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

Good day, and welcome to the second annual Winter Wonderland Best Ideas Conference. The next presenting company is Achieve Life Sciences. [Operator Instructions] I'd now like to turn the floor over to today's host, John Bencich, CEO of Achieve Life Sciences. Sir, the floor is yours.

Great. Thanks for the introduction, and thanks to everyone for joining us today. Before we get going, I'd just like to remind everyone that I may be making forward-looking statements as part of the presentation today. So I would refer everyone to our filings on sec.gov and the risk factors contained therein. So here in Achieve Life Science, we're focused on the development and ultimately, the commercialization of a drug called cytisinicline as an aid for smoking cessation and treatment for nicotine addiction. And we have a really compelling product on our hands since, one that has a huge amount of historical data supporting the safety and efficacy of the product. There's been extensive research as part of historical clinical trials, including nearly 3,000 in recent investigator-led Phase III style studies. And in addition, the product has been on the market for over 20 years in Central and Eastern Europe, where it's treated over 20 million patients during that period. But it's also a drug that's never been available in any major markets. So we were able to secure an exclusive license and supply agreement to the product from the originators, a company called Sopharma. And our objective here is to get this product on the market, first and foremost in the U.S., and then ultimately take it to the rest of the world. And to that end, we've been pushing the program forward. We formed a partnership with the NIH that helped facilitate the opening of an IND. And we've completed a Phase II trial here in the U.S. We'll talk a little bit about those results. And we're in the midst currently of 2 Phase III trials, the first of which will read out in the second quarter of this year. And the other one we just announced a couple of weeks ago and is currently enrolling. So we're moving forward quickly. We'll share some of the details of the program with you. But before we get there, I want to remind everyone just of the magnitude of the problem that we're addressing here. Smoking and tobacco-related diseases continues to be the most lethal global epidemic. There's close to 8 million deaths around the world, close to 500,000 here in the U.S. annually. And tobacco use continues to be the leading cause of preventable death. But there still remains a huge unmet need here. There's over 1 billion smokers around the globe, more than 34 million here in the U.S. And we now see an uptake in other forms of nicotine use, including e-cigarette use, which continues to be a segment that we're looking to address as we go. Now with that being said, there's currently only 2 non-nicotine, FDA-approved smoking cessation treatments. The last approved was over 15 years ago. So we think a new product is really needed in this space. And when we look at this market overall, the current treatments really are failing smokers looking to quit. This is a difficult addiction. Most smokers have a desire to quit. A little over half make a quit attempt annually, but the success rate is really quite low. And so there is quite an efficacy barrier associated with this segment. And even with the most efficacious product on the market, 4 out of 5 patients will have relapsed 6 months post initiation of therapy. So we think there's more to be done in this segment. And one of the reasons that there is low efficacy, we believe, is the safety and tolerability with the existing products. There's been a huge amount of overhang from the 2 approved prescription medications. Both have had historic black box warnings, and CHANTIX just recently was withdrawn from the market for finding nitrosamines in the product, which is a potential carcinogen. So these safety issues really are barriers and they do lead to discontinuation of the products. We see that the majority of patients taking CHANTIX don't make it through the full course of therapy. Only 50% make it to month 2, and less than 25% through month 3. And the #1 reason given there is the safety effects. So we think we have a product that addresses these needs. And when we look at the differentiation here, we've got a product that historically has been really well tolerated, in particular, due to the mechanism of action, which is highly selective to the nicotine receptors in the brain and provides a really minimal number of adverse events, which leads historically to excellent compliance. We also have a short course of treatment at 6 weeks of therapy with the option to extend out to 12, and we think this really is differentiated in the market from the products that are available today that are 12 weeks or longer. And we've got in-market experience with our products. I mentioned the black box warnings with the products that are available today. We haven't seen a history of any of those effects with our products. And we've seen really robust efficacy in terms of our historical clinical trials. And finally, the product is also naturally derived, and we continue to hear from both patients and subjects in our trials that this is an attractive element to the program. Now when we look at the market here in the U.S., in particular, I mentioned there was 34 million smokers. But when you look at the actual utilization clinically, you see that less than 4% of the market is attempting smoking cessation quit attempt with the market leader of CHANTIX. Now we ask ourselves here, why wouldn't we see more uptake here? We know for a fact that the market access component here is really compelling. The Affordable Care Act mandates that smoking cessation medications be covered. It includes 2 quit attempts plus behavioral support to go along with it. And we see that the access is great with over 80% of these scripts being delivered with no copay. Yet we also see what I mentioned before, has a high discontinuation rate from these products. And this really is due to concerns about the side effects. So we see a product that's able to alleviate those effects, should lead to better compliance and ultimately, better outcomes. Let's talk a little bit about how our drug actually works. So the drug, cytisinicline, specifically targets the alpha 4 beta 2 nicotine receptors in the brain. And it works as a partial agonist antagonist. So it works in 2 ways. First, it comes in and it blocks the receptor. So if you continue to smoke while using the medication, the nicotine can't get in to the receptors. So you don't get the same pleasure and satisfaction that you