Good day, ladies and gentlemen, and welcome to the Achieve Life Science Second Quarter 2022 Earnings Conference Call. At this time, it is my pleasure to turn the floor over to your host, Nicole Jones. Nicole, the floor is yours.

Thank you, operator, and thank you to everyone for joining the call. Today on the call 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 available on the 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 thanks to everyone for joining us today. The second quarter of 2022 has been one of the most exciting yet for Achieve. Not only did we announce successful efficacy and safety results from our Phase III ORCA-2 trial in April, but we also received grant funding from the NIH, allowing us to proceed with the initiation of the Phase II ORCA-V1 trial in adult users of e-cigarettes. These were 2 major milestones for us to reach in the first half of the year, and we are pleased to continue delivering on our commitments. As you likely have heard or read recently, there is great attention and debate surrounding smoking and nicotine e-cigarettes in the U.S. political arena. Tobacco use continues to be the leading cause of preventable disease and death, resulting in more than 480,000 American lives lost each year. We agree that action must be taken to save lives, to improve the health of smokers, and to reverse the increasing youth nicotine addiction trend. The potential restrictions to increase regulation over nicotine products, such as lowering nicotine content and restricting flavors such as menthol, are controversial and will likely take many years to be implemented if they end up proceeding at all. While they may limit access and increase scrutiny of available products, they do not solve the nicotine addiction problem at hand. With the recent FDA actions on e-cigarette products, including JUUL, we have already seen reports of e-cigarette users considering a return to combustible cigarettes. Smokers and e-cigarette users need solutions to help them overcome their nicotine addiction. That is why it's more important than ever for us to continue advancing our mission of bringing cytisinicline to the U.S. market as soon as possible. If approved by the FDA, cytisinicline would be the first non-nicotine prescription treatment for smoking cessation approved in nearly 2 decades, offering hope to the millions of smokers who want to quit for good. We believe the heightened focus by the FDA on nicotine regulation provides a nice tailwind as we look to move cytisinicline forward through the agency to market in the near future. As announced in April, we are one step closer to accomplishing our goal with the first Phase III trial results in hand. The ORCA-2 trial evaluated the efficacy and safety of 3-milligram cytisinicline dosed 3 times daily compared to placebo in 810 adult cigarette smokers in the U.S. The study evaluated both 6- and 12-week treatment durations of cytisinicline, and all participants received standard behavioral support throughout the trial. The ORCA-2 results were overwhelmingly positive, indicating that smokers who received cytisinicline were 6 to 8 times more likely to quit smoking compared to smokers who received placebo. The safety profile of cytisinicline was once again very impressive with single-digit rates of adverse events observed. We were able to validate the excellent tolerability profile for both the 6- and 12-week durations of therapy for cytisinicline in this study. The results of the ORCA-2 trial will be submitted for journal publication this year, and we look forward to presenting additional data sets from the trial at future medical conferences. We will provide updates as additional data are released. We continue to believe that the tolerability profile of cytisinicline will be