ACHIEVE LIFE SCIENCES INC

Previous wording

Our focus is to address the global smoking health and nicotine addiction epidemic through the development and commercialization of cytisinicline. There are an estimated 28 million adults in the United States alone who smoke combustible cigarettes. Tobacco use is currently the leading cause of preventable death and is responsible for more than 8.0 million deaths worldwide and nearly half a million deaths in the United States annually. More than 87% of lung cancer deaths, 61% of all pulmonary disease deaths, and 32% of all deaths from coronary heart disease are attributable to smoking and exposure to secondhand smoke.

Current wording

We are a late-stage clinical specialty pharmaceutical company with a sole mission to address the global nicotine dependence epidemic in combustible cigarette and e-cigarette usage through the development and commercialization of cytisinicline. There are an estimated 29 million adults in the United States alone who smoke combustible cigarettes and an estimated 11 million adults in the United States who utilize e-cigarettes. Tobacco use is currently the leading cause of preventable death and is responsible for more than eight million deaths worldwide and nearly half a million deaths in the United States annually. More than 87% of lung cancer deaths, 61% of all pulmonary disease deaths, and 32% of all deaths from coronary heart disease are attributable to smoking and exposure to secondhand smoke.

Previous wording

In addition, there are approximately 11.0 million adults in the United States who use e-cigarettes, also known as vaping. While nicotine e-cigarettes are thought to be less harmful than combustible cigarettes, they remain addictive and can deliver harmful chemicals which can cause lung injury or cardiovascular disease. In 2023, 2.1 million high school and middle school students reported using e-cigarettes. Research shows adolescents who have used e-cigarettes are seven times more likely to become smokers one year later compared to those who have never vaped. Currently, there are no U.S. Food and Drug Administration, or FDA, approved treatments indicated specifically as an aid to nicotine e-cigarette cessation.

Current wording

While nicotine e-cigarettes are thought to be less harmful than combustible cigarettes, they remain highly addictive and can deliver harmful chemicals which can cause lung injury or cardiovascular disease. In 2024, 1.6 million high school and middle school students reported using e-cigarettes. Research shows adolescents who have used e-cigarettes are seven times more likely to become smokers one year later compared to those who have never used e-cigarettes. Recently, the U.S. Food and Drug Administration, or FDA, granted Breakthrough Therapy Designation for cytisinicline for nicotine e-cigarette, or vaping, cessation. Breakthrough Therapy Designation is a process that expedites the development and review of new drugs and biologics that are intended to treat serious or life-threatening conditions and have preliminary clinical evidence indicating substantial improvement over existing therapies. Currently, there are no FDA approved drug therapies indicated specifically as an aid to nicotine e-cigarette cessation. We believe cytisinicline represents a unique opportunity to significantly impact global health by addressing the considerable unmet need among millions of smokers and e-cigarettes users.

Previous wording

Cytisinicline is a plant-based alkaloid with a high binding affinity to the nicotinic acetylcholine receptor. It is believed to aid in treating nicotine addiction for smoking and e-cigarette cessation by interacting with nicotine receptors in the brain, reducing the severity of withdrawal symptoms, and reducing the reward and satisfaction associated with nicotine products. Cytisinicline is an investigational product candidate being developed for treatment of nicotine addiction and has not been approved by the FDA for any indication in the United States.

Current wording

Cytisinicline is a plant-based alkaloid with a high binding affinity to the nicotinic acetylcholine receptor. It is believed to work in treating nicotine dependence for smoking and e-cigarette cessation by interacting with nicotine receptors in the brain by reducing the severity of withdrawal symptoms, and reducing the reward and satisfaction associated with nicotine products. Cytisinicline is an investigational product candidate being developed for treatment of nicotine dependence and has not been approved by the FDA for any indication in the United States.

Previous wording

Cytisinicline represents a unique opportunity to significantly impact global health by addressing the considerable unmet need among millions of smokers and e-cigarettes users. If approved by the FDA, it stands to become the first new prescription medicine in nearly two decades aimed at aiding individuals in overcoming nicotine dependence. We believe cytisinicline is differentiated from existing smoking cessation treatments given its combination of robust efficacy, minimal frequency of side effects and optional shorter course of therapy.

Current wording

We believe cytisinicline represents a unique opportunity to significantly impact global health by addressing the considerable unmet need among millions of smokers and e-cigarettes users. If approved by the FDA, it may become one of the first new prescription medicines in nearly two decades aimed at aiding individuals in overcoming nicotine dependence. We believe cytisinicline is differentiated from existing smoking cessation treatments given its combination of efficacy, well-tolerated safety profile, and a shorter therapy duration, as demonstrated in clinical trials.

