Good afternoon, ladies and gentlemen and welcome to the Achieve Life Sciences Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Executive Vice President of Commercial at Achieve Life Sciences, Ms. Jaime Xinos. Ma’am, the floor is yours..

Thank you, Laura and thanks everyone for joining us. On the call today from Achieve, we have John Bencich, Chief Executive Officer; Dr. Cindy Jacobs, President and Chief Medical Officer; Jerry Wan, Principal Accounting Officer; Rick Stewart, Executive Chairman of the Board of Directors; and Dr. Anthony Clarke, Chief Scientific Officer.

I would 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’s documents filed with the SEC concerning factors that could affect the company, copies of which are available on our website. I will now turn the call over to John..

Thank you, Jamie. We have certainly had a very busy and exciting third quarter.

On today’s call, we will discuss recently announced changes to our management team, details of our Phase 3 ORCA-2 trial that we initiated last month, a review of data presented at the Society for Research on Nicotine & Tobacco European Meeting, including results from the our RAUORA head-to-head study of cytisinicline versus Chantix, and finally, third quarter financial results.

To begin, at the end of September, we announced that I will be transitioning from Chief Financial and Operating Officer into the role of CEO. Rick Stewart, Achieve’s Co-Founder and former CEO is continuing to serve as our Executive Chairman of the Board of Directors and remains actively involved in the company’s strategic operations.

Additionally, we announced that Dr. Cindy Jacobs, Achieve’s Chief Medical Officer will assume the role of President, previously held by Dr. Anthony Clarke. Dr. Clarke, also a Co-Founder of Achieve, will continue to serve as our Chief Scientific Officer.

And finally Jerry Wan, former Senior Director of Accounting Operations has been promoted to the position of Principal Accounting Officer. While these changes were playing for some time, they were expedited in part by the pandemic, which has restricted international travel for Rick and Tony, who are both based in the UK.

While our leadership structure has realigned, our management team remains dedicated in our mission and in our conviction that cytisinicline has great promise to change the lives of millions of smokers.

To that end, I would like to hand the call over to Cindy to discuss perhaps the most compelling highlight of the quarter initiation of our Phase 3 ORCA-2 clinical trial.

Cindy?.

arm a) who will receive 12 weeks of placebo, arm b) who will receive 6 weeks of cytisinicline, followed by 6 weeks of placebo, or arm c) who will receive 12 weeks of cytisinicline.

There will be 250 subjects in each arm receiving either placebo or cytisinicline 3 times a day for 12 weeks, and then followed monthly out to week 24 for a 6 month evaluation. All subjects will receive behavior support during the study. The ORCA-2 study has two independent primary endpoints that will be evaluated.

The primary endpoint outcomes will evaluate the rate of smoking abstinence of cytisinicline treatment compared to placebo treatment at the end of both 6 weeks and 12 weeks of treatment. For both primary endpoint comparisons, smoking abstinence will be defined as continuous absence during the last 4 weeks of treatment.

That means for the 6-week treatment period, successful quitters must have smoked zero cigarettes with weekly carbon-monoxide biochemical verification at weeks 3, 4, 5 and 6 assessments for the 12-week treatment period successful quitters must have smoked zero cigarettes with the weekly carbon-monoxide biochemical verification at weeks 9, 10, 11 and 12 assessments.

Importantly, the study will be considered successful, if either or both of the cytisinicline arm to show an efficacy benefit over the placebo arm.

The second endpoint outcomes will evaluate for continued smoking absence from the end of 6 weeks cytisinicline treatment to week 24 and from the end of 12 weeks cytisinicline treatment to week 24 compared to placebo treatment at both of these same timeframes.

The study sample size and specifications are over 95% powered to show statistical significance at a nice ratio of at least 1.83 in favor of cytisinicline after 24-week assessment.

An additional secondary endpoint outcome will also look for a reduction in risk of relapse at week 24 in subjects receiving 12 weeks cytisinicline compared to those subjects receiving 6 weeks cytisinicline.

FDA has reviewed our final protocol one last time in September prior to initiating the ORCA-2 Phase 3 trial and had only two minor recommendations, that was to add an additional nicotine withdrawal evaluation and provide a subgroup exploratory analysis related to relapse.

With the study now actively enrolling subjects we look forward to updating you when all subjects have been randomized and again, when all study evaluations have been completed. I will now turn the call back over to John..

