AcelRx Pharmaceuticals, Inc. (ACRX) on Q1 2021 Results - Earnings Call Transcript
Operator: Welcome to the AcelRx First Quarter 2021 Earnings Call. This call is being webcast live on the events page of the Investors section of AcelRx's website at acelrx.com. This call is the property of AcelRx and any recording, reproduction or transmission of this call, without the express 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. Please go ahead.
Raffi Asadorian: Thank you for joining us this afternoon. Earlier today, we announced our first quarter, 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 is Vince Angotti, our Chief Executive Officer; and Dr. Pam Palmer our Chief Medical Officer.
Vince Angotti: Thank you, Raffi and good afternoon everyone. We appreciate you taking the time to join the call. I'll keep our prepared remarks brief, since our last update was just a couple of months ago. On the year-end call, we discussed the expectation that the COVID backlog elective surgeries would begin clearing up in the second half of this year. In particular, these last two months have provided more clarity on the post-COVID environment, as surgery centers and hospitals in the US are beginning to open, accept visitors and reinitiate elective surgeries. In fact, April was our best commercial month since the launch of DSUVIA. We have a long way to go, but we're seeing light at the end of the tunnel and trending back to the growth, we expected prior to COVID. Although the pandemic delayed formulary reviews over the last year through April, we've achieved 432 approvals. We're well on track to achieve our year-end target of 615 formulary approvals. Also encouraging, is the continued expansion of the clinical site studying DSUVIA, as well as growth in the diversity of physician specialties, beginning to adopt DSUVIA. One of our key messages that is resonating with health care providers is how DSUVIA supports opioid stewardship, which is reinforced with real-world clinical data, published in the second half of last year. The generation of highly relevant clinical endpoints beyond what was studied in our registration trials, remains a priority for us in 2021. We're supporting a diverse array of investigator-initiated studies with an emphasis on commonly performed orthopedic procedures. Now, I'll touch on each of these important points shortly, as I update you on the progress within our four pillars of revenue growth. Our first pillar is focused on the Department of Defense. Progress on sales to the DoD in the first quarter remained slow, as they continue to work through complex administrative and logistical matters, which we expect will be resolved soon.
Raffi Asadorian: Thank you, Vince. Despite the continued COVID headwinds in the first quarter, we strongly improved our financial position, ending the quarter with $67.3 million in cash while also reducing our senior debt to $19.1 million at the end of the quarter. The remaining long-term liabilities principally, relate to the accounting for the sale of the Zalviso royalty liability, which is non-recourse to the company. The obligation is only payable from royalties received on sales of Zalviso. If there are no royalties received then there is no repayment required. Revenues consisted mainly of product sales and were $0.5 million in the quarter, a 32% increase over the first quarter 2020. Again, despite the negative impact from the pandemic restricting access and limiting elective surgeries which was experienced across the sector.
Vince Angotti: Thanks, Raffi. So in summary, in Q1, we strongly improved our financial position, have continued to engage in the support of key studies that we believe will further demonstrate DSUVIA's differentiation to opioid stewardship and patient satisfaction and we remain committed to business development transactions from both an out-licensing and an in-licensing standpoint. As a result, we feel that we are well positioned for the post-COVID setting. I'd now like to take the -- now I'd like to open the line for any questions you might have. Debbie operator, please?
Operator: We’ll now begin the question-and-answer session. Our first question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.
Brandon Folkes: Hi. Thanks for taking my questions. Maybe first, can you just elaborate in terms of your comments on April being the best commercial month to-date? Where are you seeing growth there? Any color would be very helpful. And then secondly maybe just sort of at a high level strategically. Vince in the past you've talked about business development. What's your current thinking and sort of urgency? Obviously, it's been a different environment the last 12 months, but I'd like to get your update there. Thank you.
