AcelRx Pharmaceuticals, Inc.
Q2 2015 Earnings Call Transcript

Published: 3 Aug 2015

[Operator:]

Good afternoon. And welcome to the AcelRx Second Quarter 2015 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Timothy Morris, Chief Financial Officer. Please go ahead.

[Timothy Morris:]

Thank you, Denise. Good afternoon, everyone, and welcome to today's call. Today I’m joined by Howie Rosen, our Interim Chief Executive Officer; and Pam Palmer, our Founder and Chief Medical Officer. During the call today, we will make forward-looking statements, including but not limited to statements related to future financial results, including AcelRx’s plan to seek a pathway forward towards gaining approval of Zalviso in the U.S., potential next steps by AcelRx related to the FDA and Zalviso, anticipated resubmission of the Zalviso NDA to the FDA, including the scope of the resubmission and the timing of the resubmission, and the FDA review time, financial guidance and cash forecast; potential milestones and royalty payments under the Grunenthal agreement; the process and timing of submissions on the Zalviso MAA, including timing for potential approval of the MAA by the EMA. The status of the collaboration agreement with Grunenthal or any other future potential collaborations; the process and timing of anticipated future development of AcelRx's product candidates, including Zalviso and ARX-04, including the timing and quality of data for ARX-04 and the therapeutic and commercial potential of AcelRx Pharmaceuticals product candidates including Zalviso and ARX-04. These forward-looking statements are based on AcelRx Pharmaceuticals' current expectations and inherently involve significant risks and uncertainties. AcelRx Pharmaceuticals' actual results and timing of events could differ materially from those anticipated in such forward-looking statements and as a result of these risks and uncertainties, which include, without limitations, risks related to AcelRx Pharmaceuticals' ability to finalize the pathway towards the resubmission of the Zalviso NDA to the FDA, potential additional clinical studies, Human Factors studies, and/or additional data analyses necessary in order to resubmit the Zalviso NDA. AcelRx's ability to receive regulatory approval for Zalviso; any delays or inability to obtain and maintain regulatory approval of its product candidates, including Zalviso in United States and Europe; its abilities to receive any milestones or royalty payments under the Grunenthal agreement and the timing related there too; its abilities to obtain sufficient financing, the success, cost and timing of all development activities and clinical trials, including the Phase III ARX-04 trial and the related data; the market potential for its product candidates; the accuracy of AcelRx's estimates regarding expenses, capital requirements and the needs for financing; and other risks detailed in the Risk Factors and elsewhere in AcelRx Pharmaceuticals' U.S. Securities and Exchange Commission filings and reports, including its quarterly report on Form 10-Q filed with the SEC on May 5, 2015. AcelRx Pharmaceuticals undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations. I will now turn the call over to Howie, Interim Chief Executive Officer.

[Howie Rosen:]

Thank you very much, Tim. And I’d like to thank everyone for joining us this afternoon for our second quarter call. During today’s call we’ll provide the following; an update on our progress towards Zalviso approval in Europe with our partner Grunenthal, a brief regulatory update on Zalviso in the U.S., an update on ARX-04 and a brief review of the second quarter financial results, including cash guidance for the remainder of the year. So let me start with the Zalviso regulatory update in Europe. As we reported recently, the Committee for Medicinal Products for Human Use or CHMP of the European Medicines Agency or EMA has adopted a positive opinion for Zalviso sufentanil sublingual tablet. The opinion was not binding recommends marketing authorization for Zalviso for the management of acute moderate-to-severe post-operative pain in adult patients in hospital. Our partner the Grunenthal Group submitted the Marketing Authorization Application or MAA under the centralized procedure in July 2014. The positive opinion by the CHMP will next be reviewed by the European Commission or EC for central marketing authorization in the European Union or EU, which has the authority to approve medicines for the 28-member countries of the EU and in addition, Norway, Iceland and Liechtenstein. We anticipate a decision by the EC in late September or early October. If approved, AcelRx will be eligible to receive a $15 million milestone payment from Grunenthal, which we expect to begin launching Zalviso in the first half of 2016. AcelRx had previously received CE Mark approval for the Zalviso device and ISO Certification of its quality management system issued by British Standards Institution or BSI and notified body. Under the terms of our collaboration, Grunenthal is responsible for all commercial activities for Zalviso, including obtaining and maintaining pharmaceutical products regulatory approval in the Grunenthal territory. AcelRx will be responsible for maintaining device regulatory approval in the Grunenthal territory, and the manufacturing and supply of Zalviso to Grunenthal for commercial sales in clinical trials. In the U.S., we have been granted a General Advice meeting with the FDA in early September. The purpose of the meeting is to discuss the timeline and activities necessary to resubmit the Zalviso NDA. Pending the outcome of the meeting, we may have additional clarity on what we will need to do to gain approval of Zalviso. Now, I’d like to turn over -- the call over to Pam, who will provide you with an update on ARX-04.

