AcelRx Pharmaceuticals, Inc.
Q3 2017 Earnings Call Transcript

Published: 10 Nov 2017

[Operator:]

Welcome to the AcelRx Third Quarter 2017 Conference Call. This call is webcast live on the event stage of the Investor section of AcelRx website at acelrx.com. This call is the sole 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 the webcast replay of this call by going to the investor section of AcelRx’s website. I would now like to turn the conference over to Jane Wright-Mitchell, Chief Legal Officer. Please go ahead.

[Jane Wright-Mitchell:]

Thank you for joining us this afternoon. Toda we reported our third quarter 2017 financial results in our press release. The release and the slide presentation accompanying this call are available in the investor section of our website. With me today are Vince Angotti, our Chief Executive Officer; Pam Palmer, our Chief Medical Officer and Raffi Asadorian, our Chief Financial Officer. During this call, we will make forward-looking statements about events and circumstances that have no yet occurred, including but not limited to the process and timing, anticipated future development of DSUVIA, known as ARX-04 outside of the United States, and ZALVISO, including AcelRx’s plan for meeting with the FDA and resubmission of DSUVIA and ZALVISO NDAs to gain approval in the US. The scientific review and approval of the Marketing Authorization Application with the European Medicines Agency of ARX-04, the therapeutic and commercial potential of AcelRx’s product candidate including potential market opportunities for DSUVIA, ARX-04 and ZALVISO. And the company’s ability to continue its cash management plan to maintain a solid liquidity position and financial flexibility. And it’s projected cash flow. These statements are based on management’s current expectation and inherently involve significant risk and uncertainties. Actual results and timing of the events could differ materially from those anticipated in such forward-looking statements. And as a result of these risks and uncertainties, which include without limitation, risks related to AcelRx product development programs and outcome of any regulatory reviews, the possibility that regulatory agencies could dispute or interpret differently the results AcelRx’s clinical trials, the accuracy of AcelRx’s estimate regarding expenses, capital requirements and the need for financing and other risks including those detailed in the company’s recent SEC filing and the Risk Factor section of its quarterly report on Form 10-Q filed on August 2, 2017 and our quarter ended September 30, 2017 Form 10-Q which was filed earlier today. AcelRx disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or otherwise. Please refer to the AcelRx SEC filings for a detailed discussion on the relevant risks and uncertainties. I’ll now turn the call over to Vince Angotti. Vince.

[Vince Angotti:]