Thanks, Cindy. As you can see, the design of the ORCA-2 trial provides multiple shots on goal as it relates to the primary endpoints being investigated and the ability to have a successful trial result with improved efficacy at 6 weeks of treatment, 12 weeks of treatment or both, which is what we anticipate.

We believe offering a beneficial smoking cessation treatment that is half the duration of existing therapies is a key differentiator. And for those patients that need slightly longer treatment duration to stop smoking or to reduce chances of relapse, they would have the option to continue on treatment for another 6 weeks.

The confidence that we have in cytisinicline’s ability to help smokers quit, comes not only from our own studies, but from the numerous clinical trials that have evaluated thousands of smokers and have been conducted by external experts in the field of smoking cessation.

Most recently, the results of the RAUORA trial that compared cytisinicline to Chantix were presented at the Annual SRNT European Meeting in September. This was the first ever head-to-head study comparing these two treatments and enrolled a total of 679 smokers.

The RAUORA study was designed as a non-inferiority trial to demonstrate that cytisinicline quit rates would be no less than 10% lower than the quit rates for Chantix. Results showed that cytisinicline not only met the pre-specified non inferiority endpoint, but was trending towards superiority.

The absolute risk difference in the study was 4.29 in favor of cytisinicline, which equates to a 4.29% improvement in quit rates compared to Chantix.

More importantly, the relative risk was 1.55, indicating that subjects in the cytisinicline arm were approximately 1.5x more likely to have quit smoking at 6 months compared to subjects who received Chantix.

While we did not meet the threshold for superior efficacy versus Chantix, we were encouraged with the trend towards statistical significance, with less than one-third of the target enrollment for the trial. Notably, these efficacy improvements were achieved using the historical 1.5 milligram dose per cytisinicline in the downward titration schedule.

As discussed, ORCA-2 is using the higher 3 milligram dose administered on a simplified three times daily schedule, which was the most efficacious treatment arm in our Phase 2b ORCA-1 trial.

We are optimistic that the simplified dosing will be more convenient for smokers and potentially result in even better smoking cessation rates than what was observed in RAUORA. Also reported from RAUORA and what we continue to observe with cytisinicline is the favorable side effect profile when compared to Chantix.

Subject to treatment with cytisinicline in RAUORA experienced statistically fewer side effects, including significantly less nausea, insomnia and abnormal dreams. We know from patient research and claims data that a majority of Chantix patients do not complete their full course of therapy and the number one reason is due to side effects.

In addition to RAUORA, data were also presented at the SRNT meeting that may help explain cytisinicline’s differentiated side effect profile. Research from the University of Cambridge elucidated the potential role of the 5-HT3 receptor activity in the development of Chantix side effects.

By comparison to cytisinicline, the study showed that Chantix has a 2,000-greater fold binding affinity to the 5-HT3 receptor, which is believed to be the cause of increased rates of nausea and vomiting that smokers can experience while on Chantix.

Overall, we are very pleased with the recent clinical data that has been generated, which continues to support the possibility of cytisinicline having both best in class safety and efficacy. I will now turn the call over to Jerry to discuss the third quarter financial results..

Thanks, John. I would like to first provide an update on our recent financings and cash position and then review our third quarter financials. In the third quarter of 2020, we closed two public equity financings totaling $13.5 million in gross proceeds. Both of these transactions were common stock only.

In July, we closed a $6 million registered direct financing. The financing was completed at no discount to the previous closing share price. The financing provided net cash of approximately $5.3 million after deducting placement agent commissions and operating expenses.

In August, we closed an underwritten public offering with gross proceeds of approximately $7.5 million. We concluded the full exercise of the underwriters’ over-allotment option. We received net proceeds of approximately $6.8 million after deducting commissions and operating expenses.

In the third quarter, we saw outstanding warrant exercise that provided $2.5 million in cash proceeds. Year-to-date for 2020, we have received approximately $3.1 million in proceeds from warrant exercises. As of September 30, 2020, the company’s cash, cash equivalents, short-term investments and restricted cash were $22.4 million.

Our September 30, 2020 cash balance reflects the two financings we completed during the quarter offset by our investments in the ORCA-2 trial that allowed it to be initiated in October.

Turning to our statement of operations, the company incurred a net loss of $3.8 million for the quarter ended September 30, 2020 as compared to a net loss of $3.7 million for the same period in 2019. Net loss for the 9 months ended September 30, 2020 decreased to $10 million compared to $13.2 million for the same period in 2019.

