Achieve Life Sciences, Inc. (ACHV) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Achieve Life Sciences Third Quarter 2021 Earnings Conference Call. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to turn the conference over to your speaker today, Ms. Jaime Xinos. Ma'am, please go ahead.

Thank you, Lilly, and thanks, everyone, for joining us. On the call today from Achieve, we have John Bencich, Chief Executive Officer; Dr. Cindy Jacobs, President and Chief Medical Officer; Jerry Wan, Principal Accounting Officer; Rick Stewart, Executive Chairman of the Board of Directors; and Dr. Anthony Clarke, Chief Scientific Officer. I would 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 will now turn the call over to John.

Thank you, Jaime. On today's call, we will provide an update on the cytisinicline development program, including our ongoing ORCA-2 study, the great progress we are making on our upcoming clinical trials and provide an overview of our Q3 financial results. Let's begin with ORCA-2, our current Phase III trial evaluating cytisinicline in 810 adult cigarette smokers at 17 clinical trial sites in the United States. ORCA-2 was initiated in October of 2020 and is evaluating the efficacy and safety of 3-milligram cytisinicline dosed 3 times daily over a period of 6 and 12 weeks versus matched placebo. We reached a key milestone of completing our target enrollment in June of this year. All randomized subjects were assigned to 1 of 3 arms, to receive either 12 weeks of placebo, 12 weeks of cytisinicline or 6 weeks of cytisinicline followed by 6 weeks of placebo. All subjects have been followed monthly out to 24 weeks. The ORCA-2 study has 2 independent primary efficacy endpoints that will evaluate the rate of smoking abstinence with cytisinicline during the last 4 weeks of treatment compared to placebo at the end of both 6 weeks and 12 weeks of treatment. ORCA-2 will be successful if either or both of the cytisinicline arms show an efficacy benefit over placebo. All ORCA-2 subjects have now completed study treatment and are in follow-up. We expect the last patient's last visit to occur by end of December 2021 and top line data results to be announced in the first half of 2022. Achieve will remain blinded until the completion of all study follow-up evaluations and until the database has been finalized and locked. Additionally, planning is well underway for ORCA-3, our proposed Phase III clinical trial, which we anticipate to launch by early 2022. ORCA-3 will mirror the ORCA-2 trial in study design, safety and efficacy evaluations and statistical criteria. ORCA-3 will serve as the second required Phase III trial to support the cytisinicline regulatory submission in the U.S. Similar to ORCA-2, approximately 750 subjects are expected to be enrolled into ORCA-3 and randomized to 1 of 3 study arms to determine the smoking cessation efficacy and safety profile of cytisinicline administered for either 6 or 12 weeks compared to placebo. To support the initiation of ORCA-3, we have hired 3 new full-time clinical operations employees, completed the selection process for the CRO, finalized the packaging and study drug supply and are currently undergoing clinical trial site selection. We look forward to providing you with additional updates in the coming months as we progress towards ORCA-3 initiation. We are also making excellent progress on our plans for expansion into nicotine e-cigarettes or vaping cessation. We announced just a few days ago that the FDA has completed their review and acceptance of our IND application to investigate cytisinicline as a cessation treatment for nicotine e-cigarette users. As previously discussed, we have secured nondilutive grant funding from the NIH to offset costs related to the Phase II ORCA-V1 trial, which will enroll approximately 150 adult nicotine e-cigarette users in the U.S. The grant is awarded in 2 phases, with the initial amount of $320,000 used to complete regulatory and clinical operational activities such as protocol finalization, clinical trial site identification and the submission of a new IND for vaping cessation to FDA. Upon completion of these milestones, as assessed by NIH, Achieve expects to receive the next stage of grant award of approximately $2.5 million in early 2022, which will enable execution of the ORCA-V1 study. The funding is subject to authorization by the NIH under the grant process and is expected to cover approximately 50% of the total ORCA-V1 trial costs. We expect to initiate the ORCA-V1 study in the second quarter of 2022. Recent data indicate there are more than 11 million adult users of nicotine e-cigarettes in the United States alone. While e-cigarettes have historically been viewed as less harmful than combustible cigarettes, their long-term safety remains controversial. Since these products can also sustain addiction, many vapers are now seeking to quit nicotine completely. In research conducted by Achieve, roughly 73% of e-cigarette users expressed a desire to quit within 12 months. Of those with a more urgent interest in quitting, more than half indicated they would be interested in a new prescription cessation therapy. Currently, there are no treatments specifically indicated to help e-cigarette users quit, so we see this as an unmet commercial opportunity. If our development efforts prove to be successful, cytisinicline may offer a new cessation option for this growing population of e-cigarette users who seek to quit nicotine for good. Finally, in the third quarter, we had 2 cytisinicline data presentations at the Society for Research on Nicotine and Tobacco Annual European Meeting. The first data set evaluated the time to sustained abstinence with cytisinicline compared to placebo in our Phase II ORCA-1 trial. This new analysis determined that smokers treated in the study with cytisinicline showed an earlier onset of sustained abstinence compared with placebo. In this cohort, it took smokers who were successful at quitting a median of 7 days to achieve smoking abstinence compared to 18 days for placebo. We have seen this early onset of activity in earlier studies, including in our repeat-dose PK/PD study, where we saw a greater than 75% reduction in cigarettes consumed within the first 48 hours of initiating treatment. Data were also presented from additional ORCA-1 subgroup analysis evaluating outcomes in smokers who previously failed treatment with CHANTIX. Smokers who received 3-milligram cytisinicline 3 times daily demonstrated a week 4 abstinence rate of 51.3% compared with 15.8% for placebo-treated subjects. The cytisinicline 3-times-a-day regimen appeared to be more effective for smokers who had previously failed to quit on varenicline than the titration regimen. We believe both the speed of cessation and cytisinicline's efficacy in CHANTIX pretreated smokers bodes well for the Phase III development program and for the commercial prospects of the product. That concludes the overview of our recent highlights. Now I'd like to turn the call over to Jerry to discuss our financial results.