Vince Angotti: Sure Brandon. Thank you. So, for question one elaborate on April as the best-to-date, I can tell you that in April, we had the highest number of boxes to end users and unique orders for any given month since launch. That even includes when we had 40 sales representatives over a year ago. It's interesting to watch the first quarter as the hospitals in particular were really focused on the vaccinations as they should be in operations relative to the distribution of those vaccinations. So, we started to see the momentum actually start to pick up a little bit in March with March representing about 50% of our total orders for the first quarter in commercial. So, you could see the first couple of months when the hospitals in particular focused on the vaccinations in their operations. It was relatively light in quantity of orders or amount per order, but really started to pick up in March and we had our best months ever in April. So, that was exciting to see from a leading indicator standpoint. We also remain on track for our goal of 615 formularies by the end of the year and they have ramped up in pace in the last couple of months as well and we believe there will be further upticking of that in the second half of this year as things become even more open. That was question one Brandon. Question two, I believe, was strategically from business development our current thinking and our urgency. We've always had a high sense of urgency. I think that was evidenced by our M&A move last year early in the year. We've continued to prospect for different business development opportunities whether on the larger strategic opportunity like we tried last year or from a product basis both from an in-licensing and out-licensing perspective. We're confident that we can monetize DSUVIA, particularly in other territories outside the US and Europe, in particular is targeted to be completed this year and we feel comfortable that can be achieved. We also have the opportunity we believe for opportunistic acquisitions of products that can help build our portfolio moving forward eventually to allow our sales team to have multiple sales calls or multiple product deliveries on any particular institutional sales call. Raffi, is there anything you'd like to add to that?
Raffi Asadorian: No, I think you got it.
Vince Angotti: A high sense of urgency I think should be your takeaway Brandon, but without being ignorant to proper business agreements.
Brandon Folkes: Great. Thank you very much.
Vince Angotti: Thank you, Brandon.
Operator: The next question comes from Michael Higgins with Ladenburg Thalmann. Please go ahead.
Michael Higgins: Hey guys, good to talk with you again here. You've got in your press release a real nice list of the studies, the pilot studies pharmaco-economic reviews et cetera. Just curious what inning you may be in in that effort? This is certainly a big boost in the adoption compared to what you had at launch. But just curious as to see how many more we should look for over the coming years. Thanks.
Vince Angotti: Pam, I'll refer to you to comment on the pilot studies and kind of how you see timing moving forward and the importance of the data outburst?
Pam Palmer: Sure. Yes. So, we've got a number of investigator-initiated trials ongoing. And they're definitely enrolling well by the time they analyze the data and write it up it's definitely going to probably be the latter half of the year to get most of that data out and published. There are also studies going on though that aren't via IITs that we know of. So, it will be exciting to have some of that more near-term data come out as well. And in general, whether it's anecdotally or through the published papers, we're really seeing this consistent lowering of overall opioid use preoperatively, faster discharge times. Really like we say that DSUVIA is becoming the opioid that is opioid sparing and I think that's a really important point that is consistent across all these studies and we look to see that also hopefully from these IITs as that really feeds into the opioid stewardship protocols that a lot of these institutions are adopting.
Vince Angotti: Pam can you comment on the diversity of the orthopedic trials that we also have underway or are supporting?
Pam Palmer: Exactly. And I think as Vince mentioned during the call the key thing about orthopedic cases is that a lot of them are elective. And so patients can really shop their doctor and they want to go to doctors who are using the latest techniques and the latest approaches to treat pain et cetera. So we're really excited. We've got a couple of spine surgeries that are either ongoing or are in the queue. We've got a couple of total joint surgeries as well from that standpoint. And so yes, so orthopedic is a huge focus some plastics as well. And then we've got -- IITs are always sort of leading commercialization that it looks into new areas that we're not necessarily going after right now. So sickle cell ophthalmologic surgery is really exciting areas that we're also seeing these IITs being requested from. So it will be fun to go into those new areas as well.
Michael Higgins: That's great guys. I appreciate all that color. If you can comment on -- if this is a -- and it seems to be an ongoing effort in the next couple of years?
Vince Angotti: Yes. From a timing set standpoint -- yes.
Pam Palmer: Yes. So the absolute...
Vince Angotti: It depends on the timing event.
Pam Palmer: Yes. So the bottom-line is -- is these are -- they're rolling admissions. So as they're submitted in and we assess them and we approve some we don't approve others and then they go through contracting. So it's a bit of an approach to each of them. And so they will be rolling enrollment for all of these different things and we definitely expect this to go on for the next few years because there are so many different indications. The DSUVIA's label is so broad that even these on-label utilizations are quite varied and very interesting.
Michael Higgins: That is great to hear. Thanks. Appreciate.
