AcelRx Pharmaceuticals, Inc. (NASDAQ:ACRX) Q3 2023 Earnings Call Transcript

AcelRx Pharmaceuticals, Inc. (NASDAQ:ACRX) Q3 2023 Earnings Call Transcript November 9, 2023

Operator: Welcome to the AcelRx third quarter 2023 financial results conference call. This call is being webcasted live via the events page of the Investors section of AcelRx’s website at www.acelrx.com. This call is 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, this webcast is being recorded. You may listen to a replay of this webcast by going to the Investors section of AcelRx’s website. And now I would like to turn the call over to Raffi Asadorian, AcelRx’s — AcelRx Pharmaceuticals’ Chief Financial Officer.

Raffi Asadorian: Thank you for joining us on the call today. This afternoon, we announced our third quarter 2023 financial results and associated business updates in a press release. This press release can be found within the Investors section of our website. With me today are Vince Angotti, our Chief Executive Officer, and Dr. Pam Palmer, AcelRx’s Founder and Chief Medical Officer. Before we begin, I want to 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.

These documents can be found on our website within the Investors section. I will now hand the call over to Vince.

Vince Angotti: Thank you, Raffi, and good afternoon, everyone. Today, we look forward to updating you on Niyad, AcelRx’s lead nafamostat program as well as other highlights of our business. For those of you who have followed AcelRx over time know that our focus on product candidates for use in the medically supervised setting has greatly evolved from acute pain. We’re now at a stage where we’re focusing our expertise in drug development on a very different area of unmet medical need, specifically dialysis. Our lead product candidate, Niyad is a novel anticoagulant for use during dialysis and has received Breakthrough Device Designation from the FDA. At the close of the third quarter, we were pleased to receive approval for our Niyad IDE, allowing us to proceed with the registrational study for what could potentially become the first FDA-approved regional anticoagulant for the dialysis circuit.

We recently completed our Investigators’ Meeting, where the participants expressed excitement at the prospect of the near-term availability of an ultra-short acting anticoagulant for use in CRRT. We will now proceed with our registrational study known as the NEFRO CRRT study, the Nafamostat Efficacy in Phase 3 Registrational Continuous Renal Replacement Therapy study. This 166 patient study will evaluate Niyad versus placebo, measuring clinical endpoints that have been agreed upon with the FDA. Based on the results from this study, we plan to submit a premarket approval or PMA application in the second half of 2024. In terms of market opportunity, we estimate Niyad to have a peak annual sales potential of over $200 million in the US. And this is attributed to just the inpatient and outpatient dialysis markets excluding use in any other extracorporeal circuit.

Note that our estimate and peak sales potential assumes modest penetration into these markets, specifically attaining only about a 20% share of the current in-hospital CRRT market and 6% of the dialysis market outside of the hospital. Our interactions with leaders in the field of nephrology have reinforced the urgent medical need for an alternative anticoagulant for use during CRRT. And this, combined with our recently conducted US quantitative research reaffirms the market potential for Niyad. In fact, as announced yesterday, we’re hosting a key opinion leader panel discussion on December 6, with thought leaders in nephrology and critical care to discuss the use of anticoagulation in dialysis circuits and the NEPHRO study protocol. At this point, I’d like to turn it over to Dr. Palmer to briefly expand on this.

Pam Palmer: Thank you, Vin. Good afternoon, everyone. As Vince mentioned, we are hosting a KOL panel discussion on Wednesday, December 6, with experts from two prestigious institutions. Joining us for this event are Dr. Laurence Busse of Emory University School of Medicine, and Dr. David Boldt of UCLA School of Medicine. They are experts in continuous renal replacement therapy and our principal investigators in the NEPHRO CRRT study. The panel discussion will focus on the current approach to anticoagulation in the dialysis surface informed by our market research studies for which both physicians are co-authors on this study’s manuscript recently submitted for publication. We will also discuss the NEPHRO study protocol with doctors Busse and Boldt at this event.

