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Achieve Life Sciences, Inc. (ACHV)

Q2 2022 Earnings Call· Thu, Aug 11, 2022

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Transcript

Operator

Operator

Good day, ladies and gentlemen, and welcome to the Achieve Life Science Second Quarter 2022 Earnings Conference Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Nicole Jones [ph]. Nicole, the floor is yours.

Unidentified Company Representative

Analyst

Thank you, operator, and thank you to everyone for joining the call. Today on the call from Achieve, we have John Bencich, Chief Executive Officer; Dr. Cindy Jacobs, President and Chief Medical Officer; and Jerry Wan, Principal Accounting Officer. Achieve 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 the website and filed with the SEC concerning factors that could affect the company. I’ll now turn the call over to John.

John Bencich

Analyst

Thank you, Nicole, and thanks to everyone for joining us today. The second quarter of 2022 has been one of the most exciting yet for Achieve. Not only did we announce successful efficacy and safety results from our Phase III ORCA-2 trial in April, but we also received grant funding from the NIH, allowing us to proceed with the initiation of the Phase II ORCA-V1 trial in adult users of e-cigarettes. These were 2 major milestones for us to reach in the first half of the year, and we are pleased to continue delivering on our commitments. As you likely have heard or read recently, there is great attention and debate surrounding smoking and nicotine e-cigarettes in the U.S. political arena. Tobacco use continues to be the leading cause of preventable disease and death, resulting in more than 480,000 American lives lost each year. We are in agreement that action must be taken to save lives, to improve the health of smokers and to reverse the increasing youth nicotine addiction trend. The potential restrictions to increase regulation over nicotine products such as lowering nicotine content and restricting flavors such as menthol are controversial and will likely take many years to be implemented if they end up proceeding at all. And while they may limit access to an increased scrutiny of available products, they do not solve the nicotine addiction problem at hand. With the recent FDA actions on e-cigarette products, including JUUL, we have already seen reports of e-cigarette users considering a move back to combustible cigarettes. Smokers and e-cigarette users need solutions to help them overcome their nicotine addiction. That is why it's more important than ever for us to continue advancing our mission of bringing cytisinicline to the U.S. market as soon as possible. If approved by the…

Jerry Wan

Analyst

Thank you, John. I would like to provide an update on our cash position as of June 30, 2022, as well as review our operating expenses for the second quarter. As of June 30, 2022, the company’s cash, cash equivalents, short-term investments and restricted cash were $29.4 million compared to $43 million as of December 31, 2021. We believe we have sufficient cash to bring us into 2023. Our cash forecast includes the recently awarded $2.5 million grant funding received from the NIH to initiate the Phase II ORCA-V1 trial to evaluate the use of cytisinicline as a treatment for cessation of nicotine e-cigarette use. As a reminder, approximately half of the cost from the ORCA-V1 trial are funded through the grant from the NIH. With respect to our statement of operations, net loss decreased to $10.4 million for the quarter ended June 30, 2022, compared to $11.3 million for the same quarter of 2021. Net loss for the 6 months ended June 30, 2022, decreased to $18 million compared to $19.3 million for the same period of 2021. Operating expenses decreased for the quarter ended June 30, 2022, due to lower costs associated with the completion of the ORCA-2 trial. This was partially offset with the initiation of the ORCA-3 trial in January 2022 and the initiation of the ORCA-V1 trial in June 2022. We expect our quarterly operating expenses will increase as we progress forward with both the ORCA-3 and ORCA-V1 trials. I will now turn the call back over to John.

John Bencich

Analyst

Thanks, Jerry. We continue to make tremendous progress with the cytisinicline development program, especially with the announcement of positive Phase III ORCA-2 results and the initiation of both our ORCA-3 and ORCA-V1 trials. We remain committed to moving these trials forward and ultimately bringing a new treatment option to the market for nicotine addiction. With a compelling efficacy and safety profile and a shortened treatment regimen, cytisinicline has the potential to make a strong impact in a market that has lacked innovation and new treatments in over 15 years. The most successful prescription smoking cessation product was CHANTIX, which had peak global sales of $1.1 billion before it was withdrawn in 2021 for safety concerns. There are currently only 2 non-nicotine prescription products available to the 30 million-plus smokers in the U.S., generic CHANTIX and generic Zyban. Despite being tainted with its historical black-box warning and disruptive side effects, generic CHANTIX is anticipated to reach approximately $300 million in U.S. sales over the coming year. We believe that cytisinicline's product profile, including robust efficacy, high tolerability and shorter duration of treatment, has potential to resonate in this underserved market. We look forward to moving cytisinicline to market and providing smokers and their physicians a compelling new treatment option. We look forward to sharing with you our continued progress in the back end of this year, including completion of enrollment in our ORCA-3 and ORCA-V1 studies as well as potential for publication of the ORCA-2 results. At this time, I'd like to turn the call over to the operator and take any questions you might have. Operator?

