ACHV: When Quitting Gets You to the Finish Line

By John Vandermosten, CFA

NASDAQ:ACHV

READ THE FULL ACHV RESEARCH REPORT

First Quarter 2020 Review

Achieve Life Sciences, Inc. ACHV reported first quarter results in an early morning press release and conference call held on May 14th 2020. The company concurrently filed its 2019 10-Q with the SEC. While disruptions related to the coronavirus have required new safety measures, Achieve now anticipates a 2H:20 start to the first of two Phase III trials. Year to date 2020 highlights include publication of an AI study on nicotine effect, engagement of FreeMind Group to obtain funding for a vaping study, presentation at the SRNT 2020 Annual Meeting, and a small capital raise. During the conference call management announced that they have submitted all required documents to the FDA and anticipate starting the Phase III ORCA-2 trial this fall pending receipt of funding.

First Quarter 2020 Financial Performance

Cash burn was ($4.5) million for the first quarter, compared with ($4.9) million in the comparable prior period. Cash and equivalents and short-term investments as of March 31, 2020 were $12.2 million, a reduction from fourth quarter levels. Following the end of the first quarter, Achieve completed a private placement and raised $1.9 million gross proceeds.

Vaping Trial

In February, Achieve executed an agreement with FreeMind Group to identify and secure non-dilutive capital from government and private sources to fund a Phase II study on the efficacy of cytisinicline for smoking cessation in vaping and e-cigarette users. Data cited by the company from the Annals of Internal Medicine identified nearly 11 million users of vaping products and e-cigarettes. It will measure vaping abstinence for six and 12 weeks using carbon monoxide and serum cotinine levels to determine the primary endpoint. Achieve has applied for a three year grant that, if awarded, will provide $5 million per year to fund the effort.

Presentation of Data at SRNT, New Orleans

On March 12th, Dr. Mitchell Nides, principal investigator for the ORCA-1 trial, presented an analysis of data for the study. Further analysis did not find any differences in benefit from cytisinicline treatment based on race, gender, age or body mass index. Neither did smoking history, nor type of previous cessation product affect the utility of the drug. No clinical site differences were observed and there was no treatment difference between slow and fast nicotine metabolizers.

Phase III Trial

All materials required to start the ORCA-2 trial were submitted to the FDA in April, cytisinicline tablets are ready for disbursement, the contract research organization has been selected and 15 clinical sites have been identified. We anticipate a second half start for the first of two Phase III cytisinicline studies. The primary endpoint for the trial will be smoking abstinence during the last four weeks of the treatment period and the secondary endpoint will be abstinence at 24 weeks. Achieve met with the FDA in December to finalize trial details to ensure protocol modifications meet the agency's approval.

Exhibit I – Phase III Trial Design (1)

RAOURA Study

Data from the New Zealand RAUORA (2) study will be presented at a conference later this year. This head to head trial comparing cytisinicline and varenicline (3) may demonstrate superior safety and efficacy for Achieve's in-development product and if so will provide strong justification for commercialization. The study enrolled 2,140 Māori and their extended family in a randomized, non-inferiority trial. Enrollment is complete and data is likely in the process of being prepared for publication.

Capital Raise

In April 2020, Achieve issued 5,615,653 shares of stock in a private placement that raised gross proceeds of $1.9 million at $0.33 per share. The deal included 75% warrant coverage, issuing 4.2 million warrants with an exercise price of $0.362. Warrants have a five year life. An additional 505,409 broker warrants were also issued at an exercise price of $0.3795. Net proceeds after expenses were $1.6 million.

Achieve also updated its agreement with Lincoln Park Capital, obtaining the right to sell $11 million of common stock shares. The duration of the agreement was extended to 54 months stretching the original term until March 2022. No shares have been sold through this arrangement in 2020.

Key Events

‣ Presentation of additional analyses of ORCA-1 at SRNT New Orleans – March 2020

‣ Complete animal toxicity study – 2Q:20

‣ Possible RAUORA Data Presentation at SRNT Switzerland – September 2020

‣ Second chronic toxicology study submission to FDA – 4Q:20

‣ Launch Phase III trial – 2H:20

Summary

We believe that the historical use of cytisinicline lends support to its safety and efficacy which we anticipate will be confirmed in the upcoming Phase III trials. These registrational efforts will generate the necessary data to obtain FDA approval, presenting a relatively low risk pursuit for a new chemical entity in the United States. Achieve has completed its Phase IIb trial and maximum tolerated dose investigation and management has guided toward a second half 2020 start to the ORCA-2 trial pending funding. An additional capital raise or interest from a larger collaborator may provide sufficient dollars to complete the effort. Partners with a primary care salesforce and other infrastructure already in place are most attractive.

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1. Source: Achieve Life Sciences S-1 Filed November 6, 2019.

2. Rauora is the Māori word for rescue

3. Branded Chantix from Pfizer in the United States