Achieve Life Sciences, Inc. (ACHV) Q2 2023 Earnings Report, Transcript and Summary

Greetings. Welcome to the Achieve Life Sciences Second Quarter 2023 Earnings Conference Call and Webcast. At this time all participants’ are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Nicole Jones, Investor Relations. Thank you. You may begin.

Thank you, operator, and thank you to everyone for joining the call today. 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’s 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 available on our website and filed with the SEC concerning factors that could affect the company. I'll now turn the call over to John.

Thank you, Nicole and to everyone who has joined us this morning. The first-half of 2023 has seen the culmination of our ambitions to bring the first smoking cessation products to market in nearly 20-years take a meaningful step forward. Several milestones were met in close proximity, all of which contributed substantial value to the cytisinicline program and to shareholders. Firstly, the ORCA-3 Phase 3 trial results in May, validated and closely replicated those of the ORCA-2 trial and demonstrated significant efficacy with a benign side effect profile. Secondly, just prior to the excellent ORCA-3 results, Achieve announced positive results from the ORCA-V1 Phase 2 clinical trial in 160 e-cigarette users. Thirdly, Achieve renegotiated the terms of our convertible loan agreement extending the maturity date. Fourthly, the Journal of American Medical Association or JAMA published our groundbreaking ORCA-2 study. And finally, we raised additional capital providing cash runway well into 2024. Overall, significant progress was made on many fronts. We look forward to continuing the campaign to highlight the value of cytisinicline and the underlying public health important, so cytisinicline in the U.S. and globally. With both Phase 3 smoking cessation clinical trials completed in over 1,500 subjects, the combined results confirmed the compelling efficacy and safety evidence of cytisinicline necessary to pursue FDA approval for smoking cessation. We are aiming to make an NDA submission in the first-half of 2024 and if approved, cytisinicline could be the first new prescription treatment made available to the roughly 28 million smokers in the U.S. in nearly two decades. In parallel with the regulatory activities, we continue to focus on commercial readiness with attention on CMC and supply chain, as well as partnering discussions with interested parties around the globe, who also believe in the immense potential of cytisinicline. Additionally, we can now expand our ambitions beyond the smoking cessation market and into the broader nicotine addiction market. As you are aware, vaping is expanding in popularity and serious concerns are continuing to emerge about both the short and long-term safety of these products. Cytisinicline has the potential to be a first-in-class product for vaping cessation. Combined with the potential target market is nearly 40 million Americans, who are currently either smoking or using e-cigarettes. Looking at the data from both trials, specifically the 12-week treatment duration, the efficacy rates have exceeded what has been demonstrated historically by Chantix, Bupropion or NRT. The primary endpoint that measured cessation rates during weeks nine through 12 were over 30% with odds ratios confirming that participants, who received cytisinicline were four times to six times more likely to quit, compared to subjects on placebo. At the 24-week follow-up, the quit rates remained above 20% with odds ratios in the range of 5 times to 6 times. Although we did not include any head-to-head comparisons in our ORCA program, we can review previous trial results for reference. The most recent large scale randomized trial of approved smoking cessation treatments was the 8,000 subject EAGLES trial conducted to better understand the neuropsychiatric effects of current agents. For the U.S. population, quit rates in 24-weeks were between 11% and 16% with odds ratios ranging from 1.6 times to 2.6 times. This is in line with the independent meta analyses published by the Cochrane group, which observed odds ratios roughly between 2 times and 3 times for currently available agents. In addition, our ORCA program has validated a novel six week treatment arm, which is half the duration of existing medications. Importantly, even with this shorter course of therapy, we observed odds ratios that exceed those of existing treatments. We are very pleased with the efficacy observed to-date with cytisinicline and its potential to make a meaningful impact for patients in this setting. Complementary to the efficacy profile, the safety and tolerability we observed for cytisinicline in the ORCA program continues to shine and as described by the authors of the recent JAMA publication, as excellent. As stated in the paper only 2.9% of ORCA-2 participants discontinued cytisinicline, due to an adverse event. Side effects have been reported as a major limitation to adoption and compliance of existing therapies. Ultimately, lack of compliance leads to unsuccessful quit attempts and smoking relapse. We believe the side effect profile of cytisinicline will compel many patients to make a quit attempt using the products, aid in adherence to the regimen, and increase the likelihood of having a successful outcome. The safety should also be encouraging for prescribers, who have long dealt with the management of treatment related side effects, as well as concerns of the neuropsychiatric adverse events. Finishing off on the clinical trial updates, we also announced in the second quarter the results of the ORCA-V1 trial, evaluating the safety and efficacy of cytisinicline for e-cigarette cessation in 160 adults. We are extremely pleased to report a statistically significant benefit with a cessation rate of 31.8% for cytisinicline, compared to 15.1% for placebo. Ultimately, cytisinicline treated participants at a 2.6 times higher odds of quitting vaping, compared to the placebo group. Again, cytisinicline was very well tolerated with no treatment related serious adverse events reported during the trial. Vaping continues to be a rapidly growing epidemic with over 11 million adults reporting nicotine vape use in 2021, a 22% increase over the prior year. In a survey published in JAMA of nearly 2,000 daily users of e-cigarettes, 61% endorsed future plans to quit. Unfortunately, there are currently no treatments specifically FDA approved for e-cigarette cessation, which is why we believe this is a unique opportunity to expand the utilization of cytisinicline and make a significant impact to overall public health. At this time I’ll hand it over to Jerry to review our financial highlights and results.

