Achieve Life Sciences, Inc.

Today's conference is scheduled to begin shortly. Please continue to standby. Thank you for your patience. Thank you. Good day, and thank you for standing by. Welcome to the Achieve Life Sciences first quarter 2022 earnings conference call. At this time, all participants are on the listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, to Nicole Jones. Please go ahead.

Thank you, operator, and thanks, everyone, for joining us. On the call today from Achieve, we have John Bincich, 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 thank you, everyone, for joining us today. As you've probably heard, last month we reported the highly successful outcome of the ORCA II Phase III clinical trial of cytosinicline for smoking cessation. Cytosinicline demonstrated impressive efficacy across the primary and secondary endpoints for both the 6- and 12-week cytosinicline treatment arms. The safety and tolerability profile remains best in class. with single-digit rates of adverse events reported. We could not be more excited that cytosinicline succeeded in the challenge of helping many long-term heavy smokers in whom previous treatments have failed successfully kick the habit. And the timing could not be better to bring a new cessation option forward. For the first time in over 20 years, cigarette sales increased during the COVID-19 pandemic, while calls to quit lines dropped by nearly 30%. There are still more than 30 million smokers in the U.S. alone and over a billion globally who have not been offered a new regulatory-approved treatment in nearly two decades. Smoking kills more people every year than alcohol, AIDS, car accidents, illegal drugs, and murders combined. In the U.S., it accounts for more than 480,000 deaths and billions in healthcare dollars spent each year. Yet despite these alarming statistics, there have been very few clinical advances aiding smokers and healthcare providers to treat nicotine addiction. Chantix, which was FDA approved in 2006 and withdrawn from the market last year, was the leader in the smoking cessation category, generating over 1 billion in peak sales before going generic, with roughly 75% of those sales attributed to the U.S. market. While it has been considered the most efficacious treatment currently available, it was never able to reach its full potential of helping more people quit successfully due to its side effect profile. In fact, when marketed, only 4% of the U.S. smoking population were prescribed Chantix each year, and in the ORCA2 trial, less than half of the participants had ever used Chantix in their multiple prior quit attempts. Insights from our research and from smoking cessation opinion leaders and prescribers suggests that the primary reason a majority of smokers avoid starting or completing a full 12-week course of Chantix is due to the high incidence of side effects, such as nausea, headaches, and sleep disturbances. Based on prior evidence, we have always believed that cytosinicline could offer a more tolerable alternative, and we now have proof from a randomized Phase III study of more than 800 smokers to support this belief. The adverse event profile appears to be best in class, with more headaches and nausea in the placebo arm than in the active treatment groups. In addition, the odds ratios we observed in ORCA2 are unprecedented, with six to eight times higher odds of quitting at the end of treatment compared to placebo. And our quit rates were impressive, despite the highly addicted study population and the execution of the trial during a pandemic. We are excited to see that both six- and 12-week courses of cytosinicline therapy appear to be highly effective for smokers. The six-week therapy option provides flexibility for a shorter treatment to achieve abstinence and is half the duration of current treatments. And finally, quite simply, it is a new option. Smokers and their doctors need new solutions. This is an indication that has not seen any new approved treatments in more than 15 years. We believe a new treatment option will provide hope to the millions of smokers who are ready to finally quit. We plan to offer that hope with cytosinicline. Turning to the top-line data readout, I'd like to hand it over to Cindy to review the key findings from the ORCA-2 trial. Cindy?

