Achieve Life Sciences - Q3 2023

Transcript

Operator (participant)

Greetings. Welcome to Achieve Life Sciences' third quarter earnings conference call and webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Nicole Jones with Investor Relations. Nicole, you may now begin.

Nicole Jones (Head of Investor Relations)

Thank you operator, and thank you to everyone for joining the call today. Today from Achieve, we have John Bencich, Chief Executive Officer, Dr. Cindy Jacobs, President and Chief Medical Officer, and Jerry Wan, Principal Accounting Officer. Achieve's 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 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.

John Bencich (CEO)

Thank you Nicole, and thanks to everyone for joining us today to review our third quarter highlights and the overall status of the cytisinicline program. Over the last quarter, as well as throughout the entire year, significant progress has been made in establishing the foundation for the first novel nicotine dependence treatment in almost two decades. So far this year, with a small and efficient team of only 22 full-time employees, Achieve accomplished many significant milestones, including the announcement of positive results from our second phase III cytisinicline trial for smoking cessation and published results from our first phase III trial in JAMA, reported a statistically significant efficacy benefit in the phase II ORCA-V1 trial, the first-ever randomized controlled trial for e-cigarette cessation.

We've completed three additional clinical studies of over 100 subjects required for NDA submission, made significant progress on the compilation of the NDA, held numerous interactions, and conducted three formal meetings with the agency to prepare for filing and approval in the U.S., including, most recently, a pre-NDA discussion that occurred at the end of October, and increased outreach and further discussions with potential commercial organizations on the cytisinicline U.S. and global marketing opportunity. We believe, pending FDA approval, cytisinicline holds promise for providing a fresh start to the millions grappling with quitting smoking and vaping. There remain over 1 billion cigarette smokers around the globe. In the United States alone, over 28 million adults smoke combustible cigarettes and 11 million adults vape nicotine. The market potential for cytisinicline is substantial, and its potential impact on global public health is unparalleled.

We have strong confidence in cytisinicline's effectiveness in assisting individuals who are motivated to quit smoking. Our phase III clinical trial results demonstrate a significant advantage, with smokers treated with cytisinicline being up to eight times more likely to successfully quit smoking compared to those receiving placebo. Notably, cytisinicline stands out from existing treatments due to its excellent tolerability, with the most common adverse events affecting fewer than 10% of trial participants. We perceive a distinct opportunity with cytisinicline to reinvigorate the nicotine addiction market and make a profound impact on public health. By introducing this new treatment option, we anticipate a higher number of individuals will be encouraged to embark on a new quit attempt. With a product that is well tolerated, we anticipate a high level of compliance and adherence to treatment, thereby enhancing their chances of successfully quitting.

Our confidence in cytisinicline is reinforced by leaders in the smoking cessation community, who have consistently shown their willingness to collaborate, express interest in new research, and assist us in disseminating these crucial findings. During our engagements with this influential community, they have expressed that the goal for a new therapy should be to double the likelihood of a successful quit compared to behavioral support alone. Cytisinicline vastly exceeds this threshold, with subjects in our ORCA studies treated with cytisinicline having odds of quitting improved by upwards of six to eight times. This quarter, our research of the optimized dosing and administration of cytisinicline in U.S. subjects was published in the highly esteemed medical journal, JAMA. This recognition has made a significant impact, garnering thousands of online views and being featured in more than 40 media outlets.

Furthermore, during this quarter, Dr. Nancy Rigotti, an ORCA primary Investigator and Professor of medicine at Harvard Medical School and the Director of the Tobacco Research and Treatment Center at Massachusetts General Hospital, presented, for the first time, data results from the phase II ORCA-V1 trial of cytisinicline for e-cigarette cessation at the Society for Research on Nicotine and Tobacco Annual European Meeting. ORCA-V1 evaluated the safety and efficacy of cytisinicline treatment for 12 weeks compared to placebo in 160 adults who use nicotine e-cigarettes. Cytisinicline-treated subjects experienced statistically significant cessation rate of approximately 32%, compared to 15% in the placebo arm, or 2.6x higher odds of quitting vaping. As seen across our development program, cytisinicline was very well tolerated and no treatment-related serious adverse events were reported.

