Greetings, and welcome to the Achieve Life Sciences Second Quarter 2024 Earnings Conference Call and Webcast. As a reminder, this conference is being recorded. I would now like to turn the call over to Nicole Jones with Investor Relations. Thank you, Nicole. You may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today. From Achieve Life Sciences, we are joined by John Bencich, Chief Executive Officer; Dr. Cindy Jacobs, President and Chief Medical Officer; and Jerry Wan, Principal Accounting Officer. Management will be available for a Q&A session following today's prepared remarks. Before we begin, 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 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 thanks, everyone, for joining us. We are excited to provide an update today on the tremendous progress we have made on the Cytisinicline Development Program from both the clinical and regulatory fronts. In recent weeks, several key accomplishments have provided excellent momentum for furthering our mission of bringing cytisinicline to the millions of people who are battling nicotine dependence. Furthermore, we are pleased with the recent refinancing, which will propel us towards our first NDA submission for smoking cessation, which remains on track for filing in the first half of 2025. We'll go through each of our achievements in more detail, but briefly, in the last few months, we have received FDA breakthrough therapy designation for cytisinicline for treating e-cigarette or vaping nicotine dependence. We initiated and gained significant traction on the ORCA-OL trial evaluating the long-term safety effects of cytisinicline. We were added to the U.S. Russell 3000 and Russell Microcap Indexes, and we refinanced our outstanding debt agreement with SVB. We are very pleased with this progress and the support we are receiving from the scientific, regulatory, and financial communities, that are setting up cytisinicline for great success. I'll now turn it over to Cindy, who will give an update on recent regulatory and clinical advances.

Thank you, John. Recently in July, we were very pleased to have FDA grant cytisinicline breakthrough therapy designation for the vaping cessation indication. Breakthrough therapy designation is important because it offers access to an FDA cross-disciplinary project management team for interactive communications with senior managers and reviewers at FDA. This will be beneficial in completing the regulatory requirements necessary for expanding cytisinicline treatment, as the first approved pharmacotherapy in treating nicotine dependence for e-cigarettes cessation, not only in adults but also possibly for an adolescent vaping population. The public heightened issues surrounding the increasing e-cigarette use in young adults and adolescents justifies the need for urgent action towards a solution. Breakthrough therapy designation will help to accelerate our proposed clinical program with more active FDA input. Although there is a general understanding that using e-cigarettes is safer than combustible cigarettes, this has led to the perception that e-cigarettes or vaping nicotine are safe, resulting in a new, younger generation becoming addicted to nicotine. The developing body of scientific and medical evidence is now showing that long-term e-cigarette use can be harmful and may lead to more severe addiction due to the high nicotine levels in vapes. Long-term e-cigarette use may also contribute to potential lung injury, asthma, COPD, and negative cardiovascular effects. At the annual March meeting of the Society for Research on Nicotine and Tobacco, guidance from experts in the field was presented based on Project VECTOR, which stands for Vaping and Electronic Cigarette Toxicity Overview and Recommendations. Several recommendations were presented, which included, people who do not smoke should not use nicotine e-cigarettes, and people who use e-cigarettes should avoid long-term use of e-cigarettes. These recommendations were based on reducing long-term respiratory injury, adverse effects on the cardiovascular system and exposure to cancer-causing chemicals in vaping aerosols, as well as preventing sustained nicotine dependence. Breakthrough therapy was developed to expedite the clinical development of products that treat serious conditions, which there is an unmet need, and when there is preliminary evidence demonstrating potential benefit. Our justification was that long-term vaping may lead to serious conditions that there are no approved treatments to assist people in quitting and that the positive results we observed in our ORCA-V1 trial showed the potential benefit of cytisinicline in this setting. These criteria were all instrumental in granting us breakthrough status. We've already submitted a request for a Type-B meeting with FDA that will start interactions with their cross-disciplinary project management team and will also serve as an end of Phase 2 meeting for gaining agreement on the development plans for Vaping Cessation Indication. Moving on to our Lead Indication, Smoking Cessation and the status of the long-term cytisinicline exposure trial. In May, we initiated the open-label ORCA-OL trial, which is collecting long-term exposure data on cytisinicline. ORCA-OL is recruiting subjects who participated in our previous Phase 2 and Phase 3 trials. We are pleased to report that all 29 clinical sites are actively enrolling subjects. Enrollment has been going very well, and more than half of the proposed 650 participants have already been enrolled in the study. Over the next few months, we will be monitoring the treatment discontinuation rate, which is currently very low. The enrollment objective is to ensure that we achieve the required 300 subjects exposed for six months at NDA submission, provided that subject retention rates continue to remain high. We anticipate possibly closing out enrollment in advance of the 650 enrollment cap, possibly within the next two months. As a reminder, the primary analysis for this study will be to evaluate the rate of serious adverse events thought to be related to cytisinicline treatment. We have engaged the same independent Data Safety Monitoring Committee who had oversight of Orca 2, Orca 3, and ORCA-V1 studies to oversee and review safety events during this open-label study. We plan to provide general summary updates following the completion of these committees safety reviews, with the first meeting expected to occur in the fourth quarter, and subsequent meetings to be determined by the committee members thereafter. Based on our agreement with FDA, the necessary clinical data from ORCA-OL remains on track to support an NDA submission during the first half of 2025. As we continue our monitoring of subjects being treated in the open-label study and their exposure timing, we can further refine our guidance in the future on the NDA submission timing. Overall, I'm very pleased with the rapid progress we have made both in the clinic and with regulators since our last update. I'll now turn it back over to John.

