Achieve Life Sciences, Inc. (ACHV) Q1 2022 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Achieve Life Sciences First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today, to Nicole Jones. Please go ahead.

Thank you, operator, 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; and Jerry Wan, Principal Accounting Officer. Achieve Management will be available for Q&A after the prepared remarks. 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, Nicole, and thank you, everyone, for joining us today. As you've probably heard, last month, we reported a highly successful outcome of the ORCA-2 Phase III clinical trial of cytisinicline for smoking cessation. Cytisinicline demonstrated impressive efficacy across the primary and secondary endpoints for both the 6- and 12-week cytisinicline treatment arms. The safety and tolerability profile remains best-in-class with single-digit rates of adverse events reported. We could not be more excited that cytisinicline succeeded in the challenge of helping many long-term heavy smokers in whom previous treatments have failed, successfully kicked the habit. And the timing could not be better to bring a new cessation option forward. For the first time in over 20 years, cigarette sales increased during the COVID-19 pandemic, while calls to quit lines dropped by nearly 30%. There is still more than 30 million smokers in the U.S. alone and over $1 billion globally who have not been offered a new regulatory approved treatment in nearly 2 decades. Smoking kills more people every year than alcohol, AIDS, car accidents, illegal drugs and murders combined. In the U.S., it accounts for more than 480,000 deaths and billions in health care dollars spent each year. Yet despite these alarming statistics, there have been very few clinical advances, aiding smokers and health care providers to treat nicotine addiction. CHANTIX, which was FDA approved in 2006 and withdrawn from the market last year, was the leader in the smoking cessation category, generating over $1 billion in peak sales before going generic, with roughly 75% of those sales attributed to the U.S. market. While it has been considered the most efficacious treatment currently available, it was never able to reach its full potential of helping more people quit successfully due to its side effect profile. In fact, when marketed, only 4% of the U.S. smoking population were prescribed CHANTIX each year. And in the ORCA-2 trial, less than half of the participants had ever used CHANTIX in their multiple prior quit attempts. Insights from our research and from smoking cessation opinion leaders and prescribers suggest that the primary reason a majority of smokers avoid starting or completing a full 12-week course of CHANTIX is due to the high incidence of side effects, such as nausea, headaches and sleep disturbances. Based on prior evidence, we have always believed that cytisinicline could offer a more tolerable alternative, and we now have proof from a randomized Phase III study of more than 800 smokers to support this belief. The adverse event profile appears to be best-in-class with more headaches and nausea in the placebo arm than in the active treatment groups. In addition, the odds ratios we observed in ORCA-2 are unprecedented, with 6 to 8x higher odds of quitting at the end of treatment compared to placebo. And our quit rates were impressive despite the highly addicted study population and the execution of the trial during a pandemic. We are excited to see that both 6- and 12-week courses of cytisinicline therapy appeared to be highly effective for smokers. The 6-week therapy option provides flexibility for a shorter treatment to achieve abstinence and is half the duration of current treatments. And finally, quite simply, it is a new option smokers and their doctors need new solutions. This is an indication that has not seen any new approved treatments in more than 15 years. We believe a new treatment option will provide hope to the millions of smokers who are ready to finally quit. We plan to offer that hope with cytisinicline. Turning to the top line data readout, I'd like to hand it over to Cindy to review the key findings from the ORCA-2 trial. Cindy?