Our endeavors to combat the vaping epidemic have been met with strong support from government agencies, clinicians, and prospective commercial partners, highlighting the pressing unmet need in this area. ORCA-V1 was the first randomized placebo-controlled trial to achieve success in demonstrating the efficacy of a treatment for addressing this type of nicotine dependence. These results are highlighted as there are currently no approved treatments tailored specifically for vaping cessation. The overall e-cigarette market continues to expand rapidly, with the most recent prevalence rate in the U.S. indicating a 20% annual increase of adult users. While e-cigarettes can serve as a helpful tool for some transitioning away from combustible cigarettes, the long-term effects remain unknown, and many individuals aspire to quit nicotine altogether, which is precisely where cytisinicline can step in.

We are assessing our clinical development strategy to pursue an on-label indication for e-cigarette cessation and plan on holding an end-of phase II meeting with FDA in 2024 to discuss the requirements for approval. As there are no treatments approved for e-cigarette cessation, this is a recognized area of high unmet need, and we will position it as such during our discussions with the FDA. Our goal is to expand the label of cytisinicline for specific promotions for e-cigarette cessation, even though many healthcare providers may consider cytisinicline a viable option for treating various forms of nicotine dependence. As you may recall, ORCA-V1 was partially financed via non-dilutive grant funding from NIDA and NIH. We believe there may also be non-dilutive funding opportunities available to support a future vaping study.

Our aspirations of changing public health hinge on the regulatory filing and successful approval of cytisinicline. To that end, we have been focused on continuing the work needed to support an NDA filing, targeted in the first half of 2024. We are pleased to share that we have completed all of the in-clinic treatment portions of three NDA-enabling clinical trials that have been running over the course of this year. Specifically, these trials have been run to evaluate QT interval prolongation, steady-state pharmacokinetics in smokers, and pharmacokinetic parameters in subjects with renal impairment. We expect final study reports from these trials to be available in early 2024. Additionally, last week, we held a pre-NDA meeting with the FDA.

The FDA encourages this pre-submission engagement to solicit comments and clarification from the agency on the acceptability of key data, including information that might become available for submission during NDA review. This initial discussion was constructive and agreement was reached on many of the submission requirements. Dialogue with the FDA is ongoing, and because of this, we aren't able to provide additional details at this time. We will be in a position to provide an overview once discussions are finalized. The output of the pre-NDA discussion is critical to clarifying the final regulatory path of cytisinicline in the U.S. and will set the stage for how this product will progress through future market approvals around the globe. Additionally, these data points are important to furthering the discussions we are having with potential commercial organizations.

Since ORCA-V1 and ORCA-3 have been released and ORCA-2 was published in JAMA, we have seen significant additional commercial interest in the cytisinicline program. As we have stated previously, we continue to believe that this asset, in the hands of a larger organization, will maximize the full commercial opportunity. So what are we looking for exactly? Our ideal partner would have global capabilities with an established footprint and strong commercial capabilities and resources to maximize the global health impact that cytisinicline offers. Given the substantial U.S. market opportunity, strong U.S. sales and marketing capabilities are an important attribute that we are seeking in our selection process. We are pleased with the dialogue and engagement with potential commercialization partners and are focused on continuing to move this process forward expeditiously. At this time, I'll hand the call over to Jerry to review our financial highlights and results.

Jerry Wan (Principal Accounting Officer)

Thanks, John. I will be providing an update on our cash position as of September 30, 2023, and reviewing our operating expenses for the third quarter of 2023. As of September 30, 2023, the company's cash, cash equivalent, short-term investments, and restricted cash were $20 million, compared to $24.8 million as of December 31, 2022. We believe our current cash balance is sufficient to provide us runway into the second half of 2024. With respect to our statement of operation, net loss decreased to $7.1 million for the quarter ended September 30, 2023, compared to $13.1 million for the same quarter of 2022. Net loss for the nine months ended September 30, 2023, decreased to $24.3 million, compared to $31.1 million for the same period of 2022.