[Pam Palmer:]

Thank you, Howie. As you know, we initiated a pivotal Phase III for ARX-04 in March of 2015. I am happy to report the study is fully enrolled. In total, 163 subjects were randomized into the study. The clinical sites are now in the process of completing task necessary for database lock, assuming all goes as planned we anticipate topline results in early Q4 2015. As a reminder, ARX-04 is a single use 30 microgram sufentanil sublingual tablet in a disposable, pre-filled, single-dose applicators administrated to the patient by healthcare professional. The proposed indication for this product is a treatment of moderate-to-severe acute pain in a medically supervised setting. This Phase III study SAP-301, is a multi-center double-blind placebo-controlled trial that evaluate the efficacy and safety of ARX-04 versus placebo for the treatment of moderate-to-severe acute pain following outpatient abdominal surgery. The primary endpoint of the study is to demonstrate a statistically significant difference in the time weighted summed pain intensity difference to baseline or SPID of ARX-04 compared to placebo over a 12-hour dosing period also known as SPID-12. As you will recall, this Phase III study is a second of two pivotal clinical studies acquired for ARX-04 NDA filing. We are also working with the Department of Defense or DoD under contract to partially support our development of ARX-04. This quarter we plan to initiate the final clinical trial of ARX-04, an open-label safety study in emergency room. This study will add to the safety database for ARX-04 and will help us understand how the application of ARX-04 treats trauma-related moderate-to-severe acute pain in the emergency room one of the large target markets for this product. This study is an open label safety study in patients who presented to the emergency room with moderate-to-severe acute pain due to trauma or injury. AcelRx will continue to present the results for this clinical trial in the next several months. Planned presentations by our medical affairs team include an integrated safety and efficacy analysis of sublingual sufentanil at the 9th Congress of the European Pain Federation or EFIC meeting in Vienna, Austria, September 4, 2015. The result from the pivotal ARX-04 bunionectomy study will be presented at the 2015 European Congress on Emergency Medicine or ECEM in Torino, Italy on October 12th to October 13, 2015. The results from the pivotal abdominal surgery study SAP301 will be presented at the American Society of Anesthesiologists 2015 Annual Meeting in San Diego, October 24th to October 28th. I will now turn the call back to Tim to discuss the financial results.

[Timothy Morris:]