Thanks, John. Beyond our clinical progress this quarter, we are also pleased to have successfully completed a capital raise with gross proceeds of $16.5 million and further strengthened our financial position by refinancing our outstanding loan with Silicon Valley Bank. Under the terms of the new loan agreement, the outstanding loan will now mature on December 22nd, 2024, providing a full 12-month extension from the previous maturity date. The other provisions regarding interest rate, conversion rates, price and repayment remain materially unchanged. Turning to our statement of operations, the company incurred a net loss of $8.2 million for the quarter ended June 30th, 2023, as compared to a net loss of $10.5 million for the same quarter in the prior year. Net loss for the six months ended June 30th, 2023 decreased to $17.2 million, as compared to $18 million for the same period of 2022. Operating expenses were lower for the quarter ended June 30th, 2023, as both the ORCA-3 Phase 3 trial and the ORCA-V1 Phase 2 trial were successfully completed. We anticipate operating expenses in the second-half of 2023 to decline due to the completion of these trials were partially offset by costs associated with the initiation of the additional NDA supporting PK study, ramp up of enrollment of the renal impairment trial, an increase in NDA preparation activities. As of June 30th, 2023, the company's cash, cash equivalents, and restricted cash was $25.1 million, as compared to $16.6 million for the prior quarter. The increase in cash over the prior period was due to our registered direct offering, which closed in May 2023. We believe our current cash balance is sufficient to provide us runway into the second-half of 2024. That concludes my update. I'd now like to turn the call back over to John.

Thanks, Jerry. As a small company of only 22 full-time employees, we are quite proud of our accomplishments and how far the cytisinicline program has advanced under our direction. That said, we fully recognize the challenges that lie ahead as we shift gears to prepare the NDA filing and look forward towards regulatory approval for cytisinicline U.S. The next focus for us in the regulatory process is holding a pre-NDA meeting with the FDA, which is now scheduled to occur in the fourth quarter. This will be an important meeting and affords us a final opportunity to solicit comments and clarification from the agent in advance of our NDA submission. We are continuing to guide to an NDA submission in the first-half of 2024 and hope to be in a position to refine our submission timing after we hold our pre-NDA meeting. We continue to be excited about the market opportunity for cytisinicline, which we believe is uniquely positioned for success for a number of reasons. First, there is a large and underserved patient population of roughly 28 million people, who smoke cigarettes and approximately 11 million people, who use e-cigarettes in the United States alone. There have been no new pharmacologic agents approved by the FDA in nearly 20-years and the treatment options that are currently available are not meeting the needs of patients or their healthcare providers. Second, there are significant political tailwinds to help advance smoking cessation treatments and strong advocacy for ensuring access to medications that have demonstrated robust clinical evidence of their efficacy and safety like cytisinicline. In addition, the Affordable Care Act ensures broad insurance coverage with minimal patient burden. And finally, there are currently no branded pharmaceutical cessation agents competing for prescriber or patient share of voice enabling cytisinicline the opportunity to pick up where Chantix left off. Before losing exclusivity, Chantix dominated the category with over $1 billion in global sales, with 75% attributed to the U.S. market. And even priced at a modest discount and virtually no sales or marketing promotion, generic Chantix is generating over $300 million in annual revenues and growing in the U.S. All of these elements combined with the challenging tolerability and high relapse rates seen with existing therapies makes cytisinicline uniquely positioned for commercial success. It is truly exciting to work on a product that has such strong clinical evidence is clearly differentiated and that has great potential to make a profound impact on the lives of millions of people. In closing, thank you all once again for your support and for joining us. We look forward to updating you on our progress. And at this time I’ll now turn the call over to the operator for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Thomas Flaten with Lake Street Capital. Please proceed with your questions.

Hey, good morning. I appreciate you guys taking the questions. John, I was wondering if you could provide a little bit more color on the pre-clinical, non-clinical work that's going -- that's ongoing to support the NDA submission? Maybe a little bit more detail would be helpful.

Yes, thanks Thomas. So, on the pre-clinical, non-clinical work, really not much happening on that front, where we are focusing effort is on three remaining clinical studies. We've got a renal impairment trial that's ongoing, a QT interval study, as well as a final PK study on the 3 milligrams three times a day, all of those are expected to complete by the end of this year and be ready to be in an NDA submission first-half of next.