a key point of differentiation as smokers and their doctors consider using cytisinicline once available. Smoking cessation prescription therapies historically have had black-box warnings and high rates of troublesome side effects such as abnormal dreams, insomnia, nausea and vomiting, which increases treatment discontinuation and limits the overall utilization of current products. Quitting smoking is difficult enough due to withdrawal symptoms without the treatment making you feel even worse. We think offering a more tolerable product should help maintain strong treatment compliance, leading ultimately to better outcomes for smokers looking to quit. As we look ahead to the next milestone for the smoking cessation program, we continue to anticipate enrollment completion for our second confirmatory Phase III trial to occur by the end of the third quarter this year. ORCA-3 aims to enroll 750 smokers across 20 clinical trial locations in the U.S. The design of the trial is similar to ORCA-2 in that it will evaluate 6 and 12 weeks of cytisinicline treatment versus placebo in smokers using the same dosing schedule and endpoints for evaluation. This trial was initiated in the first quarter of this year and is currently enrolling smokers. We look forward to the next update on ORCA-3, which we expect will be when enrollment has completed in the coming months. We continue to anticipate top-line results to be available in the first half of next year. Moving on to the potential for cytisinicline and users of nicotine e-cigarettes or vapes. In June, we initiated our Phase II ORCA-V1 trial, thanks to the continued funding from the NIH and NIDA, which awarded us the next $2.5 million in grant funding to conduct this trial. ORCA-V1 aims to enroll approximately 150 adult nicotine e-cigarette users in the U.S. and is led by our ORCA-2 PI, Dr. Nancy Rigotti, Professor of Medicine at Harvard Medical School and Director of the Tobacco Research and Treatment Center at Massachusetts General Hospital. ORCA-V1 has 2 treatment arms evaluating the safety and efficacy of 3-milligram cytisinicline dosed 3 times a day for 12 weeks compared to placebo. As with the other ORCA trials, all participants will receive behavioral support. The primary objective of the study will be to evaluate successful nicotine vaping cessation. Vaping cessation is defined as weekly nicotine vaping abstinence for the last 4 weeks of treatment from weeks 9 to 12. Other timing for weekly vaping abstinence will also be assessed as secondary outcomes, for example, between weeks 3 to 6, as well as any reduction in nicotine vaping during the 12-week period. There is great enthusiasm and interest in ORCA-V1, and we are encouraged by what we are seeing thus far in terms of patient recruitment for this trial. We expect enrollment to be completed in the fourth quarter of 2022 and top-line results in the first half of next year. There are currently no FDA-approved treatments indicated specifically for users of nicotine e-cigarettes or vapes. The CDC reported that there were nearly 11 million adult e-cigarette users in the U.S. alone in 2019. While it is believed that noncombustible forms of nicotine present lower health consequences than traditional cigarettes, complete abstinence from nicotine is ultimately the goal for many. In a survey conducted by Achieve of vape and e-cigarette users, approximately 73% of participants stated they intended to quit vaping in the next 3 to 12 months. An overwhelming majority would be interested in trying a new natural prescription treatment to help them do so. We believe cytisinicline has great potential to meet the needs of this population, who are ready to quit nicotine for good. With that, I will now turn the call over to Jerry for our financial update.

