like to provide an update on our cash balance as of June 30, 2021, and then review our second quarter financials. In May, we closed an underwritten public offering with gross proceeds of $23 million, which included the full exercise of the underwriters' overallotment option. We received net proceeds of approximately $21.3 million after deducting commissions and offering expenses. As of June 30, the company's cash, cash equivalents, short-term investments and restricted cash were $42.1 million compared to $35.9 million as of December 31, 2020. We believe our current cash balance is sufficient to provide runway into 2023. Turning to our statement of operation. The company incurred a net loss of $11.3 million for the quarter ended June 30, 2021, as compared to a net loss of $2.9 million for the same period in 2020. Net loss for the 6 months ended June 30, 2021, increased to $19.3 million compared to $6.2 million in the 6 months ended June 30, 2020. Operating expenses continue to be elevated in the second quarter as we move towards full enrollment in our ORCA-2 Phase III trial. 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. It has been an incredible start to 2021 for Achieve, and we expect to continue to deliver on our milestones and objectives throughout the remaining months of this year. We will continue to honor our commitment to improve the health and well-being of people who are addicted in nicotine and desperately need new treatment options to help them quit. Approximately 14% of adults in the U.S. continue to smoke, meaning more than 34 million users of combustible cigarettes and potential quitters. With more than 480,000 deaths directly related to smoking annually, it remains the leading cause of preventable death and disease. We believe cytisinicline can make a significant impact in this therapeutic area that has seen no new advances in over a decade. In closing, our ORCA-2 Phase III trial of cytisinicline in the U.S. has completed enrollment, and our team will remain focused on execution and monitoring to ensure data results are provided as soon as possible in the first half of 2022. We have received the first portion of a significant grant that will enable us to expand our development into e-cigarette cessation where we have the potential to be a first-in-class solution for this growing market segment. Our focus here will be ensuring the milestones are completed to reach the second phase of the grant award and initiation of the ORCA-V1 study. And finally, we continue to strengthen the IP position for cytisinicline, which we expect will positively impact our commercial success and partnering discussions as they continue to evolve. We appreciate you joining us today and your continued support of Achieve. We will now open up the line for questions. Operator?

[Operator Instructions]. Your first question comes from the line of François Brisebois from Oppenheimer. François Brisebois: Just a quick one here on - I saw a generic approval yesterday for CHANTIX. I was just wondering any comments there on time line. Is this in line with expectations for generic approval? And any thoughts about potential pressure from generics on pricing?

Yes. Thanks, Frank. Good question. So on the generic front, we have been tracking this. We were aware that one of the key patents for CHANTIX did expire in November of last year, so we have been monitoring for generic entrants. So seeing Par Pharma to be the first to get approved was not unexpected. We're also aware of 3 other generic filers that are out there, including Apotex that the FDA has recently allowed to be available in the U.S. So we expect over the next 12 to 18 months to see the others perhaps also reach approval depending on how they shake out with respect to their analysis of nitrosamines, which has been an impact for Pfizer and CHANTIX. François Brisebois: Okay. Great. And if I can sneak in another one here. There's recently been a JAMA article publication discussing cytisinicline or cytisine here against CHANTIX. And it didn't quite hit the noninferiority they were looking for, but it seems like the dosing was different. Any color or any comments you'd like to make on that article?

Sure. Yes. We did see that as well. So this is a study that we think was flawed in terms of its overall design. It was investigating 25 days of cytisinicline treatment versus 12 weeks of CHANTIX. And we are aware that quit rates are never higher than when you're on treatment. And so when looking at a 6-month end point, patients on cytisinicline would have been off drug for 5 months versus only 3 months on CHANTIX. So we think the design was not appropriate. But with that being said, it nearly missed with that artifact. What we did see in that trial was similar to what we saw in the RAUORA study was significantly lower rates of adverse events. So that continues to be a theme that we see across the trials. And we also did see higher quit rates at the end of 1 month for cytisinicline versus CHANTIX. So I think overall, it continues to reinforce data we've seen historically, and we'll stay focused on what we have now, which is a differentiated dose and administration at 3 milligrams and 3 times a day. François Brisebois: Okay. Great. That's very helpful. And then just lastly on the grant here, you helped us with a little color on the amount and what that covers for the trial. I was just wondering any color on timing of this trial potentially starting, clearing the IND and I guess, getting the second part of the grant and starting the trial and how long it could be. Any color there at all?

Yes. So our focus here initially is to get those key milestones like the IND and the protocol finalized over the back half of this year, so we can set ourselves up in a position to perhaps launch that vaping trial as soon as the first half of next year. So we'll have more color on that as we go forward, but that's our goal at the moment.

Your next question comes from the line of Ted Yu with Zacks SCR.

This is Ted. I'm sitting in for John Vandermosten today. Just a quick question. According to the FDA's website, INDs are required to kind of facilitate the distribution of a drug being investigated to clinical sites. Now you guys did get IND clearance in 2017 for cytisinicline. Is an IND required for ORCA-V1 because the indication has changed?

Yes. Thanks, Ted. I'm going to pass this one over to Cindy.

Yes, it is, actually. So that is why it would be a new IND for the indication of e-cigarette vaping cessation. Obviously, all of the manufacturing information would be cross-referenced to our original IND that we submitted in 2017.

Okay. Wonderful. And shifting gears to cytisinicline dosing. It became apparent while I was reviewing your patents that a variety of dosing schemes would probably be - would probably work with you guys settling eventually on 3 milligrams, three times daily. Is there any opportunity here to explore a slow-release formulation? Or was that looked into?

Yes. Thanks, Ted. So based on the work we've done, especially through ORCA-1, we did find 3 milligrams, 3 times a day, showed the most potential. And that is what we're driving forward in our Phase III program. I think long term is a life cycle management play. There are opportunities for slow release or other versions. But for now, as we move forward towards initial approval, we will stay focused on the 3 milligrams, 3 times a day.

Your next question comes from the line of Tyler Handin with Alliance Global Partners.

This is Tyler standing in on behalf of Jim Molloy. Could you just characterize a little bit the partnership landscape? Would you be looking to self-commercialize or partner to launch in the U.S. and maybe the rest of the world?

Yes. Thanks for the question, Tyler. So I think as we look at the commercial opportunity here, we believe that we will need a commercial partner to ultimately maximize the revenue opportunity here. And so what we will be looking for is a partner that already has an existing primary care footprint in place, a group that has strong capabilities, first and foremost, in the U.S., but then also ideally on a global basis, one that we can plug and play this product into. So some of those discussions have already started. We will continue to move forward and expand that pool as we move into ORCA-2 data because we do see ORCA-2 data as a key data point in moving those discussions along. The data coming out of that trial will be both the safety and efficacy that will be in the label. So we see that as an important component, but we do see quite a large universe of potential partners in this indication.

Okay. I also do have another question as well. Are you guys potentially looking at bringing any additional compounds? Or is that not something you're considering at this time?

Yes. I think we're always looking around for other interesting compounds that could be out there that may be complementary to what we're doing today. We don't have anything imminent that we're looking to bring in. We will stay focused in terms of utilizing our capital to drive forward on the nicotine addiction side. But we do continue to look around to see if there are interesting assets that would have a similar dynamic to what we've done historically, which is drugs that already have human clinical data behind them and have a high probability of success like we have here with cytisinicline.

At this time, I'm currently showing no further questions in queue. I will now turn the call over back to Mr. John Bencich for closing remarks.

Yes. Thanks, Tiffany, and thanks everyone joining today. We've made a lot of progress here over the first half of the year and look forward to bringing forth further updates as we move forward. So thanks again for joining us today.

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