Thanks, John. I'd like to provide an update on our cash balance as of September 30, 2021 and then review our third quarter financials. As of September 30, the company's cash, cash equivalents, short-term investments and restricted cash were $33.4 million compared to $35.9 million as of December 31, 2020. We believe our current cash balance is sufficient to provide runway into 2023. This includes our anticipated costs for the ORCA-2 and ORCA-V1 trials but does not include the cost of other planned clinical trials such as ORCA-3. Turning to our statement of operations. The company incurred a net loss of $6.7 million for the quarter ended September 30, 2021 as compared to a net loss of $3.8 million for the same period in 2020. Net loss for the 9 months ended September 30, 2021 increased to $26 million compared to $10 million in the 9 months ended September 30, 2020. Operating expenses continue to be elevated in the third quarter as we fully enrolled in our ORCA-2 Phase III trial. We expect our quarterly operating expenses to decline in the fourth quarter, in line with completion of the ORCA-2 trial and in advance of the initiation of the ORCA-3 and ORCA-V1 studies, which are anticipated in the first half of 2022. That concludes a summary of our financial results. I will now turn the call back over to John.

Thank you, Jerry. It has been an incredible year so far for Achieve as we continue to deliver on our milestones and objectives. Our ORCA-2 Phase III trial of cytisinicline in the U.S. has completed enrollment, subjects have finished treatment and we are focused on execution and monitoring to ensure data results are announced as soon as possible in the first half of 2022. And significant progress is being made on plans for both ORCA-3 and ORCA-V1, specifically in regard to clinical operation activities that are crucial for those studies to begin. We believe cytisinicline has the potential to make a significant impact in lives of smokers and e-cigarette users who want to live healthier lives, and we appreciate your continued support as we work towards reaching that goal. Thank you again for joining us today. We'll now open the line for questions.