Thanks, Jane. Good afternoon ad thank you for joining us today. AcelRx is a company that remains focused on providing physicians and patients with non-invasive pain management options from moderate to severe acute pain within medically supervised setting to the development of two key products, DSUVIA and ZALVISO. In brief mostly recently we reported the receipt of a CRL regarding our DSUVIA NDA. After diligent and thoughtful review of the CRL in consultation with outside experts, we have submitted our briefing both to the FDA, requesting a Type A meeting. Pending the FDA’s calendar, we expect to have this meeting prior to the end of the year, which should provide clarity on the resubmission pathway. At the beginning of the third quarter, we announced the completion of the successful phase 3 clinical trial for ZALVISO, and we remain on track to resubmit the ZALVISO NDA by year-end, but will do so after we have the DSUVIA Type A FDA meeting. Throughout the quarter we prudently managed our cash flow to end the quarter in a solid cash position providing us with financial flexibility. Now on the call today there are three main topics we’ll cover; One, the DSUVIA CRL and our path to resubmission; Two, key milestones for the coming 12 months; and Three, highlights of the third quarter financial performance and the near-term cash flow outlook. Starting with topic one, although we were disappointed by the receipt of the DSUVIA CRL, we believe the recommendation presented by the agency are manageable. As a result, we’ve already taken steps outlining a path towards resubmission, specifically the first step towards resubmitting the DSUVIA NDA with the compilation of additional data to the briefing book of the company to the Type A meeting request which has been submitted to the agency. Our goal is to have this meeting before the end of the year. Again the outcome of the Type A meeting should provide more clarity on the DSUVIA NDA resubmission pathway. As a reminder, the two primary recommendations within the CRL were first, while the FDA commented that the safety database was suitable in a number of patients, the collection of additional data was requested on at least 50 patients to access the safety of DSUVIA such that the maximum amount described in the proposed labeling. And second, to ensure proper administration of the tablet with the single-dose applicator or SDA. The FDA recommended certain changes to the directions for use to be validated through a human factor study. With regards to the FDA’s recommendation to further ensure proper administration of the DSUVIA tablets with the FDA, we’ve included in the briefing book proposed modifications to the directions for use and also proposed a human factor study protocol to validate these modifications. We hope to receive confirmation from the FDA during the Type A meeting as these changes address the recommendations in the CRL. Now to address the topic of maximum dosing, we’ve gathered adverse events in sufentanil plasma concentration data for patients exposed to high cumulative doses of sufentanil sublingual tablets including those beyond the theoretical maximum DSUVIA daily dosage. As a reminder DSUVIA is a TRN or an as needed medication, and the proposed DSUVIA label states that a single tablet is not to be dosed more frequently than once every 60 minutes from maximum available dose of 24 tablets in 24 hours. This additional data in conjunction with previously submitted data will be discussed with the agency as it relates to their recommendation in the CRL. In addition, we’ve been attending conferences in the past several months with presentation with DSUVIA related clinical data. At the recent Anesthesiology 2017 [conference] Symposium entitled Frontiers in Opioid Pharmacotherapy, we presented data regarding the favorable tolerability profile of DSUVIA for the most common adverse event were nausea, headaches and vomiting. The [core] efficacy and safety analysis of our DSUVIA clinical trials was recognized as a top abstract. Now moving on to our second topic regarding anticipated highlights for the upcoming 12 months, there are a number of key regulatory milestones and catalysts the timing of which for the US are largely dependent upon the recommendations and information received from the Type A FDA meeting which is our first milestone. As previously stated, depending upon the FDA calendar, we anticipate this meeting will take sometime around the end of this year. The second milestone is the potential resubmission of the DSUVIA and ZALVISO NDAs; the third, potential DSUVIA and ZALVISO advisory committee meetings; and fourth, potential PDUFA dates for DSUVIA and ZALVISO. Beyond the US milestones, the CHMP opinion for ARX-04 for which EMA has recently accepted the name DZUVEO for Europe is expected in the first half of 2018. Our immediate focus in on DSUVIA in the US and getting the NDA back on track. We’ll continue to concentrate on this in the near term and will provide an update on timing after we receive more clarity from the FDA. So finally as a reminder ZALVISO is already approved in Europe and I want to highlight its recent performance. Our partner in Europe, Grunenthal continues to see increases in ZALVISO product demand with our enhanced focus on penetration through existing possible customers, plus yielding continued patient growth and we estimate close to 16,000 patient exposures of ZALVISO through the end of 2017. Grunenthal’s commercial launch has also been instrumental in allowing us to better understand and plan our approach to commercial targeting in the go-to-market strategy for the US. Now let me turn the call over to Raffi for our third topic, a review of our financial results in near-term cash flow outlook.

[Raffi Asadorian:]

Thanks Vince and good afternoon everyone. The third quarter much like the previous quarter was managed conservatively from a financial perspective, as we did not ramp up commercial resources prior to the PDUFA date for DSUVIA. We will continue to manage our cash prudently to ensure we have adequate financial resources as we focus on updating approval for our two product candidates. Moving on to the third quarter results, Q3 2017 revenues were $1.5 million, which primarily consisted of ZALVISO product sales to Grunenthal. The total revenue decline of $1.9 million from Q3 2016 was attributed mainly to lower invoicing under our DSUVIA contract with the Department of Defense due to a lower amount of DSUVIA development related work in the quarter. We’ve recognized a total of $16.1 million in revenue under the current $17 million contract with the Department of Defense. We ended the third quarter with $67.9 million in cash and cash equivalents, which was an increase $5.8 million over the second quarter of 2017. The increase was mainly driven by the use of ATM facility to raise $13.1 million [net] of fees during the third quarter. We set out an objective to raise additional capital to ensure we ended the quarter with at least $65 million in cash, which we believe will provide us a solid quarter-end liquidity position. Excluding the net proceeds from the ATM stock sales, the net cash outflow during the quarter was $7.3 million, which was lower than both the first and second quarters of this year. This was mainly driven by our operating expenses or combined G&A and R&D expenses, which net of stock based compensation, were $7.4 million in the third quarter of 2017 declining from $8.1 million in the second quarter of 2017, and $7.8 million in the third quarter of 2016. The declines were attributed to lower ZALVISO related development cost incurred in Q2 2017 and DSUVIA phase 3 trial cost in Q3 2016. Operating expenses were the main driver of our cash flow and will continue to be in the near term; particularly given a significant portion of European ZALVISO royalties and milestones was already monetized with PDL in 2015. Debt service in the third quarter was approximately 0.5 million which will increase in the coming quarter as our loan begins to amortize. Looking forward, we expect our quarterly pre-commercialization and net cash burn to be in the $10 million to $11 million range depending upon the quarter, which includes anticipated cost related to certain regulatory activities and some pre-launch preparation costs. The planned uptick from the third quarter is mainly due to the approximate $2 million of quarterly debt service in 2018 with approximately $4 million in the fourth quarter of 2017 due to the payment of a deferred fee to Hercules late in October. We will provide further cash flow guidance as needed upon obtaining clarity from the FDA on the timing of essential resubmission and approval. With that let me turn the call back to Vince.