Great. And then could you give us some sense of Sopharma’s level of preparedness at this point for an FDA inspection? Are they ready now? Do you think they still need some time just some color there would be helpful.

So with respect to Sopharma and the CMC activities over there, this continues to be a high focus area for us. They will be the -- one of the manufacturers of record in our NDA. So we continue to spend a large amount of time and effort with Sopharma ensuring that they will be ready for a future FDA inspection. This is something that they have been used to with respect to EMA. But as we're all aware, FDA is another level above. So I think of all the areas, this will probably be one we continue to focus our efforts as we proceed. But we do believe that’ll be in a position ready for inspection as we crest into next year to get an NDA on file.

And then just sticking with Sopharma could you give us a sense of where you expect to be inventory wise as you submit and then get approval?

With respect to inventory, we continue to guide that we've been building up a stockpile of cytisinicline in advance of a future launch. So this is something that will continue this year. We'd expect to have at the end of this year three to four years of launch quantity, and we'll continue to grow that into 2024 as well.

Excellent. Appreciate taking the questions. Thank you.

Thank you. Our next questions come from the line of Francois Brisebois with Oppenheimer. Please proceed with your questions.

Hey, thanks for taking the questions. So in terms of the renal, the QT and the PK, is there anything there that's, kind of, the hardest hurdle? Or is this pretty standard, and nothing to really worry about in terms of those trials before submission?

Yes, thanks for the question, Franc. With respect to those three studies, there's really nothing that would derail the NDA. These are all things would go into potentially into labeling, renal in particular in terms of any dose reductions, things like that. Bu nothing that would change the overall product profile. So these are basically clinical studies that we need to check the box for FDA.

Okay, great. And if you're thinking in terms of partnerships, is it these studies or maybe more the CMC side or anything you can share on color for -- any color you can share in terms of partnerships, timing, thoughts and maybe ex-U.S? Thank you.

Yes, thanks for the question, Franc. So with respect to partnerships, I don't think any of these studies that you mentioned are really going to be of high importance to any potential commercial partners. So, we're not able to comment on any of the ongoing discussions that we're currently having with potential partners. We think the data sets that we now have in hand from ORCA-V1, ORCA-1, ORCA-2 and ORCA-3 in terms of the core clinical package, you're going to be -- the driving factors in terms of assessment of the product profile and how that is going to be commercially viable.

Great. And then if I could sneak in the last one, just on the e-cigarette side, we've seen the data now. Can you just talk about, I'm sorry, if I missed this, the next step here for that program?

Yes, thanks, Franc. So with respect to the vaping indication, in the interim here, our focus will continue to be on NDA submission for smoking cessation. We're still working on pulling together the clinical study report for the ORCA-V1 study. On the other side of that, we'll be in a position to start some of the work around trial design, powering, budgeting of what that might look like. But again, the focus here in the near-term is going to be on the NDA for smoking cessation.

Thank you.

Thank you. Our next question comes from the line of Michael Higgins with Ladenburg Thalmann. Please proceed with your questions.

Hey, guys. Good morning. This is Farhana on behalf of Michael. So tow questions for us, so last week Endo Pharmaceuticals sued Zydus saying it must be infringing. It's nitrosamine impurity technique in a generic we're in a team. And also last week, the FDA issued guidance that established a framework for assessing an acceptable level of nitrosamine in a drug protocol. So, are you confident that the manufacturing of your drug is within the FDA's limit? And if so, is this something you can monetize with generic companies? And the second question we have is, do you plan to hire a marketing executive with experience in running a launch, preferably one doing it without a pharma budget into a large non-often market? And if so, when? Thanks.

Yes, Farhana, thanks for the question there. So we have been tracking what's going on with the Endo launch. We did see the sales last year of north of $300 million in the recent sue going across the Zydus in terms of potential IP violations with respect to another Chantix generic that's hitting the market. None of the IP that we see sitting over there reads on to what we're doing. We do think we have an opportunity for new IP around formulations on our side with respect to controlling for nitrosamines that we think could be blocking for others in this space. So that's something that we're actively working on in the background as we proceed and then obviously working in collaboration with FDA on final nitrosamine limits with respect to our drug product. So, that's something that will continue as we proceed through an NDA. So with respect to your second question on hiring another exec, this is not anything that we currently have planned at the moment. We’ve got ahead of commercial, that's leading the charge at the moment. And our focus, I think as you rightly indicated, is going to be on planning for a very nimble and efficient launch in parallel with continuing the partnering discussions as we've indicated for quite some time. We've always believe that this asset is likely best served in the hands of pharma or large biotech a group that already has a primary care footprint in place and so we want to make sure that we continue to tease out those discussions before making any investments in commercial.

