Ladies and gentlemen, thank you for standing by, and welcome to the Achieve Life Sciences Second Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Ms. Jaime Xinos, Executive Vice President of Commercial at Achieve. Thank you. Please go ahead.

Thank you, and thanks, everyone, for joining us. On the call today from Achieve, we have Rick Stewart, Chief Executive Officer; Dr. Cindy Jacobs, Chief Medical Officer; Dr. Anthony Clarke, Chief Scientific Officer; and John Bencich, Chief Financial and Operating Officer. 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's documents filed with the SEC concerning factors that could affect the company, copies of which are available on our website. I will now turn the call over to Rick.

Thank you, Jamie. On today's call, we will review the second quarter highlights. Firstly, the exciting top line data from the New Zealand RAUORA Phase 3 clinical trial, led by Dr. Natalie Walker. Secondly, Dr. Cindy Jacobs will review the continuing momentum of initiating the Phase 3 ORCA-2 trial in the U.S. later this year. And thirdly, John Bencich will review our financial results, plus the strengthening of our balance sheet, facilitating the start of the ORCA-2 trial. At the end of June, we announced the successful top line results from the investigator-led Phase 3 non-inferiority RAUORA trial, comparing cytisinicline to Chantix in the Māori or indigenous people of New Zealand. Our congratulations to Dr. Natalie Walker of the University of Auckland for conducting this landmark trial. The RAUORA trial evaluated the efficacy, safety, and cost-effectiveness of cytisinicline compared to Chantix, a smoking cessation aid. In total, the study randomized 679 subjects. As a non-inferiority trial, it was designed to demonstrate whether cytisinicline was at least as good as Chantix for efficacy and safety. In fact, it showed that cytisinicline efficacy was similar to Chantix, and that cytisinicline had a superior safety profile. RAUORA compared cytisinicline, administered on a modified schedule over 25 days of downward dosing titration, followed by twice daily dosing for a total of 12 weeks against Chantix, which is administered on an expanded dosing schedule of seven days of upward titration, followed by twice daily dosing for a total of 12 weeks. The primary endpoint was a comparison of biochemically confirmed continuous abstinence rates at six months. The trial successfully achieved the primary endpoint, showing that cytisinicline plus behavioral support was at least as effective as Chantix plus behavioral support at six months. In addition, the trial showed that cytisinicline resulted in significantly fewer reported adverse events compared to Chantix. The positive top-line results of the RAUORA Phase 3 trial, which is the first direct head-to-head comparative study between cytisinicline and Chantix, provides additional evidence that cytisinicline is at least as effective as Chantix while offering improved tolerability. We're excited about this outcome that further strengthens the potential for cytisinicline to help smokers quit. Importantly, these benefits were achieved using only the currently marketed 1.5 milligram dose of cytisinicline and the downward titration schedule. The dosing duration was modified to 12 weeks in order to match the Chantix dosing schedule. Our upcoming U.S. cytisinicline Phase 3 clinical trials will use the higher three-milligram dose at a simplified three times daily dosing schedule. Based on the results of the ORCA-1 Phase 2/B trial, we're optimistic that this simplified dosing schedule, in combination with a three-milligram dose, will be easier for subjects and potentially result in better smoking cessation rates than what was observed in the RAUORA trial. The final RAUORA trial results have been submitted by Dr. Matthew Walker, the RAUORA primary investigator, for presentation at the Society For Research on Nicotine and Tobacco European Annual Meeting, to be held this September. We look forward to sharing additional details on the RAUORA trial results when presented. Turning to the upcoming ORCA-2 double-blind placebo-controlled Phase 3 trial. Preparations are underway for the trial commencement in the fourth quarter. These preparations include careful risk management assessments for any potential impact of the COVID-19 pandemic. Our continuous risk assessment dialogue with clinical trial sites and our CRO still indicates that initiation of the ORCA-2 trial in the fourth quarter of this year remains feasible. The health and safety of our trial participants, healthcare providers, and employees will continue to be our number one priority. We continue to monitor the crisis in real-time, taking advice and precautions to minimize risk to all involved. I'll now turn the call over to Cindy to review the ORCA-2 trial design and provide the regulatory updates.