Thanks, John. As John mentioned, we are pleased to report clinically robust and statistically significant results for both primary and secondary endpoints for 6 weeks and 12 weeks of cytisinicline treatment compared to placebo in this trial. ORCA-2 is the first of 2 multicenter randomized Phase III trials evaluating cytisinicline for smoking cessation in adults in the U.S. The trial is designed to evaluate the safety and smoking cessation effectiveness of 3 milligrams cytisinicline taken 3 times daily for either 6 or 12 weeks compared with placebo. Study participants were randomized to 1 of 3 arms, and received either 6 weeks cytisinicline followed by 6 weeks of placebo or 12 weeks of cytisinicline or 12 weeks of placebo. All subjects also received standard behavioral support for the duration of the study. The ORCA-2 study had 2 independent primary endpoints that evaluated the success of smoking abstinence for both 6 weeks and 12 weeks duration of cytisinicline treatment compared to placebo. For both primary endpoint comparisons, smoking abstinence was defined as abstinence during the last 4 weeks of treatment. This 4-week biochemically verified abstinence measure remains the FDA's approvable endpoint for smoking cessation medications. The corresponding secondary endpoints evaluated for continuous abstinence in those who successfully quit smoking by week 3 through to week 24 or by week 9 through to week 24, depending on treatment duration. ORCA-2 completed enrollment of 810 smokers at 17 clinical trial locations in June of last year. On average, the study population was 54 years old had been smoking for 38 years, had 4 prior quit attempts but were still smoking about a pack of cigarettes a day. After 12 weeks of cytisinicline, 32.6% of smokers had quit smoking compared to only 7% of smokers treated with placebo. This resulted in an odds ratio of 6.3 with a p-value less than 0.0001, meaning of smokers treated with cytisinicline had 6x the odds or likelihood of quitting smoking compared to smokers treated with placebo, and it was highly statistically significant. For the secondary endpoint at 24 weeks, 21.1% treated with 12 weeks of cytisinicline were nonsmokers compared to only 4.8% treated with placebo. This gave an odds ratio of 5.3 for remaining a nonsmoker at 24 weeks after 12-week cytisinicline treatment, and also had a p-value of less than 0.0001. After 6 weeks of cytisinicline, 25.3% of smokers had quit smoking compared to only 4.4% of smokers treated with placebo. This resulted in an odds ratio of 8, meaning that those smokers treated with cytisinicline had 8x the likelihood of quitting smoking compared to smokers treated with placebo. And again, a p-value of less than 0.0001 was observed. For the secondary endpoint at 24 weeks, 8.9% treated with 6 weeks of cytisinicline remained nonsmokers compared to only 2.6% treated with placebo. This gave an odds ratio of 3.7 for remaining a nonsmoker at 24 weeks after 6-week cytisinicline treatment with a p-value of 0.0016. Turning to the top line safety and adverse events reported in ORCA-2, the frequency of treatment emergent adverse events was similar in all 3 arms. We continue to see that cytisinicline is very well tolerated with the incidence of specific adverse events in the single digits. The most common adverse events occurring in 5% or more of study participants were only insomnia, abnormal dreams, headaches and nausea. As John mentioned, the frequency of nausea and headaches were higher in the placebo arm than in the cytisinicline-treated arm. The frequency of insomnia or abnormal dreams, was only slightly higher in the cytisinicline treated arm as compared to placebo. We expect that tolerability will remain a critical point of differentiation from currently available treatments, and believe that cytisinicline, when approved, has the potential to become a new gold standard or preferred treatment for smoking cessation. That concludes the overall view of results. We continue to review additional findings and look forward to submitting these data for publication in the near future.

Thanks, Cindy. We are very excited about the strength of the ORCA-2 results and the magnitude of effect seen with cytisinicline throughout the ORCA program. We continue to see strong efficacy particularly when we consider the odds ratios that have been reported for available cessation treatments. Efficacy for both the 6- and 12-week treatment arms of ORCA-2 exceeded what was previously reported for cytisinicline, proving our hypothesis that the higher 3-milligram dose given for a longer duration has improved outcomes for smokers. Our focus now turns to the enrollment and execution of the confirmatory Phase III ORCA-3 trial and initiation of the Phase II ORCA-V1 trial in e-cigarette users. ORCA-3 is similar to ORCA-2 and that participants will be randomized to 1 of 3 study arms to evaluate 3 milligrams cytisinicline dosed 3 times daily over a period of either 6 or 12 weeks compared to placebo. ORCA-3 was initiated in January of this year and aims to enroll 750 smokers at 15 clinical sites in the U.S. Regarding ORCA-V1, we continue to expect initiation of this study in the second quarter, pending final release of grant funding from the NIH. The Phase II ORCA-V1 study will enroll approximately 150 adult nicotine e-cigarette users in the U.S. and will be led by Dr. Nancy Rigotti Professor of Medicine at Harvard Medical School and Director of the Tobacco Research and Treatment Center at Massachusetts General Hospital. As a reminder, we received the first tranche of the NIH grant funding to complete critical regulatory and clinical operational activities such as protocol finalization, clinical site identification and submission of the new IND to FDA for the e-cigarette cessation indication. We have completed and submitted the documentation on these initial required activities and are awaiting the next tranche of the NIH grant funding to initiate the ORCA-V1 study. The growing number of e-cigarette users exceeds 11 million adults in the U.S. and there are currently no approved treatment options specifically indicated for this population. We believe this is an ideal population to continue our exploration of cytisinicline's ability to be safe and effective nicotine addiction treatment. I would now like to turn the call over to Jerry for our financial update.