Previous wording

We have no products approved for commercial sale and have not generated any revenue from product sales to date. We have never been profitable and have incurred operating losses in each year since inception. Our net loss was $29.8 million for the year ended December 31, 2023. As of December 31, 2023, we had an accumulated deficit of $165.8 million, cash and cash equivalents balance of $15.5 million and a negative working capital balance of $3.8 million. During the year ended December 31, 2023, net cash used in operations was $24.5 million.

Current wording

We have no products approved for commercial sale and have not generated any revenue from product sales to date. We have never been profitable and have incurred operating losses in each year since inception. Our net loss was $39.8 million for the year ended December 31, 2024. As of December 31, 2024, we had an accumulated deficit of $205.6 million, cash, cash equivalents and marketable securities balance of $34.4 million and a positive working capital balance of $29.8 million. During the year ended December 31, 2024, net cash used in operations was $29.8 million.

Previous wording

On May 14, 2015, we entered into a Share Purchase Agreement with Sopharma AD to acquire 75% of the outstanding shares of Extab Corporation for $2.0 million in cash and $2.0 million in a deferred payment, contingent on regulatory approval of cytisinicline by the FDA or the European Medicines Agency, or EMA. The fair value of the contingent consideration on the acquisition date was nil. The contingent consideration liability is measured at fair value in our financial statements,

Current wording

In May 2015, we entered into a Share Purchase Agreement with Sopharma to acquire 75% of the outstanding shares of Extab Corporation for $2.0 million in cash and $2.0 million in a deferred payment, contingent on regulatory approval of cytisinicline by the FDA or the European Medicines Agency, or EMA. The fair value of the contingent consideration on the acquisition date was nil. The contingent consideration liability is measured at fair value in our financial statements,

Previous wording

As of December 31, 2023, the fair value of the contingent consideration was estimated to be $0.5 million (see Note 2 "Significant Accounting Policies, Sopharma Share Purchase Agreement Contingent Consideration" in the accompanying consolidated Financial Statements). We recognized a loss of $0.5 million for the year ended December 31, 2023.

Current wording

As of December 31, 2024, the fair value of the contingent consideration was estimated to be $1.1 million as compared to $0.5 million as of December 31, 2023. (see Note 2 "Significant Accounting Policies, Sopharma Share Purchase Agreement Contingent Consideration" in the accompanying consolidated Financial Statements). We recognized a loss of $0.6 million for the year ended December 31, 2024.

Previous wording

On January 22, 2018, we and the University of Bristol entered into an amendment to the University of Bristol License Agreement. Pursuant to the amended University of Bristol License Agreement we received exclusive rights for all human medicinal uses of cytisinicline across all therapeutic categories from the University of Bristol from research activities into cytisinicline and its derivatives. In consideration of rights granted by the amended University of Bristol License Agreement, we agreed to pay an initial amount of $37,500 upon the execution of the amended University of Bristol License Agreement, and additional amounts of up to $1.7 million, in the aggregate, tied to a financing milestone and to specific clinical development and commercialization milestones resulting from activities covered by the amended University of Bristol License Agreement, in addition to amounts under the original University of Bristol License Agreement of up to $3.2 million in the aggregate, tied to specific financing, development and commercialization milestones. Additionally, if we successfully commercialize any product candidate subject to the amended University of Bristol License Agreement or to the original University of Bristol License Agreement, we will be responsible, as provided in the original University of Bristol License Agreement, for royalty payments in the low-single digits and payments up to a percentage in the mid-teens of any sublicense income, subject to specified exceptions, based upon net sales of such licensed products. Up to December 31, 2023, we had paid the University of Bristol $125,000 pursuant to the University of Bristol License Agreement.

Current wording

On January 22, 2018, we and the University of Bristol entered into an amendment to the University of Bristol License Agreement. Pursuant to the amended University of Bristol License Agreement we received exclusive rights for all human medicinal uses of cytisinicline across all therapeutic categories from the University of Bristol from research activities into cytisinicline and its derivatives. In consideration of rights granted by the amended University of Bristol License Agreement, we paid an initial amount of $37,500 and agreed to pay additional amounts of up to $1.7 million, in the aggregate, tied to a financing milestone and to specific clinical development and commercialization milestones, in addition to amounts under the original University of Bristol License Agreement. Additionally, if we successfully commercialize any product candidate subject to the amended University of Bristol License Agreement or to the original University of Bristol License Agreement, we will be responsible for royalty payments in the low-single digits and payments up to a percentage in the mid-teens of any sublicense income, subject to specified exceptions, based upon net sales of such licensed products. Through December 31, 2024, we have paid the University of Bristol $125,000 pursuant to the University of Bristol License Agreement.

