Achieve Life Sciences, Inc. Q1 FY2023 Earnings Call

Thank you. Good day, ladies and gentlemen, and welcome to the Achieve Life Sciences First Quarter 2023 Earnings Conference Call. At this time, it is my pleasure to turn the floor over to your host, Nicole Jones, Investor Relations at CG Capital. Ma'am, the floor is yours.

Thank you, operator, and thank you to everyone for joining the call. 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 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 thank you to all for joining us. Just a few weeks ago, we reported positive top-line results from our groundbreaking Phase II ORCA-V1 clinical trial, the first-ever randomized placebo-controlled trial for vaping cessation. Cytisinicline treatment resulted in a statistically significant benefit for nicotine e-cigarette cessation compared to placebo. Results for the primary endpoint showed that study participants who received cytisinicline were approximately three times more likely to quit vaping compared to those who received placebo. Cytisinicline also continued to demonstrate exceptional safety and tolerability. We are very pleased with another win for cytisinicline and for people who are seeking options to overcome their nicotine dependence. Nicotine e-cigarette use continues to be a growing concern. With recent reports from the CDC indicating vaping rates in the U.S. are increasing. Data recently published indicated that roughly 11 million adults and 2.5 million high school and middle school students use e-cigarettes to vape nicotine. The CDC indicated in recent weeks, the percentage of use has increased by 2.5%. As this segment of nicotine use continues to grow, an increasing number of people who use e-cigarettes are starting to look for solutions to quit. Currently, there are no medications specifically indicated for vaping cessation. We completed a survey of people using e-cigarettes and found that 73% of participants desired to quit vaping in the next 3 to 12 months, and the overwhelming majority would be interested in using a naturally derived prescription treatment to help them do so. Based on this unmet need for treatments, the swift enrollment we observed in the ORCA-V1 trial and the statistically significant results from the recent top-line data announcement, we believe that cytisinicline has a unique opportunity to become a solution to help address this growing vaping epidemic. To touch more on the recent clinical data, I will now hand the call over to Cindy to go through the ORCA-V1 results in more detail.

Thanks, John. As mentioned, the ORCA-V1 top-line results that we shared last month showed a statistically significant benefit for cytisinicline as a treatment for nicotine vaping cessation, even though this Phase II proof-of-concept study was not powered to do that. Similar to our Phase III designs, ORCA-V1 evaluated a 3 mg cytisinicline dose three times daily for 12 weeks. ORCA-V1 randomized subjects at five clinical sites in the U.S. in a 2:1 ratio, such that a total of 160 subjects were randomized, with 107 receiving cytisinicline for 12 weeks and 53 receiving placebo. ORCA-V1 enrollment was completed in approximately four months. The average age of ORCA-V1 subjects was 34, and all of them wanted to quit vaping during the study. Approximately half of the subjects had previously tried to quit vaping via self-attempt methods. Subjects were stratified based on past smoking history, with 72% identifying as former or past smokers. Dr. Nancy Rigotti of Harvard Medical School served as the primary investigator of the study, and ORCA-V1 was supported via grant funding from NIDA and the NIH. The primary endpoint results for vaping cessation showed subjects who received cytisinicline had 2.6 times higher odds, or likelihood, to quit vaping during the last four weeks of treatment compared to subjects who received placebo. This endpoint was statistically significant with a p-value of 0.035. The four weeks continuous vaping cessation rate during weeks 9 through 12 was 31.8% for cytisinicline-treated subjects compared to 15.1% for those who received placebo. Importantly, cytisinicline benefit was also observed across all clinical trial sites and demographics, such as participant age, gender, race, and whether they had been past smokers or not. Regarding safety, cytisinicline was very well tolerated, with 50.9% of subjects who received cytisinicline reporting adverse events compared to 54.7% of subjects in the placebo arm. Adverse events were as expected, mainly mild to moderate, and there were no serious adverse events reported during the study. As these are top-line results, we are continuing to analyze the data and look forward to providing additional details on our findings as we learn more. I will now turn the call back over to John.

Thank you, Cindy. Our next key milestone is rapidly approaching, as we eagerly await results from our second NDA-enabling Phase III study, which we expect to report later this quarter. The ORCA-3 trial mirrors the design of the previously reported and highly successful ORCA-2 trial. ORCA-3 is evaluating the efficacy and tolerability of a 3 mg cytisinicline dose taken three times daily for either six or twelve weeks compared with placebo. Biochemically verified continuous abstinence is the primary endpoint, and similar to ORCA-2, it will be evaluated during the last four weeks of treatment. Each arm will be compared independently to the placebo arm, and success will be determined if either or both of the cytisinicline treatment arms show a statistical benefit as compared to placebo. Our efforts are now focused on preparing for the data readout later this quarter and continuing our preparations to support a new drug application, or NDA, for cytisinicline in the U.S. At this time, I'll now turn the call over to Jerry to review our financial results for the quarter.

