ACHV: First Quarter Results

By John Vandermosten, CFA

NASDAQ:ACHV

READ THE FULL ACHV RESEARCH REPORT

First Quarter 2023 Results

Achieve Life Sciences, Inc. (NASDAQ:ACHV) reported first quarter 2023 results in a press release and held a conference call after market close on May 9, 2022. The company concurrently filed its Form 10-Q with the SEC. 2023 highlights to date include impressive topline results from the ORCA-V1 trial, participation in various investor and scientific conferences and expansion of manufacturing and quality and operations team along with several new additions to the board of directors.

Achievements for the first quarter ended March 31st, 2023 and to-date include:

➢ Presentation at SRNT Annual Meeting – March 2023

➢ Board of Director additions – March 2023

➢ ORCA-V1 clinical trial results – April 2023

No revenues were reported for 1Q:23. Operating expense was $8.6 million yielding a net loss of ($9.0) million or ($0.50) per share.

For the quarter ending March 31, 2023 and versus the same ending March 31, 2021:

➢ Research & development expense totaled $5.5 million, up 26% from $4.4 million, attributable to the ORCA-2 and ORCA-3 trials which were active during in the quarter;

➢ General & administrative expense was $3.0 million, up 7% from $2.8 million on higher stock-based compensation and legal expenses resulting from corporate activities. Lower clinical trial awareness expenses partially offset this amount;

➢ Interest expense was ($573,000) vs. ($357,000) due to a slightly higher debt balance and higher floating interest rates;

➢ Net loss was ($9.0) million vs. ($7.6) million or ($0.50) and ($0.80) per share, respectively.

As of March 31, 2023, cash and equivalents totaled $16.5 million. This amount compares to a $24.8 million balance in cash and equivalents held at the end of 2022. Achieve has taken on $15 million of convertible debt related to its loan facility originally with SVB and now with First Citizens Bank & Trust Company. It is carried at $16.4 million on the balance sheet and includes accrued interest. The term loan matures in December 2023 and may be extended for a year. 1Q:23 cash used in operations was ($8.3) million versus ($6.8) million in the prior year period. Cash flows from financing activities were de minimus.

Phase II Vaping Trial (ORCA-V1) Trial Results

Achieve posted results from its Ongoing Research of Cytisinicline for Addiction, Vaping (ORCA-V1) trial and hosted a conference call for investors on April 20, 2023. The Phase II ORCA-V1 trial was conducted to measure the safety and effectiveness of 3 mg of cytisinicline dosed three times daily for 12 weeks compared to placebo. 160 adult, nonsmoking, vaping subjects were enrolled in the trial which began in June 2022. The trial was partially funded by the National Institute on Drug Abuse (NIDA) of the National Institutes of Health (NIH).

Topline results showed that cytisinicline was well tolerated and that there were no serious adverse events reported. Adverse event rates were 54.7% in the placebo arm and 50.9% in the cytisinicline arm, illustrating the benefit of minimizing off-target binding. Compared to varenicline, cytisinicline only binds to the α₄β₂ receptor and sidesteps α₇, 5-HT3 and α₃β₄ which are thought to be associated with the vivid dreams and nausea characteristic of its competitor. The most commonly reported (>5%) AEs in the placebo arm were anxiety, headache, upper respiratory tract infection, nausea and COVID-19 infection. In the cytisinicline arm, >5% AEs reported were sleep disturbances, anxiety, headache, fatigue, and upper respiratory tract infection.

The vaping cessation rate during the last four weeks of the study (weeks 9 – 12) was 31.8% for the cytisinicline arm and 15.1% for the placebo arm. The odds ratio indicated that subjects on cytisinicline therapy had 2.6x greater likelihood to stop vaping compared to placebo with a p-value of 0.035. Secondary endpoints will be reported after further analysis and development of an abstract to be presented at a conference. While details were not given in this press release, management disclosed that cytisinicline demonstrated a benefit compared to placebo across the secondary endpoints.

The proportion and difference of the abstinence rate as well as the odds ratio for the previously completed ORCA-2 study were higher for subjects in the last four weeks of treatment as compared to ORCA-V1. Notable differences between the groups (ORCA-V1 vs ORCA-2) are age, where vaping subjects were notably younger (34 vs. 54) and there was less emphasis on previous quit attempts (~50% had tried to quit vs average of 4 quit attempts). The number of average adverse events for the nicotine study was also lower in ORCA-V1 vs. ORCA-2. Although not measured in this study, we also have seen multiple studies and references (one included here) identifying higher levels of nicotine in vaping products as opposed to combustible cigarettes. Higher levels of nicotine may create a stronger addiction and blunt the effect of smoking cessation therapy.

