Achieve Life Sciences, Inc. Q4 FY2021 Earnings Call

Good day and thank you for standing by. Welcome to the Achieve Life Sciences Fourth Quarter and Year End 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' 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 speaker today, 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 thanks, everyone, for joining us today. During today's call, we will discuss updates on the cytisinicline development program for smoking cessation and nicotine addiction, including the status of the ORCA-2, ORCA-3, and ORCA-V1 studies. Additionally, Jerry will provide an overview of our Q4 and year-end 2021 financial results. We are off to a great start in 2022 with the kickoff of our second Phase 3 trial, evaluating cytisinicline for smoking cessation. We announced the initiation of the ORCA-3 trial in January and are now enrolling adult smokers at 15 clinical trial locations across the United States. ORCA-3 will serve as the confirmatory Phase 3 trial required for registration approval and marketing of cytisinicline in the U.S. Given our confidence in the safety and efficacy we have seen with cytisinicline to date, our ability to quickly hire and onboard additional clinical operations personnel, and our successful securement of capital from Silicon Valley Bank in December, we were able to initiate this trial sooner than expected. By expediting ORCA-3, we are not only reducing the overall capital requirements of the development program but also accelerating the overall timelines for cytisinicline in FDA submission for market approval. This is of critical importance to help the millions of smokers looking for additional treatment options. Similar in design to the ongoing ORCA-2 trial, ORCA-3 participants will be randomized to one of three study arms to evaluate three milligrams of cytisinicline, taken three times daily over a period of either six or 12 weeks compared to placebo. All subjects will receive standard behavioral support throughout the duration of the trial and will be assigned to receive either 12 weeks of placebo, six weeks of cytisinicline followed by six weeks of placebo, or 12 weeks of cytisinicline. The primary outcome measure of success in ORCA-3 will be biochemically verified continuous abstinence during the last four weeks of treatment in the 6 and 12 weeks cytisinicline treatment arms compared with placebo. Each treatment arm will be compared independently to the placebo arm, and the trial will be determined to be successful if either or both of the cytisinicline treatment arms show a statistical benefit compared to placebo. Secondary outcome measures will be conducted to assess continued abstinence rates through six months from the start of study treatment. All clinical sites are now enrolling subjects, and we have just recently launched a number of recruitment activities in the cities surrounding the trial locations. We are seeing great interest from smokers who are seeking more information on the trial and who hope to kick the habit. We look forward to sharing additional details on the trial as we progress throughout this year. Moving on to the highly anticipated ORCA-2 trial, like you, we are eagerly awaiting the results from the first Phase 3 Cytisinicline trial in adult U.S. smokers. To recap, ORCA-2 enrolled 810 smokers at 17 clinical trial locations. This trial completed enrollment in the summer of last year, and in December, the last subject's last visit was completed in line with the six-month follow-up requirement. As part of ORCA-2, an independent data safety monitoring committee conducted five pre-planned study conduct reviews, which also included safety checks. They concluded there were no concerns regarding the study conduct, and the safety and adverse event profile remained favorable. Additionally, the DSMC members commented that compliance with study medication was excellent and that the study had progressed well despite the challenges of the COVID-19 pandemic. Regarding efficacy, ORCA-2 has two independent primary endpoints that will evaluate the rate of smoking abstinence for both six-week and 12-week durations of cytisinicline treatment compared to placebo treatment. Beginning at the second week of treatment, assessments for smoking abstinence are performed through weekly self-reporting of abstinence with biochemical verification of abstinence by exhaled carbon monoxide levels. These weekly assessments occurred through the 12 weeks of blinded study treatment. Then, similar monthly follow-up assessments occurred for smoking abstinence at weeks 16, 20, and finally, week 24. For both primary endpoint comparisons, smoking abstinence is defined as continuous abstinence during the last four weeks of treatment, meaning for the six-week treatment arm, biochemically verified abstinence is required at weeks three, four, five, and six, and for the 12-week arm, abstinence is required at the assessments conducted at weeks nine, ten, eleven, and twelve. This four-week continuous abstinence measure is the FDA-approvable endpoint for smoking cessation medications. Secondary endpoint outcome measures will assess continued smoking abstinence from the end of cytisinicline treatment in both arms out to week 24 compared to placebo, as well as the reduction in the risk of relapse at week 24 for subjects treated with 12 weeks of cytisinicline versus six weeks of cytisinicline. ORCA-2 was designed with over 95% power to be able to demonstrate a continued abstinence benefit compared to placebo at the long-term follow-up comparison at 24 weeks. Finally, on ORCA-2, we continue to expect topline results to be announced in the second quarter of this year, and until then, we remain blinded to the outcome. Completing our updates on the development programs is the status of ORCA-V1, which is the Phase 2 trial evaluating cytisinicline as a cessation treatment for nicotine e-cigarette users. Following the smoking cessation approval, our ultimate goal is to later expand the cytisinicline label indication to help nicotine vapers quit, with more than 11 million adult users of e-cigarettes in the United States and no currently approved treatment options available for this population. There is a growing unmet need for a cessation therapy to help the significant numbers of vapers who want to quit. Based on survey data we have collected in partnership with IQVIA, approximately 73% of e-cigarette users expressed an interest in quitting. We announced last year that Achieve was awarded a grant from the National Institutes of Health, or NIH, to support the execution of the ORCA-V1 trial. In addition to the preparation of trial-related operational activities, the first phase of the grant funding enabled submission to the FDA of a new IND, specific to e-cigarette cessation, which was accepted by the agency in November. We have recently submitted documentation to the NIH, outlining our completion of activities associated with the first phase of the grant. Pending their review, we expect the second stage of the grant award of approximately $2.5 million to be released and to enable the initiation of the ORCA-V1 trial in the second quarter of this year. As a reminder, ORCA-V1 is designed to enroll approximately 150 subjects 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. I’d now like to turn the call over to Jerry to discuss our financial results and our strong cash position that we ended with in 2021.