Thanks, John. Looking at our statement of operations, the company incurred a net loss of $9 million for the quarter ended March 31, 2023, as compared to a net loss of $7.6 million for the same quarter of 2022. Total operating expenses in the first quarter of 2023 increased to $8.6 million as compared to $7.2 million for the same quarter of 2022. Operating expenses were higher for the quarter ended March 31, 2023, as both the ORCA-3 Phase III trial and the ORCA-V1 Phase II trial were fully enrolled during the quarter and had their last subject's last visit completed in March 2023, as compared to the same period in 2022, where only our Phase III ORCA-2 was fully enrolled. We anticipate our operating expenses to decline in the second quarter, in line with the completion of the two clinical studies. As of March 31, 2023, the company's cash, cash equivalents, and restricted cash were $16.6 million as compared to $24.8 million as of December 31, 2022. We believe our current cash balance is sufficient to provide us with runway until late 2023. I'd now like to turn the call back over to John.

Thanks, Jerry. A final highlight from the first quarter before we conclude today's call. In March, we announced a refresh to our Board of Directors to support the future direction of the company. We are pleased to welcome Mr. Stuart Duty, Mr. Thomas King, and Mr. Tom Selling to the Board. They each bring extensive leadership experience in the pharmaceutical and life sciences industries across capital markets, strategic transactions, sales and marketing, as well as manufacturing. We would also like to thank Mr. Don Joseph, Dr. Martin Mattingly, and Mr. Jay Moyes for their years of service and strategic guidance to Achieve, as they will not be standing for reelection at our upcoming Annual Shareholder Meeting on June 7. We have achieved many milestones within the first quarter of 2023, and we expect to continue this exciting year with the upcoming ORCA-3 readout. We appreciate your continued support, and I will now turn the call over to the operator for questions.

And our first question comes from Thomas Flaten from Lake Street Capital.

Great. I appreciate you John or Cindy, with respect to completing ORCA-3 and then moving forward, could you give us some sense of what you think realistic timing for an NDA submission would be? And if there are any critical path items there that we should be aware of a pre-NDA meeting with FDA or anything like that, any preclinical data that you still need to generate?

Thanks for the question, Thomas. I'm going to hand this one over to Cindy.

Sure. So we've been waiting for ORCA-3 results to coordinate a pre-NDA meeting with the FDA. Obviously, we're going to target that for this year. However, the timing will depend on when we request the meeting. We figure it will likely be at the end of quarter 3 or at some time during that quarter, but we'll find that out when we get that scheduled. We actually have three Phase I studies finishing up that we need for the NDA, like a PK study on renal impairment. Additionally, we have another PK study looking at steady-state concentrations with the 3 mg dose taken three times a day, and we are also finishing up a TQT study. These are all required for the NDA, and all of them will be completed by the end of this year. So we're looking at the first half of next year for the NDA to come together.

Excellent. John, any update on the potential for debt refinancing? Because I know that repayment is looming at the end of the year as well.

Yes. Thanks, Thomas. On the debt side, we've been in dialogue with the folks at SCB, formerly SCB now Citizens Bank. We think there is a path towards getting some movement on an extension or refinancing of that facility. So nothing to announce today, but we do think the discussions we've had so far are positive on that front.

And then just one quick final one maybe for Jerry. There was a bit of a sequential uptick in G&A. I was curious if there are any one-timers in their stock-based compensation or bonuses or anything like that.

Jerry, do you want to take that one?

Yes. Sorry, I was just on there. Yes, it was just the one-time stock-based compensation grant that we have annually at the beginning of January.

And our next question comes from François Brisebois from Oppenheimer.

The first one here, in terms of the ORCA-3 that's we're expecting to read out this quarter. I was just wondering, any thoughts on what you would expect maybe odds ratio-wise? Is this something where we should compare it to the data that you had shown in the previous Phase III ORCA trial?

Yes. Thanks for the question, Franc. In terms of odds ratios, I don't think we have a firm expectation of what those might look like. I think when we look at the market today and where odds ratios sit for the existing products, they're in the range of 2 to 3. At the low end for NRT to varenicline at the higher end. I think anything in that range or above would be seen as a win. In the ORCA program so far, at least for smoking cessation, we've seen odds ratios between 5 and 8. We’ve exceeded those benchmark requirements. From discussions we've had with key opinion leaders in this space, anything over an odds ratio of 2 is going to be a meaningful clinical benefit in this setting.