Thanks, John. I would like to provide an update on our cash position as of March 31, 2022, as well as review our operating expenses for the first quarter. As of March 31, 2022, the company's cash, cash equivalents, short-term investments and restricted cash were $36.4 million compared to $43 million as of December 31, 2021. We believe our current cash balance is sufficient to provide runway into 2023. In addition to the reported cash balance and in connection with the positive ORCA-2 results, we also received approval from Silicon Valley Bank to access the remaining capital under our $25 million debt facility put in place in December 2021. Under the agreement, we now have access to an incremental $10 million of capital that can be drawn down at our discretion over the course of the next 12 months. No amounts have been drawn down to date. Turning to our statement of operations. The company incurred a net loss of $7.6 million for the quarter ended March 31, 2022, as compared to a net loss of $8 million for the same quarter of 2021. Total operating expenses in the first quarter of 2022 was $7.2 million as compared to $8 million for the same quarter of 2021. Operating expenses decreased for the quarter ended March 31, of 2022, due to lower costs associated with the completion of the ORCA-2 trial. This was partially offset with the initiation of the ORCA-3 trial in January 2022. We anticipate our operating expenses to increase in the second half of 2022 as we further execute on both the ORCA-3 and ORCA-V1 trials. As a reminder, approximately half the cost from the ORCA-V1 trial are expected to be funded through a grant from the NIH. That concludes the summary of our financial results. I'll turn the call back over to John.

Thank you, Jerry. This is certainly a monumental time for Achieve with overwhelmingly positive Phase III ORCA-2 results and the initiation of our second Phase III study in January, we are well on our way to bringing forward a long overdue new treatment for smoking cessation. The nicotine addiction market continues to be significantly underserved and in need of new, safe and effective treatment alternatives. We believe that cytisinicline's differentiated safety profile, shorter course of treatment and compelling efficacy positions us well to make a significant impact in this large market. We look forward to bringing you further updates on our continued progress. We appreciate you joining us today and for your continued support. I will now open the line for questions. Operator?

[Operator Instructions]. I show our first question comes from the line of François Brisebois from Oppenheimer.

This is Dan on for Frank. Just a quick question on potential partnerships. Given the strength of ORCA-2 and moving forward as you start ORCA-3, I'm wondering if you could add any color on what those partnership discussions look like? How are they going? Any color you want to add to that?

Yes. Thanks, Dan. Thanks for the question here. Obviously, an important attribute as we roll along here. So as we just discussed, we're extremely excited about the top line results from the ORCA-2 trial. And we think this is really going to be instrumental in furthering the discussions with potential partners and potentially acquisition partners. So this is still early days. This is not something that's going to happen overnight, but we're I think encouraged by the response so far as we have had a chance to discuss the data to date. So I think more to come on that, but again, we're encouraged.

That's very helpful. Just a quick one on ORCA-V1. Are you still on track to receive the $2.5 million from the NIH in the second quarter? Given NIH time lines and how they work, are you still on track to receive that ahead of starting ORCA-V1?

Yes. So on the ORCA-V1 study, we will require the NIH grant funding to come through before we initiate that trial. This is our first grant that we're moving forward with. So we are in the midst of the logistics with NIH and NIDA on this one, but we do anticipate that things are on track so we can initiate that trial by the end of this quarter.

I show our next question comes from the line of Thomas Flaten from Lake Street Capital.

Just out of curiosity on the SVB, are there any hurdles that you need to jump through to get that money? Or is it purely at your discretion?

So under the terms of the new agreement -- thanks, Thomas, for the question. It is at our discretion to take amounts down. If we were to take any down, which we have not to date, there would be some liquidity requirements to come with it. But we've been having access to an incremental $10 million as kind of a belt-and-suspenders proposition was a good thing to put in place with the strength of the data.

Got it. And when can we expect an enrollment update on ORCA-3?

Good question. So you initiated ORCA-3 in January of this year. And so I think we're encouraged with the enrollment to date. Things are moving along well. I think as we had indicated on the call here a couple of weeks ago, we would anticipate enrollment to complete by the end of the third quarter of this year. So I think within that, we probably won't be giving a lot of granular updates in terms of the number of patients. But just as a reminder, the target is 750 subjects in this trial across 15 centers, all in the U.S.

I show our next question comes from the line of Michael Higgins from Ladenburg Thalmann.

It was just 2 weeks ago, we spoke on the ORCA-2 results, congrats again on those. Wondering if there's any investigator-initiated study that you're aware of or that are underway? And do you think you'll get inbound interest to study cytisinicline now that ORCA-2 is out?

Michael, thanks for the question. So at the moment, we're not actively involved in any new cytisinicline trials. We are aware of some that are ongoing because there is and continues to be a significant amount of interest around this compound. So I think as we do get inbound, I think we will assess whether or not it's something that we would like to support and get involved with.

And any plan to ORCA-2 out? You mentioned in your prepared remarks, as you did 2 weeks ago, to work towards publication. It would make sense that Dr. Nancy Rigotti being a part of those being the PI, of course. But any other trials, journals ways you can get this out?

