Achieve Life Sciences Inc

NASDAQ:ACHV

Earnings Call Analysis

Achieve Readying Cytisinicline NDA by 2025

2023 marked a pivotal year for Achieve with significant milestones in clinical and financial developments. The Phase III ORCA-3 and Phase II ORCA-V1 trials showcased cytisinicline's potential for smoking and vaping cessation. Following FDA discussions, an ORCA-OL trial will commence in Q2 to collect long-term safety data critical for the NDA submission, anticipated in the first half of 2025. A recent equity financing bolstered cash reserves to roughly $71.8 million, with fundraising expected to sustain operations into 2026 pending cytisinicline's approval. The year's operating expenses totaled $27.3 million, against a net loss of $29.8 million.

Navigating a Costly but Promising Path in Smoking Cessation

The company has navigated through a financially taxing period with significant developments in its smoking cessation efforts. The total operating expenses for the fourth quarter and the full year were $4.4 million and $27.3 million respectively, with a net loss of $5.5 million for the quarter and $29.8 million for the year. Despite the losses, there's a wave of optimism following the impressive results from the Phase III ORCA-3 trial and ongoing discussions with potential commercial partners to pave the way for market expansion. The management remains committed to finalizing the path toward expansion into e-cigarette cessation and anticipates product coverage by payors due to Affordable Care Act mandates, implying a supportive environment for future market access.

Building on Clinical Success Stories

The clinical data continues to bolster confidence as the company presented compelling results from Phase III ORCA-3 trial at the Society for Research on Nicotine and Tobacco Annual Meeting, showcasing strong smoking abstinence rates, manageable side effects, and a potential treatment breakthrough in a category stagnant for nearly two decades. This positive reception from the medical community is vital for the drug's credibility and eventual uptake, highlighting its differentiated benefits in managing side effects—a primary concern deterring smokers from seeking medication.

Strategic Preparations for Regulatory Approval

The company is strategically preparing for FDA inspection and considering additional Contract Development and Manufacturing Organizations (CDMOs) to ensure readiness and mitigate inspection risks. Such preparations are timely given the one-year extension they have gained due to trial delays. Keeping an eye on the competitive landscape, management notes that there are now 6 generic varenicline options on the market and cites IQVIA data pointing to a substantial market opportunity, with generics running north of a 30% discount to former brand Chantix.

Cost Estimates and Trial Logistics

Looking ahead, management has pinned cost estimates of the upcoming ORCA-OL trial at approximately $20 million, dispersed over 2024 and 2025. Although the trial will involve less frequent visits over an extended period, the overall cost profile is expected to align with that of previous studies due to the similarity in the number of visits and cost structures, with patient recruitment costs representing the bulk of expenditures. The company will start incurring these trial costs beginning from Q1 and intensifying through the early part of next year.

Earnings Call Transcript 2023-Q4

[Operator]

Greetings. Welcome to the Achieve Life Sciences' Fourth Quarter and Year-end 2023 Earnings Conference Call and webcast. [Operator Instructions] 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.

[Nicole P. Jones]

Thank you, operator. Good afternoon, everyone, and thank you for joining us today.

From Achieve Life Sciences, we are joined by John Bencich, Chief Executive Officer; Dr. Cindy Jacobs, President and Chief Medical Officer; and Jerry Wan, Principal Accounting Officer.

Management will be available for a Q&A session following today's 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 may affect the company.

At this time, I will turn the call over to John.

[John Bencich, executive]

Thank you, Nicole, and thank you for joining us as we discuss Achieve's financial results for the fourth quarter and year ended 2023, along with providing key updates on the cytisinicline development program.

2023 was a transformative year for Achieve, marked by significant clinical, regulatory and financial milestones. Our commitment to developing cytisinicline for smoking cessation and nicotine dependence, has yielded remarkable progress, and we're excited for the year ahead. During 2023, we completed and announced results from the Phase III ORCA-3 and Phase II ORCA-V1 trials, which have been instrumental in demonstrating cytisinicline's potential for treating nicotine dependence. The ORCA-3 trial again confirmed the promise of cytisinicline for smoking cessation with significant efficacy and tolerability benefits observed in treated patients.