Thanks, John. I would like to provide an update on our cash position as of December 31, 2021, as well as review our operating expenses for the fourth quarter of 2021. As of December 31, the company's cash, cash equivalents, short-term investments, and restricted cash were $43.1 million compared to $33.4 million as of September 30, 2021. The increase in cash over the prior quarter was due to our Silicon Valley Bank financing, which we closed in December. The Silicon Valley Bank agreement provided a total debt facility of $25 million, of which we drew down $15 million at the closing. As John mentioned earlier, the funding from Silicon Valley Bank has allowed us to accelerate the ORCA-3 trial, which we initiated in January of this year. We believe our current cash balance is sufficient to provide runway into 2023. Now, turning to our statement of operations, the company incurred a net loss of $7.2 million for the quarter ended December 31, 2021, as compared to a net loss of $4.7 million for the same quarter of 2020. Total operating expenses in the fourth quarter of 2021 increased to $7.1 million, as compared to $4.7 million for the same quarter of 2020. Operating expenses increased for the quarter ended December 31, 2021, due to higher costs associated with the ORCA-2 trial along with pre-initiation costs associated with the ORCA-3 trial. We anticipate our operating expenses to increase during 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 a summary of our financial results. I'll turn the call back over to John.

Thank you, Jerry. In conclusion, and as you've heard, we continue to deliver on the ORCA program milestones on time or ahead of schedule. We are excited to have our first Phase 3 data readout next quarter, along with the expected launch of ORCA-V1 in vaping cessation. We believe cytisinicline will continue to demonstrate best-in-class safety and offer efficacy in line with current treatments, enabling smokers to successfully quit and live healthier, better lives. We appreciate your continued support of Achieve and will now open the line for questions.

Our first question comes from Thomas Flaten from Lake Street Capital. Your line is now open.

Hey, good afternoon guys. Two quick questions: with respect to ORCA-3, do you have designs on expanding the number of sites to keep the trial moving forward, given that you have the capital on hand, or is that something that will be driven by the ORCA-2 results?

