AcelRx Pharmaceuticals, Inc. (ACRX) on Q3 2022 Results - Earnings Call Transcript
Operator: Welcome to the AcelRx Third Quarter 2022 Earnings Call. This call is being webcast live via 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 express written consent of AcelRx is strictly prohibited. As a reminder, this call is being recorded. You may listen to a webcast 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. Please go ahead.
Raffi Asadorian: Thank you for joining us on the call today. This afternoon, we announced our third quarter 2022 financial results and associated business updates in the press release. This press release within 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 want to remind listeners that, during the 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'll now hand the call over to Vince.
Vincent Angotti: Thank you, Raffi. And good afternoon, everyone. During the quarter, and more recently, we've been focused on advancing our high value development assets through the regulatory approval process, further reducing costs and finding the best commercial partner for DSUVIA. On the development front, we're pleased to report that, as of this month, the initial development batch of Niyad has been successfully produced in preparation for a planned emergency use authorization targeted for the first half of 2023. In addition, we continue with our early commercial planning to ensure that we're prepared for potential launch in Niyad next year. Our next focus will be to submit an NDA for our Ephedrine prefilled syringe, PFS-01, planned by the end of this year. Our goal is to bring forward multiple potential new commercial products throughout next year. We continue with our efficient approach to managing cash in order to accomplish these important milestones. But even with this approach, including a significantly reduced commercial organization of only four people, we've been able to grow our distributor sales with a year-over-year third quarter increase of 217% and a 51% increase year-to-date. We believe this is due to our strategic focus on getting DSUVIA adopted by procedural suite accounts, and specifically, in specialty setting such as plastic and cosmetic surgery, ENT and oral maxillofacial. As a result, we're seeing an increased interest from large national accounts in these specialty areas. As previously disclosed, we're in active discussions with larger, more resourced commercial organizations to potentially partner DSUVIA to build upon our success and maximize DSUVIA's value. We expect to finalize the transaction this quarter. Our European partner, Aguettant, initiated its launch of DZUVEO in Europe last month. Aguettant will be implementing insights learned from our launch and commercialization of DSUVIA in the US to facilitate a broad and smooth rollout of DZUVEO to physicians in the European markets. So let's move now to Niyad, our first nafamostat product that is being developed for use in the US as an anticoagulant for extracorporeal circuits, such as for use during dialysis. Niyad is being regulated as a device by the FDA, given that its mechanism of action takes place outside of the body within the extracorporeal circuit to anti-coagulate the circuit filter. Nafamostat is approved and widely used as an anticoagulant for dialysis in Japan and South Korea, and we're the first to develop it for such use in the United States. We plan to submit our EUA for Niyad to the FDA upon successful completion of our first cGMP lot production run and once stability data is available. Based on written feedback from the FDA, we're optimistic about the prospects of receiving this authorization given the recognized significant unmet medical need for patients undergoing continuous renal replacement therapy. In particular, the FDA has noted that certain health care facilities are ill equipped for the use of citrate, the alternative EUA product for this indication. We believe Niyad could address a significant unmet need for the 60% of patients for whom existing anticoagulants like heparin or citrate are not used. We believe that citrate has many practical limitations due to safety risks and complexity of administration. Yet due to the high unmet need, it has been granted an EUA. As previously disclosed, the FDA assigns Niyad a breakthrough device designation, which provides us with several advantages as we work toward gaining regulatory approval, the most salient being additional FDA input during the development and submission processes, as well as a priority review once an approval submission for the device has been filed. Furthermore, CMS has already assigned an ICD 10 procedural code for nafamostat using the extracorporeal circuit, and this will facilitate reimbursement for the product when it's commercially available. In addition, we plan to seek full FDA approval after conducting a single registrational study of 160 patients with endpoints that have already been agreed upon with the agency. As we stated in previous communications, we believe that the potential peak sales for Niyad could exceed $200 million annually as the only regional anticoagulant labeled for use in this indication in the US. And this is attributed to just the inpatient and outpatient dialysis markets, excluding use in any other extracorporeal circuits. Consistent with our priority to advance our pipeline of late stage assets, we continue to progress toward filing NDAs for our ephedrine and phenylephrine prefilled syringe product candidates or PFS products that we in-license from Aguettant. Our lead candidate is PFS-01 or our ephedrine prefilled syringe. The benefits of prefilled syringes include less waste, improved safety, the convenience of not having