In line with expectations, operating expenses continued to decrease for the third quarter of 2023, with the completion and wind down of both the ORCA-3 phase III trial and the ORCA-V1 phase II trial. We expect our quarterly operating expenses to remain lower in the fourth quarter as compared to the first half of 2023. The decrease in costs will be partially offset by an associated increase in NDA supporting activities, including the finalization of three NDA supportive clinical trials and other NDA preparation activities. That concludes my financial remarks, and I will now turn the call back over to John.

John Bencich (CEO)

Thanks, Jerry. As I stated at the beginning of the call, 2023 has been a remarkable year for Achieve and the cytisinicline development program. In the near term, we have three key priorities where we will focus our efforts. First, finalize discussions with preferred strategic commercial organizations. Second, complete preparations to finalize the NDA submission. Third, define the regulatory pathway for cytisinicline label expansion in e-cigarette cessation. We maintain our confidence in cytisinicline's ability to change the face of public health, and we appreciate your support as we work diligently to bring forward this important treatment. At this time, I'd now like to turn the call over to the operator for questions.

Operator (participant)

Thank you. We'll now be conducting a question-and-answer session. If you'd like to ask a question today, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Thank you. Our first question is from the line of Thomas Flaten with Lake Street. Please proceed with your question.

Thomas Flaten (Senior Research Analyst)

Yeah, hey, guys. I appreciate you taking the questions. John, with respect to timing of the NDA submission, given that the data from the three supportive studies will be out in the first quarter, is second quarter most likely? I know you're guiding the first half, but just some thoughts on both.

John Bencich (CEO)

Yeah, Thomas, thanks for the question there. So, you know, given that the discussions are ongoing with the agency, as we conclude the pre-NDA meeting, and we look to get final agreements and minutes out the other end, we're not able to refine anything further on that. So we'll have a future update as we kinda get through that final process and dialogue with the agency.

Thomas Flaten (Senior Research Analyst)

Coming out of that October meeting, what was there anything surprising, any incremental studies that they requested, or was it, was it pretty straightforward?

John Bencich (CEO)

I think in terms of the output, you know, I think as we mentioned, you know, the discussion was constructive. We did get agreement on many of the items that we were looking for. And there's a few other pieces that we're looking to get finalized, and written document clarification on. And so, you know, we'll be able to provide a further update on that as we get through those final discussions.

Thomas Flaten (Senior Research Analyst)

Then just one final question from me. Could you give us maybe a little assistance in mapping out spending between, you know, today and the submission?

John Bencich (CEO)

Yeah. So I think if you look at the third quarter in terms of kind of the decrease in burn that we saw from the first half of this year, I think you can expect that will continue through the fourth quarter of this year as well. You know, so we will see that decline carry forward if you're looking at kind of projecting that ahead. I think that'd be a good way to think about it at the moment.

Thomas Flaten (Senior Research Analyst)

Excellent. Appreciate you taking the questions. Thank you.

John Bencich (CEO)

Yep. Thanks Thomas.

Operator (participant)

Our next question is from the line of Michael Higgins with Ladenburg Thalmann. Please proceed with your questions.

Michael Higgins (Managing Director of Equity Research)

Thanks, operator. Hi, John. Hey, guys. Congrats on the continued progress, including your R&D expenses. That's notable here in Q3 results, and thanks for taking some questions here. If I could ask a bit more on the feedback and your progress with potential commercialization partners, wondering how that's coming along, and if you believe your discussions with the, with the FDA will be wrapping up in the first part of 2024. Do you expect to have feedback from NIDA NIH regarding vaping before you complete those potential commercialization conversations?

