AcelRx Pharmaceuticals, Inc. (ACRX) on Q1 2022 Results - Earnings Call Transcript
Operator: Welcome to the AcelRx First Quarter, 2022 Earnings Call. This call is being webcast live on the events page of 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 call is being recorded. You may listen to a webcast replay of this call by going to the investors section of AcelRx 's website. I would now like to turn the call over to Raffi Asadorian, AcelRx 's Chief Financial Officer.
Raffi Asadorian: Thank you for joining us this morning. Earlier this morning, we announced our first quarter 2022 financial results and some business updates in a press release. This press release and the slide presentation accompanying this call are available in the Investors section of our website. With me today are Vince Angotti, our Chief Executive Officer; and Dr. Pam Palmer, our Chief Medical Officer. Before we begin, I'll remind listeners that during this call, we will 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 will now hand the call over to Vince.
Vincent Angotti: Thank you. Raffi, and good morning everyone. A lot has changed in our first quarter of 2022, both in the macro market environment, but also at AcelRx. We completed our acquisition of Lowell Therapeutics earlier in the quarter, which has provided us with a number of promising product candidates. We have also advanced preparation of the NDAs for our two pre-filled syringe products, ephedrine and phenylephrine and expect initial feedback from the FDA to our inquiries at the end of this month. In addition, DSUVIA has continued to demonstrate impressive growth in the procedural suite market. Even with the limited commercial team that we've maintained. In fact we have further aligned our cost structure to concentrate on our recently expanded development pipeline. This reorganization is expected to generate annual savings of approximately $9 million. The value of the DSUVIA for patients and healthcare providers is evident based on the feedback we continue to receive from the health care community, as well as in numerous studies that are being published, extolling the benefits of the DSUVIA and various procedural environments. However, we realize that in this current market environment distributes full potential as a unique analgesic can be maximized by an entity with broader resources. Accordingly, we're actively discussing strategic relationships with third-parties with a more robust commercial presence that can help maximize distribute value for all stakeholders. Our goal is to enhance the value of DSUVIA with an organization that is better resourced and equipped to carry out the ongoing launch of this very valuable product and even further reduce our cost structure. Now let's move on to provide further details on the progress made this quarter. As we had announced in January, we closed our strategic acquisition of Lowell, which is as a family of novel nafamostat products to our portfolio with diverse potential applications, including our lead asset Niyad, which is intended for use in renal replacement therapy. Given the importance of this asset, we recently held a key opinion leader webinar with two leading internationally renowned physician experts specializing the acute kidney injury. A replay of this webinar is currently posted on the Investors section of our website and we’d encourage you to listen to hear many of the outstanding attributes in nafamostat. The webinar detailed the scientific and clinical basis behind the use of Niyad for anticoagulation of the extracorporeal dialysis circuit in both adults and children. Niyad is a lyophilized form of nafamostat that is being regulated as a device by the FDA, given that its mechanism of action takes place outside of the body of the patient, that is within the extracorporeal circuit. Nafamostat is approved and widely used for the syndication of Japan and South Korea, but it's never been developed for such use in the United States. The FDA has assigned Niyad with a breakthrough device designation, which provides us with several advantages and gaining regulatory approval. Further CMS is already assigned in ICD-10 procedural code for its use in extracorporeal circuit, which will facilitate reimbursement. Once we've manufactured the first cGMP lot of Niyad, which is expected to occur early next year, we intend to apply to the FDA for an emergency use authorization or EUA. We're currently in the final stages of securing supply and manufacturing partners for Niyad. After manufacturing of our initial lots our development plan that has been informed by the FDA, includes a single registrational study in 160 patients, which is expected to begin in 2023. And if approved Niyad would be the only regional anticoagulant for this indication in the U.S. On a thermostat portfolio is promising with the potential for Niyad, however, nafamostat has other beneficial therapeutic applications. Therefore, we will be exploring other potential indications for nafamostat as an intravenous synthetic serine protease inhibitor to be developed in the future under the name LTX-608. In the near-term, we intend to focus our resources on Niyad’s approval for CRRT and potential Emergency Use Authorization. Currently, 60% of the patients on continuous renal replacement therapy in the U.S., do not receive anticoagulants often due to the risk of currently available options. We believe Niyad could address this unmet market need. In addition, we believe the potential peak sales for Niyad alone exceeds $200 million annually. And this amount is attributed to just the inpatient and outpatient dialysis markets. The markets for the other target indications for LTX-608 were also sizable. Now, consistent with our priority of advancing our late-stage pipeline assets, we've made progress on the regulatory pathway for our pre-filled syringes. The pre-filled ephedrine and phenylephrine syringes were licensed from Aguettant, who is also our European partner for DSUVIA or DZUVEO as this named in Europe. We anticipate feedback from