Furthermore, the ORCA-V1 trial highlighted cytisinicline's effectiveness in treating nicotine dependence for vaping cessation, marking a pioneering step in helping to address this emerging public health challenge, in which currently over 11 million adults and an additional 2.1 million youth have reported vaping in the United States alone. Late last year, we conducted our pre-NDA meeting with FDA to review NDA submission requirements and timing. During the meeting, agreement was reached on many of the expected requirements, including that we have sufficient data sets from an efficacy perspective to proceed with submission. At that time, the FDA indicated that they would need additional safety exposure data beyond 12 weeks to assess the long-term exposure risk for patients receiving multiple courses of treatment over a lifetime due to the repetitive and chronic nature of smoking cessation attempts.

In February of this year, we reached agreement with the FDA that a single open-label study would meet the requirements for long-term cytisinicline exposure data, which clears the path for driving forward the cytisinicline program towards an NDA submission.

I will now turn the call over to Cindy to go into further detail on our study design and planned initiation of this open-label safety study, which we are calling the ORCA-OL trial. Cindy?

[Cindy Jacobs, executive]

Thanks, John. The ORCA-OL study will be a single-arm open-label study that will administer cytisinicline treatment with our novel 3-milligram TID administration to subjects who have already participated in our Phase II and Phase III cytisinicline trials, either for smoking or vaping cessation. The primary objective of the study will be to obtain longer-term cytisinicline exposure safety data for cytisinicline treatment for up to 1 year.

FDA was clear that the long-term exposure safety data they require a cumulative exposure for the period of 6 months and 1 year. Because this open-label study will enroll subjects who participated in our previous ORCA studies and 2/3 of them have already received up to 6 or 12 weeks cytisinicline treatment, this will allow for faster collection of cumulative exposure data to support the NDA submission. Based on our discussions with FDA, we have agreed to include safety data on a minimum of 300 subjects exposed to cytisinicline for a cumulative period of 6 months at the time of NDA submission.

And then prior to approval of the NDA that we will submit safety exposure data on at least 100 subjects with cumulative exposure for 1 year. This agreement follows the general ICH E1 guidance for products with chronic or repeated intermittent use for longer than 6 months in the treatment of non-life threatening diseases. We anticipate initiating the ORCA-OL trial in the second quarter of this year at approximately 30 clinical trial locations in the U.S., all of which participated in our prior ORCA studies. All of these clinical sites have now been engaged and are actively conducting outreach to potential participants.

As we have previously stated, there were more than 1,700 subjects who participated in the prior ORCA studies with over 1,100 that were previously treated with cytisinicline in those trials. We currently have enrollment in the protocol at up to 650 subjects to ensure that we have sufficient subjects to quickly meet the long-term exposure for 6 months and importantly, 1 year. We will obviously be monitoring enrollment and discontinuation rates closely as the study progresses to make a final determination on study enrollment. We have completed contracting and onboarding with our key contract partners and vendors to execute the ORCA-OL study as quickly and efficiently as possible. These include our CRO, data management, lab services, safety monitoring and drug distribution partners and we are on track to begin enrollment in the second quarter of this year.

And based on our current expectations, we believe we will be in a position to submit an NDA in the first half of 2025. Although the study objectives are specific to assessing for safety results, such as the incidence of serious adverse events over exposure time, we will also assess for cytisinicline efficacy with longer-term exposure. These assessments will be for observation purposes only and are not an FDA requirement or an endpoint to determine success of the trial.

In addition to finalizing NDA submission requirements for the smoking cessation indication, we will continue our discussions with the FDA regarding cytisinicline's role as a treatment for e-cigarettes cessation. We anticipate conducting our end-of-Phase II meeting and finalizing a Phase III protocol this year. We will be discussing the adequacy of a single Phase III trial for obtaining a label expansion for an e-cigarette cessation indication.

Since the Phase II ORCA-V1 trial received grant support from NIH and NIDA, we will continue to explore non-dilutive funding support as we continue to advance our Phase III planning.

