Achieve Life Sciences, Inc.

Greetings. Welcome to the Achieve Life Sciences first quarter 2024 earnings conference call and webcast. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would like to hand the call over to Nicole Jones, Investor Relations. Thank you. 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 Bincich, Chief Executive Officer, Dr. Cindy Jacobs, President and Chief Medical Officer, and Jerry Wan, Principal Accounting Officer. Management will be available for our 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 files 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 today. Today, we will review our first quarter 2024 financial performance and discuss key highlights, including reaching agreement with the FDA on the long-term cytosinicline exposure data necessary for our NDA filings. Critically for the timing of the NDA submission, we agreed on the number of subjects required with six months' exposure to enable the NDA filing. Cindy will provide an update on the ORCA-OL study and discuss the status of initiation in just a moment. Concurrently with the FDA decision, we successfully secured financing of up to $124 million, enabling Achieve to execute the ORCA-OL trial and provide cash runway through the NDA submission NDA approval, and beyond. The financing included participation from new fundamental healthcare investors, including our manufacturing partner, Sofarma. The investor demand for the financing demonstrates the importance of cytosinicline in battling nicotine dependence and a growing confidence in cytosinicline's market opportunity. The visibility of cytosinicline as a drug for nicotine dependence has been raised markedly during the quarter, and as many of you will have read, The results from the Phase II ORCAv1 trial of cytosinicline for vaping cessation were published in JAMA Internal Medicine earlier this week. The ORCAv1 study included 160 adults who used e-cigarettes daily and desired to quit. There was incredible interest in this trial, and it enrolled quickly in approximately four months. The results showed that cytosinicline more than doubled the odds of quitting e-cigarettes compared to placebo. with 31.8% of cytosinicline-treated participants achieving continuous vaping abstinence compared to just 15.1% of those receiving placebo. As seen in our other trials, cytosinicline was incredibly well-tolerated, and compliance with study treatment was exceptional. The prevalence rates of vaping continue to increase, and it is estimated that 11 million adults and 2 million middle and high school age students use e-cigarettes in the U.S. alone. More than half of adults who vape have reported interest in quitting, and many who've tried to quit struggled to do so successfully. If approved, cytosinicline would be the first FDA-approved treatment specifically evaluated and approved for e-cigarette cessation. We plan to further our discussions with the FDA on a label expansion for vaping cessation and expect to conduct an end-of-Phase II meeting later this year to discuss clinical requirements. Additionally, in the first quarter, we presented detailed trial results from our ORCA program at the Society for Research on Nicotine and Tobacco annual meeting. The ORCA II and ORCA III Phase III trials have consistently demonstrated cytosinicline's efficacy in achieving smoking cessation with favorable safety and tolerability profiles. For the first time, we presented survey results from participants in our phase three trials. Of the participants who responded, over 80% had been treated with cytosinicline. Of these cytosinicline-treated subjects, 69% of them had successfully quit smoking, and of those who did not quit completely, approximately one quarter cut their smoking in half. These respondents attributed their success in quitting to cytosinicline noting that amongst other things, it helped reduce cravings. Nearly all participants of the survey were willing to recommend cytosinicline to others, and notably, 86% of participants, including those who did not quit completely, showed interest in using cytosinicline again if needed. This is a great segue into Cindy's update on the ORCA-OL trial. Cindy?

Thank you, John. Our focus for the first quarter has been on preparations for the NDA submission, most importantly on the initiation of the ORCA-OL study. I am pleased to update that plans remain on track with our guidance, and we expect to begin enrollment within the next few weeks. As a reminder, the ORCA-OL is a single-arm, open-label study that will collect safety data on the long-term use of cytosinicline. Our agreement with FDA is to provide safety data on a minimum of 300 subjects treated with cytosinicline for a cumulative period of six months as part of the NDA submission. Subsequently and prior to product approval, we will provide data on at least 100 subjects treated for a total period of one year. Because FDA has allowed cumulative exposure Enrolling from the pool of subjects previously treated with cytosinicline for either six or 12 weeks in our smoking or vaping cessation trials will allow us to expedite the time required to generate this long-term exposure data. We are first focusing on recruitment from those subjects who have already received three months of prior cytosinicline treatment as they would only need another three months of treatment on the open label study to fulfill the six-month exposure requirement for the NDA submission. As an update, ORCA-OL is planned to be conducted at 29 clinical sites, all of which participated in our previous studies. All contracts and planning have been completed with our clinical operations partners and vendors, We have also completed the packaging of the drug product and are preparing for shipments to the sites. Meanwhile, of the 1,700 participants from our earlier trials, the sites have been conducting outreach to more than the 1,100 subjects who were previously treated with cytosinicline and are scheduling initiation visits for those who are interested. We have received feedback that there is high enthusiasm for participation from those who are eligible. Interestingly, the primary reason for not being eligible for the open label trial is that about 25% of the previously cytosiniclin treated subjects continue to be smoke or vape free, even after completing their treatment on the prior trial over one to two years ago. Even only seven to nine percent of subjects have been lost to contact or not interested, the remaining two-thirds who have been contacted want to be considered for the trial. Thus, we believe the planned enrollment should be achieved swiftly in 2024. So, in summary, we are moving forward as expected and continue to anticipate an NDA submission in the first half of 2025. and look forward to providing an update in the coming weeks once enrollment has been initiated. Now I'll turn it over to Jerry for a review of the financials for the quarter.