Thanks, Cindy. Turning now to the financial updates. We recently completed a $20 million debt refinancing with Silicon Valley Bank, that refinanced our existing debt facility and extended the maturity date from August 1, 2024, to December 1, 2027. This refinancing continues our partnership with SVB and further solidifies their confidence in Achieve and the Cytisinicline Program. The refinancing also lowers our cost of capital, extends our cash runway, and provides access to additional capital as cytisinicline moves through the regulatory approval process with FDA. I'll now hand the call over to Jerry for additional financial updates.

Thank you, John. Good afternoon, everyone. As John mentioned, we successfully entered into a debt refinancing agreement with SVB that provides for up to $20 million in availability. Under the terms of this new agreement, the $20 million term loan is divided into three tranches. The first tranche of $10 million was received at closing, the second tranche of $5 million will be available upon FDA acceptance of the new drug application for cytisinicline, and the final $5 million tranche will be available subject to SVB's discretion and Credit Committee approval. The outstanding principal will accrue interest at a floating rate per annum equal to the greater of 7%, as the prime rate minus 1%. The loan facility includes an interest-only period through December 31, 2025, followed by 24 monthly payments of principal plus interest to the maturity date of December 1, 2027. Upon achieving certain regulatory and financial milestones, there is an option for a six-month extension to the interest-only period and maturity date. Furthermore, the initial outstanding debt, including principal and accrued interest, subject to certain terms and limitations can be converted into Achieve's common stock at SVB's discretion before repayment at a conversion price of $7 per share. Subsequent tranches may be converted based on a 150% premium to Achieve's stock closing price at that time, with a minimum price of $4.85 per share. Importantly, while the loan is outstanding, SVB cannot short sell or hedge Achieve stock. We can repay and retire all outstanding convertible debt at any time before conversion, by paying a premium based on the repayment date. Let's now turn to the second quarter financials. As of June 30, 2024, the company's cash, cash equivalents, restricted cash, and short-term investments were $61.3 million as compared to $66.4 million from the prior quarter. We believe our current cash balance is sufficient to provide us runway into the second half of 2025. The company incurred a net loss of $8.5 million for the quarter ended June 30, 2024, as compared to a net loss of $8.2 million for the same quarter in the prior year. Net loss for the six months ended June 30, 2024, decreased to $15 million, compared to $17.2 million for the same period in 2023. We expect our quarterly operating expenses will increase as we progress forward with the ORCA-OL trial. I'll now turn the call back over to John.

Thank you, Jerry. Smoking remains the leading cause of preventable death, killing over 8 million people globally each year, including nearly 0.5 million in the U.S. Smoking is recognized as a major cause of various cancers, respiratory disease and lung injury, cardiovascular disease, type 2 diabetes, and dementia. We believe that cytisinicline can help address the root cause of these disorders and have an impact through disease reduction. Focusing on COPD as an example, according to the CDC, approximately 80% of COPD is caused by smoking, and 38% of the 16 million U.S. adults with COPD currently smoke. If we are able to help patients with COPD quit smoking, there is potential to significantly reduce the number and severity of exacerbations, and in the long term, potentially reduce the number of COPD patients. In addition, vaping continues to be an emerging health crisis with an estimated 11 million adults and two million middle and high school students using e-cigarettes in the U.S. The long-term health effects from inhalation of vape products that are heavily unregulated is of utmost concern. These statistics highlight the urgent need for effective cessation treatments, especially since no new products have been FDA approved in nearly 20 years. There are no FDA-approved treatments for e-cigarettes cessation, and concern is growing as evidence emerges on their long-term use. Cytisinicline has the potential to be a first-in-class treatment to address the unique challenges of quitting vaping. Currently, there are more nicotine products available than at any time in history, which has been fueled by continued innovation in ways to deliver nicotine to consumers. This includes the increasingly popular flavored nicotine products like ZYN, which has seen triple-digit growth in recent years. Regardless of the nicotine delivery mechanism, we believe cytisinicline can play a critical role in addressing this health crisis and achieving better long-term outcomes for patients. We've had a great first half of 2024 and expect the momentum to carry forward as we look to our objectives for the remainder of the year. We are now focused on closing out enrollment and continuing our focus on monitoring of subjects in the ORCA-OL trial, continuing preparations for the NDA submission, which remains on track for the first half of 2025, and conducting the end of Phase 2 meeting with FDA for the Vaping Cessation Indication. The support that we expect to receive from FDA, having breakthrough status, should further de-risk the program and expedite our ability to move through the regulatory approval process. We look forward to providing further updates on the Vaping Program after our end of Phase 2 meeting with the agency has been conducted. In closing, we are excited about what lies ahead for the company in the coming months. We greatly appreciate the dedication of our trial participants and health care providers, and the continued support of our shareholders. We remain committed to advancing our mission and in our belief in cytisinicline's potential to help millions of people overcome nicotine dependence. In parallel, we believe strongly that we can create shareholder value by bringing to market the first new FDA-approved nicotine dependence product in nearly two decades, with the potential to become the market leader and generate substantial revenues. Thank you for joining us today. We look forward to continuing our progress, and we will now open the line for questions.