I will now turn the call back over to John. John?

[John Bencich, executive]

Thanks, Cindy. In connection with the FDA clarity on NDA requirements, we bolstered our financial strength significantly in February, announcing an equity financing of up to $124.2 million in gross proceeds that includes initial upfront funding of $60 million and up to an additional $64.2 million upon exercise of milestone-driven warrants. This initial funding positions us to advance our clinical initiatives, including the ORCA-OL study and targeted NDA submission in the first half of 2025, all while ensuring a robust balance sheet as we continue strategic partnership discussions.

I will now turn the call over to Jerry, who will provide additional details on the financing and an overview of our latest financial results.

[Jerry Wan, executive]

Thank you, John. Good afternoon, everyone. I would like to first provide an update on our recent financing and cash position and then review our fourth quarter results.

As of December 31, 2023, the company's cash, cash equivalents and restricted cash totaled $15.6 million, down from $24.8 million as of December 31, 2022. Subsequent to the end of the fourth quarter, we announced a registered direct offering of common stock and a concurrent private placement of warrants with up to $124.2 million that closed earlier this month. This transaction included initial upfront gross proceeds of $60 million and up to an additional $64.2 million upon exercise of milestone-driven warrants.

After giving effect to the February 2024 equity financing, the company's pro forma cash, cash equivalents and restricted cash as of December 31, 2023, would have been approximately $71.8 million. This equity financing was key for the business, and we were pleased with the support of new and existing fundamental health care investors such as PROPEL Bio, [indiscernible] and Franklin Templeton to name a few, as well as strategic investor, Sopharma.

Proceeds from the offering will be used to fund the clinical development of cytisinicline including the upcoming ORCA-OL clinical trial, which is expected to be initiated in the second quarter of this year as well as the anticipated NDA submission in the first half of 2025. It will also be used to fund other cytisinicline related research and clinical development activities and for working capital and general corporate purposes.

We expect that the initial net proceeds from the financing will fund us into the second half of 2025, including the potential repayment of our outstanding debt obligations under our contingent convertible term loan. If the milestone warrants issued as part of the recent financing are exercised in full, we would anticipate these proceeds to extend runway into 2026 and through potential approval of cytisinicline in the United States.

With respect to our statement of operations, total operating expenses for the fourth quarter and year ended December 31, 2023, were $4.4 million and $27.3 million, respectively. Net loss for the fourth quarter and year ended December 31, 2023, was $5.5 million and $29.8 million, respectively.

That concludes my portion of the call. I'll now turn the call back over to John.

[John Bencich, executive]

Thank you, Jerry. It has certainly been an eventful and exciting start to the year. In addition to finalizing NDA plans with FDA and completing the financing to ensure we have adequate resources to complete the development of cytisinicline, we were privileged to deliver 3 presentations at last week's Society for Research on Nicotine and Tobacco Annual Meeting. Data from our completed Phase III and Phase II trials were shared with the prestigious audience of nicotine treatment specialists and researchers, who share our commitment and dedication to finding new solutions to address nicotine dependence.

Cindy presented data highlighting our impressive results from the Phase III ORCA-3 trial, which was consistent and reinforced our findings from the Phase III ORCA-2 trial. Dr. Nancy Rigotti, an ORCA primary investigator and Professor of Medicine at Harvard Medical School, reviewed findings from the Phase II ORCA-V1 trial for vaping cessation. Additionally, we delivered a presentation highlighting findings from our post-trial patient experience survey, which provided insights directly from a small sample of participants in the ORCA-2 and ORCA-3 trials, which showed high levels of reported smoking abstinence, reductions in both cigarettes consumed and cravings for smoking, and a strong willingness to recommend cytisinicline to other smokers looking to quit, if approved by FDA.

Importantly, almost 3/4 of respondents felt the side effects were manageable or that they experienced very few side effects. We continue to believe this is 1 of the key differentiating benefits of cytisinicline. As we know, side effects remain the key reason that many smokers are not compliant with or are unwilling to take currently available medications.