Thanks, Rick. The ORCA-2 safety trial builds on our experience from the successful ORCA-1 trial. Valuable lessons were learned, which have been integrated into the trial design, along with specific requirements requested by the FDA. We have consulted frequently with our key opinion leaders, who have given us the benefits of their wisdom, and we are now finalizing preparations to commence the trials in the fourth quarter. ORCA-2 is a multi-center, double-blind, randomized, placebo-controlled Phase 3 study that will randomize 750 adults who are daily cigarette smokers intending to quit smoking and are willing to set a quit date within seven days of starting treatments. Participants will be randomly assigned with equal probability to one of three arms. Arm A will receive 12 weeks placebo treatment, Arm B will receive six weeks of cytisinicline, and then be switched to placebo for the latter six weeks, and Arm C will receive 12 weeks of cytisinicline. There will be 250 subjects in each arm, receiving either placebo or cytisinicline three times a day for the 12-week study treatment period, and then followed monthly out to week 24 for a six-month evaluation. All 750 subjects will receive behavioral support during the entire 24 weeks. Similar to ORCA-1, each smoker will start study drug treatment the day after being randomized and will have their quit date set within the following five to seven days, or at least by the end of the first week of treatment. Starting after their quit date, at least two of treatments, assessments for smoking abstinence will begin through weekly self-reporting of abstinence, with biochemical verification of abstinence by exhaled carbon monoxide levels. These weekly assessments occur through the 12 weeks of blinded study treatment, then monthly follow-up assessments will occur for smoking abstinence at weeks 16, 20, and finally, week 24. The ORCA-2 study has two independent primary endpoints that will be evaluated. The primary endpoint outcomes will evaluate the rate of smoking abstinence of cytisinicline treatment at both the end of six weeks and 12 weeks treatment periods compared to the placebo treatment. For both primary point comparisons, smoking abstinence will be defined as continuous abstinence during the last four weeks of treatment. That means for the six-week treatment period, successful quitters must have smoked zero cigarettes with weekly CO biochemical verification at weeks three, four, five, and six assessments. For the 12-week treatment period, successful quitters must have smoked zero cigarettes with weekly CO biochemical verification at weeks nine, ten, eleven, and twelve assessments. The secondary endpoint outcomes will evaluate for continued smoking abstinence from the end of six weeks cytisinicline treatment to week 24 and from the end of 12 weeks cytisinicline treatment to week 24, separately and compared to placebo treatment within these same timeframes. An additional secondary endpoint outcome will look for a reduction in risk of relapse from weeks six to 24 in subjects receiving cytisinicline for six weeks versus 12 weeks. The sample size for this study is specified as 250 subjects per arm. This assumes a difference of 12% benefit for cytisinicline over placebo, with 96% power. ORCA-2 will enroll at approximately 15 clinical sites across the U.S. Each site will have specific COVID-19 protection operating procedures in place. We are preparing for potential restricted site interactions if a site needs to be quarantined, with remote testing or monitoring and procedures for missing data, per FDA guidelines, if a subject becomes infected with COVID-19 and cannot be evaluated. From a regulatory perspective, we have now completed all required non-clinical submissions to initiate our Phase 3 program. This has included submitting to the FDA all the non-clinical data required to support the six and 12 weeks of cytisinicline treatment in the Phase 3 trial. In addition, we have submitted the final protocol for the ORCA-2 Phase 3 trial. As discussed last fall, we reviewed the Phase 3 protocols and the statistical plans with the FDA in a Type B meeting in November of 2019, and have incorporated FDA input from that meeting into the final protocol. We are now proceeding with the final operational planning and logistics to initiate the Phase 3 in the fourth quarter. So in summary, we intend to initiate ORCA-2 in the fourth quarter of this year, and this trial will address three key factors: the evaluation of the higher three-milligram dose of cytisinicline for both six and 12 weeks of treatment, the simplification of the dosing schedule given only three times daily, leading to ease of use, regardless of treatment duration, and the extension of the treatment duration of six and 12 weeks to potentially increase quit rates and yield more durable efficacy results. The extension of the dosing period in the Phase 3 trial has significant benefits. It will allow us to measure the primary endpoint of four weeks of continuous abstinence while subjects are still receiving cytisinicline treatment. This wasn't possible with a 25-day treatment period in the ORCA-1 trial. As documented in the literature, measuring efficacy while subjects are and remain on treatment typically results in higher quit rates. I will now turn the call over to John to discuss recent financing activities and our second quarter results.