And the first question comes from the line of Thomas Flaten with Lake Street Capital. Please proceed with your question.

Yes, good afternoon, everybody. Congrats on all the progress. Cindy, a couple of questions for you. You mentioned the retention rate in your prepared comments, I was wondering if you could share with us what that is? And then also, can I infer from your comments around potentially ending enrollment sooner that enrollment pace is accelerating?

Well, the enrollment actually started off in an accelerated manner, and we don't give exact numbers, but given that we have over half of the intended 650, kind of tells you how well that enrollment has gone over the last couple of months. Our most important thing now is looking at the discontinuation rate. And if the discontinuation rate remains low and it's like single digits, then we're looking at how many subjects we really need to enroll to get then 300 at six months and 100 at one year? We certainly don't need 500 to 600 subjects at six months and one year. So that's where we're looking at when do we then, look at closing enrollment early to basically save cost on the trial.

Got it. And then once you have the 300 patients with six months of data, are there any other gating items that we should be thinking about, as it relates to completing the NDA package? Or is that pretty much set and you're waiting to staple this kind of to the back of it?

That is the last piece for the clin regs for the NDA. I mean obviously, once you get to six months, you have to monitor all the data, collect it, lock the database, write it up. So there is that period of time. But then you see, then or kind of thread the results of that long exposure into the ISS documents that will be ready and waiting for that last piece of information for the NDA.

And the next question will come from the line of Justin Walsh with JonesTrading. Please proceed with your question.

Hi. Thanks for taking the question. Can you expand on the potential advantages of having vaping cessations specifically on your label versus broader labels focused more generally on nicotine?

Yes. Thanks for the question, Justin. So with respect to the labeling, I think the core indication will be smoking cessation for nicotine dependence, and there can certainly be some off-label usage in other forms of nicotine addiction. But I think with respect to vaping in particular, we think it would be very powerful to be able to promote directly to e-cigarette users, given the size of that market. We look at smoking overall, here in the U.S., there are approximately 28 million adult smokers. And the vaping indication is now 11 million and growing. So it is a very, very large segment. And I think, to be able to promote as the first and likely only treatment there, we think would be very powerful.

Great. Thanks. And a quick follow-up. I don't know how much you can actually say, but I was wondering if there's any color you can provide on potential discussion points leading into your end of Phase 2 meeting with the FDA?

Do you want me to take that, John?

Yes, Cindy?

Yes. So for the end of Phase 2 meeting, we'll have a list of questions. It will all be based that, we have smoking cessation as our first indication. The biggest one will be that we only need one Phase 3 because the Phase 2 is a supporting trial. And there'll be other discussions, as far as, what do we need and any additional safety data because we'll have all the long-term exposure from this open-label study that should be appropriate for the vaping cessation as well as the smoking cessation indication. So we'll get some good clarity and agreement on what is required. So there's no surprises, and we can actually then advance to that supplemental NDA faster.

Great. Thanks for taking the question.

And the next question comes from the line of Frank Brisebois with Oppenheimer. Please proceed with your question.

Hi Dan on for Frank. Thanks for taking our questions. Just quickly one regarding the open label ORCA. We know this is a safety trial, but will you be looking at any efficacy in this trial? Is there anything from an efficacy perspective that you could get from this trial potentially for labeling purposes? Any thoughts there?

Yes, we will be looking at efficacy, especially for retreatment of individuals that have already been treated with cytisinicline, as well as, individuals that were originally on the placebo seeing it for the first time. FDA definitely views this as a primary safety study. So I'm not sure, because it's not a randomized study that we're going to get any of that in the label, but certainly, we will be publishing it, and we are collecting efficacy.

Thank you. Thanks for taking my question.

And the next question comes from the line of John Vandermosten with Zacks. Please proceed with your question.