As I wrap up my remarks, I would like to express my appreciation for your continued support and for the collaborative and ongoing efforts of our trial participants and their health care providers at our trial sites. So many of us have been personally touched by the devastating consequences of smoking and remain steadfast in our belief that cytisinicline can truly make a profound impact to help the millions of individuals who have not seen any treatment advances in almost 2 decades.

Our priorities for the balance of this year remain clear: complete the ORCA-OL study, continue NDA submission preparations, finalize the path forward for expansion into e-cigarettes cessation, and continue productive dialogue with prospective commercial partners.

Thank you again for joining us today, and we will now open the line for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Thomas Flaten with Lake Street Capital.

[Thomas Flaten, analyst]

Cindy, in your comments, there seemed to be an implication that you would not do anything on the vaping program in the absence of nondilutive funding. Was that a correct read?

[Cindy Jacobs, executive]

Well, we're looking at getting additional nondilutive funding. I don't think we're going to be able to complete the Phase III trial with only nondilutive or grant funding. So we'll probably have to have a mixture of both. But it was similar to what we had with the Phase II, half of it was paid with NIDA grant funding and half by us. So there would be some mixture of that.

[Thomas Flaten, analyst]

Got it. And then just 2 quick ones on the OL study. Is there anything being done to monitor compliance of patients with the dosing instructions?

[Cindy Jacobs, executive]

Oh, you mean as far as making sure they're compliant, we have the same compliance kind of tactics with the OL study as we did with our Phase III. We will have text messaging. We will be giving out packets. They will need to bring them in. We'll review that the tablets were taken. So all of that is being applied similarly that was done in the Phase III with the OL study.

[Thomas Flaten, analyst]

And then kind of related to that, what burden is being placed on the patients, how often they have to come in for visits and follow-ups and things like that?

[Cindy Jacobs, executive]

Well, that is the 1 nice thing. They're instead of coming in weekly, which they did for the first 12 weeks and then monthly afterwards, they start out and they're only coming in monthly through the OL study.

[Operator]

Our next question comes from the line of Francois Brisebois with Oppenheimer & Company.

[François Brisebois, analyst]

Can you help us understand the time line here from first half '25 NDA filing to potential approval and launch?

[John Bencich, executive]

Sure. Thanks for the question, Frank. So right now, as Cindy indicated on the call, we're really driving forward towards initiating the open -- the ORCA-OL trial in the second quarter of this year. We think, again, depending on enrollment of those subjects, that could put us in a position to have the requirements for NDA submission, at least completed in the clinic late this year or early next. And so that would put us in a position to get the NDA on file first half of 2025. Right now, this would be a standard review cycle, so 2 months to accept, 10 months for review, which would put approval first half of 2026.

[François Brisebois, analyst]

Okay. Great. And in terms of the OL trial, why the push on looking at efficacy here? Is there -- what's the upside of doing that?

[John Bencich, executive]

Yes. So with respect to the FDA, they specifically told us they don't need efficacy out of this trial. This is solely for longer-term exposure safety data, which is fine for FDA. But from our perspective, we think efficacy is interesting. We think there's a lot of data points that could come out of this trial that could be leveraged for publication, for payors, for other future trial planning. For example, if a patient had quit in a previous study but relapsed, how likely are they to quit again, going back on to treatment, as well as what happens with longer duration. Does that get to more robust efficacy that again could lead into a life cycle management play of extending dosing beyond 12 weeks at some point in the future.

So I think from an efficacy perspective, there's some interesting learnings that we could get out of the ORCA-OL trial.

[Operator]

Our next question comes from the line of Michael Higgins with Ladenburg Thalmann.

[Michael Higgins, analyst]

Congrats again on the agreement with the FDA. So John, if you can give us some feedback as to how the patients are responding so far. It sounds like the sites have beyond their outreach. You mentioned 30 U.S. sites. Can you give us some feedback as to how many are opening, how many are reaching out and what the patients are responding like so far?

[Cindy Jacobs, executive]

John, do you want to me to get that?

[John Bencich, executive]

Yes, it would be great, Cindy.

