ACHV: First Quarter 2022 Results

By John Vandermosten, CFA

NASDAQ:ACHV

READ THE FULL ACHV RESEARCH REPORT

Achieve Life Sciences, Inc. (NASDAQ:ACHV) reported first quarter 2022 results in a press release and held a conference call after market close on May 12, 2022. The company concurrently filed its Form 10-Q with the SEC. Highlights for 2022 include impressive topline results from the ORCA-21 trial, launch of the ORCA-3 trial, participation in various investor and scientific conferences and expansion of its manufacturing and quality and operations team and a board member addition.

Achievements for the first quarter ended March 31st and to-date include:

➢ ORCA-2 last subject, last follow up – January 2022

Initiation of ORCA-3 – January 2022

Expansion of clinical operations team – February 2022

Expansion of manufacturing & quality operations team – March 2022

Presentation at SRNT Annual Meeting – March 2022

➢ Dr. Vaughn Himes appointed to Board of Directors – March 2022

➢ ORCA-2 clinical results – April 2022

No revenues were reported for 1Q:22. Operating expense was ($7.2) million yielding a net loss of ($7.6) million or ($0.80) per share.

For the quarter ending March 31, 2022 and versus the same ending March 31, 2021:

➢ Research & development expense totaled $4.4 million, falling 22% from $5.6 million, driven by the timing of the ORCA-2 and ORCA-3 trials which were winding down and ramping up respectively in the quarter;

➢ General & administrative expense was $2.8 million, up 21% from $2.3 million on greater clinical trial media and awareness expenses, employee expenses associated with stock-based compensation and higher legal expenses as a result of increased patent application activities;

➢ Net loss was ($7.6) million vs. ($8.0) million or ($0.80) and ($1.30) per share, respectively.

As of March 31, 2022, cash and equivalents totaled $36.3 million. This amount compares to a $43.0 million balance in cash and equivalents held at the end of 2021. Achieve has taken on ~$15 million of convertible debt related to its $25 million loan facility with SVB. Following the end of 1Q:22 and the topline report from ORCA-2, in late April, Achieve was extended a commitment of an additional $10 million from the SVB loan facility which it may access when needed. Cash used in operations for 1Q:22 was ($6.8) million versus ($6.5) million in the prior year period. Cash flows from financing activities totaled $95,000, composed of proceeds from warrant exercise and ATM fundraising.

Topline Data from ORCA-2 Smoking Cessation Trial

Achieve reported topline data from its Phase III Ongoing Research of Cytisinicline for Addiction (ORCA)-2 trial in an April 27th press release. The document was accompanied by a webcast and slide deck.

Topline data was impressive, as shown in subsequent exhibits, with the primary endpoint of biochemically verified continuous abstinence measured during the last four weeks of treatment up until the end of the observation period between a cytisinicline arm of either twelve or six weeks and a matching placebo arm. We summarize the data below showing the cytisinicline arm with a result 20 points higher for a six-week and a 26 points higher for a twelve-week dosing period vs. placebo:

For the secondary endpoint of continuous abstinence during the last three weeks of treatment to 24 weeks, we provide summarized results below. Results show a 6.3 percentage point improvement for the six-week group and a 16.3 percentage point improvement for the twelve-week group.

p-values for the primary and secondary endpoints were significant, all falling substantially below the 1% hurdle.

The side effect profile, which we have featured as one of the stronger arguments for cytisinicline over competing products was also spectacular. Headaches and nausea were both lower for the cytisinicline arms compared with the placebo arm. This is in contrast to data provided for varenicline in its FDA label which was substantially greater for the active arm vs. the placebo arm.4

The Phase III ORCA-2 clinical trial enrolled 810 adult smokers to evaluate the efficacy and safety of cytisinicline as a treatment for smoking cessation. Participants were randomized into three treatment arms to receive either placebo or 3 mg cytisinicline taken three times daily for a period of either 6 or 12 weeks. The primary endpoints for ORCA-2 were biochemically verified continuous abstinence measured during the last 4 weeks of treatment. Secondary endpoints measured continuous abstinence after treatment up to 24 weeks. Subjects were monitored for smoking abstinence for 24 weeks post randomization and received standard behavioral support for the duration of the trial. ORCA-2 participants were an average age of 54 years, smoked on average 20 cigarettes per day at baseline, and had a median smoking history of 38 years with 4 prior quit attempts.

In our opinion, results were very strong and show the benefit of increasing the dosage of cytisinicline and duration of treatment relative to the upwardly titrating approach that had been previously used. The results exceed our expectations in terms of efficacy and safety and bode well for the confirmatory ORCA-3 trial which is now underway.

Cytisinicline Clinical Milestones

On January 25th, Achieve began screening subjects for the ORCA-3 confirmatory Phase III trial required for registrational approval of cytisinicline in the United States. Details for the grant-funded Phase II ORCA-V1 study in nicotine e-cigarette cessation were also provided. Enrollment of 150 subjects for ORCA-V1 should begin in 2Q:22.