Okay, that's helpful. Can you provide any updates on the manufacturing side? Are there any challenges to address or insights on the current process?

On the CMC side, we've been working closely with our colleagues over at Sopharma, who will be the manufacturers of record on that front. The focus has been, I would say, on two parallel tracks. One is just FDA inspection readiness. That’s something we will continue to focus on as we move toward an NDA filing. The other track would be preparations on supply chain, getting registration batches up and on stability, and making sure all the way through the supply chain to final packaging is sorted. Those activities are all in process as well.

Okay. Great. Lastly, can you provide an update on vaping? I'm curious if this involves label expansion and how many trials would be necessary for potential approval in that area?

Yes. Thanks, Frank. On the vaping side, as we indicated a couple of weeks back when we released the ORCA-V1 results, our belief currently is that a single Phase III trial is likely what the FDA would expect for approval in this indication. That would be under the guidance of already being on the market or having an approval for smoking cessation. So we're effectively just expanding the indication. Having a statistically significant result from ORCA-V1 reinforces our belief.

Our next question comes from Michael Higgins from Ladenburg Dolman.

Congrats on the progress with cytisinicline, including ORCA-V1. We are looking forward to seeing the second Phase III, ORCA-3 here in Q2. Question on ORCA-3. Can you give us any sense for the timing here in Q2 as investors start to look out and look at the calendars, when might we see that data come through?

The timing for ORCA-3, we've guided to the second quarter, and we think the closest we can get to firming that up would be the second half of this quarter. So any time after the middle of May, that trial result would be in play.

Okay. That's helpful. Also on the Phase III, Cindy, question for you on the 24-week data that was presented at a certain point. You noted 82% compliance at 24 weeks. Curious how that compares to varenicline or your expectations for cytisinicline and both ORCA pivotal?

Yes. I think compliance is actually quite good. I think it may be a little higher than what varenicline reported. It obviously is probably a component of being in a clinical trial as well as having the behavioral support component that continues actually throughout the follow-up period.

That's helpful. And then one on vaping. Obviously, there's an area of increased interest across society. I'm curious in your conversations with investors how they're seeing vaping relative to their interest in cigarettes.

Yes, interesting question. I think the bread and butter of what we've been doing has been on the smoking cessation side. I think people are beginning to appreciate what we just validated here with ORCA-V1, which is the potential to expand into a segment that currently has no available treatment options and is growing. We just saw the latest update of e-cigarette users here in the U.S. increase from about 9 million up to 11 million. This is a growing segment with no available options, and we think this is the right course to take as we move ahead. I think that's resonated quite strongly as we've been able to socialize the results.

Look forward to seeing ORCA-3 results. I appreciate the questions.

Our next question comes from John Vandermosten from Zacks.

Hi John and Jerry. As you guys are going to the final stages, are there any preparations that you're making for commercialization? Our belief is that you're going to work with a partner to do that. But I know sometimes that it makes sense to reach out and work on some perhaps labeling, packaging, pricing, or outreach to key stakeholders in order to kind of prep to work with the partner also help your negotiating position. Is that something that you're planning to do or makes sense to do?

Yes. Thanks for the question, John. On the commercialization prep, one of the key areas is supply chain, making sure that we've got all the blocking and tackling together all the way through final packaging and into potential distribution. So again, we're in the early phases of a lot of that planning to make sure that's on track. Another area we are looking at to ensure progress would be in market access. We know that this is a very favorable category given the Affordable Care Act mandates that all FDA-approved smoking cessation products be covered. But there's still a fair amount of work that's required to make sure that we can get all the pieces in place so we're ready to move ahead with those contracting discussions. Those are the two primary areas of focus.

And regarding labeling, what's the timeline for those discussions with the FDA in preparation there?

On the labeling front, we've already begun working with some outside advisors on what the label would look like. So that's early days. ORCA-3 will feed into that. We will need that in hand, but that's an important piece we will submit with the NDA. The bulk of that work will be done over the course of 2023.

Got it. And finally for me, any work done on a branding yet or directions in terms of how you're going to eventually market it?

Yes. We have been through an exercise on a brand name, and we did get preliminary clearance from the FDA on that. We wouldn't get final approval until it's submitted with the NDA, but we have gone through that process. So that is another piece, at least on the commercialization front, that we're ready for.

And that appears to be the last question at this time. I would now like to turn it back to management for any closing remarks.

Thanks, operator, and thanks, everyone, for joining us today. It's been an exciting first portion of 2023. We look forward to rejoining you soon with results from the ORCA-3 trial later this quarter. We appreciate the continued support, and we'll talk to you soon. Thanks.

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