AcelRx Pharmaceuticals, Inc.
Q4 2015 Earnings Call Transcript

Published: 10 Mar 2016

[Operator:]

Good day. And welcome to the AcelRx Pharmaceuticals Annual 2015 Financial Results Conference Call Webcast. [Operator Instructions] Please note this event is being recorded. Please note this event is being recorded. I would now like to turn the conference call over to Timothy Morris, Chief Financial Officer. Mr. Morris, the floor is yours sir.

[Timothy Morris:]

Thank you, Mike. Good afternoon, everyone, and welcome to today’s call. On this call I’m joined by Howie Rosen, Interim Chief Executive Officer; Pam Palmer, our Co-Founder and our Chief Medical Officer; and Gina Ford our VP of Commercial Strategy. During the call today, we will make forward-looking statements, including but not limited to statements relating to the process and timing of anticipated future development of AcelRx’s product candidates including the process and timing of anticipated future development of ARX-04 and Zalviso. Anticipated results and completion of the SAP302 and SAP303 studies for ARX-04, timing for initiation and completion along with anticipated results of IAP312 for Zalviso, launched timing and commercial availability for Zalviso Europe, anticipated resubmission of the Zalviso NDA to the FDA including the scope and timing of resubmission and the cash guidance for the year. These forward-looking statements are based on AcelRx’s current expectations and inherently involve significant risks and uncertainties. AcelRx’s actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to any delays or inability to obtain and maintain regulatory approval of its product candidates, including ARX-04 and Zalviso. Our ability to successfully design and complete the additional clinical study requested by the FDA to support the resubmission of the Zalviso NDA, our ability to timely resubmit the Zalviso NDA to the FDA and to receive regulatory approval for Zalviso. The success cost and timing of all part of development activities and clinical trials including the SAP302 and SAP303 ARX-04 studies and the IAP312 Zalviso trial or the ability to manufacture commercial supply of Zalviso and other risk detailed in the Risk Factors and elsewhere and AcelRx’s U.S. Securities and Exchange commission filing and reports, including its Annual Report on Form 10-Q filed with the SEC on November 3, 2015. AcelRx undertakes no duty or obligation to update any forward-looking statement contained in this announcement as a result of any new information, future events or changes in our expectations. I will now turn the call over to Howie, Interim Chief Executive Officer.

[Howie Rosen:]

Thank you, Tim. During today's call we’ll provide business highlights and accomplishments for the fourth quarter, our corporate goals for 2016, updates on ARX-04 and Zalviso, and review of the fourth quarter and year-end financial results. Let me start with our recent accomplishment. In October we initiated in open-label Phase 3 study of ARX-04 called SAP302 for the treatment of adult patients who present in the emergency room with moderate-to-severe acute pain associated with trauma or injury. The first 40 patients have completed the study and ARX-04 was found to be safe and effective in ER patients. Pam will share more results of the study with you in a moment. In December, we along with our representatives from our partner of the Department of Defense had a pre NDA meeting with the U.S. Food and Drug Administration to finalize the remaining plans for ARX-04. Based on those discussions, enrollment in the current SAP302 study will be expanded up to a total of 100 patients and an additional study known as SAP303 is expected to enroll up to 100 post operative patients with moderate-to-severe acute pain. Both the extension phase of SAP302 and SAP303 will allow for multiple doses of ARX-04 to be administered. We received the approval from the Department of Defense to modify the SAP302 study protocol and to include the cost in our existing contract, as well as to include some of the cost associated with SAP303. The original contract amount up to $70 million at funding remains unchanged. So length of the contract was also extended which does not reflect the change in our current thinking about NDA submission timing to rather provide some flexibility to work on activities that may be requested by the DoD after submission. Having received this approval, we've initiated the site and I’m happy to say treated our first patient SAP303 last week. The clinical sites for SAP302 are ready to proceed with the extension phase and we anticipate beginning to enroll patients this month. Switching on to Zalviso, based on the September 2015 meeting we held with the FDA, we’ve completed a protocol review with the FDA for an open-label clinical study of Zalviso called the IAP312 in post-operative patients. Pam will provide you with the brief update on the study protocol in a few moments. In Europe, Grunenthal Group, AcelRx's licensee is continuing to work with the member states of the EU and EEA to ensure that Zalviso is made available to those patients who are suitable to treat their acute moderate-to-severe post-surgical pain. Grunenthal and we expect the product to be available to Western European patients in the first half of 2016. On the commercial side, Gina Ford who you will recall joined AcelRx full-time at the beginning of October, and many of you had an opportunity to meet her at Analyst Day in October has continued to help us hone our U.S. and ex-U.S. commercial strategies for both ARX-04 and Zalviso. As Tim mentioned, Gina has joined us on this call. As always I would personally like to thank the employees of AcelRx, our contractors, consultants and clinical investigators. The communications we’ve had with the FDA have been productive regarding both ARX-04 and Zalviso and we're moving forward final studies to support both candidates NDAs. As we outlined for you in early January, our corporate goals for 2016 remain number one to complete the open-label studies of ARX-04 and to file the NDA, number two to complete the open-label study of Zalviso on post-operative patients and resubmit the NDA, and number three to support the launch of Zalviso in Europe by Grunenthal. For the development pathway for both our products clarify as you can see our focus in 2016 will be on execution. I would now like to turn the call over to Pam, who will provide you with a more detailed update on ARX-04 and Zalviso.