Vince Angotti: Mike it almost feels like we are -- it almost feels like we're just launching the product in the second half of last year with this new data and that it continues to build. And we feel like we're well-positioned in particular for orthopedics moving towards because it's estimated when we look at the data that there's a backlog of more than one million. You can imagine that total joint and spine surgery cases by mid-2022 and that the country may need up to 16 months to work through the backlog of that orthopedic care. Three of the top four inpatient elected surgeries annually are orthopedic. So we've got a significant amount of different and diverse orthopedic studies we're supporting hopefully to help them work through this backlog with proper patient care but through efficiency with DSUVIA as well. So we're excited about the positioning of the product moving forward.
Michael Higgins: That's really great color. I appreciate that. One other question would be if you can give us an update on the size of the marketing force right now where that sits? If you can give us some support in terms of this overall cost? And how you see that playing out? You've got a lot of great information. Just the next step of course is getting it out there and that can happen in a variety of ways, but one of which is the sales force? Thanks.
Vince Angotti: Yes. So our sales team remains fairly tight. We're very cost conscious and we did that last year losing it to COVID to be sure we can serve cash and really focused on hyper targeting of certain markets. We've got 15 sales representatives with AcelRx that are employed. We've got an additional 10. We've got to co-promote with La Jolla who really focuses more on hospitals as opposed to the ASCs or plastics or anything of that matter. In our 15 rep territories we focus on all of it, those hospitals, the adjacent ASCs and to a lesser extent plastics. But -- plastics has been coming on strong lately. In the fourth quarter of last year we started an experiment with two virtual sales representatives and virtual sales calls and virtual educational programming. And it appears that the plastic surgery discipline is very adaptable to that type of setting and makes decisions fairly quickly. So they're very efficient very efficient small team of two virtual sales representatives that have follow-up from our team in virtual programming we're seeing plastics really start to take the lead believe it or not in some of the most recent approvals. In addition to that, we've got three federal team members that really focus on training the military for preparation for use of the product when it's deployed in the field and a couple of national accounts people. So we're fairly tight from that perspective. We also have a small team of fewer than five medical science liaisons that are out there working with the key opinion leaders receiving the calls about the IITs, taking them to headquarters to have them bet. And then going back and working with them on what might be or might not be appropriate for all these studies and the product. So that's our team. It's fairly tight.
Michael Higgins: That’s great. I appreciate it. Thanks guys.
Operator: The next question is from Ed Arce with H.C. Wainwright. Please go ahead.
Ed Arce: Hi everyone. Thanks for taking my questions. Congrats as well, on the latest progress through this quarter. First question is, going back to the comments at the top of your release about month the April month, being the strongest to-date. As you and everyone else, looks at sort of the light at the end of the tunnel, in terms of COVID restrictions and all of that. Could you discuss how...
Vince Angotti: I think I lost you there Ed.
Raffi Asadorian: Yeah. I think he got cut off Vince.
Vince Angotti: Okay.
Operator: Yeah. Somehow he did get cut off. I'm so sorry. Yeah, he's disconnected.
Vince Angotti: Oh no. If I can just give some brief commentary to where I think he was heading in this direction and that was April being the strongest month and outlook on COVID moving forward. As I mentioned earlier from Brandon's question, April was a strong month for us and that it was our highest number of commercial boxes to end-users and our highest number of unique orders, since we launched the product just a couple of years ago. and this is with an even more tightened sales team. The second half of March was very strong for us as well. So, those are the leading indicators that we see, where things are starting to open up. I can't tell you that a good chunk of the orders in the first quarter came from ASCs and plastics. And while the hospitals were ordering, in frequency the size of the orders were, a little bit less, simply because they were seeing fewer patients during their focus time, on the vaccinations in rolling out COVID operations. And we expect that, now that the vaccinations are continuously improving in the U.S. to continue to loosen up and in the second half of the year, fingers crossed without a resurgence, getting back to normal operations for COVID moving forward with everyone, including hospitals and ASCs looking for better efficiencies to make-up for the lost revenue during this COVID period of time. And we think we can help with that based on the data that continues to be produced. So I'm hoping that that helps answer Ed's question. And I apologize if he got dropped.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Vince Angotti, for any closing remarks.
Vince Angotti: Thank you, Debbie. Again, we appreciate everyone joining us today and for your interest and continued support of AcelRx. Again, we believe, we're very well positioned for future growth, while continuing controlled expenses, expand our data set and body of evidence, and looking forward to share more with business development here in the near and distant future. So thank you for joining us. Much appreciated. Thank you, Debbie.
Operator: This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