Thank you, Cindy. Good afternoon, everyone. I'd like to provide an update on our financial activities this quarter, focusing on the financing and strategic implications for our operations, and then review our current financial status and forward outlook. Echoing John's earlier points, this quarter we successfully secured a significant financial boost with a registered direct offering of common stock and a concurrent private placement of warrants, collectively worth up to $124.2 million. The initial amount raised was $60 million, with the potential to receive up to an additional $64.2 million upon the exercise of milestone-driven warrants. This recent cash infusion ensures that we have the necessary resources to continue our clinical development plans effectively, including the pivotal ORCA-OL trial and our anticipated NDA submission. As of March 31, 2024, our cash, cash equivalents, and restricted cash were $66.4 million. Looking forward, we anticipate that the initial net proceeds from this financing will sustain our operations well into the second half of 2025. If the milestone-driven warrants are fully exercised, we anticipate it will extend our financial runway into 2026 and through potential approval of cytosinicline in the U.S. In regards to our statement of operations, total operating expenses in the first quarter of 2024 decreased to $6 million, as compared to $8.6 million for the same quarter of 2023. The company incurred a net loss of $6.5 million for the quarter ended March 31, 2024, as compared to a net loss of $9 million for the same quarter of 2023. We expect our operating expenses and net loss to increase over the coming quarters as we initiate the ORCA-OL study. In summary, this quarter has strengthened our position both financially and strategically. With a strong cash position and a clear path forward, we are well prepared to meet our upcoming milestones and continue our journey towards bringing cytosinicline to market. That concludes my update. I'll now turn the call back over to John for closing remarks.

Thank you, Jerry. We've had a dynamic start to 2024, advancing FDA discussions on NDA submission requirements and securing capital to provide resources for the execution of those required activities, in particular for the ORCA-OL trial. The recent positive reception of our clinical data published in JAMA and presented at SR&T not only reinforces the scientific validity of our findings, but also highlights the medical community's recognition of cytosinicline as a potentially promising treatment for smoking and vaping cessation. Smoking remains the leading cause of preventable death, killing more than 8 million people globally each year, with nearly half a million of those deaths in the U.S. Smoking and exposure to secondhand smoke contribute to various cancers, as well as other pulmonary and cardiovascular diseases, creating devastating consequences to patients and their families. Cytosinicline's future role in disease reduction is perhaps highlighted by chronic obstructive pulmonary disease, or COPD, a lung disease primarily caused by cigarette smoking. According to the CDC, 38% of the nearly 16 million U.S. adults diagnosed with COPD report current smoking. COPD is the sixth leading cause of death in the U.S., with estimated annual patient-related costs of $31 billion, which is expected to nearly double by 2029. Providing people with better options to quit smoking has the potential to reduce overall rates of COPD and offset the associated rising costs in the future. Additionally, smoking is a major cause of cardiovascular diseases such as heart attacks and stroke. According to the American Heart Association, cardiovascular disease accounts for about 800,000 U.S. deaths every year, making it the leading cause of all deaths in the United States. Of those, nearly 20% are due to cigarette smoking. These statistics and the importance of disease reduction validate the urgent need for effective cessation treatments. particularly as there has been no new approved smoking cessation agents in nearly 20 years and currently no FDA-approved treatment for e-cigarette cessation to mitigate the broad public health impacts of smoking and vaping. It is clear the complexity of nicotine dependence increases healthcare costs and necessitates specialized interventions. We believe cytosinicline can play a critical role in this preventable health crisis and help achieve better long-term outcomes for patients. For the balance of 2024, our priorities are clearly defined. We will continue our focus on initiation and completion of enrollment of the ORCA-OL study, continue preparations for the NDA submission for smoking cessation, and obtain further FDA guidance for expansion into e-cigarette cessation indication. In closing, I want to express my gratitude to our shareholders for your continued support and the dedication of our trial participants and their healthcare providers. We remain committed to providing a new therapeutic option that can significantly impact the lives of those affected by nicotine dependence. Thank you again for joining us today. We are eager to continue our progress and will now open up the line for questions.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Once again, that's star 1 to register a question at this time. Today's first question is coming from Thomas Flatton of Lake Street. Please go ahead.