[Pam Palmer:]

Thanks Howie. Let's start with ARX-04. Previously we reviewed results with you from SAP301, which is the Phase 3 study of ARX-04 for the short term treatment of patients with moderate-to-severe acute pain following ambulatory abdominal surgery. ARX-04 met primary and secondary endpoints in this study showing that patients who received ARX-04 experienced significantly greater pain reduction compared to placebo, as measured by the time-weighted summed pain intensity difference over the first 12 hours of treatment or SPID-12. Two weeks ago, we reported encouraging interim efficacy and safety results from the single dose phase of SAP302, an open label single arm Phase 3 study of ARX-04 in the emergency room. Pain intensity is measured using a 0 to 10 numeric rating pain scale and ER setting, a drop in pain intensity of 1.3 on the scale has been demonstrated clinically meaningful. Of the 40 patients, who have been enrolled and treated to date in the study, this mean drop of 1.3 points occurred approximately 20 minutes after dosing and that one hour after dosing the pain intensity was 2.7 points below baseline. The primary endpoint of this study is a time weighted summed pain intensity difference to baseline over the first hour or SPID-1. The mean SPID-1 value in these patients is similar to previous studies of sublingual sufentanil in post-operative patients. Adverse events were consistent with previous clinical studies with the most frequent events, nausea and somnolence, each reported in two of the 40 patients. None of the participants to-date have terminated the study early due to adverse events. In addition towards analgesic efficacy, we assess the cognitive effect of ARX-04 on patients in the study. We conducted this analysis at the request of the United States Department of Defense since drug induced cognitive impairment on the battlefield is a particular concern using a well-known cognitive test the six item screener patients demonstrated no change in mean test scores before and after dosing. The SAP302 study will continue to enroll patients with the goal of enrolling up to 100 patients in total. This extension arm of the study will allow for multiple doses of ARX-04 given hourly as needed for pain for up to four doses. To further expand on our experience with ARX-04 in various patient populations, we have also commenced SAP303, a Phase 3 study in post-operative patients with moderate-to-severe acute pain focusing on patients greater than 40 years of age. In addition, the enrollment will be open to patients' with comorbidities such as renal impairment or liver impairment. The study will also accommodate multiple doses of ARX-04, in this case allowing drug administration for up to 12 hours. Both studies are expected to be completed by the third quarter of 2016. Assuming successful completion of the SAP302 extension phase and the new SAP303 studies, we anticipate submitting the NDA for ARX-04 in the fourth quarter of 2016 for the treatment of moderate-to-severe acute pain in a medically-supervised setting. Moving on to Zalviso as how we mentioned, based on our communications with the FDA, we completed the protocol review and are planning to initiate an open-label clinical study called IAP312 of Zalviso in approximately 315 post operative patients. This study will primarily measure the rate of device errors including the failure to dispense medication, as well as the incidence of misplaced or dropped tablet. We will also collect additional efficacy and safety data in all patients. To build on our previous Phase 3 studies, IAP312 will include all surgery types, require a minimum of only 24-hours in the study and allow for multiple types of pain treatment before and during the study known as multi-model analgesia. Pending successful and timely completion of the study, we expect to be in a position to resubmit the NDA for Zalviso by the end of 2016. I will now turn the call over to Gina to provide an updates on the commercial activities.