Thank you, Pam. Earlier today, we reported financial results for the second quarter and first six months ending June 30, 2015. I’ll refer to you that press release for specific details on the actual results. The net loss for the second quarter 2015 was $8.9 million or $0.20 basic and diluted net loss per share. This compares to a net loss of $10.6 million or $0.24 basic net loss per share and $0.30 diluted net loss per share for the second quarter of 2014. The decreases in net loss and net loss per share is primarily due to revenue generated under our contract with the DoD for ARX-04 development and increased G&A expenses as a result of the cost reduction plan implemented at the end of March 2015, partially offset by having no other income in the second quarter of 2015 as compared to $2.2 million of other income recognized in the second quarter of 2014. For the first six months ended June 30, 2015, AcelRx reported net loss of $18.9 million, or $0.43 basic net loss per share and $0.47 diluted net loss per share. This compares to $20.2 million, or $0.47 basic net loss per share and $0.50 diluted net loss per share for the same period in 2014. We recognized $1.4 million in revenue related to the DoD contract in the six months ending June 30, 2015, in addition, in the six months ended June 30, 2015, we recognized $667,000 of previously deferred revenue under the collaboration agreement with Grunenthal, as compared to $166,000 in the first six months of last year. At the end of June, we had cash, cash equivalents and investments of $51.2 million. This compares to $75.4 million at the end of December 2014. The net change in cash, cash equivalents and investments was $24.2 million for the six months ended June 30, 2015, $13.3 million for the second quarter and $10.9 million for the first quarter 2015. The decrease in cash for the second quarter of 2015 was higher than the first quarter of 2015, mainly due to the initiation of principal payments under the line of credit with Hercules. These payments totaled $2.2 million for the second quarter 2015. Assuming receipt of the $15 million payment from Grunenthal for the approval of Zalviso in the EU and revenues earned under the DoD contract for ARX-04, we anticipate our cash balance at the end of the year 2015 to be approximately $45 million. On the investor relations and business development front planned presentations and participation in an upcoming conferences include Rodman & Renshaw 17th Annual Global Investment Conference sponsored by H.C. Wainwright September 9th in New York; the FBR Second Annual Healthcare Conference, September 9th in Boston; the Newsmaker Biotech Industry Conference sponsored by BioCentury, September 10th in New York; the BioPharm America Conference, September 14th and 17th in Boston and 15th Annual Biotech in Europe Forum for Global Partnering & Investment, September 29th and 30th in Basel, Switzerland. I will now turn the call back to Howie for some closing comments.

[Howie Rosen:]

We are pleased with the recent positive CHMP opinion regarding Zalviso in the EU and may have more clarity with regard to the FDA and Zalviso over the next quarter. Our pipeline continues to advance as we expect topline pivotal Phase 3 results from ARX-04 early in the fourth quarter. And as we initiate an additional Phase 3 open-label safety study with ARX-04 in the emergency room. Finally, I would like to announce that AcelRx will be hosting an Analyst and Investor Day on October 2nd in New York City. We look forward to providing more detail on ARX-04 at that time, including any new data available as well as more background on the commercial opportunities. Following our upcoming FDA meeting, we also may have more clarity on Zalviso and our plans pathway forward. Thank you for being on the call today. We will now open the call up to questions.

[Operator:]

Thank you. [Operator Instructions] And our first question will come from Randall Stanicky of RBC Capital Markets. Please go ahead.

[Randall Stanicky:]

Hey. Thanks, guys. I have several. The first one and this question maybe premature but I want to ask it anyway. What are your initial expectations for the upcoming general advisory meeting and could we get in your view, immediate feedback on how you should proceed?

[Timothy Morris:]

Sure. Randall, this is Tim. Our expectations are, is that obviously, we will sit with the agency and work with them in terms of two things. One, to try to determine the nature of their request for additional clinical studies and then two, we want to talk to them about the timeline and the plans to move forward. I think that’s been the goal all along from that. I guess in terms of -- the second part of your question, do you think you will get immediate feedback is that -- what was the second part, Randall?

[Randall Stanicky:]

Yeah. I mean, should we expect -- when you sit down with them, should we expect a fairly quick decision and update to us in terms of how you are expected to proceed?

[Timothy Morris:]

Yeah. That’s difficult to say. I think if it’s obviously one-way or another then essentially the timelines could be relatively quick. We are hoping that the meeting does provide some clarity there. We would plan to get feedback to the extent we have something to say about a definitive timeline, a definitive set of actions. It’s difficult right now to promise that but we understand the importance. Howie, what do you think?

[Howie Rosen:]

I agree. It’s done -- depending on what we discussed in the past sometimes, they just didn’t get advise from some of our outside advisors as well. But our goal would be to update people once we have the clarity.

[Randall Stanicky:]

Got it. And let me ask one more. Rest of world, if this is something that could be an opportunity between now and an update on the U.S. path? Is there an opportunity to do additional deals such as you did with Grunenthal and other regions such as Latin America and other places?

[Howie Rosen:]

With Zalviso?

[Randall Stanicky:]

Correct. Yeah.