Yes. Thanks, Michael, for the additional question there. So I think on additional data points, we ourselves are still getting more data points out of ORCA-2 that will continue here over the coming weeks. And I think as we get more of that information out, I think we'll assess other ways to get additional data points out into the market. I think as Cindy had articulated on the last call, we do see this as strong data. And I think we want to work with Nancy to get this published in a swift manner, so we can get the full data sets out of there. But there will be a number of data points that are beyond the top line results that we announced a couple of weeks ago that we think could be quite interesting as we move along.

Yes, I look forward to those. Last one here. Just to confirm the filing, assuming we've got very similar review here on ORCA-3 where you've hit strongly on both the 6- and the 12-week end points is called primaries. How does it work for the application? Do you file on the same endpoint as Varenicline, which is a 12-week end point and it's supplemented them by 6-week data? Or do you file having 6 and 12 week? How does the language work out?

Yes. Thanks, Mike. I'll hand this one over to Cindy.

Yes, it would be both 6 week and 12 week as far as being approved for treatment durations.

Interesting. So you have the comparator to Varenicline but in terms of the labeling, it can show 6, 12 and even 24-week data, I would assume?

Yes. So I mean this -- we're really trying to get flexibility for smokers as well as their physicians. As the ORCA-2 showed if a smoker was very motivated and quit smoking by 3 weeks and continued nonsmoking to 6 weeks, and they didn't want to take any more treatment, that would be then the 6-week treatment. I do think, as Nancy pointed out, we obviously had more individuals get more success the longer they were on treatment and stopped smoking. It took them 5, 6 weeks, 7, 8 weeks. And certainly, by 9 weeks, then they had become a nonsmoker. So it really gives that flexibility to smokers and their physicians on how long the individual wants to continue treatment.

That's really helpful. I see your comment on -- and we heard this 2 weeks ago, the longer that they're on, the more success they have. And I think we're looking for some patient-level data that will support that. Is that the case? And if so, is that kind of June, July timing?

Yes. So what we'll have is prevalence rates on each week. So you can see as each week who was a nonsmoker and who wasn't. And so we do expect that to be higher as you get more treatment. It's very similar to varenicline in that regard. But for those individuals that stop smoking within 2 to 3 weeks, it's not that they have to continue for another 9 to 10 weeks of treatment because what the data will show is that there was no risk of relapse in those individuals if they switched to placebo or they stayed on cytisinicline. So those -- that kind of information and endpoints will be in the publication.

I show our next question comes from the line of John Vandermosten from Zacks.

John, from your interest, it sounded like you were doing some commercialization research. And I'm wondering, what are the key factors that you think were able to drive Pfizer to get $1 billion in sales per year. Is there anything that they did that was -- that helped them get there that you think is particularly important?

Yes. Good question, John. Thanks for calling in. I mean I think one of the things that we're seeing now, which I think is still interesting, now that CHANTIX has been withdrawn from the market completely, and we do have at least a single generic that is now fully available. Like one, it hasn't taken over kind of where CHANTIX has been historically, but it is on a run rate to sell about $300 million over the ensuing 12 months. So I think that is encouraging for us because for all practical purposes, it looks like we have a better product on our hands. And if effectively an inferior product is on pace, albeit at a lower price point than it's been historically to do a fair amount of sales. I think that bodes well for the potential of cytisinicline long term. And I think the other piece to keep in mind is, frankly, just having a new treatment option. There hasn't been anything new in over 15 years since CHANTIX was originally launched, and I know that was a big attribute originally for that product as well. So I think given the fact that we've got as Cindy just talked about a shorter course of treatment, a significantly improved safety and tolerability profile and very strong efficacy, it should set up well to be a very compelling product on the market.

Okay. And then do you think it takes a big pharma to get that $1 billion that we all kind of think about? Or could a smaller company do it, too?

Yes. I mean, I think in some sense, you get in what you get out what you put in to a lot of the marketing efforts. I think with that being said, I think there are ways to take this to market without the same level of capital needs that a large pharma would do. And I think just quite simply, the size of the market is so large, even going after a smaller percentage out of the gate should still result in really sizable revenues. So I think there is a range here. And I think as we continue partnering discussions and look at kind of what our role might be as well, we'll take that all into consideration.

I'm showing no further questions in the queue. At this time, I would like to turn the call back over to John Bencich, CEO, for closing remarks.

Thank you. Thanks again for joining us today. We appreciate your continued support and look forward to bringing you further updates on our continued progress as we move forward throughout 2022. Thanks again for joining us today.

This concludes today's conference call. Thank you for participating. You may now disconnect.