Good afternoon, ladies and gentlemen, and welcome to the Achieve Life Sciences Second Quarter 2018 Earnings Conference Call. My name is Ashley and I will be your conference facilitator. At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, this call is being recorded.

At this time, I would like to turn the conference to Jaime Welch, Executive Vice President of Commercial at Achieve. Please go ahead..

Thank you, Ashley and thanks everyone for joining us. With me today from Achieve are Rick Stewart, Chief Executive Officer; Dr. Anthony Clarke, Chief Scientific Officer; and John Bencich, Chief Financial and Operating Officer. Dr. Cindy Jacobs, our Chief Medical Officer is unable to join today's call.

Before we begin, 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 filed with the SEC concerning factors that could affect the company, copies of which are available on the website. I’ll now turn the call over to Rick..

Thank you, Jaime. On today's call we will provide an update on the tremendous progress of the cytosine clinical development program. We'll also discuss the near-term milestones that we believe have the potential to create significant value for the company over the next 12 months.

We will additionally look at the smoking cessation market opportunity in the U.S. and globally, provide additional information on the history of cytosine and provide a summary on the nonclinical and clinical activities to date. Following on cytosine program updates, John will discuss our recent financing and second quarter 2018 financial results.

I'd like to begin by first providing an overview of the status of smoking and nicotine addiction and why we believe cytosine is well positioned to address this critical need. Globally there are over 1 billion smokers. In the U.S.

alone there are an estimated 36.5 million smokers and nearly half a million die every year as a direct result of smoking related illness, that's one person every minute. Smoking is the leading cause of preventable death and approximately 30% of all cancer deaths are attributed to smoking.

The CDC estimates that more people are addicted to nicotine than any other drug and reports that nearly 70% of all smokers desire to quit and 55% make a quit attempt each year. Despite this high number of attempts, only between 4% and 7% of people are successful in quitting smoking a year.

While a majority of biotech companies are dedicating efforts to cancer treatments our focus at Achieve is to advance cytosine to help people quit smoking and reduce not just cancer prevalence, but other diseases including pulmonary, cardiovascular and diabetes.

It is worth taking a moment to review the long history of cytosine as a smoking cessation aid. Cytosine is a well established 25-day smoking cessation treatment that has been approved and marketed in Central and Eastern Europe for over 20 years and is the market leader in many of those countries under the brand name Tabex.

It is estimated that over 20 million people have already used cytosine to help treat nicotine addiction. It is a naturally occurring plant based treatment with a well defined, dual acting mechanism of action.

It is believed to aid in smoking cessation by reducing the severity of nicotine withdrawal symptoms to agonistic binding to nicotine receptors in the brain and by reducing the reward or satisfaction associated with smoking through anti-agonistic properties.

In addition to the history of in-market use, over 2000 patients have been treated with cytosine in two investigator led Phase 3 trials in Europe and New Zealand. In both of these trials cytosine was found to be both effective and well tolerated.

The first Phase 3 trial called TASC was sponsored by the UK Centre for Tobacco Control Studies and evaluated cytosine versus placebo in 740 moderate to heavy smokers treated for 25 days at a single center. The successful results of the TASC trial were published in the New England Journal of Medicine in September 2011.

These results show that treatment with cytosine was 3.4 times more likely than placebo to help smokers to quit for one year. The CASCADE trial in New Zealand was the second Phase 3 trial conducted. This was a non-inferiority open label trial in 1310 heavy smokers.

Patients were randomized to receive either cytosine for 25 days or nicotine replacement or NRT for eight weeks. This trial was sponsored by the Health Research Council of New Zealand. The positive results were also published in the New England Journal of medicine in December 2014.

Results show that smokers treated with cytosine were 1.43 times more likely to quit for six months compared to those treated with NRT. Importantly, the six months rate of abstinence for cytosine at 22% was comparable to recently published data for an already approved prescription smoking cessation drug called Chantix.

While these first novelty Phase 3 trials are important and further demonstrating the benefits of cytosine globally, we have engaged with the FDA and other regulatory agencies to define the additional requirements for market approval.

Over the last several months and a collaboration of the thought leaders in the smoking cessation community, we've been moving expeditiously with the FDA to advance the development of cytosine.

In June 2017 we submitted our investigational new drug or IND application for cytosine to the FDA, which included nonclinical studies sponsored by the NCCIH Division of the National Institutes of Health.

This report has been invaluable and progressing the nonclinical program which allowed us to immediately initiate our clinical development activities. In August 2017 we initiated a study assessing the effect of food on the bioavailability of cytosine in normal, healthy volunteers.

Results were announced in November 2017 and demonstrated similar bioavailability of cytosine in fed and fasted [ph] subjects. In October 2017 we initiated a study in 36 smokers to evaluate the pharmacokinetics and pharmacodynamics of 1.5 mg and 3 mg of cytosine given for 25 days. Preliminary results were announced in February 2018.

The results indicated a trend towards better efficacy with a higher 3 mg dose although this study has too few patients to be conclusive.

