ACHV

Business Context and Reporting Period

This Form 8-K, dated January 5, 2017, reports a material definitive agreement between OncoGenex Pharmaceuticals, Inc. ("OncoGenex") and Achieve Life Science, Inc. ("Achieve"). The filing details a proposed merger intended to create a combined entity expected to be renamed Achieve Life Sciences, Inc. The transaction is structured as a tax-free reorganization under Section 368(a)(2)(D) of the Internal Revenue Code and is expected to close in mid-2017, subject to stockholder approval from both companies.

Key Financial Metrics and Transaction Terms

The filing does not provide historical revenue, profit, cash flow, or debt metrics for either company. Key financial terms of the transaction include:

• Exchange Ratio: Each outstanding share of Achieve common stock will convert into approximately 4,242.8904 shares of OncoGenex common stock, subject to adjustments based on capitalization changes.
• Ownership Structure: Post-merger, OncoGenex equityholders are expected to own approximately 25% of the Combined Company, while Achieve equityholders are expected to own approximately 75% on a fully diluted basis.
• Termination Fees: A fee of $500,000 is payable under specified termination circumstances. A fee of $1,000,000 is payable if a party breaches covenants regarding alternative transactions.
• Expense Reimbursement: Upon certain terminations, a party may be required to pay the other party's third-party expenses up to $500,000.
• Contingent Value Rights (CVRs): OncoGenex stockholders will receive CVRs entitling them to 80% of consideration received by the Combined Company from milestones related to OncoGenex's apatorsen product candidate over a five-year period.

Material Changes and Governance

The filing outlines significant changes to corporate governance and leadership upon the consummation of the merger:

• Board Composition: The Combined Company's Board will consist of seven members: three designated by OncoGenex and four by Achieve.
• Executive Leadership: Rick Stewart (current Chairman of Achieve) is expected to become Chairman and CEO. Anthony Clarke (Achieve CSO) will remain CSO. John Bencich (OncoGenex CFO) and Cindy Jacobs (OncoGenex CMO) will retain their roles. Scott Cormack (OncoGenex CEO) will resign as CEO but remain on the Board.
• Support Agreements: Holders of approximately 78% of Achieve's outstanding shares and 1.2% of OncoGenex's outstanding shares have entered into support agreements to vote in favor of the merger.
• Lock-Up Agreements: The same shareholders are subject to a 180-day lock-up period on the sale of Combined Company stock following the merger.
• Bylaws Amendment: OncoGenex amended its bylaws to designate Delaware courts as the exclusive forum for internal corporate claims.

Outlook, Risks, and Contingencies

Management commentary and risk factors highlight the following:

• Closing Conditions: The merger is contingent upon stockholder approval and the satisfaction of other closing conditions.
• Apatorsen Milestones: OncoGenex has a six-month period (starting February 2017) to secure a third-party agreement for the development or commercialization of apatorsen. Failure to do so may result in no consideration being payable to CVR holders.
• Forward-Looking Risks: Risks include failure to obtain stockholder approval, inability to meet closing conditions, delays in transaction completion, failure to realize anticipated benefits, and the inherent risks of drug development and commercialization.
• Financing: The Combined Company may require additional financing to fund development programs and clinical trials.

Investor Verification Checklist

• Verify the final exchange ratio and any adjustments to the 4,242.8904 share conversion rate in the upcoming proxy statement.
• Confirm the status of the six-month effort to secure a third-party agreement for the apatorsen product candidate, as this directly impacts CVR value.
• Review the joint proxy statement/prospectus (Form S-4) for detailed financial statements of both entities and the pro forma capitalization of the Combined Company.
• Assess the specific termination rights and the likelihood of the $500,000 or $1,000,000 termination fees being triggered.
• Monitor the voting results of both OncoGenex and Achieve stockholders, as the transaction is not binding without their approval.