We expect our quarterly operating expenses to increase with the initiation of our Phase 3 trial. Our subjects are randomized into the study. That concludes the summary of our third quarter financial results. I would now like to turn the call back over to John..

Thank you, Jerry. As you can see, we had an exciting and busy third quarter. Our continued focus will be on the execution of the Phase 3 program. While in parallel, we continue to explore opportunities for partnering and additional ways to expand the potential for cytisinicline.

As discussed in previous calls, we continue to seek non-dilutive funding to initiate a trial in nicotine addicted e-cigarette users and believe this could be a future indication of cytisinicline to help address the vaping epidemic.

Finally, in closing, I would like to remind everyone that we will be hosting a virtual KOL roundtable next week on Tuesday, November 17, at 12 p.m. Eastern Time. The event will feature 5 esteemed thought leaders in the field of smoking cessation, including Dr.

Nancy Rigotti, Professor of Medicine at Harvard Medical School and the ORCA-2 primary investigator. This event will provide an excellent opportunity to hear firsthand from experts on their perspective of cytisinicline, our development program and how it fits within the smoking cessation market.

Additional details and registration information can be found on the IR page of the Achieve website. That concludes our prepared remarks. We will now open the line for questions.

Laura?.

Thank you, sir. [Operator Instructions] Your first question will come from the line of Michael Higgins from Ladenburg Thalmann. Sir, your line is now live. Go ahead please..

Thanks, operator. Hi guys.

How are you?.

Good..

Thanks for taking the questions. Couple on ORCA-2. Congrats on the start and also I heard there is a lot going on there, you mentioned in the press release in your comments with COVID underway as well. Just a couple of questions on what’s making it – how I guess it’s obvious that COVID essentially makes it tougher to enroll.

On the other hand, there is likely to be a greater motivation amongst the patients that are keenly aware that there is heightened risk with COVID. How was this on balance so far? You are seeing greater preparation for patients in difficulty or they seem to be more motivated and how are the sites behaving so far? Thanks..

The sites actually have been wanting to start even sooner. Most of our sites have been designated essential businesses and they have actually been open and running clinical trials and enrolling patients through the year. So, they have been very motivated to get this started. They actually – some of these sites have been on COVID vaccine trials.

So from the site perspective, they are just excited to finally get this study on rolling and believe the screen activity ramped up really quickly. So, I don’t think there is a problem as far as the interest in subjects.

I should say that we are metering enrollment right now just to make sure that all the procedures and processes are there that the site is used to, that everything goes smoothly and then we plan on ramping up after the new year. So, we are actually for us as a company metering that enthusiasm until after the first of the year..

Right. Yes, makes sense. Okay, thanks. Cindy, while I have you here, you mentioned in September, the check with the FDA that there were two adjustments, I think of some secondary, I didn’t quite hear all that. It sounded like some nicotine withdrawal evaluations and some relapse measurements.

Could you clarify what those are again?.

Yes. We have actually – so just to remind you in November, we have the FDA and a Type B meeting, review the protocol, all of the statistic analyses everything was fine.

We did send the protocol, the final protocol to them for one last review in July letting them know that we planned on starting in that October timeframe and they really came back with only two minor changes they asked us to do a nicotine withdrawal assessment at week 7 and they asked us to add another exploratory objective for an analysis and that was it.

So we felt pretty confident that all issues especially the primary endpoints and the assessments and the safety and the efficacy had been well vetted with just only those two minor changes and we made them and off and running we went..

Thank you for that. And then one final if I could here.

It doesn’t sound like there is a need to have any adjustments along the way for COVID, it sounds like in the design, there could be a virtual if necessary kind of walk us through how the CLL confirmation, the [indiscernible] confirmation happens very soon, we have to have face-to-face meetings for that? Thanks..

Yes, so they can actually do that if worst case scenario, they could drive up in a car and actually have these assessments and we were also looking at – so subject really came out to be COVID positive that we have the ability to have home evaluations in that, we can send the CL monitors to their home for them to do it virtually on their own as well as send medications study drug to them.

So besides that, we have looked at having virtual as well as home delivery for those subjects. So, we have really looked at all aspects of trying to make sure we don’t have missing data.

Now, even though you plan for that, if we do have missing data, we also have a plan to discuss any issues that we might have with missing data with FDA prior to final study analysis and data – study database lock..

Makes sense. Appreciate the insights. Thank you..

Thank you. Your next question will come from the line of Thomas Flaten from Lake Street Capital Markets. Your line is now live go ahead please..