Operator

Operator

[Operator Instructions] And our first question comes from Thomas Flaten from Lake Street Capital. Next in line is Michael Higgins from Ladenburg Thalmann.

Michael Higgins

Analyst

Congrats on continued results. Looking forward to seeing the results coming up here spring of next year. A couple of questions for you as we look out to ‘23 if I could. What your thoughts on are for the timing of the NDA filing, specifically if there’s any additional studies or CMC work that needs to be completed, let’s say, by midyear of next year? Any comments on the timing for that filing?

John Bencich

Analyst

Michael, thanks for the questions. I'm going to hand it over to Cindy for this one.

Cindy Jacobs

Analyst

Sure. We’re looking at the timing for the NDA, the latter half of next year. There are 2 studies that we need to finish up. One is a study – a PK study with renal impairment and then a standard kind of like TQT study that we will be finishing up by early part of next year. As far as additional CMC, I’ll let John kind of go over that, but that’s kind of on the same time frame for coming together by the end of next year.

John Bencich

Analyst

Yes. I think the clinical pieces are in motion, as Cindy mentioned. Then on the CMC side, we're working with Sopharma, our partner on this, to get the validation batches up and running later this year. So we could be in a position for that NDA filing in the back half of 2023.

Michael Higgins

Analyst

And then just a follow-up on the validation batches. How many patients worth of supply do you think you’ll have ready, say, by the time the drug is approved?

John Bencich

Analyst

Yes. On the validation batch side, so what we've been focusing on is really stockpiling product in advance of commercial launch. We look to be on track to have between 2 and 3 years of launch quantity by the end of 2022. We expect that to increase as we continue to progress in 2023 and 2024. I think as we get into next year more fully, we'll refine further kind of the batches that will be out there and ready for launch. But we've got plenty of supply to make sure that we get those squared away and out into the marketplace.

Michael Higgins

Analyst

Very good. One last one here if I could. I haven't heard much mention here so far on the call of potential partnering discussions. Anything you can share on those would be super helpful. And if there's any changes over the summer months on that?

John Bencich

Analyst

Yes. On the partnering front, obviously, we can’t comment on any ongoing discussions that may be occurring. I will say that there has been continued interest in the program, and we expect that would likely continue as we move the program forward. And I would expect more interest the closer we bring this towards FDA approval and commercial launch. I think we continue to stay focused in running that in parallel to our own commercial planning exercises.

Operator

Operator

Our next question comes from François Brisebois from Oppenheimer. François Brisebois: Sorry if this was mentioned. It’s breaking out a little on my end. But going forward with the OpEx here on the R&D side, I was just wondering any comments on what to expect maybe in 2023 or second half of ‘22.

John Bencich

Analyst

Yes. So as Jerry mentioned on the call, in terms of expenses, we would expect those to be elevated, especially in the third quarter now that we're up and running on both ORCA-3 as well as ORCA-V1. As we get to full enrollment on those and patients start to roll off of study, which will kind of progress into the early parts of 2023, we would expect those R&D expenses to taper off quite significantly. But as Cindy mentioned, we do have a couple of other trials in terms of TQT and renal impairment that will be running in parallel with those trials as well. But that's kind of how we see the expenses shaping up. François Brisebois: Okay. Great. And so I heard that – I think you guys mentioned the cash to be sufficient to get into 2023. But just wondering, I think data from ORCA-3 is first half ‘23. Do you guys comment on whether or not the cash is sufficient to get to data readout?

John Bencich

Analyst

Yes. I think at the moment, we're focused on getting ORCA-3 enrollment complete. I think once we have that in hand, we'll be able to clarify further kind of where that puts us in terms of where we might expect top line results. I think as we move forward, we'll be able to narrow in on the timing of that. François Brisebois: Okay. Great. And just lastly, you talked about potentially a publication of ORCA-2. I was just wondering any – you talked about a medical conference. Any conferences to – in this space to kind of think about that would be – that would make sense for you guys?