the FDA by the end of this month on our plan for the first pre-filled syringe product candidate ephedrine or PFS-01. Assuming agreement from the FDA, we expect to submit NDAs for these two products, these two product candidates this year. With two NDAs filed in 2022, we expect to have approved products to launch next year. The market opportunity for these assets exceeded $100 million and we believe we'll be able to obtain a large share of this market with minimal commercial investment. And while we're eager to concentrate resources on our pipeline, we've made very good progress focusing our commercial efforts for DSUVIA into procedural suites over the last three quarters. As a result of this continued growth and what we strongly believe are favorable prospects for DSUVIA, there is interest from other parties related to commercializing the product. Accordingly, to ensure value is maximized for our shareholders, we're in active discussions with more resourced, potential commercial partners to take on DSUVIA. This would potentially provide AcelRx the opportunity to benefit from a stronger commercial presence from a larger company, reduce investment required by AcelRx and provide an accelerated return on investment to our shareholders as DSUVIA continues to accelerate its growth trajectory. The adoption for DSUVIA for use in procedural suites remains encouraging and is the largest driver of use. This is an important market as many painful procedures are now being performed in procedural suites, which are more cost effective than hospitals in ASCs. In 1Q ‘22 DSUVIA achieved historical highs in new ordering customers, reordering customers, total number of unique orders, doses to end-users, and new REMS enrollments. This growth was driven by the procedural suite market as it now represents 71% of all commercial sales in 1Q ’22, that's up from 59% in 4Q ‘21 and up from 28% in 1Q ’21. Now that we have identified where DSUVIA can be successful and increased presence is required in these locations to further grow sales. This is why we're confident that the working with the commercial partner of DSUVIA is a necessary next step. In the meantime, we've restructured our commercial resources to consist of a small virtual sales team focused on procedural suites, which we believe is the most efficient approach. Year-to-date, we've had a number of publications about DSUVIA specifically for its use in plastic and cosmetic surgery, providing further real world evidence of the many benefits both to patients and the overall healthcare system that can be experienced when administering DSUVIA and the procedural suites setting, as well as other settings. In terms of other markets for DSUVIA’s application, you may have seen our year-end earnings release announcing a commentary published in the Journal of Military Medicine highlighting the favorable pharmacological properties of DSUVIA for use in the military setting. In addition, more recently an editorial was published in the same journal describing DSUVIA’s potential psychological benefits to injured soldiers by initiating timely pain management on the battlefield. The editorial identified DSUVIA as “certainly a step forward in improving acute pain management in combat settings”. We're further encouraged that the DoD is finally initiated two studies that were originally planned to commence 18 to 24 months ago. We believe that the initiation of these two studies, as well as the recent military publications further cement the DoD's commitment to DSUVIA for battlefield use. Our despite the U.S. military deeming DSUVIA the preferred treatment choice for those in the battlefield, things have moved slower than anticipated to formally rollout DSUVIA in the setting. We continue to weigh on final clearance related to the administrative and logistics prerequisites that once cleared will facilitate the U.S. Army and purchasing DSUVIA for their sets, kits and outfits or SKOs. The Army continues to make purchases for their pre- position stockpiling program, but we expect an increase once the Army begin supplying the SKOs for deploying and deployed troops. We remain excited about the upcoming launch of DSUVIA or DZUVEO in Europe, we expect Aguettant will launch DSUVIA in the third quarter of this year and they remain focused on other pre-launch activities. We look forward to monitoring the uptake of this important drug in a new market and believe that Aguettant will definitely benefit from our experience in launching DSUVIA in the U.S., as they further their launch plans. I'll now hand the call over to Raffi to take you through the first quarter financial results.
Raffi Asadorian: Thank you, Vince. Our first -- our financial position remains solid with $39.3 million in cash at March 31, and $11.4 million in senior debt. Our debt level continues to reduce each quarter as we reach maturity in Q2 2023. Total sales of $0.4 million in the first quarter was an increase of 17% over the fourth quarter of 2021. DSUVIA sales volume growth continues to accelerate with volume growth excluding DoD of 64% in the first quarter, compared to the fourth quarter of 2021. This is the fourth consecutive quarter of commercial or ex Department of Defense sales growth -- sales volume growth, which was led by procedural suites, all of this, despite a limited commercial infrastructure. Operating expenses or combined SG&A and R&D expenses were $8.7 million in the first quarter of 2022, compared to $8.6 million in 2021. Excluding non-cash, depreciation and stock-based compensation, first quarter 2022 cash operating expenses were $7.7 million. The increase in operating expenses in Q1 2022 was mainly driven by increased DSUVIA manufacturing-related costs, partially offset by reductions in personnel-related expenses. The restructuring, Vince discussed earlier on this call is expected to generate approximately $9 million in annual savings and an estimated $500,000 restructuring charge that will be recorded in our second quarter financial statements. I’d now turn the call back over to Vince.