All right. Thank you. Hello and good afternoon. I wanted to ask what your screening success rate is for the OL trial. And then also on that same theme. Have you been able to enroll out of the 12-week cytisinicline exposure patients and enroll a bunch of those? Or has it been pretty even between, I guess, the patients that were in the placebo, the six week?

Sure. The nice aspect is the screen fail rate. The screen fail rate has been half or even lower than our usual expectations, which we anticipated since most of these individuals had already gone through screening and participated in previous ORCA studies. We expected the screen fail rate to be low, and it is. Notably, in the Phase 3 and even the Phase 2 vaping study, two-thirds of the individuals had already received treatment with cytisinicline. Similarly, two-thirds of the individuals in the open label study have also previously been treated with cytisinicline. We are getting some placebos, which is beneficial because it means we have more subjects overall treated with cytisinicline. Additionally, having those individuals helps us reach the six-month and one-year marks sooner.

Okay. Great. When we consider the breakthrough therapy designation that was granted, there are a few ways it could be beneficial. It might speed up the trial process, lower costs, or enhance the chances of eventual approval. In those three areas, which do you think will be the most significant advantage from this FDA program?

I think both right now, quicker agreement to what the Phase 3 clinical trial will look like. And then once that we're getting through that trial, then negotiating a rolling submission, and then obviously, upon having it being submitted to priority review. So it's kind of taking time off through all aspects of the development.

Yes. On the grant side of things, the Vaping Phase 2 trial, which is where the grant was directed previously. We have received all the funding related to that. So that's now complete, but we'll continue to look for future opportunities, in particular, given the strong support we've received from NIH and NIDA historically.

Great. All right. Thank you, John. Appreciate it.

And the next question comes from the line of Michael Higgins with Ladenburg Thalmann. Please proceed with your question.

Hi, guys. This is Farhana on behalf of Michael. Congratulations from us on our progress this quarter. So one question from us. Last week, JAMA published a series of papers on vaping and following the recent breakthrough therapy designation. Are you hearing any activities from the FDA, the NIH, or any other government agencies that may support your development in the vaping indication?

Yes. Thanks for the question, Farhana. We're continuing to track all the activities going on across the spectrum, in particular with respect to vaping. So we do expect more support on that front. I think the biggest piece that we're looking to here in the near term would be through the breakthrough designation, now that we have that in place with FDA, and then as I just mentioned previously, continuing to look to see if there's additional support we might be able to garner from NIH and NIDA. I think those are the two most critical areas. And I think when you look across the overall landscape of what's being done in terms of other existing smoking cessation products being studied across the vaping indication, there really isn't too much happening in that space. So we think driving this program forward quickly can really move the needle in a category that has no approved products currently.

And the next question comes from the line of Ilya Zubkov with Freedom Broker. Please proceed with your question.

Good afternoon, and thank you for taking my question. My first question is on the ORCA-OL trial. So given the swift recruitment of trial participants, do you plan to publish any interim results from the trial this year?

When we complete our data safety monitoring committee, we will provide an update on the status of the safety monitoring. However, at this moment, we are not publishing any information.

Okay. Thank you. And I have another one on the anticipated e-cigarettes trial. I know that it is difficult to discuss the details before meeting with the FDA. But as the higher risk of vaping for adolescents was mentioned, are you considering targeting this population in the e-cigarettes study as well?

Yes, but more in a post-marketing kind of arena. So the most important thing for us is to complete a Phase 3 for vaping cessation in young adults. But like our other studies, young adults we define as 18 years and older. So we will have younger adults and looking at that as well for a future potential Adolescent Program.

Great, thank you. I'll pass the line.

And the next question is a follow-up from Thomas Flaten with Lake Street Capital. Please proceed with your question.

John or Cindy, I just wanted to confirm. So assuming you have a good end of Phase 2 meeting with FDA around the end of the year, what would your intentions be with respect to actually starting a study? Would that be done under your own account? Or would you anticipate working with a partner on that? And what would the timing be? I'm just thinking from a modeling perspective more than anything right now.

Thanks for the question, Thomas. I think on next steps on the vaping program, I think the most important piece is getting through the end of Phase 2 meeting, really understanding what's required going forward and seeing what sort of support we might be able to garner from FDA to accelerate that. I think with respect to starting a new trial, it's really probably more middle of next year at the earliest. The focus is going to continue to be getting that NDA on-file in the first half of 2025, and driving the core indication forward to approval.

Excellent. Appreciate it. Thanks, John.

Thank you. At this time, we have reached the end of the question-and-answer session. Now I'd like to turn the call back over to the management team for any closing comments.

Thanks again, everyone, for joining us today. We look forward to providing additional updates as we progress through the balance of this year and drive the program forward towards NDA submission in the first half of 2025. So again, appreciate the continued support, and have a great afternoon.

And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.