normally would with nicotine consumption. But it also partially stimulates the receptor, but albeit at much lower levels than nicotine. And this helps with the cravings and withdrawal symptoms associated with making a quit attempt. And this targeting of the alpha 4 beta 2 receptor really is a validated target. In fact, this is the same target that CHANTIX goes after with their product. But that's really where the similarities end, because with CHANTIX, they also hit other off-target effects that lead to the poor tolerability. In particular, there's 2 receptors that we're aware of, 5-HT3 and alpha 7, that we believe are responsible for the sleep disturbances and nausea that come with CHANTIX. And we know from what's been put out in the literature to date that we hit these targets at significantly lower levels than that of CHANTIX. Now when we transition to how that plays out clinically, you can see on the right with CHANTIX or varenicline, about 28% of patients will experience nausea and vomiting when taking that product. And that typically happens in the first couple of weeks of therapy, which is why CHANTIX starts with a low dose and titrates up, where historically for us, we started with a high dose and titrated down that you can see we have a very muted effect here on the nausea front. Now with CHANTIX, if you make it through the nausea and vomiting, you see elevated levels of sleep disturbances, abnormal dreams and nightmares, insomnia, headaches. Again, additional reasons to be noncompliant and drop off the product. And you can see for cytisinicline, it continues to be single digits in terms of the adverse events, which we think in this category is really important because this is more elective. It's very difficult to quit. And if people feel terrible on the medication, they will go back to smoking. And this is something that we've seen in recent studies. One that was just published here last year was a study called RAUORA. This was the first ever head-to-head trial directly against CHANTIX. And what we saw in this trial was statistically lower rates of adverse events for cytisinicline when compared to CHANTIX. And this was across every single category. And these were individually significant at nausea, insomnia as well as abnormal dreams. And again, this is something that we've seen comparing across trials historically, but to see it in the same setting was a really great result for us in this study. Now if we transition into some of the data that we've generated here more recently, our Phase II ORCA-1 trial was a dose selection trial that really honed in on what was the appropriate dose and administration to take forward into Phase III. So we looked at 4 different active arms against matched placebo in this trial. Now in terms of the demographics in this study, these were a pack a day smokers, been smoking for over 30 years. And you can see made between 4 and 5 quiet attempts previously to kick the habit. And you can see in those previous attempts, it really ran the gamut from varenicline, which is CHANTIX, to Bupropion to various forms of NRT as well as e-cigarettes, yet they're all still smoking, which I think gives a glimpse of just how difficult it is to quit in this setting. Now what we found in this trial was that the 3 milligrams, 3 times a day dose and administration was the best-performing arm of the bunch. We saw a 50% biochemically confirmed quit rate at the end of treatment compared to 10% on placebo. And we saw that this effect was maintained for a subsequent 4-week period. And this is what we decided to take forward into Phase III and explore further. Now on the safety side, we continue to see single-digit rates of adverse events. And there was probably more safety reporting in this trial than in any previous study done to date, yet we didn't see any new or unusual safety artifacts coming out of this trial. So again, a great result, really reconfirms that we've got a differentiated safety profile with our product. So taking the product forward from here, we did make a shift to move to the 3 milligrams, 3 times a day dose and administration. We also decided to extend the dosing period from 25 days to 6 and 12 weeks. We think this has the potential to increase efficacy from what we've seen historically. It also allows us to measure the FDA approvable endpoint, which is a 4-week continuous abstinence rate, and do that while patients are still on drug. With the 25-day course of treatment, some, if not all, of that measurement would have to be post treatment. So what we designed in our Phase III trial is a 3-arm study looking at placebo in Arm A, 6 weeks of cytisinicline treatment on Arm B, and 12 weeks of treatment on Arm C. And we will track patients up to 6 months post randomization in terms of long-term follow-up. The study was designed at 750 patients split across the 3 arms in a 1:1:1 randomization. We did over-enroll slightly in this trial to about 270 per arm. And when we look at the primary endpoint here, we'll be looking at quit rates during the last 4 weeks of treatment, so weeks 3 through 6 in Arm B, weeks 9 through 12 in Arm C, and we will compare those to the placebo arm. And these are independent primary endpoints. So we could win at 6 weeks, we could win at 12. And what we would anticipate is we would win at both. And from a label perspective, this would be a 6-week course of therapy. And if the patient needs a little bit longer to quit, they could refill out to 12 weeks. Now the trial overall, we think, is very well powered, over 95% to show a difference at the long-term follow-up. So we continue to remain confident that this is the right trial design to get the result that we're looking for in this setting. Now in addition to our work on smoking cessation, we're also looking to expand into e-cigarette cessation as well. This is a segment of the market that's grown leaps and bounds over the last decade. And currently, there are no approved treatment options to help people quit. And with all the other products on the market already generic, no one's looking into this. So we see this as a segment of the market that we could wholly own commercially and be more than just an aid to smoking cessation and more a treatment for nicotine addiction more broadly. And we think that would really set us apart in the marketplace. So we were able to secure an NIH grant of up to $2.8 million to help drive forward a Phase II trial to help nicotine e-cigarette users. So it will be a 150-patient trial. We are currently working through the grant logistics, and we hope to be in a position to initiate this trial in the second quarter of this year. So when we look at the milestones in front of us, we've completed the Phase II ORCA-1 