A live question and answer session for analysts will follow the panel discussion. With Niyad’s Breakthrough Device Designation open discussion with the FDA allowed an efficient IDE submission, an agreement with respect to the protocols’ patient population, key endpoints, and inclusion-exclusion criteria. The primary endpoint of the study is assessing the activated clotting time or ACT, resulting from the administration of Niyad to the dialysis circuit compared to the ACT in the placebo saline group over the first day of CRRT. We believe that this should be a straightforward primary endpoint to achieve since those patients on placebo will not be receiving any anticoagulants and therefore, their ACT would not be expected to increase. Secondary endpoints include duration of filter life before clotting occurs and a number of transfusions required due to red blood cells or platelets loss.

As a reminder, Niyad is being regulated by the FDA as a device, since the mechanism of action of Niyad is within the dialysis circuit and not the patient. This serves as an advantage for us to efficiently move Niyad towards approval, since device studies typically require much lower patient exposures than drug study. The feedback that we have heard from the clinical sites is that enrolment should be robust, allowing top line data mid-2024 and a PMA submission soon thereafter. I will now turn the call back over to Vince.

Vince Angotti: Thank you, Dr. Palmer. Knowing that the nafamostat has been a standard of care for CRRT in South Korea and Japan with decades of use and a favourable safety profile, we’re confident in the success of this study as it is evaluating the nafamostat versus saline as the placebo for activated clotting time. As Dr. Palmer stated, based on study timing, we plan to prepare a PMA submission to the FDA in the second half of next year. This would enable us to potentially launch Niyad in the first half of 2025. We’re proceeding with early-stage commercial planning after already receiving an ICD-10 CMS procedural code to facilitate reimbursement. Now just a few words on our prefilled syringe candidates. The need for pre-filled syringes is as clear, since their availability offers a significant improvement and advantage for the overall health care system, including less waste, improved safety, and the convenience of not having to dilute and prepare the syringe and advance our procedures.

Our Fedsyra pre-filled syringe containing the anti-hypertensive ephedrine is the first of two pre-filled syringe product candidates in our pipeline that is closest to an NDA filing. Following our capital raise in the second quarter, we have continued to prioritize resources on the development of Niyad, and are evaluating the timing of the NDA submission for Fedsyra. AcelRx has evolved quite a bit over the past 18 months, and we’re now a very different company than we were just a few years ago. To round out our transformation, the transition of DSUVIA to Alora Pharmaceuticals is still ongoing, and AcelRx continues to support Alora to facilitate their success. We expect their focus to turn to commercial activities early next year as the supply chain transition is completed.

As a reminder, AcelRx is being reimbursed by Alora for all support provided during the transition. We continue to lead the relationship with the Department of Defense or DoD to ensure continued engagement. The DoD is the single largest DSUVIA customer and has been recently placing orders on a more regular basis. Third quarter DSUVIA demand from the DoD was comparable to the second quarter, but revenue recognition was impacted by the timing of certain shipments. In addition, the DoD has entered into a contingency contract with a wholesaler, who must now maintain a minimal amount of inventory on hand with rapid replenishment requirements. Finally, the completion of the DSUVIA early evaluation of pain or DEEP trial sponsored by the DoD at the University of Pittsburgh Medical Center will be a key milestone.

This study is expected to be completed in the first quarter of next year. And of note, the DoD granted UPMC a total of $11 million including support of this DSUVIA trial, the results of which may lead to additional DOD branches adopting DSUVIA. As a reminder, we received a 75% royalty on all sales to the DoD, a 15% royalty on non-DoD commercial sales, and up to $116.5 million in sales-based milestone payments from those commercial sales. Now I’ll hand the call over to Raffi to take you through the details of our third quarter financial results.

Raffi Asadorian: Thank you, Vince. We ended the quarter with $13.4 million in cash and short-term investments. This includes the capital raised through the financing closed in July with new and existing healthcare investors. This financing provides capital of up to $26 million upon the exercise of the milestone-based warrants, including $10 million of gross proceeds that were made immediately available. These new investors appreciate the value of Niyad, and have been extremely supportive of management as Niyad development progresses and with the clinical study about to begin. Revenues for the third quarter of $0.1 million were generated primarily from royalties on the sales of the DSUVIA, principally from sales to the Department of Defense on which we earn a 75% royalty from ALORA.