[Cindy Jacobs, executive]

Yes. So the 30 sites, they've all started to reach out this month to the participants, and they are getting a lot of enthusiasm for coming back into an open-label study. I guess we were not surprised by this because we did do surveys of the Phase III afterwards, and that's some of the data that was presented at the SRNT meeting last week that they were very satisfied and they thought the treatment was very helpful. And so with that positive survey probably indicates that, yes, they are -- we are getting positive responses for participating in this open-label study.

[Michael Higgins, analyst]

That's great. Yes, we saw that presentation last week, and so not surprised to hear that. Curious if you've had a chance since the news from the FDA last December to have discussions with payors in light of that news and how that may guide what you're doing here in the open-label trial. What kinds of efficacy information which currently the FDA is not looking for, but certainly may help with your reimbursement scenarios post approval. Anything that you can share with us from the discussions as to what you may be looking for in terms of efficacy from this trial?

[John Bencich, executive]

Sure. Thanks, Michael. Yes, on the payor front, we've had a number of discussions with payors over the last 2 or 3 years. And I think 1 thing to keep in mind is that the Affordable Care Act does mandate that all FDA approved smoking cessation medications be covered. So from an access perspective, this is 1 of the better categories out there.

With that being said, the open-label trial, I think we'll have the ability, like I mentioned before, to look at what happens with repeat administration. So both success initially and then retreatment again or perhaps lack of success in an initial treatment and having success the second time around. All those sorts of data points can be used with payors as we have those discussions leading up to and on the other side of approval of this product. So I think those are probably the most important pieces. But I think as we kind of dig in further with the data sets that we get, there could be other interesting learnings that we can leverage with the payor community.

[Michael Higgins, analyst]

That makes sense. One quick follow-up, if I could, is the monthly visits. If you find because it's different than the weekly as before, that patients just aren't as compliant as they were in the previous trials. Are you able to adjust along the way and seeing that and try to reach out to them more often?

[Cindy Jacobs, executive]

Absolutely, yes. And that's 1 of the things we will be monitoring in that regard.

[Operator]

Our next question comes from the line of John Vandermosten with Saks.

[John Vandermosten, analyst]

How many -- since there's a delay relative to the first expectations on the trial, how does this affect the work with Sopharma preparing for the FDA inspection and all the other work that you were planning to do with them?

[John Bencich, executive]

John, thanks for the question. So as we've spoken about further, 1 of the key areas of focus for us will be and continue to be working with Sopharma to ensure FDA inspection readiness. So that will continue. This gives us effectively another 12 months of preparation timing with respect to that. One of the items that we are working with Sopharma is looking at additional CDMOs that could be side by side with Sopharma. Groups from both a drug substance and drug product perspective that have already been FDA approved historically that could continue to minimize any risk from an inspection perspective.

So that's something that we're working with in addition to the continued work at Sopharma in their site.

[John Vandermosten, analyst]

Great. And then we saw, I guess, an explosion of generic options for varenicline recently. And I don't know if you have seen any news on that or had any update for us. I know you're keeping an eye on that on the generic side and how that's progressing. Any new observations over the last several months?

[John Bencich, executive]

Yes. With respect to generic varenicline, I believe there are 6 generics on the market now. So over the last 12 months, that has expanded beyond Endo, who was the first to market. So something we continue to monitor as we proceed. And we have seen some data points. I believe there's some recent IQVIA data that was suggesting that generic market for varenicline Clean was on an annual run rate of roughly $450 million. And from what we're seeing in the marketplace, that's somewhere north of a 30% discount to where Chantix the brand left off.

[Operator]

Our next question comes from the line of Ilya Zuo with Freedom Bergen.

[Unknown Analyst]

Notable event, Evicto, [indiscernible] Annual Meeting. Could you share any feedback received from the professional community on the presented results of ORCA program and have they any concerns about potential chronic use of the drug?

[John Bencich, executive]

Yes. Thanks, [indiscernible], for the question. So as we talked a bit on the call, we did have a very strong reception at the SR&T meeting last week. We were able to present 3 different data sets from the Phase III program and then the ORCA-V1 trial results presented by Dr. Nancy Rigotti from Harvard Mass General. I would say, overall, very well received, and I think we continue to see cytisinicline as the lead compound driving to market. There's really not much else going on behind it that's anywhere near the phase of development that we have with our product candidate here.