Vincent Angotti: Thank you, Raffi, we're excited about the many upcoming potential catalysts and value drivers, our future and the transformation we made over the past year with our late-stage development assets. And I'd like to open the lineup for any questions you might have. Operator?
Operator: We will now begin the question-and-answer session. First question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.
Brandon Folkes: Hi, thanks for taking my questions and congratulations on all the progress. And just two from me this morning. Firstly, maybe just on the OpEx saving. How should we think about those savings being reinvested back into the new programs that you do bring on board versus over the pardon versus dropping to the bottom line? And then secondly, can you talk about the interest you've had in DSUVIA? And what are you looking for in terms of an agreement to get it over the line here? How important is a launch upfront? Thank you.
Raffi Asadorian: Hey, Brandon. It’s Raffi, I missed that last part of it, but you got -- Vince got it. So I'll answer the first question, and then -- I mean the savings we have this year most all of that will be dropping to if you want to call it the bottom line, but we'll be additional cash savings, because the development costs are not significant early on for our pipeline products. So I think for this year most of that comes back as a cash savings. As it relates to the second question, Brandon, the interest in DSUVIA and kind of how that looks. Well it actually runs the gamut anything from licensing in particular aspects of the market, whether it’d be a segment and procedural suites, hospital other two full divestiture of the program and we're entertaining all as we move through these discussions.
Brandon Folkes: All right, thank you very much.
Raffi Asadorian: You're welcome very much.
Operator: The next question comes from Ed Arce with H.C. Wainwright. Please go ahead.
Thomas Yip: Hi, good morning, everyone. This is Thomas Yip asking couple of questions for Ed. So first announced today the headcount reduction, can you provide an estimated number of acquisitions and what are their primary work functions and in general area?
Vincent Angotti: Yes, it’s in the neighborhood, I'll give you a percentage of between 40% to 45% of our head count, predominantly in the commercial arena. With other 10 general positions that might affect that, that have multiple duties.
Thomas Yip: Got it, okay. And also somewhat related to that, you also announced discussions with potential partners to support commercial plan for sales expansion of DSUVIA. And you just talked about a little bit about general framework, should we expect any impact on your work with the DoD and how would that work out?
Vincent Angotti: No, you shouldn't expect any impact, that we've had a longstanding relationship now with the DoD, we are in frequent communication with them and it wouldn't have an impact relative to that. I mean again the functions we're looking at is anything from a full divestiture actually us keeping certain segments of it like the DoD or some others that may have some more resourcing, but again it's the full gamut of possibilities for the product and the DoD will not be affected.
Thomas Yip: Okay, thanks. Thanks for the other color. And then perhaps as you just pointed out, will exclude DoD and a range of possibilities, can you give us some ideas, how you envision this new plan, either through your own effort and also through partners as well? Any roadmap to us that Q2, kind of, elevate DSUVIA sales in the U.S. from current levels?
Raffi Asadorian: Yes, the plan here, look, so we like the response for getting from our communications, we made a lot of adapt -- we adopted a lot of new mechanisms to move into the procedural suite market in particular during COVID, but not only because of COVID, because we see the market moving away from hospitals for many of these procedures and the selling cycle being shorter. With that said, we still think hospitals are an opportunity moving forward, we still believe the ASCs are an opportunity obviously moving forward. But all this requires a much larger infrastructure then we have, even in the procedural suites. So we're maintaining primarily a virtual sales team today, which is more efficient cost structure and has been very responsive to communications and educations for DSUVIA, but it's not enough and that not enough factor is the point where we believe for our shareholders for DSUVIA for the education of health care practitioners, it has to come with a larger effort, an effort that we can't do well while we're also concentrating on the recently acquired late-stage development pipeline. So as opposed to trying to do both, we are going to really focus on that late-stage development pipeline, we’ll continue the momentum on DSUVIA, but hope to expand it in a much greater degree moving forward with the partner.
Thomas Yip: Understood, then if perhaps one final question. Speakers of nafamostat, can you discuss what are the next steps to move the nafamostat in two Phase 3 and as a study protocol can agree with the FDA?