Overall, the results were strongly supportive of safety and efficacy in a new group of subjects with nicotine addiction. There are no products that are approved for individuals who want to quit in the large and growing vaping population. We anticipate that following approval of initial combustible cigarette label, Achieve will pursue a broader label for cytisinicline when sufficient data is available for the drug to serve as a smoking cessation therapy for any type of nicotine dependence.

ORCA-V1 Vaping Trial Background

In early June 2022, Achieve announced the receipt of the National Institutes of Health grant to conduct a vaping study. The $2.5 million grant was expected to fund about half the cost the ORCA-V1 trial which enrolled non-smoking vaping subjects. The study began in late June and enrolled subjects at five locations in the United States. Dr. Nancy Rigotti, who was the principal investigator for the ORCA-2 trial, assumed this same role for ORCA-V1. In a November 8th press release, Achieve announced early completion of target enrollment for the vaping trial. The last vaping subject was dosed in February 2023 and the last subject completed his or her last visit one month later.

The ORCA-V1 trial randomized 160 adult users of nicotine e-cigarettes across five clinical trial locations in the United States. Participants were randomized 2:1 to receive either 3 mg of cytisinicline three times daily or placebo three times daily, for a period of 12 weeks. Dosing followed the same regimen as used in ORCA-2. Patients also received standardized behavioral support throughout. The primary endpoint is continuous abstinence during the final four weeks of treatment. The Phase II study examined vaping cessation as the endpoint at the six week and twelve week point by measuring cotinine levels.² Dr. Nancy Rigotti, Professor of Medicine at Harvard Medical School and Director, Tobacco Research and Treatment Center, Massachusetts General Hospital was the primary investigator for the ORCA-V1 trial.

The faster than expected enrollment for ORCA-V1 suggests there is strong demand for a vaping cessation solution. Management noted that the vaping subjects were generally younger and with a higher proportion of female enrollees as compared to the makeup of the other ORCA smoking cessation trials. If ORCA-V1 is successful, results may be sufficient, along with a successful ORCA-2 trial, to justify only one e-cigarette Phase III pivotal study to obtain approval.

ORCA-3

ORCA-3 is soon to report topline results and we expect something any time after the middle of May 2023. The trial targeted enrollment of 750 subjects across 15 clinical trial sites, randomized into three arms. Dosing is 3 mg three times per day (TID). 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 six months from the start of study treatment.

Milestones

➢ Produce validation batches of cytisinicline with Sopharma – 2H:22

➢ Completion of pharmacokinetic and QT/QTc studies for cytisinicline – 1H:23

➢ Addition of regulatory and Chemistry, Manufacturing and Control (CMC) personnel – 1Q:23

➢ SRNT Conference – March 2023

➢ Mock FDA inspections with Sopharma – 2022/2023

➢ ORCA-V1 results – April 2023

➢ ORCA-3 results – 2Q:23

➢ Completion of cytisinicline supportive studies

o PK study, renal impairment

o PK study, steady state concentration of 3mg, 3x per day

o QT interval prolongation

➢ Cytisinicline NDA filing – 1H:24

Summary

Achieve Life Sciences is completing the final pivotal and ancillary trials for its cytisinicline product prior to an anticipated new drug application (NDA) next year. With the topline report of ORCA-V1 in hand, investors’ attention turns toward ORCA-3, which is the second pivotal Phase III smoking cessation study. Results are expected to be shared with investors in the next several weeks and we are optimistic that it will provide results similar to those presented for ORCA-2.

Following the ORCA-V1 results, we increased our valuation to $50 per share. Achieve represents an outstanding value with numerous comparative clinical trials run on the drug, a deep understanding of the safety profile of cytisinicline compared to other in-development drugs, favorable efficacy results from trials already run and clear boundaries for the commercialization opportunity given the performance of varenicline. The latest data even further support the safety profile of cytisinicline which was better in the active arm than in the placebo arm. We see even greater opportunity for cytisinicline compared with varenicline given the likelihood of gaining approval to treat nicotine addiction in vaping and higher penetration in markets outside of the United States, especially Asia.

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1. Compiled by analyst

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