AcelRx Pharmaceuticals, Inc. (NASDAQ:ACRX) Q4 2022 Earnings Call Transcript

AcelRx Pharmaceuticals, Inc. (NASDAQ:ACRX) Q4 2022 Earnings Call Transcript March 30, 2023

Operator: Welcome to the AcelRx 2022 Full Year and Fourth Quarter Financial Results Conference Call. This call is being webcast live via the Events page on the Investors section of AcelRx’s website at www.acelrx.com. This call is the property of AcelRx, and any recording, reproduction or transmission of this call without the expressed written consent of AcelRx is strictly prohibited. As a reminder, today’s webcast presentation is being recorded. You may listen to a replay of this webcast by going to the Investors section of AcelRx’s website. I would now like to turn the call over to Raffi Asadorian, AcelRx Chief Financial Officer.

Raffi Asadorian: Thank you, Andrew. Thank you for joining us on the call today. This afternoon, we announced our full year and fourth quarter 2022 financial results and associated business updates in a press release. This press release can be found with the investors within the Investors section of our website. With me today are Vincent Angotti, our Chief Executive Officer; and Dr. Pamela Palmer, AcelRx’s Founder and Chief Medical Officer. Before we begin, I want to remind listeners that during this call, we will likely make forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of AcelRx. Please refer to our press release in addition to the company’s periodic, current and annual reports filed with the Securities and Exchange Commission for a discussion of the risks associated with such forward-looking statements.

I’ll now hand the call over to Vince.

Vincent Angotti: Thank you, Raffi, and good afternoon, everyone. This past year has been a transformative one for AcelRx. We’re pleased to update you today after executing on our previously stated goal of divesting DSUVIA, our first commercial product to Alora Pharmaceuticals. Alora is a well-resourced operation with extensive experience commercializing products in hospitals, expertise in the manufacturing and sales of controlled substances and a team of over 200 salespersons. In addition to the 15% royalty on net commercial sales and the $116.5 million in sales-based milestones in our agreement with Alora, we’re able to leverage our invested time and resources working with the Department of Defense, the single largest customer for DSUVIA through a 75% royalty on DoD net sales.

In today’s press release, we announced a new publications and presentations on this area, including a presentation at the Anesthesiology Annual Meeting 2022 by the Uniform Services University of the Health Sciences on DSUVIA for Battlefield Pain Management. In the presentation, the authors once again recommended the adoption of DSUVIA by the Department of Defense to improve pain management in the battlefield setting. These and other recent publications provide continued endorsement of the value of DSUVIA for acute pain management. Now the DoD has many different purchasing points across various areas of the armed services. We remain focused on the U.S. Army since the largest opportunity for DSUVIA is within their sets, kits, and outfits or SQs for deploying troops.

The DoD is a very important relationship, and we believe that this will provide long-term value for our shareholders. After the expected closing of the DSUVIA transaction in the coming days, we’ll have transformed the company and are confident that we can leverage our successful development expertise and obtaining approval for our late-stage high-value assets. In particular, we’re focusing on our lead nafamostat program, Niyad, which has FDA breakthrough designation and is being developed for use in the U.S. as an anticoagulant for Extracorporeal circuits in particular, such as dialysis. As such, we wanted to provide visibility into Niyad’s potential, which we believe is a key component of the company’s value. Nafamostat is approved and widely used as an anticoagulant for dialysis in Japan and South Korea.

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We, AcelRx, are the first developer for such use in the United States. And if approved of Niyad would be the only regional anticoagunant labeled for use in this indication in the U.S. Clotting in the dialysis filter during continuous renal replacement therapy or CRRT is a major limitation to the patient receiving effective dialysis. In addition, filter clotting results in loss of red blood cells, platelets and clotting factors often requiring transfusions for the patient. For these reasons, the international CRRT guidelines recommend the use of an anticoagulant infused into the dialysis circuit. So today, two anticuagnant options exist for CRRT, first heparin and then their citrate, which is only available under an EUA. Our recent U.S. quantitative market research confirms the urgent medical need for an alternative anticoagulate for use in CRRT.