[Vince Angotti:]

Thanks Raffi. Just to summarize, our immediate focus is on the request to Type A meeting with the FDA, which means this thing will be held before the end of the year. We believe we will have a clear path towards resubmission of the DSUVIA NDA after consultation with the FDA. Finally, we continue to be prudent with our cash and to make further regulatory clarity before spending our commercial or other resources. Now I’d like to open the line for any questions you may have. Operator

[Operator:]

[Operator Instructions] And our first question comes from Randall Stanicky from RBC Capital Markets. Please go ahead.

[Unidentified Analyst:]

So first on the DSUVIA, I wanted to clarify exactly when you submitted your request for the Type A meeting, and when do you expect to provide an update around path forward? Would it be following the receipt of meeting minutes and if so, would you expect us to have that update kind of just towards the end of the year. I also saw that you intend to resubmit NDA result after the Type A meeting for DSUVIA. I understand that this doesn’t necessarily imply any changes to timings since you had always said that you intend to submit it before year-end. But just wanted to understand why you wanted to wait until after the meeting for DSUVIA since presumably the issue with DSUVIA doesn’t have any read through with ZALVISO?

[Vince Angotti:]

Let me see if can just start [collecting] those questions quickly. So I think the first one was when did we submit the Type A meeting request, the DSUVIA CRL. So that would have occurred this week, and we got confirmation of receipt on it this week.

[Unidentified Analyst:]

Okay, and would we receive an update following the receipt of meeting minutes?

[Vince Angotti:]

Yes, that will be most likely simply because at that point you got confirmation of what was discussed in the meeting, and it would be dependable information moving forward that it’s been documented.

[Unidentified Analyst:]

Got it.

[Vince Angotti:]

I think the final question you had was ZALVISO after the Type A meeting. Let me just be clear, we prepared the resubmission of the ZALVISO NDA. So we continue to stay focused on that track moving forward, but decided to hold on this until after we applied for the FDA meeting regardless of DSUVIA. Just to be sure we’ve all available information before resubmitting. And while there isn’t clearly a read-through from the ZALVISO CRL to the DSUVIA CRL, we think it’s wise because of the common platform of sublingual sufentanil tablet to be sure we understand everything we can before submitting that or resubmitting that NDA.

[Operator:]

Our next question comes from Roger (inaudible) with Jefferies. Please go ahead.

[Unidentified Analyst:]

I have certain question here, the first one is, can you comment to what extend has the critical environment today come to relative to the decision DSUVIA. We know recently President Trump just declared a national emergency on opioids, and the doctor call it, always the first initiative is combating opioids crisis.