Thanks, John. As John mentioned, we are pleased to report clinically robust and statistically significant results for both primary and secondary endpoints for six weeks and 12 weeks of cytosinicline treatment compared to placebo in this trial. ORCA-2 is the first of two multicenter randomized Phase III trials evaluating cytosinicline for smoking cessation in adults in the U.S. The trial was designed to evaluate the safety and smoking cessation effectiveness of 3 mg cytosinicline taken three times daily for either six or 12 weeks compared with placebo. Study participants were randomized to one of three arms and received either six weeks cytosinicline followed by six weeks of placebo or 12 weeks of cytosinicline or 12 weeks of placebo. All subjects also received standard behavioral support for the duration of the study. The ORCA2 study had two independent primary endpoints that evaluated the success of smoking abstinence for both six weeks and 12 weeks duration of cytosinicline treatment compared to placebo. For both primary endpoint comparisons, smoking abstinence was defined as abstinence during the last four weeks of treatment. This four-week biochemically verified abstinence measure showed remains the FDA's approvable endpoint for smoking cessation medications. The corresponding secondary endpoints evaluated for continuous abstinence in those who successfully quit smoking by week 3 through to week 24 or by week 9 through to week 24, depending on treatment duration. ORCID 2 completed enrollment of 810 smokers at 17 clinical trial locations in June of last year. On average, the study population was 54 years old, had been smoking for 38 years, had four prior quit attempts, but were still smoking about a pack of cigarettes a day. After 12 weeks of cytosinicline, 32.6% of smokers had quit smoking compared to only 7% of smokers treated with placebo. This resulted in an odds ratio of 6.3, with a p-value less than .0001, meaning that smokers treated with cytosinicline had six times the odds or likelihood of quitting smoking compared to smokers treated with placebo, and it was highly statistically significant. For the secondary endpoint at 24 weeks, 21.1% treated with 12 weeks of cytosinicline were nonsmokers compared to only 4.8% treated with placebo. This gave an odds ratio of 5.3 for remaining a nonsmoker at 24 weeks after 12-week cytosinicline treatment. and also had a p-value of less than 0.0001. After six weeks of cytosinicline, 25.3% of smokers had quit smoking compared to only 4.4% of smokers treated with placebo. This resulted in an odds ratio of eight, meaning that those smokers treated with cytosinicline had eight times the likelihood of quitting smoking compared to smokers treated with placebo. And again, a p-value of less than 0.0001 was observed. For the secondary endpoint at 24 weeks, 8.9% treated with 6 weeks of cytosinicline remained non-smokers compared to only 2.6% treated with placebo. This gave an odds ratio of 3.7 for remaining a non-smoker at 24 weeks after 6 weeks cytosinicline treatment with a p-value of 0.0016. Turning to the top-line safety and adverse events reported in ORCA2, the frequency of treatment emergent adverse events was similar in all three arms. We continue to see that cytosinicline is very well tolerated with the incidence of specific adverse events in the single digits. The most common adverse events occurring in 5% or more of study participants were only insomnia, abnormal dreams, headaches, and nausea. As John mentioned, the frequency of nausea and headaches were higher in the placebo arm than in the cytosinicline-treated arms. The frequency of insomnia or abnormal dreams was only slightly higher in the cytosinicline-treated arms compared to placebo. We expect that tolerability will remain a critical point of differentiation from currently available treatments and believe that cytosinicline, when approved, has the potential to become a new gold standard or preferred treatment for smoking cessation. That concludes the overall view of results. We continue to review additional findings and look forward to submitting these data for publication in the near future.

Thanks, Cindy. We are very excited about the strength of the ORCA2 results and the magnitude of effect seen with cytosinicline throughout the ORCA program. We continue to see strong efficacy, particularly when we consider the odds ratios that have been reported for available cessation treatments. Efficacy for both the 6- and 12-week treatment arms of ORCA2 exceeded what was previously reported for cytosinicline, proving our hypothesis that the higher 3-milligram dose given for a longer duration has improved outcomes for smokers. Our focus now turns to the enrollment and execution of the confirmatory Phase III ORCA III trial and initiation of the Phase II ORCA V1 trial in e-cigarette users. ORCA III is similar to ORCA II in that participants will be randomized to one of three study arms to evaluate three milligrams cytosinicline dosed three times daily over a period of either 6 or 12 weeks compared to placebo. ORCA3 was initiated in January of this year and aims to enroll 750 smokers at 15 clinical sites in the U.S. Regarding ORCAV1, we continue to expect initiation of this study in the second quarter, pending final release of grant funding from the NIH. The Phase II ORCAv1 study will enroll approximately 150 adult nicotine e-cigarette users in the U.S. 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. As a reminder, we received the first tranche of the NIH grant funding to complete critical regulatory and clinical operational activities such as protocol finalization clinical site identification, and submission of the new IND to FDA for the e-cigarette cessation indication. We have completed and submitted the documentation on these initial required activities and are awaiting the next tranche of the NIH grant funding to initiate the ORCAv1 study. The growing number of e-cigarette users exceeds 11 million adults in the U.S., and there are currently no approved treatment options specifically indicated for this population. We believe this is an ideal population to continue our exploration of cytosinicline's ability to be safe and effective nicotine addiction treatment. I would now like to turn the call over to Jerry for our financial update.

Thanks, John. I would like to provide an update on our cash position as of March 31st, 2022, as well as review our operating expenses for the first quarter. As of March 31st, 2022, The company's cash, cash equivalents, short-term investment, and restricted cash were $36.4 million, compared to $43 million as of December 31, 2021. We believe our current cash balance is sufficient to provide runway into 2023. In addition to the reported cash balance and in connection with the positive ORCA II results, we also received approval from Silicon Valley Bank to access their remaining capital under our $25 million debt facility put in place in December 2021. Under the agreement, we now have access to an incremental $10 million of capital that can be drawn down at our discretion over the course of the next 12 months. No amounts have been drawn down to date. Turning to our statement of operation, the company incurred a net loss of $7.6 million for the quarter ended March 31, 2022. as compared to a net loss of $8 million for the same quarter of 2021. Total operating expenses in the first quarter of 2022 was $7.2 million, as compared to $8 million for the same quarter of 2021. Operating expenses decreased for the quarter ended March 31, 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. We anticipate our operating expenses to increase in the second half of 2022 as we further execute on both the ORCA-3 and ORCA-V1 trials. As a reminder, approximately half the costs from the ORCA-V1 trial are expected to be funded through a grant from the NIH. That concludes the summary of our financial results. I'll turn the call back over to John.