Thank you, John. I would like to provide an update on our cash position as of June 30, 2022, as well as review our operating expenses for the second quarter. As of June 30, 2022, the company’s cash, cash equivalents, short-term investments and restricted cash were $29.4 million compared to $43 million as of December 31, 2021. We believe we have sufficient cash to bring us into 2023. Our cash forecast includes the recently awarded $2.5 million grant funding received from the NIH to initiate the Phase II ORCA-V1 trial to evaluate the use of cytisinicline as a treatment for cessation of nicotine e-cigarette use. As a reminder, approximately half of the cost from the ORCA-V1 trial is funded through the grant from the NIH. With respect to our statement of operations, net loss decreased to $10.4 million for the quarter ended June 30, 2022, compared to $11.3 million for the same quarter of 2021. Net loss for the 6 months ended June 30, 2022, decreased to $18 million compared to $19.3 million for the same period of 2021. Operating expenses decreased for the quarter ended June 30, 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 and the initiation of the ORCA-V1 trial in June 2022. We expect our quarterly operating expenses will increase as we progress forward with both the ORCA-3 and ORCA-V1 trials.

Thanks, Jerry. We continue to make tremendous progress with the cytisinicline development program, especially with the announcement of positive Phase III ORCA-2 results and the initiation of both our ORCA-3 and ORCA-V1 trials. We remain committed to moving these trials forward and ultimately bringing a new treatment option to the market for nicotine addiction. With a compelling efficacy and safety profile and a shortened treatment regimen, cytisinicline has the potential to make a strong impact in a market that has lacked innovation and new treatments in over 15 years. The most successful prescription smoking cessation product was CHANTIX, which had peak global sales of $1.1 billion before it was withdrawn in 2021 for safety concerns. There are currently only 2 non-nicotine prescription products available to the 30 million-plus smokers in the U.S., generic CHANTIX and generic Zyban. Despite being tainted with its historical black-box warning and disruptive side effects, generic CHANTIX is anticipated to reach approximately $300 million in U.S. sales over the coming year. We believe that cytisinicline's product profile, including robust efficacy, high tolerability, and shorter duration of treatment, has the potential to resonate in this underserved market. We look forward to moving cytisinicline to market and providing smokers and their physicians a compelling new treatment option. We look forward to sharing with you our continued progress in the back end of this year, including completion of enrollment in our ORCA-3 and ORCA-V1 studies as well as the potential for publication of the ORCA-2 results. At this time, I'd like to turn the call over to the operator and take any questions you might have.

Our first question comes from Thomas Flaten from Lake Street Capital. Next in line is Michael Higgins from Ladenburg Thalmann.

Congrats on continued results. Looking forward to seeing the results coming up here in the spring of next year. A couple of questions for you as we look out to ‘23 if I could. What are your thoughts on the timing of the NDA filing, specifically if there’s any additional studies or CMC work that needs to be completed, let’s say, by mid-year of next year? Any comments on the timing for that filing?

Michael, thanks for the questions. I'm going to hand it over to Cindy for this one.

Sure. We’re looking at the timing for the NDA, the latter half of next year. There are 2 studies that we need to finish up. One is a PK study with renal impairment and then a standard kind of like TQT study that we will be finishing up by the early part of next year. As far as additional CMC, I’ll let John kind of go over that, but that’s kind of on the same time frame for coming together by the end of next year.

Yes. I think the clinical pieces are in motion, as Cindy mentioned. Then on the CMC side, we're working with Sopharma, our partner on this, to get the validation batches up and running later this year. So we could be in a position for that NDA filing in the back half of 2023.

And then just a follow-up on the validation batches. How many patients' worth of supply do you think you’ll have ready, say, by the time the drug is approved?

Yes. On the validation batch side, what we've been focusing on is really stockpiling product in advance of commercial launch. We look to be on track to have between 2 and 3 years of launch quantity by the end of 2022. We expect that to increase as we continue to progress in 2023 and 2024. As we get into next year more fully, we'll refine further the batches that will be out there and ready for launch. But we've got plenty of supply to make sure that we get those squared away and out into the marketplace.

Very good. One last one here if I could. I haven't heard much mention here so far on the call of potential partnering discussions. Anything you can share on those would be super helpful? And if there's been any changes over the summer months on that?

Yes. On the partnering front, obviously, we can’t comment on any ongoing discussions that may be occurring. I will say that there has been continued interest in the program, and we expect that would likely continue as we move the program forward. I would expect more interest the closer we bring this towards FDA approval and commercial launch. I think we continue to stay focused in running that in parallel to our own commercial planning exercises.

Our next question comes from François Brisebois from Oppenheimer.

Sorry if this was mentioned. It’s breaking out a little on my end. But going forward with the OpEx here on the R&D side, I was just wondering any comments on what to expect maybe in 2023 or the second half of ‘22?

Yes. So as Jerry mentioned on the call, in terms of expenses, we expect those to be elevated, especially in the third quarter now that we're up and running on both ORCA-3 as well as ORCA-V1. As we get to full enrollment on those and patients start to roll off of the study, which will progress into the early parts of 2023, we would expect those R&D expenses to taper off quite significantly. But as Cindy mentioned, we do have a couple of other trials in terms of TQT and renal impairment that will be running in parallel with those trials as well. But that's kind of how we see the expenses shaping up.

Okay. Great. And so I heard that – I think you guys mentioned the cash to be sufficient to get into 2023. But just wondering, I think data from ORCA-3 is first half ‘23. Do you guys comment on whether or not the cash is sufficient to get to data readout?