[Vince Angotti:]

Clearly we’re all aware of the political environment around the opioid epidemic in the US, and you would ask that we feel if that affected the decision for DSUVIA. We can’t comment as it relates to the FDA’s perspective or on that political environment and opioid epidemic in the US and whether that was directly relevant to the decision or commentary we received on DSUVIA. We believe the commentary was again focused on a scientific material that was supplied to them. As it relates to us, in particular, our position as it relates to our development program has not changed and that’s why we are addressing in the development program is moderate to acute pain in a medically supervised setting. That’s where the limitations stand with no interest in our products moving forward as it relates to the retail outlet that you might expect to typically see some of these opioids in, whether it be local chain like [CBS], Walmart or [Krogers]. To that end we also have no interest in growing the opioid market as it relates to our products. In the event that the medical professional under medical supervision has decided that the opioid is the proper class of medicine to address these moderate to acute pain patients in that possible plate setting. We believe we got a compelling alternative moving forward once that decision is already been made. I hope that helps answer the question Roger.

[Unidentified Analyst:]

The next question is, so during the FDA, NDA review how far have you entered in to the label claims discussion regarding the DSUVIA with FDA?

[Vince Angotti:]

As it relates to that question, let me comment on how it’s difficult to give a measurement. What I can comment to you is that the components within the CRL were not issues that we had discussed along the way.

[Unidentified Analyst:]

Last question, regarding the human factor study, usually you already requested the Type A meeting and you saw the external [conduct] and so could you provide some comment on the strategy how would you address this human factor study.

[Vince Angotti:]

So as it relates to the human factor study, the strategy will not be that different than we had done before, other than the fact that making additional modifications to the directions for use and conduct data study historically as we have for DSUVIA. And just to give you some history of perspective, when we conducted the study for DSUVIA, the (inaudible) was in the neighborhood of about 45 participants and took less than a month to complete.

[Operator:]

[Operator Instructions] And our next question comes from Michael Higgins with ROTH Capital Partners. Please go ahead.

[Michael Higgins:]

I understand your age, you believe that safety is okay, and a certain unspecified number of patients weren’t taking DSUVIA, let’s say once per hour or at least that much. I guess that’s the first half of the question, you can comment on that. The second half being, is there a potential to file or to seek approval with this slightly different label, where as in (inaudible) patient study.

[Pam Palmer:]

Sure Michael, its Pam. Yes we believe that we have sufficient number of patients to address the dosing in the maximum range for DSUVIA. And regarding the label under which we would expect that information to come out of the meeting to have more clarity on it that post-CRL meeting with the FDA upon resubmission certainly when we get in to detailed labelled negotiations we’ll be talking about that.

[Vince Angotti:]

Michael you have to be specific as it relates to the dosing in the label or something other than that when you comment different label.

[Michael Higgins:]

That was for my second question, but I’ll start up on them here. I am trying to get a sense for how geared you are to keeping the proposed labeling as it is and there’s a number of way that could be changed. One of which is instead of the (inaudible) it could be every two hours. But I think so you could change this by age which is not (inaudible) periods. And there’s other factor as well to fully adjust which you’re going forward rather than run that 50 patient study. So I’m just trying to access how tightly you’re hanging on to your proposed labeling so far.

[Vince Angotti:]

Good question. Pam can continue to answer those.

[Pam Palmer:]

Sure. And I think we have had spoken (inaudible) about that since we had waited to change the label. One thing to keep in mind when you talk about changing it every two hours or something like that. We ran our efficacy study allowing 16 minutes in between dosing. So you don’t want to invalidate any of your efficacy studies. Also you don’t have any safety concerns with the dosing of our drug. And so the question is whether you impact or limit the dosing of a product when there is no safety signal dictating that limitation. These are all questions and discussion we will have with the FDA, but we do believe that we have sufficient data from the enrollment and both are DSUVIA and ZALVISO studies that bracket that (inaudible) will allow dosing and we believe we’ve got sufficient safety both in an effort to then profile and plasma concentration level of Sufentanil that we have submitted to the FDA.

[Michael Higgins:]

So far here you’re right. It sounds like you don’t see a problem with your safety profile even with a dose every hour. The FDA only would like to see more patients, more higher end than what you’ve got. And we’re not sure what you have, but certainly it sounds like it’s not enough to satisfy the FDA. So we’re adjusting to look for more information of what you have and it doesn’t sound like you find any need to change its label, because what you’re looking at is demonstrating enough safety. Does that clear your [summary]?

[Pam Palmer:]

Yes, recently we submitted data, additional patients and to give us that sufficient database at higher dosing amount. And we feel that is support of the hard label, but we will discussions with the FDA regarding the specific learning of the label.