Hey, guys. Thanks for taking the questions. Just want to follow-up on RAUORA during Dr. Walker’s presentation, SRNT, she mentioned there was an opportunity to perhaps go back and use some different statistical models and tools to evaluate whether or not there was another cut of the data that could be done that might show superiority.

Is that ongoing do you know?.

Hey, Thomas. Yes, I think we are not aware of the kind of status of that based on her comments during the presentation there. I think what we are currently looking for at the moment is the ultimate publication of the data. We know that’s in process.

And so we are looking forward to seeing data coming out and that is ultimately published in a manuscript..

Great.

And then just to follow-up on the, I think the question about enrollment, is it fair to assume you should be fully enrolled kind of partway through the second quarter of next year, is that a fair assumption, just trying to do the follow-up timing and when we might have data?.

Yes. Actually, without any COVID interference, we were hoping that we could get this enrolled by the end of the first quarter. So, if there is some delay in enrollment, then it would be the beginning of quarter two..

Okay.

And then just one quick final one on ORCA-V1, have you guys made any progress in finding a non-dilutive financing opportunity to advance that program?.

So, we are currently evaluating that. We have identified an opportunity that we think we match up well with getting grant funding for that trial. And so that’s what we are currently pursuing it at the moment. The deadline for that is right at the beginning of next year.

And so we will go ahead and we are pulling together the documentation and the thesis for why it makes sense currently and get that submitted. So, I think as soon as we have further updates on that, we will happily provide..

That’s great. Thanks for taking the questions..

Thank you. Your next question will come from the line of Jason McCarthy from Maxim Group. Your line is now line. Go ahead please..

Hi, guys. This is Joanne Lee on the call for Jason McCarthy. Thanks for taking my questions and congratulations on your continued progress. I know you guys just started enrolling patients into the Phase 3 ORCA study last month.

But I was wondering if there are any updates you guys could provide at this time and if we could look forward to any sort of preliminary data at the upcoming KOL later this month? Thanks..

So, in terms of update on enrollment so far, we don’t have anything else to report outside of Cindy’s update earlier, other than we continue to be on target. We are metering enrollment between now and the end of the year.

And again, our target has been to complete enrollment by the end of the first quarter, but I think if there are some COVID related delays that might push that up into the second quarter of next year, but so far everything is on target..

Great. Thank you.

And you just mentioned that enrollment could be completed by first quarter ‘21? Could you just fast forward on how you guys were able to mitigate timing delays in relation to COVID rising and in general smoking cessation was impacted by COVID, because it seems to be at a time when people don’t really want to stop smoking?.

Cindy, you want to grab that one?.

Sure. Well, actually, it’s a double-edged sword, because individuals who are smokers can actually have worse symptoms, especially if they are hospitalized. In fact, we are going to be going into this in far more detail at the KOL event next Tuesday.

So, this is a perfect timing to plug that if you are interested in more of that and hearing it from the experts, tune into that KOL event next week..

Okay, got it. Alright. Thank you so much..

Thanks, Joanne..

Thank you. Your next question will come from the line of John Vandermosten from Zacks SCR. Your line is now live. Go ahead please..

Good afternoon, everyone and congratulations, John and Cindy on your promotion and welcome to the call, Jerry.

Wanted to build off some of the initial questions on the enrollment for ORCA-2, are all 15 sites ready to enroll or do we only have a few of them open now with the rest opening as of the beginning of the year?.

No, all of them are open and streaming at this time..

Okay, great. And then also want to recognize the great results from the RAUORA trial that we are quite close to showing superiority. I think that didn’t get enough attention and that was really a big positive from Zacks point of view. I also wanted to look at the vaping trial.

I thought that it looks like the protocol for that was out in the previous presentation that has been put out.

Can you talk a bit about how that will be structured? When it goes live assuming you are able to obtain that financing?.

Are you talking about this general study design?.

Yes, exactly, for the vaping trial..

Yes, the study is 150 subjects who are vaping only, so they are not vaping and smoking cigarettes, so most of these subjects will have been, frankly, prior smokers who are vaping. Of the 150, it will be a one to two randomization, with 50 receiving placebo and a 100 receiving cytisinicline for 12 weeks.

So, everyone will, I will go for 12-week treatment, you will have 50 with getting 12 weeks of placebo and a 100 getting 12 weeks to cytisinicline, but we will be looking and comparing at measuring 6 weeks and 12 weeks vaping cessation as the endpoint, it’s very similar to actually what the ORCA-2 is doing, but not with three arms, because we are really not going to be comparing reduction and risk of relapse in the vaping study.