Yes. I think at the moment, we're focused on getting ORCA-3 enrollment complete. I think once we have that in hand, we'll be able to clarify further where that puts us in terms of where we might expect top-line results. As we move forward, we'll be able to narrow in on the timing of that.

Okay. Great. And just lastly, you talked about potentially a publication of ORCA-2. I was just wondering, are there any conferences in this space that would make sense for you guys?

Yes. So on the medical conference front, I think historically, one of the core forums for us has been SRNT, or the Society for Research on Nicotine and Tobacco. The biggest of those events is the annual U.S. conference, which is typically in the late first quarter of the year. There are European conferences in the fall. We’re looking at what makes sense, but I would stay tuned, especially for that annual U.S. conference as the one that we'd be focused on.

Can you just comment on maybe the interest for the program outside of the U.S.?

Yes. So we have seen, I would say, global interest. Historically, we've seen, I would say, overweight interest out of Asia, but we also see interest out of Europe as well. It really does span the globe. For us, we think the most interesting scenario would be a single global partner as opposed to dividing this up into multiple regions around the globe.

And our next question comes from John Vandermosten from Zacks.

I had a couple of questions on how the vaping trial had started and how it’s going. I assume that you started enrolling the first patient in July. Is that right? And you had all 5 sites opened at that point?

Yes. We initiated right at the end of June. Over the last 1.5 months or so, we've really been getting everything up and running. We do have patients that have been randomized or subjects being randomized in that trial. We’re quite encouraged with what we're seeing so far in terms of interest in recruitment. We look forward to further updates on that as we get into the back end of the year.

Okay. Sounds good. I guess after doing 2 of them so far, you’re learning how to efficiently enroll those. Question on kind of a general question on medical consensus about low-nicotine cigarettes. That’s a little outside of what you’re looking at. But I have had some questions from investors on that and wondering if you had heard of any research that shows that that’s effective at all?

Yes. Good question. I think there has been some data, in particular, around another product that's out in the market that just launched earlier this year that is a low-nicotine cigarette. I think what we have seen is that data set may not be the most robust in terms of how it relates directly to real-world circumstances. Clearly, if you remove nicotine or lower it considerably, you're probably going to get people either smoking less or smoking them more deeply to get the same nicotine they're used to getting. This is an area that we're obviously tracking. The FDA has been very keenly looking to regulate this further. We'll look forward to the proposal in the second quarter of next year concerning what those plans look like. This is going to be several years out before any potential disruption. The beauty is at that stage, we'll likely be on the market and be there ready for smokers if the cigarettes that they're used to smoking are disrupted.

Got it. And the last one for me is just on the trend in generic varenicline. I was able to find some of the data in those reports. It looks like they’ve been doing pretty well there. But I was wondering if you had seen any other data maybe in terms of scripts and sequential growth?

Yes. I think the only thing I would note is we mentioned it looks like a run rate probably north of $300 million at the moment in terms of where they're at. The big piece there is that it is only roughly half of the CHANTIX unit sales before it was withdrawn from the market last year. They just launched last September, so it’s still early days in terms of them replicating that historic CHANTIX demand. I think it will be interesting to see how that progresses, but it is a good data point out in the market just in terms of continued interest in smoking cessation products overall, including as we move forward to market here in the next couple of years.

And our next question comes from Vernon Bernardino from H.C. Wainwright.

So you mentioned in June that you initiated the ORCA-V1 clinical trial across 5 trial locations. Just wondering if you started dosing in all 5 trial locations? And when might we see data from the ORCA-V1 trial?

Yes. Thanks for the question, Vernon. On the vaping trial, we've got 4 out of 5 of the sites that are fully activated at this point. One is in process at the moment, and they should all be up and running shortly. Excited to see what has come through thus far. We've got Nancy Rigotti from Harvard Mass General as the PI. She was also the PI on our ORCA-2 study. We've chosen 4 other sites that were high-quality, high performers on our previous studies. We like the group that we have activated for this and are happy with what we've seen so far in terms of recruitment.