ORCA-3

ORCA-3 is similar to ORCA-2 in trial design, safety and efficacy evaluations and statistical criteria. The trial will target enrollment of 750 subjects across 15 clinical trial sites, randomized into three arms. Dosing will be 3 mg three times per day (TID). As per FDA requirements, it will be conducted at new sites from ORCA-2 to ensure the statistical robustness of the data. As with the first Phase III trial, the primary outcome measure for ORCA-3 will be biochemically verified continuous abstinence during the last 4 weeks of treatment in the 6 and 12-week cytisinicline treatment arms compared to placebo. Each treatment arm will be compared independently to the placebo arm, and the trial will be considered successful if either or both of the cytisinicline treatment arms show a statistical benefit compared to placebo.  Secondary outcome measures will be conducted to assess continued abstinence rates through 6 months from the start of study treatment. We anticipate that the diminishing impacts of COVID, the alignment of the start of the trial with New Year’s resolutions to stop smoking and Achieve’s extensive experience conducting this type of trial, the enrollment of the planned 750 patients will be at a materially faster pace than in previous studies. On January 25, 2022, Achieve announced that it had initiated ORCA-3.

Management reiterated timeline guidance on ORCA-3 during the April 27 clinical update call and expects the trial to be completed by year-end 2022. Following analysis and reporting of topline, assuming the data mirrors what we saw in ORCA-2, a new drug application (NDA) could be submitted in the back half of 2023.

ORCA-V1

ORCA-V1 trial will enroll 150 subjects that are vaping but not smoking. Randomization will be divided into a 2:1 split with 100 receiving twelve weeks of cytisinicline and 50 on placebo. Dosing is expected to follow the regimen evaluated in ORCA-2: 3 mg TID. The Phase II study will examine vaping cessation as the endpoint at the six week and twelve week point by measuring cotinine levels.8 If the trial is successful, results may be sufficient, along with a successful ORCA-2 trial, to justify only one Phase III to obtain approval. On November 2, 2021, Achieve announced that cytisinicline’s investigational new drug (IND) application for e-cigarette cessation had been reviewed and accepted by the FDA. Grant funding of $2.5 million and the start of ORCA-V1 are both expected to occur before the end of 2Q:22. However, timing is reliant on receipt of funding from the NIH.

$25 Million Loan Facility from Silicon Valley Bank

On December 22, 2021, Achieve announced that it had entered into a $25 million debt agreement with Silicon Valley Bank (SVB). The proceeds are expected to fund the completion of the cytisinicline smoking cessation clinical development program. SVB will fund $15 million in convertible debt on the close of December 22, 2021. Upon mutual consent, Achieve may borrow additional non-convertible term loans of up to $10 million before December 31, 2022. The outstanding loans will accrue interest at 7.0% per year compounding monthly plus the greater of 2.25% or prime minus 1.0%. SVB may convert its debt at $9.34 per share. All outstanding convertible debt will mandatorily convert when Achieve’s common stock closing price per share has been equal or greater to $24.00 for thirty consecutive trading days. Finally, Achieve has the right to extinguish its SVB debt completely prior to conversion by payment of a premium of 125% of outstanding principal including interest before 18 months after closing date. After 18 months from the closing date, the premium rises to 150%.

Along with the announcement of the strong results from ORCA-2, Achieve also was allowed to access an additional $10 million in funding from Silicon Valley Bank. The loan and security agreement will mature on April 1, 2026 with additional terms of the agreement available in the 8-K filed on April 27.

Key Events

➢ Launch of ORCA-3 – January 2022

➢ Topline readout of ORCA-2 – April 2022

➢ ORCA-V1 launch – 2Q:22

➢ Second carcinogenicity study completed – 2022

➢ ORCA-V1 results – 1H:23

➢ ORCA-3 results – 1H:23

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1. Ongoing Research of Cytisinicline for Addiction

2. Source: Zacks analyst compiled exhibit using data provided by Achieve Life Sciences

3. Source: Zacks analyst compiled exhibit using data provided by Achieve Life Sciences

4. According to the FDA label for varenicline, nausea was reported in 16% of the 0.5 mg group, 30% in the 1 mg group and only 10% in the placebo group. Headache was 19% in the 0.5 mg group, 18% in the 1 mg group and 13% in the placebo group. Since the trials were structured differently, direct comparisons are difficult; however, directionally the results suggest that cytisinicline has a better profile for nausea and headache. For insomnia and abnormal dreams, both cytisinicline and varenicline arms showed higher incidence as compared to the placebo arm.

5. Source: Zacks analyst compiled exhibit using data provided by Achieve Life Sciences

6. Source: Achieve Life Sciences Clinical Development Update Corporate Presentation April 2022

7. Source: Achieve Life Sciences Clinical Development Update Corporate Presentation April 2022

8. Cotinine is a metabolite of nicotine. Cotinine urine or blood testing is considered highly accurate for assessing nicotine use, including vaping.

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