John Bencich

Analyst

Yes. So on the medical conference front, I think historically, one of the core forums for us has been SRNT, or the Society for Research on Nicotine and Tobacco. The biggest of those events is the annual U.S. conference, which is typically in kind of late first quarter of the year. There is European conferences in the fall. So I think we're looking at what makes sense, but I would stay tuned, especially for that annual U.S. conference is the one that we'd be focused on. François Brisebois: Can you just comment on maybe the interest for the program ex U.S.?

John Bencich

Analyst

Yes. So we have seen, I would say, global interest. Historically, we've seen, I would say, overweight interest out of Asia, but we also see interest out of Europe as well. So it really does span the globe. But for us, I think the most interesting would be a single global partner as opposed to dividing this up into multiple regions around the globe.

Operator

Operator

And our next question comes from John Vandermosten from Zacks.

John Vandermosten

Analyst

I had a couple of questions on just how the vaping trial had started and how it’s going. I assume that you started enrolling the first patient in July. Is that right? And you had all 5 sites opened at that point?

John Bencich

Analyst

Yes. So we initiated right at the end of June. So over the last 1.5 months or so, we've really been kind of getting everything up and running. We do have patients that have been randomized or subjects being randomized on that trial. And as we mentioned on the call, we're quite encouraged with what we're seeing so far in terms of interest on the recruitment side. So I think we look forward to further updates on that one as we kind of get into the back end of the year here.

John Vandermosten

Analyst

Okay. Sounds good. I guess after doing 2 of them so far, 2 are the ones you’re learning how to efficiently enroll those. Question on – kind of a general question on medical consensus about low-nicotine cigarettes. I mean, that’s a little bit outside of the kind of what you’re looking at. But I have had some questions from investors on that. And wondering if you had heard of any research that shows that, that’s effective at all?

John Bencich

Analyst

Yes. Good question. I think there has been some data in particular around another product that's out in the market that just launched earlier this year that is a low-nicotine cigarette. I think what we have seen is that data set may not be the most robust in terms of how it relates directly to real-world circumstances. But I think, yes, clearly, if you remove nicotine or lower them considerably, you're probably going to get people either smoking less or smoking them more deeply to get the same nicotine that they're used to getting. So this is an area that we're obviously tracking. FDA has been very keenly looking to regulate this further. We'll look forward to the proposal in the second quarter of next year on kind of what those plans look like. That will likely move forward then with a public comment period. So I think either way, this is going to be several years out before any potential disruption. And I think the beauty is at that stage, we'll likely be on the market and be there ready for smokers if the cigarettes that they're used to smoking is disrupted.

John Vandermosten

Analyst

Got it. And last one for me is just on the trend in generic varenicline. I was able to find some of the data in those report. It looks like they’ve been doing pretty well there. But I was wondering if you had seen any other data maybe in terms of scripts and sequential growth there, if you had any color on that at all?

John Bencich

Analyst

Yes. I think the only thing I would note, so we did mention that it looks like a run rate probably north of $300 million at the moment in terms of where they're at. But I think the big piece there is that is only roughly half of the CHANTIX unit sales before it was withdrawn from the market last year. So they are still – they just launched last September. So it’s still early days in terms of them being out in the marketplace and kind of replicating that historic CHANTIX demand. So I think it will be interesting to see how that progresses. But I think it’s a good data point out in the market just in terms of continued interest in smoking cessation products overall, including as we move forward to market here in the next couple of years.

Operator

Operator

And our next question comes from Vernon Bernardino from H.C. Wainwright.

Vernon Bernardino

Analyst

So you mentioned in June that you initiated the ORCA-V1 clinical trial across 5 trial locations. Just wondering if you started dosing in all of those 5 trial locations? And when might we see data from the ORCA-V1 trial?

John Bencich

Analyst

Yes. Thanks for the question, Vernon. So on the vaping trial, we've got 4 out of 5 of the sites that are fully activated at this point. So we've got one that's kind of in process at the moment. So they should all be up and running here shortly. But yes, excited to see what has come through thus far. And I think of -- just a reminder, we've got Nancy Rigotti from Harvard Mass General as the PI. She was also the PI on our ORCA-2 study. And then we basically looked for 4 other sites that were high-quality, high performers on our previous studies as well. So we like the group that we have activated for this and happy with what we've seen so far in terms of recruitment.

Vernon Bernardino

Analyst

And as far as timing, you think?