Thanks, Cindy. I'd like to first provide an update on our recent financings and cash position, and then review our second quarter financials. Post the end of the second quarter, we have announced two public equity financings, totaling $13.5 million in gross proceeds. Both of these transactions were common stock only that were priced at stepped up valuations from the previous. Last month, we announced the closing of a $6 million registered direct financing. The financing was completed at no discount to the previous closing share price. The financing provided net cash of approximately $5.5 million after deducting placement agent commissions and operating expenses. This week, we announced the pricing of an underwritten public offering with gross proceeds of approximately $7.5 million. This was also a common stock only offering that included the full exercise of the underwriters' overallotment option, and will provide estimated net proceeds of approximately $6.8 million after deducting commissions and offering expenses. In addition, subsequent to the end of the second quarter, we have also seen outstanding warrants exercised that have provided an additional $2.3 million in cash proceeds. In total, we have received approximately $2.9 million in proceeds from warrant exercises since the start of the second quarter. The additional capital will help maintain momentum on cytisinicline development and set us up with a strong balance sheet going into the second half of the year, as we initiate the ORCA-2 Phase 3 trial. As of June 30, 2020, the Company's cash, cash equivalents, short-term investments, and restricted cash were $12.2 million. On a pro forma basis, including the July and August financings, as well as warrant exercises, we'll be starting the third quarter of 2020 with approximately $26.7 million of cash on hand. Turning to our statement of operations, the Company incurred a net loss of $2.9 million for the quarter ended June 30, 2020, compared to a net loss of $3.6 million for the quarter ended June 30, 2019. The net loss for the six months ended June 30, 2020 decreased to $6.3 million, compared to $9.6 million for the six months ended June 30, 2019. As noted previously, we expect our quarterly operating expenses to remain lower in advance of initiating the Phase 3 trial. That concludes the summary of our second quarter financial results. I would like to now turn the call back over to Rick.

Thank you, John. The second quarter highlighted the true potential of cytisinicline as a future leader in the smoking cessation market, with the release of successful top line results from the RAUORA Phase 3 trial, comparing cytisinicline and the current market leader, Chantix. Additionally, we continue to make excellent progress in preparing for the commencement of the ORCA-2, 750-subject, placebo-controlled Phase 3 trial. And of course, we took the opportunity to add additional capital during the quarter to further reinforce our balance sheet. The RAUORA trial results are a landmark because this is the first direct head-to-head comparison of cytisinicline efficacy and safety compared to the current market leader, Chantix, which reported 2019 global sales, just shy of $1.1 billion. We're pleased that cytisinicline showed its potential to compete strongly with Chantix, and clinical data continues to indicate a potential best-in-class profile for cytisinicline for smoking cessation. We are well prepared to start the upcoming Phase 3 trial, with FDA requirements fully met. The non-clinical data required by the FDA to commence the ORCA-2 Phase 3 trial has now been submitted for FDA review. Preparations for the start of the Phase 3 trial progress, with the aid of leading KOLs in the field, and we remain optimistic that the first Phase 3 trial will commence in the fourth quarter of 2020, COVID-19 permitting. Finally, I'd like to briefly discuss the impact of COVID-19, specifically on smokers, and why we believe cytisinicline will have a key role to play in aiding smokers to quit in the future. Advice from the regulatory agencies, such as the CDC and WHO, has never been stronger or more vital about quitting smoking. The impact of COVID-19 in individuals with pre-existing conditions, such as pulmonary, cardiovascular, and other smoking-related diseases, has amplified the urgency to quit smoking now. There are two key COVID-19 implications for smokers. Firstly, the impact of cigarette smoking on lung health is incredibly damaging and is believed to lead to more susceptibility to the COVID-19 virus and more severe symptoms. And secondly, it appears that smoking rates are on the rise, as a result of changing social dynamics, reports of vaping-related lung disease, and the banning of flavored vape products. There has never been a more critical time for smokers to quit for good, and we believe cytisinicline can play an important role in helping them do so. Thank you again for joining us today. That concludes our prepared remarks, and we will now open the line for questions. Please open the line.

The first question comes from Michael Higgins of Ladenburg Thalmann. Your line is open.