John Bencich (CEO)

Hi, Michael. Yeah, thanks for the question. So on the vaping indication, you know, you know, what we've been guiding to is holding an end-of-phase II meeting next year. You know, in terms of, you know, further refining on timing on that, we can't really provide that at the moment. Our focus will continue to be on the smoking cessation NDA as kind of that, that initial priority to make sure that that's moving forward, expeditiously.

Michael Higgins (Managing Director of Equity Research)

Is it fair to say the partnering discussions would be separate for cigarette versus vaping?

John Bencich (CEO)

On the partnering discussions, you know, I think we have seen, you know, a fair amount of interest coming from the vaping side of the opportunity. You know, smoking cessation will continue to be the core of that. And so I think in terms of the initial opportunity, you know, that's gonna be the first piece to launch. And so, you know, both are important, but I think the smoking, given kind of the near-term nature of it, is gonna be the majority of the focus there.

Michael Higgins (Managing Director of Equity Research)

That's fair. Thanks. And then, just to clarify for everyone on board here, the gating factors ahead of the NDA filing, obviously, you have discussions with the agency. You've got some three studies reading out early next year. Are those the two primary drivers? Obvious discussion with the agency, but anything else besides those three that you're waiting on?

John Bencich (CEO)

Yeah. So those three are obviously critical in terms of having those key components that we knew were gonna be needed for the NDA. I think as we finalize the pre-NDA discussions and get those final written minutes, we'll be able to clarify further timing on the NDA piece. And I think the key piece of this is getting clarity going forward, and that feeds back into the partnering discussions and making sure that, you know, the path towards approval is fully clarified, and that's exactly what we're getting out of the pre-NDA meeting.

Michael Higgins (Managing Director of Equity Research)

Makes sense. Appreciate it. Thanks, guys.

Operator (participant)

Thank you. Our next question is from the line of François Brisebois with Oppenheimer. Please proceed with your question.

Speaker 8

Hi, this is Dan on for Frank. Thanks for taking my questions. Firstly, congrats on the JAMA publication and also the ORCA-V2 presentation at the, and the V1 presentation at the SRNT. Can you give us a sense of the KOL feedback that you're hearing from these conferences? Anything in particular in terms of cytisinicline's features, tolerability, efficacy, that is standing out, that is coming up? Any color there.

John Bencich (CEO)

Yeah, thanks for the question. I'm going to hand this over to Cindy.

Cindy Jacobs (President and Chief Medical Officer)

Yeah, well, with Nancy Rigotti actually presenting, and our other KOLs are pretty excited as far as the efficacy that cytisinicline shows. But actually, they're even more impressed and excited about the safety profile, which allows then individuals to stay on treatment and get the benefit. So it's really a combination of the efficacy and safety profile that they are the most excited, for smokers and, you know, in the future, vapers to actually have a new therapy to help with their nicotine dependence.

Speaker 8

Great. And just any updates on the FDA inspection readiness at, on the Sopharma front, and also any updates regarding preparations with regard to supply chain, getting the registration batch? Are all those processes on track?

John Bencich (CEO)

Yeah, thanks for the question there. So, you know, I think the, the Sopharma and CMC attributes are going to continue to be a, a focus as we move forward through NDA submission. As we've, we've indicated historically, you know, we've been working very closely with Sopharma and their readiness efforts, including, you know, numerous, mock FDA inspection, audits. So that, work will continue, as we progress. And, you know, Sopharma continues to be confident that, they can be ready for a, a future inspection, but it will continue to be a, a high area of focus for us as we proceed.

Speaker 8

Thank you. Thanks for taking my questions.

Operator (participant)

Thank you. As a reminder, if you'd like to ask a question, you may press star one. The next question is from the line of John Vandermosten with Zacks. Please proceed with your questions.

John Vandermosten (Senior Analyst)

All right, thank you. Is there any reason to think that the potential vaping phase III trial would be much different from ORCA-3? Are there any considerations there? Might it be smaller or I know it's kind of early, but just thinking ahead on that?