And as far as timing, what do you think?

Yes. It's going to depend on when enrollment gets complete. But I think at the moment, we've been guiding likely the first half of next year. Obviously, a big range will be triggered off of enrollment, but first half of next year for top-line results.

Do you anticipate most of the enrollment will be in that one site?

Yes. We have 5 total sites in the ORCA-V1 trial. We’ll look to spread that as evenly as we can across those study centers for 150 e-cigarette users or vapers.

And our next question comes from Michael Higgins from Ladenburg Thalmann.

Just some follow-ups here if I could. There was a study not long ago in cytisinicline against varenicline, NRT and placebo. Wondering if you’re aware of any other ongoing investigator-initiated studies, these things being more and more popular. Just trying to get a sense as to what’s coming.

Yes. Thanks, Michael. Yes, I mean, there is continued interest for cytisinicline around the globe. I think we are aware of some other smaller trials being run across Europe as well as looking into Asia or Mongolia, some work being done. None of it is really, I think, analogous to what we put together here in the U.S. It’s typically on the Eastern European dose and administration. As some of those come out with interesting data points, we will share that with everyone.

Just a follow-up on that one. Do you know if any of these have come around yet to your dosing regimen with TAD?

Yes, none that we've seen.

Not yet anyway. Okay. And then this fall, it doesn’t sound like you have anything at SRNT. I just want to clarify on that. And then thinking ahead to next spring, what might we see maybe for ORCA-2? I don’t think you’ll have a chance then. I’m just thinking of the timing of it to have even late breakers at SRNT, but if you could let us know on those would be great.

Yes. So I think barring any major disruptions, we would anticipate having some data sets at the annual U.S. SRNT conference in the spring of next year. Between now and then, we've been focused on working with the investigators on ORCA-2, including Dr. Rigotti, on getting the ORCA-2 results published and we're going to focus that on high-quality journals. But that's the focus: to get that published first and then move forward with additional data sets that we'll share with everyone.

And our next question comes from Jim Molloy from Alliance Global Partners.

John, kind of a bigger picture question on the manufacturing. How goes the plans to try to chemically manufacture cytisinicline versus the current growing – getting it from trees, and how goes expanding, broadening, diversifying the risk of the planting sites to other locales?

Yes, Jim, thanks for the question. On the synthetic side, this has continued to be an area that we are exploring. If someone is going to crack a way to make this synthetically, we want it to be us to protect that administration method. So far, that's proven very difficult. Our focus here has been more on stockpiling, as I mentioned earlier, getting 3 to 4 years of launch material in hand. We have made some progress on additional plantations or areas to plant, including down in Latin America. It’s early days on that, but we think having another growing cycle in the Southern Hemisphere would make sense. We're close to moving forward with a partnership with a university here in the U.S. to explore areas where we could plant cytisinicline right here in North America. Yes, lots going on there, but we'll have additional updates as that progresses over time.

Understood. And I know you touched on it earlier, but is the environment for bringing in partners characterized as a buyer's and seller's market? Talk a little bit about the level of interest that you’re seeing for partnerships.

Yes. I mean, not just post ORCA-2 data, but overall, we have seen continued interest around cytisinicline. As I mentioned earlier, historically, it has probably been overweight to Asia. But we have seen global interest as well, with folks that have strong capabilities in Europe. So it really is quite broad. In terms of appetite, until these things move ahead to the point where we start to get into contracting, it’s a bit hard to predict outcomes. I do think as we move forward, the closer we get to commercialization, the more and more interest there will be in the program.

And at this time, there appear to be no further questions. I would now like to turn it back to management for any closing remarks.

Thanks, operator, and thanks, everyone, for joining us today and for your continued interest in the company. We look forward to sharing additional information with you in a couple of months, and thanks again for joining us. Take care.

Thank you. This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.