Okay, great. Thank you. I’ll jump back in the queue.

Thank you. Our next questions come from the line of James Molloy with Alliance Resource Partners. Please proceed with your questions.

Hello. This is Laura Suriel calling in for Jim Molloy. Thank you for taking the questions. So with the higher odds of ratio -- of the higher odds of quitting seen in the 12-week treatment arm versus, you know, the six-week treatment arm in the -- our recent ORCA-3 data. Are you looking into having the specific, you know, 12-week treatment as the final treatment regimen for cytisinicline?

Yes, thanks for the question, Laura. So with respect to the presentation commercially, we think it would -- it likely will read up to 12-weeks of treatment. So from a physician perspective, they would prescribe 12-weeks of cytisinicline. Patient would fill six weeks. If they need a little bit longer to quit, then they would go back and refill for that incremental six weeks to do the full 12-week course of medication. And I think the beauty of what we've built here is that we've got validated data with even half the duration of the existing products on the market, which we think is a novel presentation in the market.

Got it. Thanks for the clarity. And then also with the Phase 2 ORCA-V1 trial now complete, what's the status on a potential trial of cytisinicline for pediatric vaping cessation?

So with respect to a pediatric indication for vaping, this is something that's likely going to be well down the road. Our focus in the interim is going to be on adult e-cigarette users, similar to what we've done on the smoking cessation side. Obviously, the youth epidemic in vaping is monumentally big and that's gotten a lot of the PR here over the last five years. So we do think it is something that needs to be addressed, but I think first and foremost, for us is getting that indication opened up on the marketplace and allowing it to be prescribed as such before diving into what we believe will be a difficult population to treat.

Got it. Thanks for the questions and congrats on the progress this quarter.

Thanks, Laura.

Thank you. Our next question comes from the line of John Vandermosten with Zacks Research. Please proceed with your questions.

Thank you and good morning, John. How are you doing?

Great.

So in our research, we have identified a number of potential suitors for Achieve, including Pfizer, GSK, [Perrigo] (ph), Dr. Reddy’s and a bunch of others. Do you think that it might make sense to have one deal or if potentially multiple deals, you know, because there's different regions which may have, different opportunities, you know, that I'm thinking New Zealand, Australia, for example, there's a lot of focused on cytisinicline and team vaping and a whole bunch of other things that make that a particularly attractive region. Is there anything that might how's you to split it up, or does it make more sense to have one partner that fully commercializes the product?

Yes, thanks for the question, John. With respect to our ideal partner, it would be a single global partner that have capabilities in all the various territories around the world that we're interested in. I think with that being said, given that the U.S. has been such a substantial portion of revenues globally, when looking at Chantix as a proxy, strong U.S. capabilities are going to be critical for this launch. With that being said, we've seen a tremendous amount of interest out of Asia over the years. We have seen multiple term sheets for deals in those regions and we specifically not move forward with them. So we can play out the potential for a larger single transaction. But I think there are opportunities, I think like you said, across the globe, there is a need, kind of, everywhere you look given that there's over a billion smokers around the globe. So I think that's kind of the ordering we're thinking about. Single global partner first before we start thinking about multiple deals.

Sounds good. And China seems particularly attractive as well, because I think they're making a lot of efforts to cut smoking and that's a pretty high interest rate over there as well. And then back to the potential suitors, do you think pharma’s appetite is more to go before approval comes or to wait until it's a certain thing. You know, I think there's been a lot less, type of risk recently. And I'm just wondering, kind of, what your sense is on how big pharma is thinking about when to transact based on regulatory hurdles?

Yes. So in terms of willingness, from pharma, I mean, I think the good news is we've seen an uptick in M&A activity, as well as partnerships here over the last six to 12 months. So I think that's encouraging. I think when you look across the board, there's a lot of companies that revenue cliffs that are coming over the next two to three years. So, there is a need to replace some of that with new revenues. So, we think all that, kind of, shapes up well, as we kind of make the push to find a commercial partner.

Okay, great. And have you seen any studies out there put in place? And I've seen a few out there. They seem rather small and maybe funded by government, but just measuring cytisinicline and perhaps a head-to-head study or something of a [Indiscernible]

Yes. With respect to other ongoing studies or recent results, not aware of any. We've got the Australian study, as well as the New Zealand study that we're head-to-head against Chantix. But outside of that, you're not aware of any sort of large scale trials like that, that are ongoing.

Great. Thanks, John. Appreciate it.

Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to John Bencich for closing comments.

Thanks again everyone for joining us today. The second quarter was a very pivotal one for us with critical data points both in the vaping side of the equation, as well as for smoking cessation and getting through our second and final Phase 3 trial. So really excited about the progress we've made and look forward to providing additional updates as we move forward to a future NDA submission. Thanks again for joining us today.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.