to dilute and prepare the syringe in advanced procedures and an improved shelf life. Based on Aguettant's label, the expected shelf life of the ephedrine prefilled syringe is three years. Again, we plan to submit the NDA for our first prefilled syringe ephedrine by the end of this year, with a second following next year. With potential approval of an NDA for our ephedrine prefilled syringe, commercialization could occur as soon as next year. As stated previously, we believe that the market opportunity for these assets exceeds $100 million, and we believe 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. Before handing the call over to Raffi, I want to reiterate our belief in the high market potential and medical promise for DSUVIA and note the continued enthusiasm of researchers and key thought leaders. For example, in October, we announced the podium presentation made by Dr. Jeffrey DeWeese at Plastic Surgery The Meeting 2022 held October 27 through the 30th. This was a presentation of an important study of DSUVIA investigated in a large cohort of plastic surgery procedures with significant results. This study entitled, Experience in Complex Outpatient Plastic Surgery Procedures Using Sufentanil Sublingual Tablets, was conducted in 324 plastic surgery cases and reported many positive benefits of DSUVIA, including, for example, the ability to perform complex, extensive cosmetic procedures without general anesthesia, allowing for a rapid discharge time. Also last month, we announced two abstracts that were presented at the Anesthesiology Annual Meeting 2022. The first abstract presentation was from a 190 patient, investigator initiated trial conducted at Brigham and Women's Hospital comparing the use of DSUVIA versus intravenous opioids for the management of post operative pain following spinal surgery. The study found that such patients had significantly lower reported post operative pain scores when treated with DSUVIA versus intravenous opioids. The second abstract presentation was by the Uniformed Services University of the Health Sciences, which is the nation's federal health sciences university. In this abstract, the authors recommend 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, both for patients experiencing acute pain in the medically supervised setting, as well as for those serving in our military, who would benefit from a more practical and safer alternative for acute pain management. In addition, Cleveland Clinic recently completed a study on the use of DSUVIA in orthopedic surgery patients with publication expected in the coming months. Beyond the procedural suite setting, DSUVIA's largest customer is the Department of Defense. This large customer has many different purchasing points across various areas of the armed services. In fact, other branches of the military, including the US Air Force, and US Navy, have recently placed or initiated the first orders for DSUVIA. That said, we're still focused on the US Army, knowing that the largest opportunity for DSUVIA is within their sets, kits and outfits or SKOs for deploying troops. Throughout this past quarter, we have continued to conduct multiple meetings to support the DoD acquisition process. We believe that our efforts are finally getting momentum to ensure DSUVIA's broader adoption within the US Army. In the meantime, the army continues to make purchases for their stockpiling program. I'll now hand the call over to Raffi to take you through the third quarter financial results. Raffi?
Raffi Asadorian : Thank you, Vince. Our financial position remained solid with $20.9 million in cash at September 30 and $7.4 million in senior debt. Our debt continues to reduce each quarter as we reach maturity in June 2023. DSUVIA sales increased 217% from Q3 2021 and 51% compared to the nine months ended September 2021. DSUVIA has continued to demonstrate growth in the procedural suite market with a very lean sales team, consisting of only four total commercial headcount. We remain steadfast in our belief DSUVIA's full potential can be maximized by a partner with more resources. The adoption of DSUVIA for use in procedural suites for specialties, such as plastic surgery, oral maxillofacial and ENT continues to remain the largest driver of DSUVIA sales. The procedural suite market represented 74% of all commercial sales for DSUVIA in the third quarter of 2022, increasing from 51% in the third quarter of 2021. We believe that the work performed to date with targeting procedural suites has provided our potential new commercial partner a platform for increased growth. We expect to finalize the transaction with a potential partner by the end of this year. Total net revenues in the third quarter of 2022 of $0.5 million declined $1.4 million compared to the same period in 2021 due to the recognition of $1.7 million in revenues in the third quarter of 2021, attributed to an upfront payment received related to our DZUVEO European licensing agreement. We are excited to have Aguettant launching DZUVEO, as DSUVIA is branded in Europe, which we believe will further support brand recognition here in the US. Excluding non-cash depreciation and stock-based compensation, our third quarter 2022 combined SG&A and R&D expenses were $5.7 million compared to $8.6 million in 2021. The decrease in combined SG&A and R&D expenses in Q3 2022 was mainly driven by lower personnel-related costs and a reduction in DSUVIA related selling expenses. We continue to evaluate our existing cost structure for further potential savings to extend our cash runway. I'll now turn the call back over to Vince.
Vincent Angotti : Thank you, Raffi. And I now like to open the line up for any questions you might have. Danielle?
