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ACHV: Fiscal Year 2018 Operational and Financial Results

By John Vandermosten, CFA

NASDAQ:ACHV

READ THE LATEST ACHV RESEARCH REPORT

Achieve Life Sciences, Inc. (ACHV) released its financial results for 2018 and filed the companion 10-K for the year ending December 31, 2018 on March 14, 2019. An investor conference call was held following the release to discuss recent achievements and financial results. No revenues were reported for the development stage company and operational expenses totaled $12.8 million producing a net loss of ($3.61) per share. Since our initiation, the company initiated a maximum tolerated dose (MTD) trial to examine the feasibility of a higher dose as they move into a Phase III trial.

Additional highlights include the End of Phase II meeting in May 2018, completion of drug-drug interaction studies in June and the launch of the Phase IIb ORCA-1 trial in October. The FDA granted a pediatric waiver allowing future studies to exclude children given the low number of individuals under age 12 with nicotine addiction.

Net loss for 2018 was ($12.7) million or ($3.61) per share on a weighted average share count of 3.51 million. This was comprised of operational costs of $12.8 million, offset by a small net contribution from interest and other income.

Total research and development expense of $5.9 million rose 89% from the $3.1 million spent in 2017. The marked increase stemmed from the start of the ORCA-1 trial, repeat dose pharmacokinetics trial and a food effect study using a new formulation. Increased employee and facilities expenses were also recognized and were related to an increase in development activity.

General and administrative expenses were $6.9 million in 2018, rising from $3.5 million during the prior year. The 97% expansion came from greater employee headcount, public company expenses, consulting fees, legal fees and professional fees as a result of the closing of the merger and integration of OncoGenex.

Cash burn was ($10.7) million in FY:18, compared to ($9.1) million in FY:17 due to increased trial activity and the upfront payments to the contract research organization (CRO). Cash and equivalents and short-term investments as of December 31, 2018 were $14.7 million, an increase from year end 2017 levels of $5.3 million. The increase was attributable to a $19.8 million infusion of cash from financing, from a variety of sources including public offerings, warrant exercise, direct offerings and funds from Lincoln Park Capital. As of March 14, 2019, 6.72 million shares are outstanding.

Results from PK/PD Study

On February 22nd, Achieve released a summary of final data for its Phase I/II multi-dose, pharmacokinetic and pharmacodynamics (PK/PD) clinical study of cytisinicline in smokers.

The results of the 26-patient trial demonstrated a dose dependent response with abstinence levels of 39% in the 1.5 mg group and 54% in the 3.0 mg group. Following the 25-day course of therapy, subjects had an 80% reduction in cigarettes smoked, an 82% reduction in CO expiration and a 46% quit rate. Management pointed out the high success rates in the trial given the participants did not make a commitment to quit and there was minimal behavioral support.

ORCA-1 Trial

Full enrollment in the Ongoing Research of Cytisinicline for Addiction (ORCA) was reached in February 2019, several weeks ahead of schedule. 254 subjects were enrolled in the Phase IIb study which is evaluating a 1.5 mg and 3.0 mg dose in the 25-day treatment for nicotine addiction with cytisinicline. Topline efficacy and safety data are expected to be available in mid-2019. Results from the trial will be used to refine the design of the upcoming Phase III studies.

MTD Study

A maximum tolerated dose (MTD) study was launched in March to determine stopping criteria and dose-limiting events for cytisinicline. The highest daily dose to date used in the trials has been 9 mg (6 x 1.5 mg) and Achieve is examining a doubling of that dose before titrating downward and has so far observed no significant issues. The MTD study will start at a single dose of 6mg and increase in 3 mg increments to a planned maximum of 21 mg per day.

Phase III Trial

Achieve is on track to start its Phase III trial in the second half of 2019. There are trial design issues that are being finalized with the FDA and will be guided by the results of the ORCA-1 and other trials being conducted. The areas to be confirmed include trial execution, statistical powering and optimal dosing. It is this last component which is most interesting given the dose response observed in the PK/PD study. To explore dose efficacy more thoroughly, a MTD study was launched this month. Competitor varenicline was dose limited by the off-target effects (most commonly nausea) that we discussed in our initiation, a profile that cytisinicline may not have. If there is a positive dose response relationship at higher levels of cytisinicline, and the side effect profile remains favorable, higher efficacy could be the outcome.

As data is analyzed and discussions with the FDA continue, we anticipate additional information regarding the dosing structure for cytisinicline in the Phase III study.

Key Events

‣ Initiation of Phase IIb (ORCA-1) trial in US – October 2018
‣ $5.6 million capital raise – October 2018
‣ Waiver for evaluating cytisinicline in pediatric population – December 2018
‣ Last patient enrolled in Phase IIb – February 2019
‣ Repeat dose final study final results release – February 2019+
‣ Launch of MTD study – March 2019
‣ Last patient, last visit Phase IIb – 2Q:19
‣ Top line results from ORCA-1 trial – mid-2019
‣ Launch 800 person Phase III trial – 4Q:19
‣ Launch 1,500 person Phase III trial – first half 2020
‣ Complete 800 person Phase II trial 4Q:20
‣ Complete 1,500 person Phase III trial – year end 2021
‣ Submit NDA to FDA – 2022
‣ FDA response and launch of cytisinicline - 2023

Summary

We believe that the long historical use of cytisinicline provides confidence that the upcoming Phase III trials will be successful and will provide the necessary data to obtain FDA approval, presenting a relatively low risk pursuit for a new chemical entity. If Phase III trials are able to show materially improved success over what varenicline has achieved, we anticipate even higher sales than what we forecast in our model.

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