As Vince mentioned, the quarter was negatively impacted by timing of shipments in the quarter, which are expected to be realized in the fourth quarter of this year. Our combined R&D and SG&A expenses in the third quarter totaled $3.4 million compared to $4.5 million last year, and excluding non-cash related expenses, it was $3 million in Q3 2023. We remain on track to stay within the range of our full year 2023 combined R&D and SG&A expense guidance excluding non-cash expenses of $16 million to $20 million. We expect fourth quarter R&D and SG&A expenses, excluding noncash expenses, to increase from the third quarter as we begin our clinical study. We anticipate top-line data of this clinical study by the middle of next year, so we expect expense levels over the next several quarters to be higher than levels we’ve seen over the last two quarters.

We will provide further financial guidance for 2024 at a later date. I’ll now turn the call back to Vince.

Vince Angotti: Thanks, Rafi. Now like to open the line for any questions you might have. Operator?

Operator: [Operator Instructions]. Our first question comes from Ed Arce with H.C. Wainwright.

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Q&A Session

Thomas Yip: Hi, good afternoon, everyone. This is Thomas asking a couple of questions for Ed. Thank you for taking our questions. So first question for the NEPHRO CRRT study. Can you discuss what’s your estimated timeline to full enrolment in order for the mid-2024 readout? And also, given the start date we have as we approach the end of the year, how — do you anticipate slow pace around Christmas, New Year timeframe?

Pam Palmer: Hi, yeah, it’s Pam here. These are ICU patients, so in fact, the holidays really don’t affect their enrolment whatsoever. They have acute kidney failure, unfortunately, sort of regardless of the time of year. So we don’t anticipate coming into the end of the year here, your normal clinical trial slowdown that you would see with many studies. It’s a small study, so as far as last patient out till top line data, there shouldn’t be a large delay. We’ll be making sure we clean up the database as time goes on, and so there shouldn’t be a large lag. So we’re expecting the study to end sort of mid-next year and then also have top-line data soon thereafter about the same time.

Thomas Yip: Got it, understood. Perhaps some more detail around the NEPHRO CRRT study. Of the 10 ICU centers that were selected for this study, can you describe some major attributes for the selection?

Pam Palmer: For the patient selection?

Vince Angotti: For the site selection.

Pam Palmer: The site selection, sorry. Site selection are actually major academic centers. They are the top names in this deal. In fact, many of them were our advisors or are advisors when we took on Lowell and looked at this protocol, and I had to reach out to folks who are knowledgeable in this area to help us define inclusion-exclusion criteria, et cetera. Also, when we did our quantitative market research, to help us analyze that data, we relied on these folks. So they are also the co-authors in that manuscript that has been submitted. So that’s really who we’re leaning on for the clinical trials as well. And they’re sort of — they all know each other, they’re all friends. And it’s a small, tight-knit community and it’s the major centers, Emory, UCLA, there are centers like that.

Thomas Yip: Got it. And then perhaps just one last question from us and then we’ll jump back on the queue. Assuming NEPHRO CRRT study data positive, which we expect to be keep our PMA. Can you — what are some other major components of the PMA for Niyad?

Vince Angotti: Maybe talk about — components or endpoints of the study, you mean components of the PMA?

Thomas Yip: Yeah, components of the PMA in addition to the registrational study data.

Pam Palmer: Yeah. So there’s going to be just a couple of the preclinical tox studies that are very short and easy to run. We’ll be doing that concurrently with the trials. And of course, there’s our stability data as well that we’re actually generating right now.

Vince Angotti: Maybe expand on the secondary endpoints just quickly. I know we mentioned them, but just to reinforce what he asked.

Pam Palmer: Yeah, you mean what are the clinical endpoints on the trial, the primary endpoint is activated clotting time for the first 24 hours. And then the secondary endpoint is looking at that same activated clotting time over the first 72 hours, along with the number of transfusions, filter changes due to clotting, et cetera, of the first 72 hours. So all the primary and secondary endpoints are over within 72 hours. And therefore, a completer is somebody who’s gone to this study for at least all those three days. They can be enrolled up to seven days per the protocol, but they will be considered a completer after just three.

Thomas Yip: Okay. Thank you so much for the detail. So looking forward to the study start and very shortly.

Vince Angotti: Thanks, Thomas.

Operator: Our next question comes from James Molloy with Alliance Global Partners.