More importantly, we observed a remarkably quick reduction in the number of cigarette smoked within the first two to three days after starting cytosine treatment and the main reduction in cigarettes smoked per day was reduced by over 75% by the end of day 2. More recently, we completed a number of in vitro drug interaction studies.

These results were submitted to the FDA and announced in June of this year. In May 2018 we completed an end of Phase 2 meeting with the FDA to further define the nonclinical and clinical requirements for Phase 3 developments and ultimately ANDA submission.

Also in May we announced that the UK Intellectual Property Office granted a patent on a new succinate salt of cytosine. This new form of cytosine could lead to enhanced product stability and long-term potency. And in June 2018 we completed a $15.8 million financing that John will discuss momentarily.

We expect that our next key milestone for 2018 will be the completion of our second food effect study evaluating an improved cytosine tablet. This new tablet has an extended shelf life and is currently being used as commercial product in Central and Eastern Europe through a partner so far.

We expect the results of our study to be available in the third quarter of 2018. We're pleased with the progress we have made in 12 months and as we look to the future, we have confidence in our ability to execute on our upcoming milestones with the goal of bringing cytosine closer to U.S. approval and commercialization.

Moving on to the next steps in our clinical program. Our recent conversations with the FDA concluded that we could proceed with our Phase 3 program, but they suggested that we also assess alternative dosing strategies that might enhance patient compliance.

Consistent with this dialogue we have chosen to conduct a 250-patient optimization trial in the U.S. that will evaluate overall treatment efficacy, safety and compliance profiles of various cytosine dosing regimens compared to placebo. The primary endpoint of the trial will be the reduction in the number of cigarettes smoked during treated.

We plan to initiate this Phase 2b trial in the fourth quarter of 2018 with top line results expected by the second quarter of 2019. We believe the results of this will help us better define key elements of our Phase 3 clinical studies such as packaging, cytosine dosing and behavioral support.

Our conversations with the FDA also concluded that the results to date from a drug interaction studies appeared appropriate to initiate the Phase 3 clinical trial program. And the proposed plans for chronic toxicology and carcinogenicity studies appeared acceptable to support a future ANDA submission.

The FDA also viewed that our proposed Phase 3 primary and secondary efficacy endpoints, intended behavioral support and statistical plans appeared appropriate. They recommended additional subjects selection criteria and safety assessments to be included in the Phase 3 clinical trials which will also be included in the Phase 2b trial.

We believe our Phase 3 program will be on track to initiate in 2019 results of the Phase 2b trial and subject to additional financing. I will now turn over the call to John to discuss our recent financing and second quarter financial results..

Thanks Rick. As Rick highlighted earlier we were pleased to announce in June the closing of an underwritten public offering of common stock, preferred stock, and warrants that resulted in gross proceeds of $13.8 million which included the full exercise of the underwriter's overallotment option.

After deducting underwriting discounts, commissions and offering expenses, the offering resulted in net cash of approximately $12.2 million. Importantly, full exercise of the warrants issued in the offering has the potential to generate additional proceeds of $13.8 million.

We plan to use the net proceeds from the financing for working capital and other general corporate purposes including funding ongoing operations and to continue the development of cytosine in the clinic including the initiation of the Phase 2b trial in the fourth quarter of this year.

Details of the offering include Class A units priced at $4 per unit with each unit consisting of one share of common stock and a five-year warrant to purchase one share of common stock with an exercise price of $4 per share and Class B units priced at $1000 per unit with each unit comprised of one share Series A preferred stock which is convertible into 250 shares of common stock and a five-year warrant to purchase 250 shares of common stock also with an exercise price of $4 per share.

The conversion price of the preferred stock issued in the transaction as well as the exercise price of the warrants are fixed and do not contain any variable pricing features or any price based anti-dilutive features.

The preferred stock issued in the transaction includes a beneficial ownership blocker, but has no dividend rights except when also paid on common stock, no liquidation preference or other preferences over common stock and with certain limited exception has no voting rights.

As of June 30, 2018 our cash, cash equivalents and short-term investments were $15.3 million compared with $4.4 million as of March 31, 2018. In addition to the net proceeds from the June financing, our June 30 cash balance also includes $428,000 in proceeds resulting from the exercise of warrants issued in the June financing.

Total operating expenses and net loss for the three months and six months ended June 30, 2018 were $2.8 million and $5.8 million respectively. That concludes the summary of our second quarter financial results. I would now like to turn the call back over to Rick..

Thank you, John. In conclusion, a substantial market and patient need exists in the U.S. and globally for a safe and effective smoking cessation treatment. We believe cytosine can address this need as an alternative to existing treatments.

Cytosine has the potential for better efficacy than NRTs at potentially superior side effect profile than existing prescription drugs.

Over the next few months we have several anticipated key milestone that we believe will continue to propel the cytosine development program forward, including the initiation of our Phase 2b optimization trial later this year and completion of our new food effect study.

We look forward to providing you with an update on these and additional advancements in the near future. Thank you again for your continued interest in Achieve..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect and everybody have a great day..