This is much more of a pilot study..

Okay. Yes.

Maybe that kind of gets to my next question, which is going to be, I think it’s a Phase 2, if that could possibly be used in conjunction with the ORCA-2 trial to perhaps get an additional approval or a way to get that approved so that it could be used for that as well?.

Well, obviously, it’s only 150 subjects, but you can bet that if there is statistical significance, we would be discussing with FDA having that as a supportive trial for them one Phase 3 for vaping as an additional indication, follow-on indication..

Okay, great. Well, that’s all for me. Thank you, guys..

Thanks, John..

Thank you. [Operator Instructions] Your next question will come from the line of Jim Molloy from Alliance Global. Your line is now live. Go ahead please..

Hey, guys. Thanks for taking your questions.

A quick question really on the two endpoints on the trial, the p value is 0.05 for the both of them I am saying quickly it’s either or both for a successful trial? And then maybe the follow-up on that will be if you had to pick one, I know all the kids are beautiful, which one given the mechanism of action of cytisinicline, do you think it’s more likely to hit?.

That’s right. Well, yes, we do think both of them are beautiful. So, when you look at the p value 0.05, it’s a two sided. So you have to understand iTop one sided p value. So obviously for cytisinicline being better than placebo, the p value has to be 0.025 or less.

If both of those endpoints meet, 0.025 or less, the study is statistically successful at both endpoints. Now, if you have one endpoint that does not make that significance level then the other endpoint does have to have a lower p value of 0.0125 to be significant.

I guess if you look at that, you would think the chance of 6 weeks might be less than 12 weeks more treatment is better.

So, the 12-week might be the one that would be significant, but for our bet, if we are betting, we are betting both of them are going to be significant and that it will give them flexibility that some individuals who only want to take 6 weeks of treatment can take 6 weeks, those that might take longer to stop smoking or the reduction of risk of relapse actually is significant.

Those more factory smokers might choose to go 12 weeks from their treatment..

Well, thanks for that answer.

And maybe a follow-on that, Cindy, in the part of the trial, which you think placed in the strength of cytisinicline, the shorter duration of therapy or the lower side effects?.

Well, certainly, the lower side effects are going to be very helpful, because no one really likes to have side effects if you are trying to quit smoking on top of the nicotine withdrawal. So, I think that 6 weeks if you stop smoking that is a success..

Best of luck and thank you for taking the questions..

Thanks, Jim..

Thank you. We do have a follow-up question coming from Mr. Michael Higgins. Your line is now live. Go ahead please..

Thanks. Just a follow-up to get some insights from you guys as to what we will see next week. I understand the event is happening, of course. I am very happy to be moderating.

But is there certain permissions required that’s new next week, obviously, you are a go ahead in the KOLs there, the event was really spectacular and you have got a great list coming – most of us are coming back again this year.

Anything new from RAUORA, anything different from a bit more information there, obviously, we will ask and get some depth of the [indiscernible] studies versus the designs here with cytisinicline, but anything in particular we should look for next week? Thanks..

Great. That’s helpful. Yes, I think in terms of new information, I think we are planning on doing a deeper dive into the Phase 3 trial and from the mechanics around that of further analysis of the endpoints as well as some of the pieces in place related to mitigating the effects of the pandemic.

I think in terms of new data coming out of RAUORA or prior information, we are not planning on anything there. But again, as you noted before, I think we have got a great group of key opinion leaders in this space.

And I know we got a lot of positive reviews when we got some of these books together last September in terms of elucidating what is going on in the smoking cessation landscape and why a new treatment option really is needed in this space and I think letting the experts in the field get their time to talk about the space I think is always helpful to get just more information out in terms of why this is important.

So, I think all in all, it should be a real great event. Hope that everyone gets a chance to tune in for that..

That’s great. And likely some further discussion on the e-vaping opportunity I assume..

Yes, indeed..

Great. Look forward to it. Thanks guys..

Thank you. And I am showing no further questions at this time. I would like to turn the conference back into Mr. John Bencich for any closing remarks..

Great, thank you. Thanks everyone again for joining us on the call today. I hope many of you will get a chance to tune in next Tuesday for our KOL Roundtable. We look forward to providing additional updates as we progress in the near future. Thank you again..

Thank you, sir. Thank you so much for joining us and again, thank you everyone for participating. This concludes today’s conference. You may now disconnect. Stay safe and have a lovely day..