Hey, good afternoon. I appreciate you

One moment, please. Thomas, please go ahead.

Sorry about that. Cindy, I just wanted to confirm with you the mention you made about the 29 sites and the status of contracting. I was a little confused. Are all those sites under contract and ready to enroll, or was the contracting comment related to the other vendors that you're using?

Nope. Those sites are finishing up their contracts. They're going to be ready to roll all of them within the next couple of weeks.

Great. And then the 1,100 subjects, just so I understood, that's two-thirds of the 1,700 you previously identified, and about 25% of those 1,700 were smoke or vape-free, and the rest were lost to follow-up or not interested. Did I catch that math?

Yeah, but what we're doing is we're still getting contacting all of the 1,100. So those that we've contacted, which is getting close to almost most of them, yes. So we're just, as each week we go, we're contacting more subjects. And so those are the numbers as we get contact with those subjects. About 20%, 25% are not eligible because they're smoke or vape free, which is very problematic. pleasing, actually, for us. And then there was only about 7%, 9%, maybe 10%. Again, the numbers keep rolling in during the week that either they're lost to contact or they're not interested. So, yeah, we are consistently about two-thirds of the individuals we're calling are interested in participating and are making contact, obviously, with the sites for screening.

And then just from a statistical perspective, if you're starting with a group of 1,100, do you feel comfortable that from that 650 of them will be able to actually enter the study?

Yes, but we're also going to open a few spots to placebo subjects on those studies to increase our overall numbers of exposed subjects for the integrated safety summary.

Got it. I appreciate it. Thanks for taking the questions.

Thank you. The next question is coming from Michael Higgins of Leidenberg Thelman. Please go ahead.

Thanks, Appir. Hi, guys. Thanks for taking the questions. Congrats again on the solidified balance sheet, the agreements with the FDA, progress on enrolling ORCA-OL. Regarding that letter, just to follow up from the prior question, I just want to understand, of the two-thirds or so of the 1,100 that you reached out to, It sounds like from the comments that all of them are willing and interested to come back into the study, but have you gotten more granularity as to what percent of those that you think will actually reenter the study and get back on cytosinically? Thanks.

Yeah, we won't really know that until the screening process starts and they go through the inclusion-exclusion criteria, but just on that note, they've already been through the inclusion and exclusion criteria on the prior trials, and we've loosened it up for the open-label study. So, we don't think the screening failure rate is going to be high. Let's put it that way.

Okay. And then a follow-up in your comment about the placebo patients. Re-enrolling these patients now with the expectation that they would go right into serocinicline, how do you handle the potential for those going on placebo and how many in ORCA-OL would be on placebo?

And there will be no one in the open label study on placebo. These are prior subjects who were on placebo in the previous trials, and they would be seeing cytosinicline for the first time, and that would increase our overall exposure of individuals with cytosinicline overall.

Okay, makes sense. I thought maybe you were dosing them placebo all of a sudden. No, no. Got it. And then you mentioned going after those that have been treated for three months. What is your number? How big is that pool? How many have been treated for three months?

I don't have the exact numbers that have been called and that they're currently interested. Those are the things that we're going to be monitoring as they come into the trial and start getting treated. we have already a link that will link their prior treatment to the treatment that they're getting in the open label so we can monitor the overall exposure level as we do the study.

Okay. Makes sense. And then, thank you, Cindy and John. One for you here before I go is in your partnering discussions, you know, we're seeing Increasingly, it seems, Pfizer, Lilly, and others, big and small, have been leveraging these virtual physician connections and the direct drug shipment to patients approach. How has that development affected your partnering discussions? Because I can just see it coloring the partner that you're most interested in working with. But just curious your feedback on that. Thanks.

Yeah. Thanks, Michael. Not able to comment on any specific discussions that are ongoing, but I will say kind of the new digital techniques and virtual techniques that are being utilized today and have come into effect over the last five or so years, in particular during the pandemic, are key attributes that we're looking for. We think those are the right approaches to really move the needle moving forward in this category, and I think This will only continue, and I think the tailwinds from some of the larger pharmas that have, you know, gotten involved in other similar indications, you know, think obesity, diabetes, areas like that, where, you know, finding a way to get the awareness out is critical. We think those are great sort of tools that will be used as we think about cytosine clean launching.

Yeah, I think it's a real wind at your back as you're partnering here, so great to see it all happen. I appreciate it. I'll jump back in the queue. Thanks, guys.

Thank you. The next question is coming from Frank Brebaus of Oppenheimer. Please go ahead.