Previous wording

Research and development, or R&D, expenses consist primarily of costs for clinical trials, contract manufacturing, personnel costs, milestone payments to third parties, facilities, regulatory activities, non-clinical studies and allocations of other R&D-related costs. External expenses for clinical trials include fees paid to clinical research organizations, clinical trial site costs and patient treatment costs.

Current wording

Research and development, or R&D, expenses consist primarily of costs for clinical trials, manufacture of product, personnel costs, milestone payments to third parties, facilities, regulatory activities, non-clinical studies and allocations of other R&D-related costs. External expenses for clinical trials include fees paid to clinical research organizations, clinical trial site costs and patient treatment costs.

Previous wording

We expect our R&D expenses to increase for the foreseeable future as we continue to conduct our ongoing non-clinical studies, and initiate new clinical trials and registration-enabling activities. The process of conducting clinical trials and non-clinical studies necessary to obtain regulatory approval is costly and time consuming and we may never succeed in achieving marketing approval for cytisinicline. (See “Item 1A. Risk Factors—Risks Related to the Development of Our Product Candidate Cytisinicline.”)

Current wording

The process of conducting clinical trials and non-clinical studies necessary to obtain regulatory approval is costly and time consuming and we may never succeed in achieving marketing approval for cytisinicline. (See “Item 1A. Risk Factors—Risks Related to the Development of Our Product Candidate Cytisinicline.”)

Previous wording

General and administrative expenses consist primarily of salaries and related costs for our personnel in executive, finance and accounting, corporate communications and other administrative functions, as well as consulting costs, including market research, business consulting, human resources and intellectual property. Other costs include professional fees for legal and auditing services, insurance and facility costs.

Current wording

General and administrative expenses consist primarily of salaries and related costs for our personnel in executive, finance and accounting, and other administrative functions, as well as consulting costs, including commercial, corporate communications, market research, business consulting, human resources and intellectual property. Other costs include professional fees for legal and auditing services, insurance and facility costs.

Previous wording

Our research and development expenses for our clinical development programs were as follows (in thousands):

Current wording

Our research and development expenses for our cytisinicline clinical development program are as follows (in thousands):

Previous wording

Research and development expenses for the years ended December 31, 2023 and 2022 were $15.8 million and $30.1 million, respectively. The decrease in 2023 as compared to 2022 was primarily due to the timing of completion and wind down of our Phase 3 ORCA-3 trial in May 2023 and Phase 2 ORCA-V1 trial in April 2023. This was partially offset by higher costs associated with an increase in NDA-supporting activities including initiation and enrollment in other clinical studies for renal impairment, QT interval prolongation and other remaining PK parameters, manufacturing and FDA readiness activities.

Current wording

Research and development expenses for the years ended December 31, 2024 and 2023 were $22.8 million and $15.8 million, respectively. The increase in 2024 as compared to 2023 was primarily due to the initiation, in May 2024, of our ORCA-OL open label safety trial. This increase was partially offset by a reduction in costs associated with our Phase 3 ORCA-3 trial and Phase 2 ORCA-V1 trial as both were completed in the second quarter of 2023.

Previous wording

We have incurred an accumulated deficit of $165.8 million through December 31, 2023 and we expect to incur substantial additional losses in the future as we operate our business and continue or expand our R&D activities and other operations. We have not generated any revenue from product sales to date, and we may not generate product sales revenue in the near future, if ever. As of December 31, 2023, we had a cash and cash equivalents balance of $15.5 million and a negative working capital balance of $3.8 million. For the year ended December 31, 2023, net cash used in operations was $24.5 million. We have historically financed our operations through equity financings. While we believe that we will be able to settle our commitments and liabilities in the normal course of business as they fall due during the next 12 months, as a development-stage company with no current sources of revenue, we are dependent on our ability to raise funds (through public or private securities offerings, debt financings, government funding or grants, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements) to support the ongoing advancement of our clinical trials and corporate activities. We believe that our existing cash and cash equivalents, which includes net proceeds of approximately $56.2 million from our February 2024 registered direct offering, will be sufficient for us to fund our current operating expenses and capital expenditures into the second half of 2025, including through potential NDA submission to the FDA for cytisinicline and the potential repayment of our outstanding debt obligations under our contingent convertible term loan.