John Bencich

Analyst

Yes. So it's going to depend on when enrollment gets complete. But I think at the moment, we've been guiding likely the first half of next year. Obviously, a big range will be triggered off of enrollment, but first half of next year for top line results.

Vernon Bernardino

Analyst

Do you anticipate most of the enrollment will be in that one site?

John Bencich

Analyst

Yes. So we've got -- there's 5 total sites in ORCA-V1 trial. And so I think we would look to have that as evenly spread as we can across those study centers. And that's in 150 e-cigarette users or vapers.

Operator

Operator

[Operator Instructions] And our next question comes from Michael Higgins from Ladenburg Thalmann.

Michael Higgins

Analyst

Just some follow-ups here if I could. There was a study not long ago in cytisinicline against varenicline, NRT and placebo. Wondering if you’re aware of any other ongoing investigator-initiated studies, these things being more and more popular. Just trying to get a sense as to what’s coming.

John Bencich

Analyst

Yes. Thanks, Michael. Yes, I mean, there is continued interest for cytisinicline around the globe. I think we are aware of some other smaller trials being run across Europe as well as thinking to Asia or Mongolia, some work being done. None of it is really as, I think, analogous to what we put together here in the U.S. It's typically on the Eastern European dose and administration. But I think as some of those come out of their interesting data points, then we'll be sure to share that with everyone.

Michael Higgins

Analyst

Just a follow-up on that one. Do you know if any of these have come around yet to your dosing regimen with TAD?

John Bencich

Analyst

Yes, none that we've seen.

Michael Higgins

Analyst

Not yet anyway. Okay. And then this fall, it doesn’t sound like you have anything at SRNT. I just want to clarify on that. And then thinking ahead to next spring, what might we see maybe ORCA-2? I don’t think you’ll have a chance then. I’m just thinking of the timing of it to have even late breakers at SRNT, but if you could let us know on those would be great.

John Bencich

Analyst

Yes. So I think barring any major disruptions, we would anticipate having some data sets at the annual U.S. SRNT conference in the spring of next year. Between now and then, we've been focused on working with the investigators on ORCA-2, including Dr. Rigotti on getting the ORCA-2 results published, and we're going to focus that on high-quality journals. But that's the focus is to get that published first and then move forward with additional data sets that we'll be able to share with everyone.

Operator

Operator

And our next question comes from Jim Molloy from Alliance Global Partners.

Jim Molloy

Analyst

John, kind of a bigger picture question on the manufacturing. How goes the plans to try to chemically manufacture cytisinicline versus the current growing – getting it from trees and how goes expanding, broadening, diversifying the risk of the planting sites to other locales?

John Bencich

Analyst

Yes, Jim, thanks for the question. So on the synthetic side, this has continued to be an area that will -- we're poking around on. If someone's going to crack a way to make this synthetically, we want it to be us so we can protect that administration, that way of producing it. So far, that's proven very difficult. So our focus here in real time has been more on stockpile, as I mentioned earlier, getting 3 to 4 years of launch material in hand at the time of commercial launch. We have made some progress on additional plantations or areas to plant, including down in Latin America. Early days on that, but we think having another growing cycle in the Southern Hemisphere would make sense. And then we're close to moving forward with a partnership with a university here in the U.S. to look at areas where we could plant cytisinicline right here in North America. So yes, lots going on there, but we'll have additional updates as some of that progresses over time.

Jim Molloy

Analyst

Understood. And I know you touched on it earlier, but is the way to characterize be the environment for bringing in partners, say the buyer and sellers market, talk a little bit about the level of interest that you’re seeing for partnerships?

John Bencich

Analyst

Yes. I mean, I think not just post ORCA-2 data, but I think overall, historically, we have seen continued interest around cytisinicline. I think as I mentioned earlier, historically, it's probably been overweight to Asia. But we have seen folks that have global scale as well as strong capabilities in Europe. So I think it really is quite broad. I think in terms of appetite, I think until these things move ahead to the point where we start to get into contracting and things like that, it’s a bit hard to predict outcomes. But I do think as we move forward, the closer we get to commercializing this, the more and more interest that it will be on the program.

Operator

Operator

And at this time, there appear to be no further questions. I would now like to turn it back to management for any closing remarks.

John Bencich

Analyst

Thanks, operator, and thanks, everyone, for joining us today and for your continued interest in the company. We look forward to sharing additional information with you in a couple of months, and thanks again for joining us. Take care.

Operator

Operator

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.