[Howie Rosen:]

Yeah. I think we’ve always felt they are having an approval in one of the major territories. U.S. or Europe would be a big leg forward in terms of trying to put together a rest of the world partnership. So, I think the positive CHMP opinion is clearly a step in the right direction there. Lot of these countries will look to an EU approval or approval to MAA to move forward. So, we would hope that, assuming we get an approval in Europe, again late September, early October, I think that will be a catalyst. I don’t think we will have anything between now and the meeting in September with the agency. But we think that having the European approval in place will help on our PE efforts outside of the U.S.

[Randall Stanicky:]

Got it. Okay. And one final one just maybe for Pam. But just on ARX-04, assuming we get favorable data, when should we expect you to file and then the follow-up to that would be how are you thinking about the commercial build out in the absence of a Zalviso sales infrastructure? Thanks.

[Howie Rosen:]

Sure. I will ask Pam to comment on the timing and then I will come back on the commercial question.

[Pam Palmer:]

Sure. Well, we’ve certainly shown efficient NDA filing capabilities at least for Zalviso. So, certainly in 2016, we would be filing an NDA with positive data from the SAP301. The current plan for the open-label safety ER study is small study, so that shouldn’t take much time to finish.

[Howie Rosen:]

So I think I will pick up things that we have to do Randall before we have the definitive timeline on the filing with the NDA -- kind of a pre-NDA filing. As soon as we have something a little more definitive on the timeline, we will get back to you. I think as you saw at the end of the prepared remarks how we talked about at an Analyst Day on October 2, so we will look to fill in a little bit more details around timelines for ARX-04 quietly closer to that date. You asked the question on the commercialization, and you’re right there is no plan, it was to potentially piggyback after Zalviso commercial effort. I think we are doing a couple things from the commercial press standpoint for ARX-04. One, we are trying to actually understand the size of the market. And I think our initial work is showing that the market potential is bigger than either we originally thought and others had originally thought. So we are trying to figure out the best way to approach this. We are still of the belief that having some commercial capability ourselves is the best way to retain value for the company and for the shareholders. We are trying to make sure that we can identify the exact markets to go after and to look at all of the potential options that we would go to commercialize it under a couple different scenarios that would be with Zalviso, without Zalviso, with the partner. So we don’t have anything definitive yet, but we are beginning to think about the commercial potential for ARX-4. And again, we would look to probably share some of our findings with you and maybe explore some of the potential paths to commercial the product round about the time when Phase 2 results are unveiled and in little bit more detail around the Analyst Day at the beginning of October.

[Randall Stanicky:]

Great. Thanks, guys.

[Timothy Morris:]

No problem. Thank you.

[Operator:]

Your next question will come from David Amsellem of Piper Jaffray. Please go ahead.

[David Amsellem:]

Thanks. Just I guess a follow-up on this general advice meeting. Maybe give us a little bit of color on what happens to get to point where you would decide to go through a formal dispute resolution process, and if that’s something that’s still on the table.

[Timothy Morris:]

I think David we would always kind of reserve that, right. I think to-date we have been comfortably for the interactions with the agency. We clearly want to have the meeting. I think if we don’t come to some resolution or if we don’t come to a path forward that appears to be reasonable to us or our external advisors or something that make sense, we may potentially pursue a more formal dispute resolution at that time. So again, it’s a little bit too early to tell. We always have that. So for example, if their request I think we are just really too outrageous and didn’t make sense to us and continue down the pathway that for us we are just not attainable. And we are unrealistic. And we would potentially look to pursue a little bit different formal dispute resolution versus just kind of rolling over and continuing to study the drug. So that might be one scenario.

[David Amsellem:]

Okay. And then secondly and I may have missed this, I apologize in advance. But just on the CEO search, maybe give us a little bit of color on how you’re thinking about what kind of candidate would be ideal and how far long you can be you are if you can talk about that? And then I guess lastly in terms of that, is there -- are there any other major hires within the organization that you feel you need to make beyond just chief executive position? Thanks.

[Timothy Morris:]

Yes. I have been I think -- and I will let Howie comment. So I think a lot of that David has to do with the outcome of the meeting, the timeline, and the path forward in terms of what’s required for Zalviso. And I think that’s why today it depends on how long that takes and then what type of person we’re looking for, but how we do want to comment on today is question.