Operator: . The question comes from Brandon Folkes of Cantor Fitzgerald.
Brandon Folkes: Congratulations on the progress. Maybe just firstly from me. We're not that far from year-end. So can you elaborate about the visibility and how close you are to a deal on DSUVIA? And how should we think about the range of possibilities? Is this a complete divestment of DSUVIA you're pursuing? Or a number of potential specialty or subspecialty partnerships?
Vincent Angotti: Yeah. We're going to have Raffi answer that. He's been deeply involved with the participants in the discussion of DSUVIA.
Raffi Asadorian: I think, Brandon, the structure is still a bit open. But the way we're saying it is we would divest DSUVIA, but maintain the long term upside through some sort of milestones and royalty structure. And we're also in discussions to keep a piece of that, where we would continue to sell in one of the main sectors, but that's all still being evaluated with the participants we're talking with right now.
Brandon Folkes: Maybe just switching to Niyad. Firstly, any gating factors to the Niyad launch at this stage? Is it just stability? Has that been manufactured and put on stability or anything else we should think about there? Along the same lines, how would you characterize the interactions with the FDA currently? I heard you're on track. So that's great. And then how should we think about timelines for review of this EUA? I think we've all been sucked in a little bit on the EAUs and COVID. So can you just level set our expectations in terms of timelines on the EUA for Niyad in terms of the review timelines?
Vincent Angotti: This is Vince. We'll start with the first portion of your question, which was on gating factors. Our direction from the FDA on gating factors was clearly around CMC. So that's where we've put all of our efforts here in 2022. As mentioned, we've successfully produced our first test run of it, all specs being met. We're in the process right now putting it up on stability with the final manufacturing run, so the clock will be moving on that. So we feel good about the CMC. I think one important factor is we're also evaluating multiple alternatives to manufacturing it on our own, for synthesizing it on our own through other potential partners that could even potentially accelerate that EUA submission. So we're heading down multiple paths to be sure that we achieve our goals in early next year. Timelines for EUA, on how to think of that. You can't. I think it's all over the map based on everything we've researched and studied. They could happen quickly. They could take months. They might take more than months. I think it significantly depends on the disease state within which you're operating and how it's being affected by the current environment. I think, importantly, we're actually working on some additional research and information here that Pam can comment on, in particular relative to physicians and what they're seeing with the current environment, how it's affecting them and continuous renal replacement therapy.
Pamela Palmer: Yeah, we're conducting market research on 150 kidney specialists intensivists and really examining their issues with the current CRRT anticoagulants, really looking at the impact that COVID has had. HHS has just agreed to maintain COVID-19 Public Health Emergency past January. It's still an issue. We don't know how bad this winter is going to be at. So, they're they've got issues, they've got CRRT patients that need anticoagulation. And we are just thrilled to move this forward and really help these patients out, hopefully with that EUA.
Vincent Angotti: So not a perfect answer on timelines of EUA because there is no standardization, but we're working aggressively to accelerate it as much as we can.
Brandon Folkes: Maybe one more for me and I'll hop back in the queue. Can you just update us on your conversations, maybe with physicians in practice? Obviously, the fact that you're going to EUA, there this significant need. But given that this product hasn't been in market for so many years, never been in the market in the US, but ex-US, how difficult or how much work do you think there is to change habits and just treatment standards ahead of the ramp, but just once you've launched? How quickly do you think you can convert centers over to Niyad?
Pamela Palmer: It's a small group of specialists. They really operate off of sort of colleague to colleague information, the guidelines. Certainly, we've been working with the folks who write the guidelines. We had an important sort of KOL call. I think it was last May, where Dr. Stuart Goldstein and Lakhmir Chawla went over the advantages of nafamostat in a recent published study that showed the benefits of nafamostat over citrate by Dr. Goldstein. So there's a small group, they write the guidelines together, they all get together at meetings. And so, word travels very fast. We're not looking at this being a huge commercial expense to get nafamostat into these hospitals once the EUA is approved.
Vincent Angotti: I think the other key consideration here is nafamostat isn't a foreign term to them, meaning they understand through the education, watching what's happening internationally, that it's a standard of care in other markets. They just haven't had access to it here in the US. So the molecule in nafamostat, how it's being used will not be a new concept, but it would certainly be a nice available concept to them moving forward.
Operator: The next question comes from Ed Arce from HC Wainwright.
Unidentified Participant: This is Thomas asking a couple of questions for Ed. So, first, I think for Raffi, since you're the point person for DSUVIA negotiations, what would you consider to be key elements of an optimal partnership? And can you go over what are some potential impacts on ongoing partnership with the US military?