Hi. This is Dan on for Frank. Thanks for taking our questions. Regarding the 29 sites, Do you expect a certain subset of them to be higher-enrolling sites based on any factors, or do you expect sort of equal distribution across the board? Any insights you can share based on the previous enrollment rates that you saw at these sites from the previous trials?

Yeah, so obviously these sites, because of whatever their enrollment was on the previous study, there were some that were higher rollers than others, then they are using basically those subjects coming back in. Of the 29 subjects, the 29 sites, these are all sites that did very well in the previous studies, not only in getting subjects enrolled, but also the data management. So although obviously there'll be differences in the sites due to their prior enrollment, we expect all sites to be up and running quickly with the subjects already contacted.

Great. And just one quick follow-up. Could you remind us what the frequency of visits and follow-ups is on this trial? And particularly, any potential challenges you foresee in terms of patient compliance or monitoring in this trial versus the Phase 3s?

You know, and in fact, the Phase 3s were weekly clinic visits, you know, during the 12-weeks treatment. In the open labels, it's monthly treatment visits or clinic visits. So that actually is 12 visits basically spread over the year. So it's not onerous as far as the clinic visits. As far as the drug accountability, a lot of the same processes and procedures are in place to monitor drug accountability. I think as far as the compliance of the subjects on the study, the commitment of the subjects... they will know what is being asked of them by the time they get through the screening and the informed consent form. And that's important, as well as the commitment and the protocols with the company and the sites to help them quit and stay smoke and vape free during the study. So I think the compliance for staying on the study will be there on the commitment of both sides, the subject as well as the sites and the company.

That's very helpful. Thanks for taking our questions.

Thank you. The next question is coming from John Vandermorsten of Zaxx. Please go ahead.

All right. Thank you, and good afternoon, John, Cindy, and Jerry. I was looking at some of the vaping trials that are out there. There are a bunch of them, and they're probably in a bunch of different levels of seriousness. Some are using cell phones with teens to help them stop vaping, and some are using a Varenicline to measure that. And I'm wondering just in your time at SRNT and maybe some of the other conferences and just looking around, poking around, if there are any serious other vaping trials that are going on that you've seen out there.

Yeah, John, thanks for the question there. Something we continue to monitor in terms of what else is happening out in the landscape. And I think with respect to vaping and, frankly, smoking cessation overall, we're just not seeing any real serious studies being run at the moment. We did see another readout from a vaping trial at SR&T, but it was significantly smaller and less controlled than what we just published earlier this week with ORCA V1. So something we continue to monitor, but there really isn't anything else going on that we see is really moving the needle in this space.

Okay. Was that in Vareniclean, or was that some other product that's used?

It was a Vareniclean trial, and again, most of what's being done out there is academic-driven and not, I would say, company-driven that would actually, you know, lead to an indication for vaping. Okay. Great. That's all for me. Thank you. Thanks, John.

Thank you. The next question is coming from Ilya Upkov of Freedom Brokers. Please go ahead.

Good afternoon. Thank you for taking my question. You've mentioned that patients who have taken the drug in the previous studies for at least three months can only take the drug for three plus months in ORC-OL to get into the statistics for NDA. Correct me if I'm misunderstood. My question is, does it matter how long ago this patient finished taking the drug in the previous study to include already achieved duration of taking the two final exposures?

Yeah. So, you know, what the FDA is looking for is cumulative treatment. So it doesn't have to be continuous, which I think is what your question is getting at. So if someone saw a you know, six or 12 weeks of drug two years ago, and they get, you know, incremental three months today, we would just add that total exposure together. So as we bring in the patients, whether they were, you know, six weeks, 12 weeks of exposure previously, we'll just start adding the incremental exposure as part of the OL trial together until we get that, those 300 subjects that have been treated for six months cumulatively.

Okay, thank you. And one more from me, please, regarding possible liable extension for e-cigarette cessation. Do you expect FDA to require separate long-term safety data beyond 12 weeks in the population of e-cigarette smokers?

Yeah, good question. So as part of our discussion with FDA, around the open-label trial. They indicated that this study, one, would be needed for both a smoking indication and a vaping indication, but I think the key piece here is that this trial we're running now will work for both, so we will not have to run a separate longer-term exposure trial for a vaping indication, which is why we are allowing both subjects from our smoking trials as well as the vaping study into this new trial.

Great. Thank you, John.

Yep, thank you, Ilya.

Thank you. That brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Bincich for closing comments.

Thanks, Donna. We've made tremendous progress this year and look forward to providing additional updates as we proceed, in particular in the coming weeks as we look to initiate enrollment in the ORCA-OL trial. So thanks again, everyone, for joining us today and for your continued support of Achieve.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines and log off the webcast at this time and enjoy the rest of your day.