[Howie Rosen:]

Yes. David. And thanks for the question. And Tim is right, it partially depends on where we end up in the US, but also in terms of getting the quality of candidate that we want having some of that uncertainty taking care of is important. And I am committed to stay on as long as necessary. So there is no quack picking in terms of finding someone.

[David Amsellem:]

Can I follow up? Is there -- is the implication here that you’re having trouble attracting a candidate with the path forward being up in the air? In other words, Tim, if I’m interpreting your comment correctly, does it mean that you have to have clarity on the path forward in order to be able to make a hire?

[Howie Rosen:]

Well, it’s really more considered. The second part of your original question was -- which was, whether there are any other key hires that we would need. And so, as you know, from a cost reduction point of view, we reduced essentially all of our -- most of our commercial infrastructure, and so the timeline to when we would get to commercialize the things or so is one of the key things. And so do you want someone with the background that has a strong commercial background and more of a general management background or different, something different.

[David Amsellem:]

Thank you.

[Timothy Morris:]

I think, David, I would also say that, I mean, the search has actually been put on hold, so they haven’t been actively looking for folk, so until we have this clarity if the company has made decision to not aggressively look for new candidates.

[Operator:]

Our next question will come from Boris Peaker of Cowen. Please go ahead.

[Boris Peaker:]

Thanks for taking my question. I guess maybe just first on the general advice meeting with the FDA. I’m just curious what happened to get that meeting. Like previously, you were denied the meeting and now they allowed it. So any kind of discussion or exchange of information that enabled it.

[Timothy Morris:]

Howie, do you want to take that?

[Howie Rosen:]

Yes. I can take that. So we continue to have a dialogue with the FDA and we provided them with some additional information and that led them agreeing to grant the meeting. So we are pleased to have that progress.

[Boris Peaker:]

Got you. Was that clinical information? I just want a clarification.

[Howie Rosen:]

It was really just pretty much across the board. So just leveraging the information we had and perhaps providing in a more comprehensive way.

[Boris Peaker:]

Got you. Also in terms of the European opportunity, I’m just curious how are the market dynamic vis-à-vis so different in Europe. And in the context of what can we learn from Grunenthal’s initial launch in Europe regarding the U.S. commercial potential of this drug?

[Timothy Morris:]

Yes. I think a couple of things. I mean, obviously, PCA is a standard of care for post-operative pain, moderate-to-severe acute pain in hospital settings. So to some extent the standard of care will be different. The pricing will be different. Their pricing won’t be as good as we get in the U.S. So, I think, it will be nice to see what happens in clinical practice. It will be nice to see if they are gaining favor with the certain type of procedure or having particular success with say, orthopedics or general surgeons. It will be interesting to see if they are having success on a regional basis and whether that is due to some of the work that they have done from a pre-marketing standpoint. So, I think, there probably is a fair amount to learn from their experience in Europe that we could hopefully parley into the U.S. So, I don’t know, Pam, you have spent some time them, do you have any comments and what that market looks like and how we can use it here in U.S.?

[Pam Palmer:]

Sure. I think, whatever happens there certainly conservative indicator about what happened here. We do know that they’re more price sensitive. We think we priced our product accordingly to take advantage of their price sensitivity. But also you might see disparities between Northern Europe and Southern Europe, for example, that you are not necessary going to see in the U.S. where adoption tends to be more just uniform. But I think whatever they do is certainly we would expect it to be more robust in U.S.

[Boris Peaker:]

And lastly, my last question. Have you commented what the overall commercial potential that you see in Europe?

[Howie Rosen:]

Yes. I think, we have independently taken a look at that market and I think we put the opportunity conservatively at -- again at lower pricing at a peak sales of about US$150 million.

[Boris Peaker:]

Great. Thank you very much for taking my questions.

[Howie Rosen:]

Thank you, Boris.

[Operator:]

And the next question will come from Michael Higgins of Roth Capital Partners. Please go ahead.