You want me to get that, John? Actually, right now, with the 15 sites we're looking at, we would have no problem with our targeted enrollment timelines. If it looks like we need to have more sites, we will. To remind you, we added two more sites because we were actually enrolling ORCA-2 during the pandemic, and that's where we needed more additional sites.

Got it. And then with respect to V1, is that the start of that study intended to coincide with the release of ORCA-2? Are those two things de-linked completely?

They're de-linked completely. The start of ORCA-2 is really based on getting our second phase of our grant funding. And we've just put in all the documents to NIH that we've completed the phase one, so now we're just waiting for the release of the Phase 1 of the Phase 2 funding to start the vaping trial.

Excellent. Appreciate it. Thank you.

Thank you. Our next question comes from the line of Francois Brisebois from Oppenheimer. Your line is now open.

Hi. Thanks for taking the questions. Just a couple here. So just to be clear, between ORCA-2 and ORCA-3, I think they're very, very similar in terms of design. Are there any differences at all? I think I saw maybe a little less patients anything else that's different?

The only difference is the inclusion exclusion criteria have been loosened just a little bit. Otherwise, it really is exactly the same design. There may be one less clinical visit that was required at day three, but otherwise, yes, it is exactly the same.

Okay, great. And then in terms of the endpoint hitting either six weeks or 12 weeks, you mentioned that either would be considered successful. But do you have any thoughts on the commercial potential? Depending on whether it hits six weeks or 12 weeks, or do you know both or one or the other just based on the competitive landscape?

Yeah, thanks. Thanks, Frank. In terms of whether six or twelve is preferred, I mean, I think ideally, we'd love to have both. And I think that's our expectation is it will hit on both six and twelve weeks. I think from a competitive landscape, I'm not sure it matters all that much. I think what we'll continue to see is a heavily pre-treated group of smokers that have tried and relapsed multiple times to quit. And I think the safety profile in particular and better tolerability that comes with cytisinicline is going to resonate, regardless of a shorter or slightly longer duration of treatment.

Okay. Great. And then I'll sneak in a last one here if I can; in terms of the efficacy, we talked about being comparable and just maybe beating on safety. But can you just help us, I know it's a cross comparison is difficult to do, and other than rail or other there hasn't really been a head-to-head with Chantix. But do you remind maybe the listeners of the efficacy in a similar design that the Chantix saw versus placebo?

Yeah. Great question, and one that I'm sure is on everyone's mind going into data. And I think the best way to think about this is in terms of benefit over placebo. The way that's typically viewed is looking at an odds ratio, which basically looks at the magnitude of the effect of the drug over placebo. When we look at the currently available treatment options that are on the market today, we have NRT, bupropion, varenicline. For NRT and bupropion, those are just below two to one in terms of their benefit, and varenicline, what's been known historically as Chantix before it was withdrawn from the market, it's been just under three. What we continue to hear from key opinion leaders in the space is that the baseline benefit needs to be a 2x over placebo. We've seen across multiple trials quit rates do range depending on trial design and subject demographics, but I think looking at the odds ratio is a way to mute the differences between the trials. Lots of publications out there from the Cochrane group and others articulate this. But that's really what we're looking for is only for a 2x multiple over placebo in this trial.

Yeah. All right. Thank you very much.

Thank you. Our next question comes from the line of John Vandermosten from Zacks. Your line is now open.

Thank you. Actually, this is Richard Hantke calling in for John. Hello, John and everyone. How are you? I just got two topics that I want to discuss and then our John will follow up with you after the call. The first is just picking up some more on Chantix. Pfizer, I guess, reported that the revenues were down 56% in 2021 and we understand that it came off patent, we understand there's some contamination issues, but is there anything more that you're aware of, and what caused that kind of decline that maybe translated obviously to your drug and how might that affect things down the road and commercialization? And then do you have any in terms of generics, any idea how they performed? So that was my first set of questions.