The study results show that the inherent risks of the currently used products, Heparin, which has used 43% of the time in patients and Citrate, which is used in 28% of patients lead physicians cannot use anticoagulants, which again, is below the international standard of care, and the remaining 29% of patients are undergoing CRRT. Consistent with the published literature and our recent quantitative market research, 84% of physicians reported that frequent filter changes occurred when not using an anticoagulant. This not only leads to increased blood loss and an increase in the number of transfusions, but also results in delayed or prolonged treatment time and imposes a burden on health care resources. Now in addition to our market research, detailing the specific adverse events physicians were concerned about regarding Citrate, it included hypocalcemia, citrate safety, alkalosis and others.

So in conclusion, we believe that the market opportunity for Niyad is 29% of the patients that are receiving no anticoagulant as well as the 28% of patients that are receiving citrate. This totals almost 60% of the CRRT patients. This market research is significant. We plan to submit it for peer-reviewed publication in the second quarter. We’ve already completed the production of the initial development batch in Niyad and are now completing stability product testing in preparation for planned EUA submission. We remain on target to submit this EUA in the second quarter. And in addition, having already received an ICD-10 CMS procedural code for reimbursement, we’re proceeding with early commercial planning. Niyad is estimated to have a peak sales potential of $200 million, and this is attributed to just the inpatient and outpatient dialysis markets, excluding use in any other extracorporeal circuits.

We anticipate that we’ll need only a very modest sales force for launching Niyad. Our market research has reinforced that it is clearly an important unmet patient need and we look forward to initiating a single registrational trial in the second half of 2023, of which the primary end points have already been agreed upon by FDA for 160 patient study. Consistent with our priority to advance our pipeline of late-stage assets, we continue to make progress towards filing NDAs for our ephedrine and phenylephrine prefilled syringes. As such, our other near-term corporate milestone expected by the end of Q2 2023 is the filing of a new drug application for our prefilled syringe of ephedrine branded as Fed Sera, again, branded as Fed Sera. The benefits of prefilled syringes include less waste, improved safety, and the convenience of not having to dilute and prepare the surrendering advance of procedures, resulting in a shift towards their use.

Based on our partner Aguettant experience in Europe, the expected shelf life of Fed Sera is three years. Nearly all of the currently used to sedan prefilled syringes are made by compounding pharmacies, which have an inherent short shelf life and well-known risks for contamination. The ability of physicians to have available a convenient prefilled terminally sterilized efferent syringe that has a three year self-life will be a significant improvement and advantage for the overall health care system. As stated previously, we believe that the market opportunities for the assets exceeds $100 million, and we believe that we’ll be able to obtain a significant share of this market with minimal investment since much of the commercialization efforts are expected to be through contracting with group purchasing organizations and hospital networks.

And just to put the market potential for a pre-filled syringe into better context, A ready-to-use bowl of ephedrine, not a prefilled syringe, but a ready-to-use valiosedrin launched in 2020 and reported that $30 million in sales in only its second year of launch. With potential approval of the NDA for Fed Sera, commercialization could occur as soon as the first half of next year. As we stated in today’s press release, both the Niyad and Fed Sera regulatory submissions will bring us closer to delivering important advancements for the health care system and increasing value for our shareholders. In conclusion, I’m pleased to report that we believe we’re well positioned to execute on a new successful chapter for AcelRx. We’ve divested our opioid product to focus on our proprietary anticoagulant program which we believe has the potential to reach $200 million in peak sales.

We’ve made significant progress in our clinical development program of Niyad, and we’re preparing to move to a registrational trial with endpoints agreed upon by FDA and later this year. We’re also on track to file our NDA for our first prefilled syringe product candidate, Fed Sera, which also has significant upside potential for the company if approved. Importantly, we’ll continue with our efficient approach to managing cash as we accomplish these key milestones. I’ll now hand the call over to Raffi to take you through the fourth quarter financial results.