Raffi Asadorian: Obviously, I won't get into too much detail since we have not finalized the parties that we're discussing with. But I think the most important is having a partner that we're comfortable with that is going to do a great job and invest in DSUVIA. We clearly believe in the product. We know we have not been able to resource it like we have wanted to. But we believe there is a lot of value still in this product and it's evidenced by us being able to continue to grow sales with a very limited team. That's why any structure that we have been discussing, and will likely come out to, will have a royalty and milestone structure that we can participate in the upside. And that's important for us. What's also important is maybe keeping a part of the business â and I don't want to get into any details. But keeping a part of that business that we think has upside for us, given the relationships that we've been able to develop in that market.
Vincent Angotti: Yeah, I think it's important that the partner â elaborating what I've said just for a moment, They would already have a commercial organization or that type of structure that allows them to spread the costs of an additional product over that structure. Whether it's the pharmacovigilance, et cetera, where for us, it's just isolated to one product. So, Raffi has done a nice job in sourcing those potential partners. Thomas, I think the second part of your question, was it about the DoD?
Unidentified Participant: Yeah, that's right. And the potential or ongoing partnerships with DoD?
Vincent Angotti: We've been working with the DoD for years now, and we've just more recently actually had direct contact with their specific purchasers. Well, often historically, it's gone through the wholesalers or middlemen, RFQs, et cetera. Now, we're being contacted directly by the military. And that's a nice change for us moving forward. Even though we've been working with other members of military, these are the actual end user orders of it. We also got our first indications of order from the Air Force and Navy. While they're not typically as large as the Army or with the potential of the Army, it's nice to see the additional branches starting to utilize or inquiry for DSUVIA based off of their addition or membership of the Joint Deployment Formulary because of DSUVIA's availability to all military branches. So we feel good about that moving forward. It's been a lot of hard work behind the scenes. But now with these multiple different pathways of purchasing it through the wholesaler, directly with us and some other avenues, we feel that the momentum is really beginning to pick up with the military.
Unidentified Participant: Perhaps next question for Niyad for the EUA. Should we expect to see any new supportive data ahead of the decision, either press release or medical conference?
Pamela Palmer: We likely will publish the market research that we're doing actually with 150 key folks that anticoagulation for CRRT, reporting this data. We actually think it's going to be robust enough research that we would publish that. But, no, we're not specifically moving forward for any additional data you'll see prior to the EUA. But we will have the registrational study right on the heels of that EUA submission where we're looking at 160 patients, a single registrational study to move towards the full approval of Niyad.
Vincent Angotti: Maybe you can comment on the fact that that study in structural organization endpoints has been discussed already with the FDA.
Pamela Palmer: Yes, the endpoints have been agreed upon. It's a very straightforward study. It's an anticoagulation â Niyad versus placebo. And the primary endpoint is activated clotting times. So, it's a very straightforward study as far as we're concerned.
Brandon Folkes: Perhaps one final question from us regarding the pre-filled syringe products. As we know, Niyad commercial prep is already underway. Any overlap there in terms of commercial infrastructure and preparations between these two product lines?
Vincent Angotti: As we evaluate Niyad for a commercial launch, as Pam mentioned to you, it's pretty much a top down approach from the key experts in the country that are all aware of the guidelines that they utilize. So that's not going to require much of a sales team relative to that. That's going to be more about education for those KEs top down. Sales force for prefilled syringes will really be limited more to contracting. Ephedrine and phenylephrine are very well known molecules. They're used every day in surgical suites across the country. So it's not about convincing them on the molecules themselves. They're standards of care. It's more about the group purchasing organizations and the integrated delivery networks, IDMs, and educating them on the availability of it through contracts moving forward. So this will be less traditional launches that you typically seen with larger sales teams, this would be very small commercial organizations focused on a few KEs in contracting moving forward, both of which will be limited in total scope from a number standpoint when you combine them. So, we feel like it's going to be very efficient moving forward.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Vince Angotti for closing remarks.
Vincent Angotti: Thank you, Danielle. Thank you for joining us today and for your continued support of AcelRx. We're excited about the progress made with our pipeline of assets, the efficiency and our cost structure, the strategic direction for DSUVIA as well as the multiple catalysts â potential catalysts over the next year, and we will remain focused on driving long term shareholder value. We look forward to answering any additional questions you may have offline and, again, look forward to sharing our future developments. Thank you again.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