[Gina Ford:]

Thank you, Pam. Since our last 4Q in October, we have continued to further define specific market segments to refine our launch strategy for ARX-04. Specifically, we continue to review and research the potential use of ARX-04 and the pre-hospital setting that includes advanced life-saving ambulance paramedics and first responders, the emergency department, short-stay surgery, ambulatory surgery centers, U.S. government DoD and NATO, and plastic surgery in burn patients. We have completed preliminary interviews with payers to determine the market access profit and price sensitivity in the U. S. and the EU. We are refining our estimates of the cost of current therapies, specifically the cost of IV opioids. In the fall, we completed a survey of emergency department professionals at a meeting of emergency medicine. From the survey, one, support the need for improvement in pain management; two, suggest 80% of ER patients don't receive their first dose of IV opioid until 15 minutes or more; and three, indicate that two-thirds of those surveyed would like to use the product like ARX-04 in their institutions. In 2016, we are continuing our commercial strategy activity including preliminary launch planning for ARX-04 and Zalviso in the U.S. I will now turn the call back over to Tim for the financial results.

[Timothy Morris:]

Thank you, Gina. Earlier today we reported financial results for the fourth quarter and year-ended December 31, 2015. I'll refer you to that press release for specific details on the actual results. The net loss for the fourth quarter of 2015 was $10.5 million or $0.24 basic and diluted net loss per share. This compares to $13.8 million or $0.32 basic and net loss per share for the fourth quarter of 2014. The decrease in net loss in the fourth quarter of 2015 as compared to the fourth quarter of 2014 was primarily due to the reduction in cost-related to the Zalviso development program, the cost reduction plan implemented at the end of March 2015, and the revenue attributed to the research and development work performed for ARX-04 under the DoD contract. For the year ended December 31, 2015, AcelRx reported a net loss of $24.4 million or $0.55 basic net loss per share. This compares to net loss of $33.4 million or $0.77 basic net loss per share for 2014. Revenue for 2015 was $19.3 million, which included $14.9 million recognized under our collaboration agreement with Grunenthal and $4.4 million of revenue recognized under the DoD contract. Revenue for the year ended December 31, 2014 was $5.2 million related to our collaboration agreement with Grunenthal. At the end of 2015, AcelRx had cash, cash equivalents and investments of $113.5 million. This compares to $75.4 million we had at the end of December 2014. The increase in cash balance was primarily attributable to the $61.2 million in net proceeds on the royalty monetization offset by the cash required to fund our continuing operations. Excluding the net cash received from the royalty monetization and the milestone payment of $50 million from Grunenthal for the EU approval of Zalviso, the decrease in cash, cash equivalents and investments would have been $38.1 million for 2015. Assuming the time of completion of clinical studies and accomplishments of the 2016 corporate objectives of how we mentioned above, we anticipate cash, cash equivalents and investments to be between $70 million and $75 million at December 31, 2016. On the IR front, planned presentations and participation in the upcoming conferences and meetings include this week, the Cowen and Company 36th Annual Health Care Conference specifically March 9th in Boston, the 28th Annual Roth Conference on March 15th in Laguna Niguel, and the BIO-Europe Spring 2016 on April 5 in Stockholm, Sweden. We’ll now turn the call back to Howie for some closing comments.

[Howie Rosen:]

Thank you, Tim. We have made significant progress in both ARX-04 and Zalviso in the fourth quarter receiving important input from the FDA on both products regulatory path. Based on FDA discussions, we have expanded the ARX-04 SAP302 study and initiated SAP303 to provide broader experience with various patient populations in treatment setting. For Zalviso, we treated the protocol review with the FDA and plan to initiate IAP312, which is designed to access the overall performance of the device. We are expecting number of clinical and regulatory announcements during the year and look forward to keeping you informed of our progress. Thank you for being on the call today. We'll now open up the call for questions.

[Operator:]

[Operator Instructions] The first question we have comes from Randall Stanicky of RBC Capital Markets. Please go ahead.

[Randall Stanicky:]

Great. Thanks guys for the question. I just have a couple. On the first, it sounds like you made some changes to the pricing model internally, but can you just talk a little bit more about how you're thinking about pricing ARX-04. Has anything evolved on that front? And then secondly, just - as we look at the NDA submissions and resubmission timelines for ARX-04 and Zalviso. As we think about next year they could be coming to market roughly around the same time. Can you just talk about how we should think about the rollout, which is going to come out first? And any additional color on the commercial ramp you can help us will be great. Thanks.

[Timothy Morris:]

Sure Randall, this is Tim. I'll turn it back to Pam. On the pricing front for ARX-04 we still have lot of work to do their before we figure that out. But I think what we have done is a fair amount of work as it relates to the current cost of IV opioid use. So Pam what are the specific elements that you are looking at and that have been included in your submission for the abstract?

[Pam Palmer:]

Sure. Yes. We will be presenting at the ISPOR Pharmacoeconomic Meeting in May in Washington DC. And we've looked at the price of what it cost an emergency room basically to start an IV and give one dose of an IV opioid, whether it's morphine, hydromorphone or fentanyl. No, we looked at all three. And it's substantial enough that we feel very comfortable with - we have quite a broad margin for pricing of ARX-04.