trial. We're currently in the final phases of the ORCA-2 Phase III trial with top line data expected in the second quarter of this year. And I mentioned earlier that we just announced the initiation of the second confirmatory Phase III trial, which we're calling ORCA-3. The design of this will mirror that of ORCA-2, so a 3-arm trial, targeting 750 patients across 3 arms. We're just now enrolling on that trial, and we'll have further updates as we move along in terms of the timing of data on that, but we would anticipate that to be in the first half of 2023. And then I mentioned just previously, ORCA-V1, the study in e-cigarette cessation, we're looking to launch here in the second quarter of this year. So coming very quickly. So one final piece here, and then we'll wrap up and see if there are questions. But we do have a broad portfolio of product protection around this program that extends out to 2040. So this is a naturally derived product, so we don't have composition of matter on the molecule itself. So we've been building up patent families around formulation, method of use, the extraction process that we used to obtain the drug. And we've got 7 granted patents at the moment across 7 families. The most important of these was issued last year, and this was on the 3 milligrams, 3 times a day dose and administration. This is an Orange Book-listable patents that extends out to the third quarter of 2040, and we think will provide lots of product protection as we look to commercialize this product. Now in addition to the patents, there will be regulatory exclusivity that comes along with a new chemical entity, both here in the U.S. as well as in Europe. And we also see the supply chain is offering additional protection around the program. This is a molecule that is not able to be synthesized in any feasible manner. And so a generic entrant into this market would have to find a sizable source of supply, which we think would create additional barriers. Now we, over the years, have pressure-tested ability to make this product synthetically. We went to the University of Bristol and engaged their help to find a synthetic route. Now while they were not able to achieve that goal, they were able to structurally modify the botanical source and create some novel derivatives that we think could have implications in other CNS indications. And this is a program that we see as having some value that we will look for potential out-licensing opportunities around the work that's coming out of this program. So more to come on that. So to wrap things up here, just to highlight, we've got a product that we think is really well positioned to address what continues to be a global public health epidemic. It's a product that has a very differentiated product profile that looks to be much safer and more tolerable than existing products on the market that have a history of having box warnings as well as limited efficacy. This continues to be a very large market opportunity with over 1 billion smokers around the globe, a growing segment of e-cigarette users that's over 11 million in the U.S. alone, and in a segment that is really lacking in new options with nothing new in over 15 years, and a dynamic with the Affordable Care Act mandating new products be covered. CHANTIX, again, has been the most successful product that reached peak sales of over $1 billion before going generic. And we see a real potential with a strong product profile to potentially expand that market going forward. And we've got a product that has a history of safety and efficacy given the historical trials and end market experience that we've had. And we've had really strong interactions with the FDA here over the last several years that give us a real clear direction on how to get this product to market, and we are now executing on that plan. And then finally, we've got strong product protection around the product that we believe will support this well into the future. So I appreciate everyone joining today. I'll take a pause there and see if we've got any questions in the queue.

We do have 1 question on capital. So we did end the third quarter of last year with $33 million of cash on the balance sheet. We were able to secure an incremental $15 million of capital through a facility with Silicon Valley Bank in the fourth quarter of last year that has an additional $10 million of capacity that comes with it, and that gives us runway out into 2023, and really, the capital within that facility to complete the remainder of the development of the program that should be sufficient to move this forward to an NDA. And then another question here on the timing of trials. Mentioned ORCA-2 will read out here in the second quarter of this year. ORCA-3, we are just initiating that trial. It's across 15 centers here in the U.S. And depending on timing of enrollment, we think that should set up top line results in the first half of 2023. And I'm seeing one more question here on what positive ORCA-2 results mean for potential partnering opportunities. I mean, I think that's a good question. So we do see both the Phase III trials as being instrumental in furthering discussions with potential partners. This is a program that we will look to find a commercialization partner to go along with. We'll be looking for a big biotech or pharma that has an existing primary care sales force already in place, one that we can plug and play this product into. And we think both of the Phase III trials will be instrumental in driving those discussions forward. This will be the data set that goes in the label. So any final market analysis that may be required should be derived off of those data sets. So we see those as incredibly important. We also see an opportunity to take this product to market through digital channels, direct to consumers, leveraging some of the technologies that would allow the facilitation of a telehealth visit. So pulling patients in through a portal, getting a script written and then drop shipping products directly to patients' doorsteps. We think smoking cessation is an indication where that would really resonate and another opportunity that lies ahead of us. I think that's all the questions that I'm seeing in the queue today. I just want to thank everyone again for joining us today, and we look forward to providing additional updates as we drive the program forward.

Thank you. Ladies and gentlemen, that does conclude Achieve Life Sciences presentation. The next session will begin in 5 minutes. Please consult the conference agenda for the next presenting company. Remember, one-on-one meeting requests are still open, so be sure to log in to conference platform and request more meetings. You may now disconnect.