Thank you, Jerry. This is certainly a monumental time for Achieve. With overwhelmingly positive Phase III ORCA II results and the initiation of our second Phase III study in January, we are well on our way to bringing forward a long overdue new treatment for smoking cessation. The nicotine addiction market continues to be significantly underserved and in need of new, safe, and effective treatment alternatives. We believe that cytosinicline's differentiated safety profile, shorter course of treatment, and compelling efficacy are positions us well to make a significant impact in this large market. We look forward to bringing you further updates on our continued progress. We appreciate you joining us today and for your continued support. I will now open the line for questions. Operator?

Thank you, sir. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. I show our first question. It comes from the line of Francois Brisbois from Oppenheimer. Please go ahead.

Hi, this is Dan on for Frank. Thanks for taking the question. Just a quick question on potential partnerships. Given the strength of ORCA II and moving forward as you start ORCA III, I'm wondering if you could add any color on what those partnership discussions look like, how are they going, any color you want to add to that.

Yeah, thanks, Dan. Thanks for the question here. Obviously, an important attribute as we roll along here. So, you know, as we just discussed, you know, we're extremely excited about the top-line results from the ORCA-2 trial, and we think this is really going to be instrumental in furthering the discussions with potential partners and potentially the acquisition partners. So, you know, this is still early days. This is not something that's going to happen overnight, but we're, I think, encouraged by the response so far as we have had a chance to discuss the data to date. So, I think more to come on that, but again, we're encouraged.

Thanks. That's very helpful. Just a quick one on Oracle V1. Are you still on track to receive the $2.5 million from the NIH in the second quarter? given NIH timelines and how they work? Are you still on track to receive that ahead of starting ORCAv1?

Yeah, so on the ORCAv1 study, we will require the NIH grant funding to come through before we initiate that trial. This is our first grant that we're moving forward with, so we are in the midst of the logistics with NIH and NIDA on this one, but we do anticipate that things are on track so we can initiate that trial by the end of this quarter. Great. Thank you.

Congrats on all the progress. That's it for me.

Thanks, Dan. Thank you. I show our next question comes from the line of Thomas Slayton from Lake Street Capital. Please go ahead.

Yeah, thanks for taking the questions. Just out of curiosity on the SVB, are there any hurdles that you need to jump through to get that money, or is it purely at your discretion?

So under the terms of the due agreement, thanks, Thomas, for the question, it is at our discretion to take amounts down. If we were to take any down, which we have not to date, there would be some liquidity requirements that come with it. But we think having access to an incremental $10 million is kind of a belt and suspenders situation. proposition was a good thing to put in place with the strength of the data.

Got it. And when can we expect an enrollment update on ORCA 3?

Good question. So, you know, we initiated ORCA 3 in January of this year, and so I think we're encouraged with the enrollment to date. Things are moving along well. I think as we had indicated on the call here a couple of weeks ago, we would anticipate enrollment to complete by the end of the third quarter of this year. So I think within that, we probably won't be giving a lot of granular updates in terms of the number of patients. But just as a reminder, the target is 750 subjects in this trial across 15 centers all in the U.S.

Great. I appreciate it. Thank you.

Thanks, Thomas.

Thank you. I show our next question comes from the line of Michael Higgins from Leidenberg-Dahlman. Please go ahead.

Thanks, operator. Thanks, guys, for taking the questions. Hello again. It was just two weeks ago we spoke on the ORCA2 results. Congrats again on those. Wondering if there's any investigator-initiated study that you're aware of or that are underway, and do you think you'll get inbound interest to study cytosinicline now that ORCA2 is out? Thanks.

Yeah. Hi, Michael. Thanks for the question. So, at the moment, we're not actively involved in any new cytosinicline trials. We are aware of some that are ongoing because there is and continues to be a significant amount of interest around this compound. So I think as we do get inbounds, I think we will assess whether or not it's something that we would like to support and get involved with.

Thanks. And any plans to get ORCA2 out? You mentioned in your prepared remarks, as you did two weeks ago, to work towards publication, it would make sense that Dr. Nancy Rigotti would be a part of those, being a PI, of course. but any other trials, journals, ways that you can get this out, thanks.