[Operator Instructions] And your first question comes from the line of Michael Haug from Lake Street Capital.

This is Michael Haug calling in for Thomas Flaten. My first question is what are you hearing from the community about the CHANTIX recall? And is this recall impacting patients at all?

Yes. Thanks for the question, Michael. We've obviously been tracking what's been going on with CHANTIX and the fact that earlier this summer, they withdrew a handful of lots from the market because they found nitrosamines, which is a potential carcinogen in the drug product. It was just, I think, 3 or 4 weeks ago that they announced a full withdrawal of the remaining lots that were on the market. So we know that it is currently not available. What we also saw this summer was the first generic that was approved by FDA from Par Pharmaceuticals and it does look like that is now available on the market. So while Pfizer's product with CHANTIX is no longer there, we think there is still accessibility starting to come online with the generics being launched.

Okay. That was very helpful. And then why was it elected to start ORCA-V1 in the second quarter of '22? Is there any chance you can start sooner?

Let me turn that over to Cindy to discuss the ORCA-V1 initiation in the second quarter of next year.

Yes. It's really more for the timing for us to get back to NIH and clear the milestones for what is the Phase I funding and then to go into the Phase II funding. They actually have 75 days as their estimated review time. So just by default, by the end of this quarter, we'll have what we view are our milestones completed. We will have gone through our Phase I grant money. So if we get this submitted by the end of this year, we're probably looking at February, March to get then the second Phase II funding. And then that's why we have quarter 2 really as a realistic start. Of course, this is the government, so it's still an estimate.

And your next question comes from the line of Francois Brisebois with Oppenheimer.

This is [ Dan ] on behalf of Frank Brisebois. Just following up on some of those questions. Starting with a question about generics. Any updates in terms of the ongoing issues with nitrosamine as it relates to the generics that are now coming into the market for CHANTIX?

Yes. Thanks, Dan. Good question. So the FDA did put out some updates on this earlier this fall, where they did indicate the nitrosamine levels, not only in CHANTIX where they were exceeding the limits, but also for Par Pharmaceuticals as well as an Apotex generic from Canada showing that those levels were in line. So we know that the generics are within spec, but we haven't seen any update from Pfizer in terms of anticipated resolution of this issue. So we'll continue to monitor as we go forward, but currently, there's no estimated time for CHANTIX being back on the market.

Okay. And as a second question, in terms of the milestones for the ORCA-V1, any color you can add on how far along you are in achieving those milestones? Is the protocol finalized? Anything on that?

Yes. Actually, the protocol finalized. It was included in with the IND to FDA as part of the review. So they have cleared us for that protocol.

[Operator Instructions] Your next question comes from the line of John Vandermosten from Zacks.

John, Jerry, Cindy, good to hear your voices again. I wanted to extend the question related to generics and the CHANTIX going out of the market. Does that change the dynamics for negotiations that you guys might have with some of the players out there who might pick up cytisinicline eventually? Or is it too soon, I guess, to start talking to others about eventual commercialization?

Yes. I think overall -- thanks, John. Good to connect. I think on the generics issue, I think, overall, it's a net positive for us. I mean, I think, in one sense, we always knew we would be launching into a generic varenicline market. But I think having the main branded product withdrawn from the market is a net positive for us. It's just another mark on what has been a somewhat disliked product over the years from the box warning to the high rates of nausea and vomiting and abnormal dreams and just the poor tolerability. And now the fact that they found a potential carcinogen in it, I think, does help our prospects long term and creates some additional interest in what we're doing. I guess as it specifically relates to any ongoing dialogues, I think ORCA-2 and the Phase III data is probably going to be more important than at least what we're seeing in the market today with the generics.

Okay. Very good. And congratulations on the vaping study clearance. Is anyone else working there? There are a bunch of other companies out there that have a foot in the space, and I'm wondering if anyone else is trying to pursue that market as well that you've seen.