Raffi Asadorian: Thank you, Vince. The planned closing of the DSUVIA transaction with Alora Pharmaceuticals in the coming days, is expected to add value through reduced cash burn and leveraging via Alora commercial infrastructure to collect royalties and milestones on DSUVIA sales. We’re excited to work with Alora on the transition and supporting the potential long-term value creation from the transaction. Our full year 2022 DSUVIA sales totaled $1.8 million which was a 76% increase over 2021 despite a significant reduction in our commercial investment to conserve cash. We believe Alora’s ownership of DSUVIA will deliver a significant increase in DSUVIA sales after the initial transition period. As Vince mentioned, our focus now turns to our lead program in nafamostat for which significant potential near-term milestones exist as well as our first prefilled syringe NDA submission, Fed Sera.

We continue to focus on our cash and ended the year with $20.8 million in cash and investments. Our debt continued to amortize and the balance at the end of the year was $5.4 million. Combined R&D and SG&A expenses for the fourth quarter of 2022 totaled $7.3 million compared to $6.9 million for the fourth quarter of 2021. Excluding noncash depreciation and stock-based compensation expense, these amounts were $6.6 million for the fourth quarter of 2022 compared to $5.6 million for the fourth quarter of 2021. The increase in combined R&D and SG&A expense in the fourth quarter of 2022 was primarily due to costs associated with the December financing and other legal costs, partially offset by net decreases in R&D and SG&A expenses compared to the fourth quarter of 2021.

We expect our cash operating expenses in 2023 to range from $16 million to $20 million, which include costs related to a planned launch of Niyad under an EUA, initiating the single registrational study for Niyad and the PDUFA fee for Fed Sera for which an NDA submission is expected in the second quarter of this year. ‘ll now turn the call back over to Vince.

Vincent Angotti: Thank you, Raffi. I’d now like to open the line for any questions you might have. Andrew?

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Q&A Session

Operator: The first question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.

Brandon Folkes: Thanks, taking my question Vinc, Congratulations on all the progress. Maybe I’ll just start on DSUVIA. Can you just talk about who drives the military procurement with this deal? Are there any current DoD orders? And then just to sort of €“ will you have a continued involvement on the DoD side or just staying ahead of the DOD? I’ll ask my civic question, then I’ll hop across to Niyad.

Vincent Angotti: Sure. So the DoD purchasing is decentralized when you consider it from the different branches of the military, that being that the Navy, the Air Force the Coast Guard and the Army all purchased through different avenues. And even within the Army, in particular, you have different avenues that drive it. So, for instance, we have relationships that we work with, with the Defense Health Agency, the Defense Logistics Agency, Usama. Working on contingency contracts with the Army outside of those particular channels and of course, the so it’s a myriad of different channels within the military. The largest driver, though, will be through these which are often driven centrally by a single purchaser for troop deployment and readiness.

These relationships have been fostered over time. It takes time. But we feel like we’re really advancing them here just in the course of the past year to a new level. And part of it, honestly, is the tension that builds around the world and the challenges with the conflict and the creation for potential more deployments, unfortunately for our U.S. armed services. So we’re going to continue to maintain those relationships, drive them and hopefully be able to supply them at the right quantity and timing as those things escalate.

Raffi Asadorian: Yes. It’s our responsibility, Brandon. That remains with us.

Brandon Folkes: Okay. Great. as good to hear. And then so maybe just shifting gears to Niyad. Maybe just a two part that probably go together. Any color on the steps outstanding from here on in, in terms of submitting the EUA, would you — you sound quite confident. We’re almost at 2Q. So is it fair to just think of it as procedural from here on in. And then along those lines, in terms of manufacturing of Niyad, can you just remind us on this EUA will you need an inspection? And then secondly, staying on manufacturing, can you just talk about your ability to supply the market just given that 60% figure you put out today? Thank you, very much.

Vincent Angotti: Sure. I can address the first part of that question, and I’ll continue to turn it over to Raffi and Pam as it relates to some of the supply. So we’ve been working on the EUA for a year at least in preparation. And part of — just to give you an example of the quantitative market research we just completed that started, I think, in the fourth quarter last year with results in the first quarter this year to continue to show the FDA the elevated use of CRRT in the hospitals from a post-COVID standpoint, pre and post, if you really want to consider it post right now. So we have put all of our work together related to the package and the 1 remaining aspect, most importantly, has remained CMC. So we’ve got the balance of the package basically ready to go.