[Randall Stanicky:]

Has that changed from the -- I know you're talking about $20 per unit on the DoD commitment, but is there any range that you could provide us at this point just in terms of how we should model that? High-to-low opportunity?

[Timothy Morris:]

Yes. I think we have always felt that the price that we have with the DoD represents a floor price. And so given some of the information I think that will come out in terms of the current cost, we do believe that there should be significant amount of room above that between the $20 and then what the actual current cost of the standard of care is today. And then on your question as to - relates to the timing of the launch in the various approvals, we'll have Howie comment.

[Howie Rosen:]

Thanks for your questions. So at this point we are still working through exactly how we sequence launches and as I mentioned our focus really is on clinical and regulatory side. The nice thing when we look at these two products is that there is some overlap in terms of the call point so with the emergency rooms then the hospital and that is obviously opportunities were support outside the hospital sitting as well. So, we're still sort of working through how we would actually launch the products and what’s sequence in timing.

[Randall Stanicky:]

Got it. Thanks guys.

[Operator:]

Next we have Michael Higgins from ROTH Capital Partners.

[Michael Higgins:]

Hi, guys thanks. Couple of questions if I could, the first being your cash situation looks good, your guidance is in line Q4 seem to be a bit higher on the expense side than we had expected so if you could help us with the quarters going forward and how we should look at the R&D line with Phase 3 is going and data coming up in Q3. Thanks.

[Howie Rosen:]

Sure, I think as it relates to kind of the fourth quarter, I mean clearly some of the prep work for these clinical studies that are now moving forward and some of the work that we have done with the FDA was probably driving that a little bit. In terms of the actual cash and the cash burn next year I think you guys have – and we’ll try to give some guidance on that but I would also say that I believe R&D will be slightly higher next year starting in '16 than it was in '15 mainly because we’ll have now three studies ongoing even though those are all open-label studies but the offset of that is going to be the additional revenue that’s going to come from the remainder of the DoD contract in '16 as compared to '15.

[Michael Higgins:]

Okay, that’s helpful. Help us out with the time for following for 04 in Europe might have come late this year or is that more likely in '17?

[Howie Rosen:]

Yes, most likely that's a 17 event. We want to use the same exact database that we’ve used in the U.S. for Europe, we’re also going to need some clarifying - initial clarifying meetings with some scientific – from the scientific advisor in Europe next couple of months as well. So there are also just a natural timeline between a filing of the NDA, MAA. So that will follow on fairly quickly but from a timing standpoint most likely it looks like the filing for the MAA will be 2017 event.

[Michael Higgins:]

Okay. Tom it seems like the clinical events seem to be fairly straightforward seems to kind of come to a calm I suppose. Any updates for us on the outlook for filling the CEO spots and who you are looking for, for that position?

[Timothy Morris:]

Thanks for that question. As I mentioned before we have been screening and interviewing candidates and as I told the Board that I'm here for as long as maybe. So we'll see the opportunity be thoughtful about that. We will definitely update you on progress there.

[Michael Higgins:]

Fair enough. Thanks guys.

[Operator:]

Next we have Hugo Ong of Jefferies.

[Hugo Ong:]

Hi guys, thanks for taking the question. Just quickly on SAP303 you mentioned that you will be enrolling patients that are 40 years or older, is there an upper limit at all in terms of the age of the patients you’ll be enrolling?

[Pam Palmer:]

No, we’ve actually never had an upper limit in any study that was ever conducted.

[Hugo Ong:]

Okay, great. And in 302 we also investigate ARX-04 in patients with pain due to severe burns?

[Pam Palmer:]

Sure, if they come in to the emergency room, we’re looking at any acute trauma to a patient. So whether it’s due to severe burns or car accident or a fall what have you.

[Hugo Ong:]

Okay, got it. Thank you.

[Operator:]

At this time, we’re showing no further questions. We will then conclude our question-and-answer session. I'd now like to turn the conference call back over to Mr. Howie Rosen, Interim Chief Executive Officer for any closing remarks. Sir?

[Howie Rosen:]

Thank you, Michael. Thank you again for joining us for our fourth quarter and year end call. We'll be participating in several investment conferences as we mentioned in the coming months, so we look forward to keeping you updated on our progress.

[Operator:]

And we thank you sir to the rest of the management team for your time also today. The conference call is now concluded. At this time, you may disconnect your lines. Thank you, take care and have a great day everyone.