Yeah, thanks, Michael, for the additional question there. I think on additional data points, you know, we ourselves are still getting more data points out of ORCA2 that will continue here over the coming weeks, and I think as we get more of that information out, I think we'll assess, you know, other ways to get additional data points out into the market. I think as Cindy had articulated on the last call, we do see this as strong data, and I think we want to work with Nancy to get this published in a swift manner so we can get the full data sets out of there. But there will be a number of data points beyond the top-line results that we announced a couple weeks ago that we think could be quite interesting as we move along.

Yeah, I look forward to those. Last one here, just to confirm the filing, assuming we've got very similar review here on ORCA3 where you've hit strongly on both the six and the 12-week endpoints, these co-primaries. How does it work for the application? Do you file on the same endpoint as Verniclean, which is a 12-week endpoint, and it's supplemented then by six-week data, or do you file having six and 12-week How does the language work out, I think?

Yeah, thanks, Michael. I'll hand this one over to Cindy.

Yes, it would be both six-week and 12-week as far as being approved for treatment durations.

Interesting. So you have the comparator to Renicline, but in terms of the labeling, it can show six, 12, and even 24-week data, I would assume. Yes.

So, I mean, we're really trying to get flexibility for smokers as well as their physicians. As the ORCA-2 showed, if a smoker was very motivated and quit smoking by three weeks and continued non-smoking to six weeks and they didn't want to take any more treatment, that would be then the six-week treatment. I do think, as Nancy pointed out, we obviously had more individuals get more success the longer they were on treatment and stopped smoking. It took them five, six weeks, seven, eight weeks, and certainly by nine weeks then they had become a non-smoker. So it really gives that flexibility to smokers and their physicians on how long the individual wants to continue treatment.

That's really helpful. So your comment on, you know, we heard this two weeks ago, the longer that they're on, the more success they have. And I think we're looking for some patient-level data that will support that. Is that the case? And if so, is that kind of a June, July timing?

Yeah, so what we'll have is prevalence rates on each week. So you can see as each week who is a nonsmoker and who wasn't. and so we do expect that to be higher as you get more treatment. It's very similar to varenicline in that regard. But for those individuals that stopped smoking within two to three weeks, it's not that they have to continue for another nine to ten weeks of treatment because what the data will show is that there was no risk of relapse in those individuals if they switched to placebo or they stayed on cytosinicline. So that kind of information and endpoints will be in the publication.

Wow, that's really helpful. Thanks, Cindy.

Thank you. I show our next question comes from the line of John Vandermosten from ZAC. Please go ahead.

Hey, good afternoon, everyone. John, from your intro, it sounded like you were doing some commercialization research, and I'm wondering, you know, what are the key factors that you think were able to drive Pfizer to get a billion dollars in sales per year? Is there anything that they did that helped them get there that you think is particularly important?

Yeah, good question, John. Thanks for calling in. I mean, I think one of the things that we're seeing now, which I think is still interesting, You know, now that Chantix has been withdrawn from the market completely, and we do have at least a single generic that is now fully available. Like, one, it hasn't taken over kind of where Chantix has been historically, but it is on a run right to sell about $300 million over the ensuing 12 months. So I think that is encouraging for us because for all practical purposes, it looks like we have a better product on our hands. And if effectively an inferior product is on pace, albeit at a lower price point than it's been historically to do a fair amount of sales, I think that bodes well for the potential of cytosinicline long-term. And I think the other piece to keep in mind is, frankly, just having a new treatment option. There hasn't been anything new in over 15 years since Chantix was originally launched, and I know that was a big attribute originally for that product as well. So I think given the fact that we've got, as Cindy just talked about, a shorter course of treatment, a significantly improved safety and tolerability profile, and very strong efficacy, it should set up well to be a very compelling product on the market.

Okay, thanks. And then do you think it takes a big pharma to get, you know, that billion dollars that, you know, we all kind of think about, or could a smaller company do it too?

Yeah, I mean, I think in some sense, you know, you get out what you put in to a lot of the marketing efforts. I think with that being said, I think there are ways to take this to market. without the same level of capital needs that a large pharma would do. I think just quite simply the size of the market is so large, even going after a smaller percentage out of the gate should still result in really sizable revenues. So I think there is a range here, and I think as we continue partnering discussions and look at kind of what our role might be as well, we'll take that all into consideration. Great. Thanks, John. Appreciate it. Yep. Thank you.

Thank you. I'm sure no further questions in the queue. At this time, I'd like to turn the call back over to John Bensich, CEO, for closing remarks.

Thank you, and thanks again for joining us today. We appreciate your continued support and look forward to bringing you further updates on our continued progress as we move forward throughout 2022. Thanks again for joining us today.

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