[Vince Angotti:]

I think it’s important to understand that they have data from the original NDA that’s been reanalyzed within our submission of briefing book as well as new data that they have not previously had. So with that being said, I think there needs to other consideration and that’s what we’ll discuss with them moving forward.

[Michael Higgins:]

One last one before I jump in to queue. Any pushback by age from the agency and the discussions with us.

[Vince Angotti:]

(inaudible) age.

[Michael Higgins:]

Dosing by age, any differences there (inaudible) versus done by age.

[Pam Palmer:]

We’ve analyzed as one has to do for the integrated summary of safety in the NDA by different subgroups, and we feel very confident in our safety for a number of different (inaudible) gender age, BMI etcetera.

[Vince Angotti:]

And I would reiterate the comment I think we’ve made earlier and that the FDA did state the ups in the (inaudible) that the number of patients in the safety database was sufficient moving forward than with this particular dose that they had a question about.

[Operator:]

Next question from Ed Arce with H.C. Wainwright. Please go ahead.

[Ed Arce:]

Wondering if there’s has been a date set for you to meet with the agency, and if not when would you do expect to do so. And also if the study is ultimately being necessary, about how long do you think ultimately the [play] could be before you could refile. Thanks a lot.

[Vince Angotti:]

Well I’ll handle the first portion and Pam will handle the second portion. So we did comment earlier that we did submit the request for the Type A meeting and accompanying briefing book this week. The date has not been set, but we did receive a confirmation from the FDA that they received our materials. Typically the guidelines were that they would provide a meeting to you based on the receiving of the request within 30 days. Clearly that’s our hope and goal, but it will depend on the FDA’s calendar. As it relates to the second and (inaudible) refer that one to Pam.

[Pam Palmer:]

Surely, we can’t really speculate on the study design, what that study would look like, how longer it would take. It would be an extremely difficult study to even conduct given the nature of apparent dosing of this drug. And again to reiterate, they did say that our safety database was suitable in number. So it’s not clear that there’s actually additional clinical study that is required. So we just feel very positive about the new analysis and new patient that we put together and we’re willing to put in to a new brief submission of the NDA.

[Ed Arce:]

Perhaps one follow-up, if you perhaps could summarize your objective of the meeting with the FDA in to maybe two or three key things. What would be the optimal outcome you think of that meeting?

[Vince Angotti:]

So if we don’t want to speak for the FDA and begin to communicate things before we’ve had a discussion with them. But clearly and we said I think a number of times here, we believe the data that we submitted to them both re-analysis of data in hand as well as new data could potentially satisfy the request or the (inaudible) number one that leads to maximum dosing. Number two, we believe the human factor studies the one we connected to well and had a history of doing that as it relates to DSUVIA. And so finally getting a career path on that is concrete and measurable moving forward, so that in collaboration with the FDA we actually have agreement on those next steps, as oppose to a neutral area.

[Operator:]

And we have time for one more question, and that’s a follow-up from Michael Higgins with ROTH Capital Partners. Please go ahead.

[Michael Higgins:]

Just wanted to follow-up regarding the human factor study in the dropped tablet. If the instructions were to state that the healthcare professional needed to stay in the room while the patient had that Nano tab under the [tongue], would that satisfy what the FDA is looking for?

[Vince Angotti:]

Well I can comment to that, that wasn’t one of the suggestions they had communicated. They clear (inaudible). And tangent to that the goal is to be sure that you observe the [patient] needs and at what stage. So to confirm observation and that will be the closest to it.

[Michael Higgins:]

And that’s already in the instruction for you, so that’s in addition to that?

[Vince Angotti:]

So without getting in to too many of the specifics as it relates to that, its highlighted more in a more pronounced fashion.

[Operator:]

And this concludes our question-and-answer session. I’d like to turn the conference over to Vince Angotti for any closing remarks.

[Vince Angotti:]

Thanks Steven, and thank you for joining us today and for your continued support of AcelRx. We look forward to updating you on the continued progress with a regulatory path forward and the outcomes in the coming months, and/or softness in our approach and look forward to our meeting with the FDA. Thank you and have a great day.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.