Current wording

We have historically financed our operations through equity and debt financings. While we believe that we will be able to settle our commitments and liabilities in the normal course of business as they fall due during the next 12 months, as a late-stage clinical specialty pharmaceutical company with no current sources of revenue, we are dependent on our ability to raise funds (through public or private securities offerings, debt financings, government funding or grants, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements) to support the ongoing advancement of our clinical trials and corporate activities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient for us to fund our current operating expenses and capital expenditures into the third quarter of 2025.

Previous wording

Subject to certain terms and conditions, the Lenders may convert all or any part of the outstanding Convertible Term Loan principal and accrued and unpaid interest at any time prior to maturity into shares of our common stock at a conversion price equal to $9.34 per share, subject to customary anti-dilution adjustments. Additionally, all outstanding Convertible Term Loan principal and accrued and unpaid interest will mandatorily convert into shares of our common stock, at the conversion price, on such date, if any, when the closing price per share of our common stock has been equal to or greater than $24.00 for thirty consecutive trading days prior to such date.

Current wording

Additionally, the outstanding principal of the New Convertible Term Loan, plus accrued and unpaid interest, will automatically be converted into shares of our common stock at the applicable conversion price on such date if any, when the closing price per share of our common stock has been equal to or greater than (a) in the case of the outstanding aggregate original principal amount of the New Convertible Term Loan, plus accrued and unpaid interest, $24.00 or, (b) in the case of the outstanding principal amount of the second and third tranches of the New Convertible Term Loan, plus accrued and unpaid interest, three times the applicable conversion price, in each case for the thirty consecutive trading days prior to such date, and the Liquidity Conditions (as defined in the New Debt Agreement) have been satisfied.

Previous wording

The Debt Agreement contains customary affirmative and restrictive covenants, including covenants regarding the incurrence of additional indebtedness or liens, investments, transactions with affiliates, delivery of financial statements, payment of taxes, maintenance of insurance, dispositions of property, mergers or acquisitions, among other customary covenants. We are also restricted from paying dividends or making other distributions or payments on our capital stock, subject to limited exceptions. The Debt Agreement also includes customary representations and warranties, events of default and termination provisions. The Lenders may not engage in any short sales of, or other hedging transactions in, our common stock while any amounts are outstanding under the Debt Agreement. Our obligations under the Debt Agreement are secured by substantially all of our assets, other than intellectual property.

Current wording

The New Debt Agreement contains customary affirmative and restrictive covenants, including covenants regarding the incurrence of additional indebtedness or liens, investments, transactions with affiliates, delivery of financial statements, payment of taxes, maintenance of insurance, dispositions of property, mergers or acquisitions, among other customary covenants. We are also restricted from paying dividends or making other distributions or payments on our capital stock, subject to limited exceptions. The New Debt Agreement also includes customary representations and warranties, events of default and termination provisions. The Lender may not engage in any short sales of, or other hedging transactions in, our common stock while any amounts are outstanding under the New Debt Agreement.

Previous wording

On December 21, 2021, we entered into an At-the-Market Offering Sales Agreement, or ATM, with Virtu Americas, LLC, as sales agent, pursuant to which from December 21, 2021 through December 31, 2023, we offered and sold an aggregate of 200,000 shares of our common stock. These aggregate sales resulted in gross proceeds to us of approximately $1.5 million. During the year ended December 31, 2023, we did not sell any shares of our common stock pursuant to the ATM. The ATM was subsequently terminated on February 29, 2024, and no further sales of our common stock will be made pursuant to the ATM.

Current wording

Through the date of termination of the ATM, we offered and sold an aggregate of 200,000 shares of our common stock. These aggregate sales resulted in gross proceeds to us of approximately $1.5 million. During the year ended December 31, 2024, we did not sell any shares of our common stock pursuant to the ATM.

Previous wording

In a concurrent private placement, we issued unregistered warrants to purchase up to 13,086,151 shares of common stock at an exercise price of $4.906 per share (provided, however, that the purchaser may elect to exercise the warrants for pre-funded warrants in lieu of shares of common stock at an exercise price of $4.906, minus $0.001, the exercise price of each pre-funded warrant). These warrants will be immediately exercisable for shares of common stock or pre-funded warrants in lieu thereof, and will expire on the earlier of (i) three and one-half years following the date of issuance and (ii) 30 days following our public disclosure of the acceptance of an NDA for cytisinicline by the FDA in a Day 74 Letter or equivalent correspondence.