Vincent Angotti: Yes, I'll have that question relative to nafamostat move to Dr. Palmer about the next steps on nafamostat and our plan over the course of the next year.
Pamela Palmer: Yes. So, Thomas, we're planning on initially making the first batch of product and as Vince mentioned applying for EUA, which is already perceived very favorable feedback from the FDA and we talked about that on the -- in the KOL day that we had recently. But the protocol itself, the endpoints have been agreed upon, they are very straightforward, again it's a simple study of 80 nafamostat patients versus 80 placebo patients, so that's patient getting no anti-coagulation, while they undergoing renal replacement therapy. And the primary endpoint is looking at the activated clotting time. So it's straightforward, it’s been informed by the FDA, and we're excited to start that Phase 3 program after batches of the drug are made.
Thomas Yip: Got it. Thank you so much. Dr. Palmer and thank you very much, Vince. Looking forward to the progress in coming months.
Vincent Angotti: Thank you, Thomas.
Operator: The next question comes from Robert LeBoyer with Noble Capital. Please go ahead.
Robert LeBoyer: Good morning. There was a mention of the use in the procedural suites and it’s sounds --
Raffi Asadorian: Hey, Robert just to comment, you went blank on us there at the start, could you repeat the question of the beginning, I apologize.
Robert LeBoyer: Okay. There was a mention that DSUVIA is being used and growing in the procedural suites, which sounds like you're identifying procedures and settings where the drug is growing and could continue to grow. Could you just elaborate a little bit on the types of surgeries and the procedures, where it's being used?
Vincent Angotti: Absolutely, I'll refer this to Dr. Palmer one moment. But there's three main categories where physician disciplines are using it in, I think the thing you have the commonly think of are awake surgeries. Those three disciplines are primarily plastics, oral maxillofacial and ENT, within those three disciplines Pam, maybe you can talk about the results we've seen in the concentration of efforts on certain procedures.
Pamela Palmer: Sure, plastics has been the most straightforward one from us for years and years plastics have been working away from hospitals and ASCs into the procedural suites. It's more patient-friendly, frankly it's less expensive and as we know a lot of plastic surgeries are self-pay from the patient. So they have adopted DSUVIA fairly quickly something like ENT for example, that’s a specialty that only recently has been focusing their painful procedures and outpatient setting. They typically were done in hospitals and ASCs before, but because of a reimbursement to the physicians that's changed recently they get actually more reimbursement for performing these in outpatient procedure suite. Then, we've seen a large volume of those et cetera move into that setting. And so there has been more recently very interested in learning more about DSUVIA and the ENTs that have adopted it are really excited about what they're able to do comfortably with the patient in that office-based setting. And then oral surgeons, of course we've been interested in that group for a while, there has been a slow and steady adoption with the oral surgeon, but we really feel that it could be reaching a tipping point soon as more of them are hearing about DSUVIA. And that's just the three, I mean, we've always believe that colonoscopy has the scopes become smaller with time and a little less painful on the actual procedure, they don't need that heavy sedation, they need typically have in the past with your IAP Protocol, IV fentanyl et cetera. So we are really excited about DSUVIA to be going into those areas as well. So from a prestigious suite standpoint, that's the movement all procedurals -- painful procedurals are really sort of moving in that direction and we believe DSUVIA is just the perfect opportunity to create a non-invasive analgesic that can really address the unmet need in that market.
Vincent Angotti: Yes, Robert, so while we've had personal exposure to the plastics for anything from liposuction or radio frequency, microneedling, which we just saw a published paper on more recently neck lifts Away Neck lifts and blepharoplasties. And for the ENTs as Pam mentioned the sinuplasties for oral maxillofacial, full mouth, tooth extractions and full arch in plants. Really painful procedures for these patients, that's only where we've concentrated our efforts and I think that's an important point that Pam mentioned. And as we move to a strategy where others can be involved markets like GI as you mentioned OBGYN others that we can't adjust just based on limited resources I think will now become more transformational for our product within their particular practices moving forward.
Robert LeBoyer: Okay, thank you. That was very helpful.
Vincent Angotti: You're welcome.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Vincent Angotti for any closing remarks.
Vincent Angotti: Yes. Well, thank you for joining us today and for your continued support of AcelRx. We are especially grateful to our employees for all their hard work and dedication. Again, we believe we're well positioned for the future, we're excited about the prospects of our development pipeline, maximizing the potential for DSUVIA and will remain focused on driving shareholder value, while controlling expenses. We look forward to sharing more developments in the near future. Thank you. Be safe and take care.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