Yes. Yes. Good question, John. Yes, at the moment, we're not aware of anyone else. We think, at the moment, we're the only one that is pursuing a specific vaping indication. And so I think that would set us apart in the market. Obviously, there would be some -- with the products on the market today like NRT and others, people are surely trying those to help quit. But I think having a product specifically indicated in this market would be very powerful for us. So yes, we're excited about getting that going. IND was the first step in that, but we look forward to initiating that trial next year.

Yes. That's great news. The other thing I wanted to bring up was the FDA recently authorized the first electronic cigarettes. It was an R.J. Reynolds product. Does that change the smoking cessation environment at all for them kind of tacitly saying that you could use this as a way to stop smoking?

No. I mean I think we've been tracking this. This has been kind of an ongoing development with the FDA's oversight over the e-cigarette market, and it took them the full year to start to respond back on these marketing applications. And I think if anything is shifting, it's likely just the market dynamics, and we saw a huge number of products be kicked back, a number received marketing denial orders from FDA. So the market may be somewhat consolidated at the end of the day, but it's not going away. And I think the FDA has made it clear they do not like the candy and fruit flavors. So some of that looks like it's going to be limited. But at the end of the day, I think there is a market for e-cigarettes, whether it's smoking cessation or otherwise, that will be in play as we go forward.

And your next question comes from the line of Jim Molloy from Alliance Global Partners.

I had a quick question on the ORCA-3 trial. Could you walk through expectations here on sort of the run rate to get that done in top line data? And I know it's kind of early to look forward about potential NDA filing.

Yes. Jim, thanks for the question. So ORCA-3, as we indicated on the call, we're actually kind of well underway in terms of the preparations for initiating that study. Early next year is what we're planning on. I think before we get into time lines for data and things like that, I think it's important that we get to the point where we're initiating it, which will actually kind of set the trajectory going forward. But as we indicated, this is an important study for FDA in terms of 2 well-controlled trials for approval. And from our perspective, getting that underway sooner is going to shorten the overall time lines to ultimately an NDA submission, approval and a launch of this product, which is why we're looking at accelerating that and not waiting for ORCA-2 data to initiate that second trial.

And the thinking is, as well, sort of similar to the ORCA-2 to kind of ride the crest of New Year's resolutions of quitting smoking and helping get initiations going on the trial.

Yes. Yes. Absolutely, Jim. And I think that's something that we've seen over the years. It's been a great time to be out in the market recruiting subjects in smoking-cessation trials. So I think being out early next year would be a great place for us to be with the ORCA-3 study.

And maybe nuts and bolts. You've already -- I don't know if you've touched on it earlier in the call. I hopped in a little late. I apologize. The R&D kind of down a little bit in the quarter. Can you talk about [ reversing ] of sort of the run rates you had first half of the year? You talk a little bit about expectations for the rest of the year for G&A and R&D. And then should we see dramatic changes in 2022 or kind of in line with how '21 went?

Yes. So in terms of run rate, Q3 did decline a little bit. We would expect to see that in a similar level in Q4, so a little bit less than what we saw first half of this year, which is kind of through the middle of the year with ORCA-2, which was really the largest portion of the burn this year. So when you kind of fast forward to next year, a big component of that, once we initiate ORCA-3, will be a similar-sized trial to what we're running this year with ORCA-2. So I think we will see a bit of a roll-off in Q4 and then I think a ramp-up as we get into the middle of next year as we get into the ORCA-3 study as well as ORCA-V1 as well layering on.

And I'm showing no further questions in the queue at this time. I'll hand the call back to Mr. John Bencich for closing remarks.

Thanks, Lilly, and thanks, everyone, for joining us today. Obviously, huge progress being made this year. We're excited to announce kind of where we're headed with ORCA-V1 and ORCA-3 next year. So we've got a lot of things in play moving forward as we go, and we're looking forward to keeping everyone updated as we roll into ORCA-2 results next year. So thanks, everyone, for joining us, and we appreciate the continued support.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.