Current wording

In a concurrent private placement, we issued unregistered warrants to purchase up to 13,086,151 shares of common stock at an exercise price of $4.906 per share (provided, however, that the purchaser may elect to exercise the warrants for pre-funded warrants in lieu of shares of common stock at an exercise price of $4.906, minus $0.001, the exercise price of each pre-funded warrant). These warrants will be immediately exercisable for shares of common stock or pre-funded warrants in lieu thereof, and will expire on the earlier of (i) three and one-half years following the date of issuance and (ii) 30 days following our public disclosure of the acceptance of an NDA for cytisinicline by the FDA in a Day 74 Letter or equivalent correspondence. The shares of common stock issuable upon exercise of the warrants (or pre-funded warrants, as applicable) were subsequently registered pursuant to our registration statement on Form S-3, which was declared effective on May 6, 2024.

Previous wording

The registered direct offering raised total gross proceeds of approximately $60.0 million, and after deducting approximately $3.8 million in placement agent fees and offering expenses, we received net proceeds of approximately $56.2 million.

Current wording

The registered direct offering raised total gross proceeds of approximately $60.0 million, and after deducting approximately $3.9 million in placement agent fees and offering expenses, we received net proceeds of approximately $56.1 million.

Previous wording

For the years ended December 31, 2023 and 2022 net cash provided by financing activities was $15.3 million and $19.3 million, respectively. Net cash provided by financing activities for the year ended December 31, 2023 relates to proceeds received from our May 2023 private placement and warrant exercises. Net cash provided by financing activities for the year ended December 31, 2022 relates to proceeds received from our November 2022 private placement, ATM sales, stock sales under our employee stock purchase plan and warrant exercises.

Current wording

For the years ended December 31, 2024 and 2023 net cash provided by financing activities was $48.5 million and $15.3 million, respectively. Net cash provided by financing activities for the year ended December 31, 2024 relates to proceeds received from our February 2024 registered direct offering, the New Convertible Term Loan associated with the refinancing transaction in July 2024, warrant exercises, and stock sales under our employee stock purchase plan. This was partially offset by repayment of our Convertible Term Loan associated with the refinancing transaction. Net cash provided by financing activities for the year ended December 31, 2023 relates to proceeds received from our May 2023 private placement, and warrant exercises.

Previous wording

Investing activities in 2023 consisted of property and equipment purchases. There were no investing activities in 2022.

Current wording

Net cash used in investing activities in 2024 was due to transactions involving marketable securities in the normal course of business. Investing activities in 2023 consisted of property and equipment purchases.

Previous wording

We may be required to pay future contingent consideration to Sopharma, AD as part of the Share Purchase Agreement, which is contingent upon obtaining regulatory approval of cytisinicline by the FDA or the EMA.We determine the fair value of the contingent consideration using a probability based discounted cash flow approach whereby we forecast the timing of the cash flow of the related future payment based on cytisinicline's current clinical development phase and the remaining requirements for regulatory approval. We then discount the expected payment amount to calculate the present value and then apply a probability of success in obtaining regulatory approval as of the valuation date. We evaluate the underlying projection used in determining the fair value each period and make updates as necessary.

Current wording

We may be required to pay future contingent consideration to Sopharma as part of the Share Purchase Agreement, which is contingent upon obtaining regulatory approval of cytisinicline by the FDA or the EMA. We determine the fair value of the contingent consideration using a probability based discounted cash flow approach whereby we forecast the timing of the cash flow of the related future payment based on cytisinicline's current clinical development phase and the remaining requirements for regulatory approval. We then discount the expected payment amount to calculate the present value and then apply a probability of success in obtaining regulatory approval as of the valuation date. We evaluate the underlying projection used in determining the fair value each period and make updates as necessary.

Previous wording

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This guidance is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. We are evaluating this standard to determine if adoption will have a material impact on our consolidated financial statements.

Current wording

In December 2023, the Financial Accounting Standards Board, or FASB, issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This guidance is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the United States. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. We are evaluating this standard to determine if adoption will have a material impact on our consolidated financial statements.

Previous wording

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to provide enhanced segment disclosures. The standard will require disclosures about significant segment expenses and other segment items and identifying the Chief Operating Decision Maker and how they use the reported segment profitability measures to assess segment performance and allocate resources. These enhanced disclosures are required for all entities on an interim and annual basis, even if they have only a single reportable segment. The standard is effective for years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024 and early adoption is permitted. We are evaluating this standard to determine if adoption will have a material impact on our consolidated financial statements.

Current wording

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to provide enhanced segment disclosures. The standard will require disclosures about significant segment expenses and other segment items and identifying the Chief Operating Decision Maker and how they use the reported segment profitability measures to assess segment performance and allocate resources. These enhanced disclosures are required for all entities on an interim and annual basis, even if they have only a single reportable segment. The standard is effective for years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024 and early adoption is permitted. The adoption of this standard did not have a significant impact on our financial position or results of operations.