Yeah, thanks, Richard. So in terms of Chantix revenues, that's been compounded with two factors there. The first, obviously, was the first generics hitting last year that was launched. I think probably more importantly is the fact that Pfizer pulled Chantix from the market last year, that started early summer with some limited withdrawals then went to full global withdrawal of Chantix. So the brand is currently no longer on the market. I think the combination of not being able to sell products and generics hitting is why we've seen that decline in revenues. I don't think there's any real read in terms of the market opportunity here. We don't have details in terms of how the first generic has performed. It was a stub period anyway. We do know that it's out there and from what we've seen, it's about a 25% reduction off the list price of Chantix, but something we will continue to monitor. For us, we've always known we were going to be launching this product into a generic market. The beauty of this indication is that the Affordable Care Act mandates that smoking cessation products be covered. When you combine that with the fact that even with a lot of the most efficacious products out there today, the majority of patients are still relapsing and going back to smoking, they will need another treatment option down the road. So we still continue to feel strongly about the market opportunity here.

Excellent. Thank you. And then the second question, the $2.5 million that you expect to receive in Q2 for the grant, is that on track? My understanding through John is that you expected to launch the trial in Q2. Has that trial been backed up at all, or is everything on schedule?

Yeah. Good question. So we continue to believe that's on track. We are currently working through the grant logistics with the NIH. We've submitted the documentation showing that we've completed the initial stages of the milestones that were set out under the grant. So we're just awaiting a response from the NIH that we can proceed into the next phase, which unlocks the $2.5 million for funding for the trial itself. So yeah, at the moment, everything remains on track, but we are beholden to the grant process with the NIH to ultimately move that forward.

Got it. All right. Thank you. That's enough for now, knowing John. He's got a list of other questions. He'll get ahold after the call. Thank you.

Very good. Thanks, Richard.

Thank you. Our next question comes from James Molloy from Alliance Global. Your line is now open.

Hey, John. Thanks for taking my question. I had a quick question on potential partners, U.S. partnerships. I know that much will depend on how the data looks in the second quarter. Was there any color that you can provide for outsiders looking in on how those discussions are going and sort of the nature of the process?

Hi, Jim. Yeah, thanks for the good question. This is an ongoing process in terms of our outreach looking for potential commercial partners. We have continued to expand the outreach going into ORCA-2 data. I think the closer we get to data, and ultimately to commercialization, we think there will continue to be more interested parties. We've seen an uptick in terms of interest this year, and we would expect that to continue with data in hand as we get results from the ORCA-2 trial. But I'm not going to get into individual conversations or details, but yes, we have a process up and running, and we will continue to push that forward. The ORCA-2 results will be a big part of that.

Great. And maybe one question we touched on, I think last time we spoke. Given what looks to be a significant AE advantage versus Chantix, can you speak a little bit about the potential for expanding the market beyond sort of, I believe it's a pretty good number, to be sure. But beyond that, just given how many people dropped out with the AEs on Chantix?

Yeah. So I think the safety and tolerability profile is clearly a key differentiator. We continue to hear from not only physicians but also patients that the profile for existing products, particularly for Chantix, really is a big hindrance to uptake. We do see a product that is more tolerable and easier to utilize without the adverse events to be something that patients are interested in. Coupling that with the fact that there hasn't been a new product in over 15 years, I think there is a real opportunity to grow the market here. I think that's just within smoking cessation. I think that's why we're excited about expanding into e-cigarette cessation as well with ORCA-V1 because I think that really is an opportunity that has not been tapped into yet. Some recent data points indicate there are over 80 million e-cigarette users around the globe today, and that's one that continues to grow. We know those e-cigarette users and vapers are looking to quit, and there are currently no products indicated to help them. I think that's where the market will go long term. It's been a rapid uptake, but it hasn't dented the cigarette consumption market, which remains tight at over 1 billion smokers around the globe. When you combine those two markets together, we see a large market ahead of us with the product that should resonate with patients.

Thanks for taking the questions.

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

Thank you, and thanks everyone again for joining us today and for your continued support of Achieve. We continue to be excited about what lies ahead for us, including the ORCA-2 results, which are right around the corner, the expected launch of ORCA-V1 in the second quarter, and the continued execution of the recently launched confirmatory ORCA-3 trial. We look forward to continuing to provide everyone updates throughout the year as things progress. And thanks again for joining us today.

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