Hi, guys. Thanks for taking the questions. Congratulations on the continued progress. We seem to be going along as planned here, despite the challenges of the year. Question for you as we look ahead to SRHE confidence or SRHEE, that's being posted online this year. How should we look for KOLs and ourselves to learn about prior results, given the online format conference? Are you expecting a webinar specific to these results to be provided for the Q&A portion? How should we plan for this? Thanks.

I'll hand that one over to Cindy.

Well, we know the SRNT-E meeting will be virtual. So we expect that Natalie will be narrating her slides in detail for that presentation. I think we have discussed whether we would have a webinar afterwards. And it's interesting that you asked that question because that would be something we could do afterwards within that month time period, very similar to what we did with the ORCA-1 results.

I see. So kind of an analyst day, post the SRNT-E presentation?

Yes. We'd have to work that in with Natalie's schedule as well. Obviously, it's a little bit more problematic when you're looking at New Zealand. But yes, we've talked about how sadly some of us might have to be doing this in the middle of the night.

All right, well, obviously, we're hoping for during the day for ourselves.

Yes, the East Coast definitely. I think West Coast people that will be in the middle of the night, my guess is.

Understood. I feel your pain. Any progress for us on the EVFA study that you can relate to us? Didn't hear a lot on that in your prepared remarks, but obviously, that's something we're all following as well. Thanks.

Your next question is from the line of John Vandermosten of Zacks. Your line is open.

Good afternoon, guys. And thanks for taking my questions. And also, congratulations on the capital raise. Great to see that almost $30 million balance you have there. And if I remember correctly, I think that it was allocated about $15 million for the ORCA-2, and then another $15 million for the second, if I remember correctly. But can you just give me a sense of how much more capital you'll need to finish off both of the trials, given your current status on the cash side of things?

John, do you want to do that one?

Yes. Absolutely. Thanks for the question, John. And yes, your memory is correct. The Phase 3 trial is approximately a $15 million study, which I think as we described on the call, having close to $27 million on the balance sheet puts us in a great position to execute on that trial. And the second Phase 3 will be approximately the same capital requirements.

Okay, great. So, you're pretty close to having what you need to finish this off. That's great news. Let's - so just an update on when we might see a generic competitor for Chantix. I think we might have discussed this last time, and I think there was just a little uncertainty on how much the patent protection was providing for them. What is the latest view on that in terms of a Chantix competitor or Chantix generic coming out?

Yes, I'll take that one. What we're looking at the moment is really the expiry of the more important patent looks like it's around about May, June of 2022. So we're not actually - plus there's going to be additional protection from a pediatric extension. So we're anticipating seeing some generic competition, probably early part of 2023.

Okay, got it. Thanks for that. That's great. And then you mentioned this, Rick, just a little bit about changes in smoking behavior. I mean, has there been any observations of how that has changed as the Coronavirus has started? I mean, people have picked up a lot of different habits. I think people have been drinking more alcohol. But I don't know about trends for smoking. I know there's been a big health trend as well. But have you seen any data out there on actual smoking and how that might have changed since March of this year to present?

Well, it's really a shift from vaping back into cigarette smoking. We've always maintained that in terms of risk reduction or harm reduction, vaping is around about 95% improvement versus cigarette smoking. But I think with some of the lockdown pressures that people have experienced, plus some of the issues and concerns around the lung disease associated with vaping, we've seen people who were attempting to quit move back towards cigarette smoking. So yes, there is data out there that supports the idea that it's more in that area. I mean, there are 11 million vapers right now. Roughly half of those are youth. But it's the other half who were perhaps more reformed smokers who now seem to be moving at least back towards cigarette smoking.

Okay, interesting. Interesting shifts there. And last question on the vaping study that you guys were working on. Any progress there? And any closer to getting that grant money for the study in that area?

Yes, I mean, it's a highly competitive process. And frankly, we didn't make the cuts as far as the NIH is concerned. But we continue to believe that a vaping study will add substantial value, and we're seeking alternative funding sources. So it's an area that we're significantly interested in. Our KOLs are interested in pursuing that. But our capital is focused on the Phase 3 clinical trials. So we're looking at alternative sources of grant funding for that vaping study.

Okay, great. Thank you. I'll get back in queue.

I am showing no further questions. At this time, I would like to turn the conference back to Mr. Rick Stewart, CEO of Achieve.

Well, thank you again for joining the call and your continuing interest in supporting Achieve. And we look forward to talking to you again with our third quarter results. Thank you.

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