[Michael Higgins:]

Thank you, Operator. Hi, guys. All the questions have been asked on the upcoming September meeting. But hope you can help us with what you believe the FDA has learned from March regarding the NDA and as well as, what you’ve learned from the FDA’s position since that March letter?

[Timothy Morris:]

Yes. Michael, this is Tim. It’s going to be difficult to interpret what the FDA has learned and what we’ve learned from them. I think as Howie mentioned earlier, I think maybe some continual dialogue with the agency, I think providing additional information to them from some of the data that we have generated since the CRO and that has been specifically in the bench test data and Human Factor work. It’s hard to say if that has had an impression on them or what exactly they think of it until we’ve had the meetings. So it’s probably too much to speculate as to change in their thinking, not really have many opportunities in front of them. So we are encouraged by the fact that they have been in the meeting. We think it is a positive step forward and we’ll just take it for what it’s worth.

[Michael Higgins:]

Is this reasonable -- to expect say there is 75% chance that there is some sort of outcome from the meeting that we’ll hear something within the week or we’ll wait until October 2nd and have more of dialog with you there?

[Timothy Morris:]

Yes. Again I will depend on the nature of the meeting but keep in mind that the October 2 date wasn’t set around anything specific to the FDA. We just looked at that as an appropriate time for an update. In terms of letting the market know the results of the meeting with the agency, I think as Howie mentioned before, we will take what we learned from the meeting. We will confer with a lot of our experts here and then once we’ve are in agreement on the path forward and the results of the meeting, we’re happy to kind of explain this to the market. So we do know that it’s important to us and to everyone and to our investors. And so we will try to get something out as quickly as possible.

[Michael Higgins:]

Okay. Then one last follow-up, it sounds like you have a confirmed date for meeting, pardon me, if I’m wrong on that. You can help us -- is the meeting with the reviewers, does it extend beyond that, is there supervisors as well?

[Howie Rosen:]

The meeting is with the division and other folks in the agency have been invited to participate. We won’t know who actually participates until the meeting has taken place.

[Michael Higgins:]

Okay. Thanks guys.

[Howie Rosen:]

Sure.

[Operator:]

The next question will come from Hugo Ong of Jefferies. Please go ahead.

[Hugo Ong:]

Hi, guys. This is Hugo speaking in for Biren Amin. Just a question on ARX-04’s trial and abdominal surgery. Can you talk about why your stratifying based on gender and whether or not this was done similarly in the Zalviso program?

[Howie Rosen:]

Sure. Pam will answer that one for you, Hugo.

[Pam Palmer:]

Sure. What we have a situation in these studies where we have procedures that are sort of gender specific. For example, the most, -- one of the procedures is abdominoplasty that we are doing at SAP301. And those are mostly going to be in women and so we are just making sure and we’ve got obviously our herniorrhaphy as well that will mostly be in men. So, we are just making sure that we’ve got sort of an even balance of males versus females in general for that study. But the main thing was to make sure that not -- and there is three different types of surgeries that we did -- inguinal herniorrhaphy, abdominoplasty and then any laparoscopic surgery. And so we just want to keep a close eye on the male, female. They are intended to be more females than males in all of our study. So that was something we also saw for SAP301.

[Hugo Ong:]

Okay. Great. And just a follow-up, is there any reason why -- an inclusion criteria, is there any reason why you are requiring the female patients or child bearing potential to have effective method of birth control when they are going to do abdominal surgery?

[Pam Palmer:]

It’s just standard. It’s a standard whenever your -- there is nothing specific about sufentanil and opioids are used in pregnant women all the time but it’s just a standard for investigational study, trying to make sure that the patients aren’t pregnant.

[Hugo Ong:]

Got it. Great. Thanks for taking my questions.

[Pam Palmer:]

Sure.

[Operator:]

And this will conclude our question-and-answer session. I would like to hand the conference back over to Howie Rosen for his closing remarks.

[Howie Rosen:]

I’d just like to thank everyone again for taking the time today to call in to our second quarter call. And as we mentioned, we will be participating at several investment conferences next month. So, we look forward to keeping you updated. Thanks again.

[Operator:]

Ladies and Gentlemen, the conference has now concluded. We thank you for attending today’s presentation. You may now disconnect your lines.