John Bencich (CEO)

Yeah, so in terms of overall sizing, I think, you know, looking back at ORCA-2 and ORCA-3 is probably a good proxy in terms of overall sample size. You know, as we've indicated before, you know, our belief is, you know, single phase III trial is what would be required for approval in this indication, but ultimately, you know, we'll need to get guidance from FDA on that. But the ultimate design, we'll still be working on, in terms of what that looks like. But yeah, that sort of size is what you should anticipate.

John Vandermosten (Senior Analyst)

Okay, great. And I was doing some reading on varenicline, and there's thoughts that it could be used for other types of addiction, perhaps cocaine and things like that. Is that something that you might consider as well to pursue beyond nicotine addiction?

Cindy Jacobs (President and Chief Medical Officer)

This is Cindy. So we've had a lot of interest from our KOLs and other investigators of considering that once obviously approved for smoking cessation through grants. And so we're, we're supportive in those types of investigator-sponsored trials to kind of look at the other areas of addiction that cytisinicline could be helpful. And with that then, watch and see what we should pursue as a company.

John Vandermosten (Senior Analyst)

Is that something that you talk to with potential buyers at this point? You know, I mean, might those get split off and you pursue, you know, you pursue that on your own and, and they lift out the, the nicotine addiction part? Or is that, would that kind of all go together, do you think? I mean, again, I know it's early, but just I'm wondering kind of how the thought would be on that and maybe conversations that you've had.

John Bencich (CEO)

Yeah. So I think in terms of, you know, discussions with commercialization partners, you know, I think this is really looking at the totality of this. We're not looking at splitting this apart, in terms of of multiple pieces. Like as we, you know, indicated on a larger scale before, you know, we've had term sheets ex U.S., from parties, in particular, a lot of interest coming out of Asia. You know, our continued belief is that, you know, this asset belongs in the hands of a single global partner, one that does have strong U.S. capabilities to maximize, the opportunity here in the U.S. And so that's what we're looking for, and we think that really kind of revolves around, you know, the entirety of the asset, not, you know, carving it up into specific indications.

John Vandermosten (Senior Analyst)

Okay. And then looking at the potential sales force that might work the best for this after approval, are there any characteristics that you kind of look for? You know, and I'm sure you have a number of suitors that you're talking to, and obviously, you know, on your side, you want to see something that's attractive there to know who you can target and negotiate hardest with. What are some of those features that you look for in a sales force that, you know, would allow cytisinicline to kind of layer on easily and, you know, have them be very effective?

John Bencich (CEO)

... Yeah, I think when we look at this overall indication, you know, that historically and where we see it moving forward, it will continue to be a primary care call point. So from our perspective, you know, having reps on the ground that can hit that call point, you know, this could be an asset that's basically plugged and played into an existing sales force out there. We think that's kind of the easiest path forward. But there could be other opportunities when you look at more specialty companies that have, you know, either a CNS focus or addiction focus. So I think there's a number of angles, but I think a strong overlap with the call point is one of the key considerations for us.

John Vandermosten (Senior Analyst)

Okay. And then, any hints on a, on a brand name that you guys might be working on or looking for or?

John Bencich (CEO)

We do. Good question. This is something that we've pre-cleared with the agency already. Obviously, it's not fully blessed until the NDA review gets through the end. But that's one of the components we did pre-clear early just to make sure that we had that ready to roll.

John Vandermosten (Senior Analyst)

Great. All right. Thank you, John. Thank you, Cindy.

Operator (participant)

Thank you. At this time, I'll turn the floor back to management for closing remarks.

John Bencich (CEO)

Yeah. Thanks, operator, and thanks everyone for joining us today. We appreciate, you know, all the continued interest. It's been a tremendous year with data coming out of not only our second confirmatory phase III trial, but also the first-ever randomized placebo-controlled trial in vaping, and publication of our first phase III trial in JAMA. So really excited about where the program sits today and the interest that we continue to see from commercialization organizations. We look forward to driving this forward expeditiously and providing updates as we proceed. So thanks everyone again for joining us today.

Operator (participant)

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.