So I think that's refreshing. I think overall, the perspective is that this is a viable treatment option and a very needed treatment option in a category that hasn't seen any new options in nearly 2 decades. So I think overall, a great, very warm reception from a lot of the folks that we look to for input as we've developed this program over the last several years.

[Unknown Analyst]

And 1 more from me, please. Could you elaborate on the safety endpoints requested by FDA for open-label trial? Have any changes to the protocol being made in safety parameters compared to the previous studies?

[Cindy Jacobs, executive]

Sure. They -- we have kind of a primary, 1 of looking at just serious adverse events. And then after that, it would be any related serious adverse events, just general treatment emergent adverse events, related treatment emergent adverse events, any clinically significant laboratory abnormalities and pretty much after that, looking at any problematic vital signs. I mean, most of these we haven't seen in the Phase IIIs, but we have all of those objectives or endpoints in the open label as similarly as we did in the Phase III studies.

[Operator]

And our next question comes again from Michael Higgins with Ladenburg Thalmann.

[Michael Higgins, analyst]

Can you help us with your conversations with the FDA and NIH vaping, what that may look like throughout this year? I know you want to get that going. You've had your hands full with OL and all that's been happening there. But just trying to get a better sense for the timing with the vaping program and your discussions.

[John Bencich, executive]

Yes. So the focus on the vaping indication really is going to be the end of Phase II meeting with the agencies. So now that we've got the ORCA-V1 trial complete, we're able to share that with the agency. Again, under the guise of an end of Phase II meeting to get clarity on the path forward. As we've indicated before, our belief is that a single Phase III trial is what will be required to open up the label and expand into nicotine e-cigarette cessation, but we need clarity on that. So that is a high priority for us this year and something we'd hope to get clear beyond in the second half of this year.

[Michael Higgins, analyst]

Okay. Sounds good. And then second 1 here being manufacturing. It sounds like the sites are open and so forth. Do you have enough supply at this point? Is that still coming on board in the summer months and into the fall? Just trying to understand that the manufacturing is ready to go for OL.

[John Bencich, executive]

Yes. Thanks, Michael. On the manufacturing side of things, this probably is the gating item to initiating centers and getting folks back into the clinic for the ORCA-OL trial. The tablets have all been made and we're in the process here in the coming weeks to get that blister packed and ready for the clinic. So everything is on track to move that forward here in the coming weeks, so we can initiate the ORCA-OL trial.

[Michael Higgins, analyst]

Awesome. Okay. Sounds good. And then finally, I noticed the OpEx in Q4 was lighter than we had expected. Congrats on that. And then we look ahead to ORCA-OL and trying to get an assessment or some sort of a gauge as to how the cost may be compared to ORCA-2 and 3. It's longer, but less frequent visits. Just trying to get a sense in comparison to the trials, how this cost may come out.

[John Bencich, executive]

Yes. Thanks, Michael. With respect to the costs for ORCA-OL, we've currently estimated this as a roughly $20 million trial that will come in basically over the course of 2024 and 2025. So while the visits are less frequent, the overall number of visits is similar to what we've seen in our previous studies, just over a longer period of time, and as Cindy articulated the what we're doing in those businesses is very consistent. And the bulk of the cost of these studies is the patient recruitment costs.

So the bulk of the expense will come in as the patients are enrolled and complete their therapy. So we'll see some of that cost kick off here in Q1 and then drive the bulk of it through the first part of next year. So hopefully, that's helpful in kind of modeling out the expenses.

[Operator]

And we have reached the end of the question-and-answer session. I'll now turn the call back over to John Bencich for closing remarks.

[John Bencich, executive]

Thanks, operator, and thanks, everyone, for joining us today. Appreciate all the continued support. We've made a huge amount of progress here recently to get clarity from FDA and really move forward quickly with the ORCA-OL trial. And we look forward to providing additional updates as we proceed and look forward to continue to stay in contact. Thanks again, everyone.

[Operator]

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.