AcelRx Pharmaceuticals Reports Second Quarter 2014 Financial Results

REDWOOD CITY, Calif., Aug. 11, 2014 /PRNewswire/ -- AcelRx Pharmaceuticals, Inc. (Nasdaq: ACRX), (AcelRx), a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of acute and breakthrough pain, today reported financial results for the three and six months ended June 30, 2014.  On July 25, 2014, AcelRx announced that the U.S. Food and Drug Administration (FDA) issued a Complete Response Letter (CRL) for the Company's new drug application (NDA) for Zalviso™, (sufentanil sublingual tablet system).  Since the receipt of the CRL, AcelRx has been working on a reply and intends to meet with the FDA to discuss the items contained in the CRL.  

"We were disappointed with the receipt of a Complete Response Letter for Zalviso and we look forward to meeting with the FDA to clarify the items included in the CRL and to discuss our planned response," stated Richard King, president and CEO of AcelRx. "We have spoken to the FDA and plan to meet with them by the end of September 2014.  We anticipate we can refile the Zalviso NDA before the end of 2014, pending the outcome of the meeting with the FDA.  We remain confident in the Zalviso development program and will work closely with the FDA to address the Agency's concerns as outlined in the CRL to ensure that healthcare professionals and patient communities will have access to Zalviso."

The CRL contains requests for additional information on the Zalviso System to ensure proper use of the device.  The requests include submission of data demonstrating a reduction in the incidence of optical system errors, changes to the Instructions for Use for the device to address inadvertent dosing, among other items, and submission of additional data to support the shelf life of the product.  We believe certain of these requests have been addressed in amendments to the NDA that were submitted prior to the receipt of the CRL but, as acknowledged by the FDA, have not yet been reviewed by the Agency.  While we anticipate that additional bench testing and human factors testing may be required to address certain items in the CRL, there were no requests to conduct additional human clinical studies. However, there is no guarantee that the information previously provided or to be provided to the FDA will be adequate to address the issues raised in the CRL.    

Second Quarter Financial Results

Net loss for the second quarter of 2014 was $10.6 million, or $0.24 basic net loss per share, and $0.30 diluted net loss per share, compared to $17.4 million, or $0.47 basic and diluted net loss per share, for the second quarter of 2013.  Basic net loss per share for the three months ended June 30, 2014 includes $2.5 million in non-cash income related to the valuation of PIPE warrants which were issued in connection with a PIPE financing completed in June 2012. This non-cash income was deducted from net loss in order to arrive at the numerator for the calculation of diluted EPS and 1.0 million shares were added to the denominator (using the treasury stock method) to reflect the dilutive effect of the PIPE warrants.  Common shares used in calculating earnings per share were 43.3 million for basic EPS and 44.3 million for diluted EPS for the second quarter of 2014, compared to 37.3 million for basic and diluted EPS for the second quarter of 2013.

The decrease in the net loss was primarily due to the valuation of PIPE warrants, fluctuations for which are charged as other income or expense, partially offset by an increase in operating expenses.

During the second quarter of 2014, AcelRx recognized $71,000 of deferred revenue under the collaboration agreement with Grunenthal, which AcelRx announced in December 2013, for the commercialization of Zalviso in Europe and Australia. During the second quarter of 2013, AcelRx recognized revenue of $407,000 resulting from reimbursement for work completed under a research grant from the U.S. Army Medical Research and Materiel Command, or USAMRMC, for development of ARX-04, a sufentanil tablet system product candidate for the treatment of moderate-to-severe acute pain in a range of ambulatory environments. The research grant was completed in the fourth quarter of 2013.    

Research and development expenses for the quarter ended June 30, 2014 were $7.3 million, compared with $6.1 million for the quarter ended June 30, 2013.  The increase was primarily due to continued development work to support the FDA's review of the Zalviso NDA.  

General and administrative expenses were $5.0 million for the second quarter of 2014, compared with $2.1 million for the second quarter of 2013.  The increase was primarily due to market research and other pre-commercial activities in support of potential marketing approval of Zalviso.  

As discussed above, other income and expense in the second quarter of 2014 includes $2.5 million in non-cash income caused by a decrease in the value of the PIPE warrants.  During the second quarter of 2013, these PIPE warrants created $8.7 million in non-cash expense.

Year-to-Date Financial Results

For the six months ended June 30, 2014, AcelRx reported a net loss of $20.2 million, or $0.47 basic net loss per share and $0.50 diluted net loss per share, compared to $30.2 million, or $0.81 basic and diluted net loss per share for the same period in 2013.  Basic net loss per share for the six months ended June 30, 2014 includes $1.8 million in non-cash income related to the valuation of PIPE warrants, which was deducted from net loss in order to arrive at the numerator for the calculation of diluted EPS and 0.5 million shares were added to the denominator (using the treasury stock method) to reflect the dilutive effect of the PIPE warrants.  Basic net loss per share for the six months ended June 30, 2013 includes $10.4 million in non-cash expense related to the valuation of PIPE warrants. Common shares used in calculating earnings per share were 43.3 million for basic EPS and 43.8 million for diluted EPS for the six months ended June 30, 2014, compared to 37.2 million for basic and diluted EPS for the same period in 2013.

Research and development expenses for the six months ended June 30, 2014 were $12.0 million, compared to $15.4 million for the six months ended June 30, 2013.  The decrease over the six months ended June 30, 2014, was primarily due to a high level of activity associated with Phase 3 clinical studies of Zalviso in the first half of 2013.  General and administrative expenses were $9.0 million for the six months of 2014, compared with $4.3 million for the six months ended June 30, 2013.  The increase was primarily due to market research and other pre-commercial activities in anticipation of marketing approval of Zalviso.  

As of June 30, 2014, AcelRx had cash, cash equivalents and investments of $92.3 million, compared to $92.9 million at March 31, 2014 and $103.7 million at December 31, 2013.  The decrease in cash during the year was driven by cash used in operations, primarily offset by the $10.0 million draw down of the second tranche of the loan and security agreement with Hercules, in June 2014.

Financial Outlook

We reiterate and issue financial guidance for the year, as follows:

• Research and development expenses are expected to be in the range of $27 to $29 million for the year and relatively flat quarter over quarter.
• General and administrative expenses, including pre-commercialization expenses, are expected to be in the range of $21 to $23 million for the year and relatively flat quarter over quarter.
• Total operating expenses for 2014 are anticipated to be in the range of $48 to $52 million.
• Estimated cash, cash equivalents and investment balances at December 31, 2014 of at least $65 million.

Corporate Update and Review of Recent Accomplishments

• On July 7, 2014, and pursuant to the license and supply agreement with Grunenthal Group, AcelRx and Grunenthal Group announced that Grunenthal submitted a Marketing Authorization Application (MAA) to the European Medicines Authority for Zalviso for the management of moderate-to-severe acute pain in adult patients in a medically supervised environment. Under the terms of the license agreement, AcelRx will receive a cash payment of $5 million for the MAA submission in the third quarter of 2014. AcelRx is eligible to receive an additional $15 million milestone payment upon the approval of the MAA. After approval by EMA, AcelRx is eligible to receive approximately $200 million in additional milestone payments, based upon successful regulatory and product development efforts ($28.5 million) and net sales target achievements ($171.5 million). Grunenthal will also make tiered royalty, supply and trademark fee payments in the mid-teens up to the twenty percent range, on net sales of Zalviso in the Grunenthal territory (EU, Australia and certain other countries).
• In June 2014, AcelRx completed a pharmacokinetic study in support of the ARX-04 development program. In this study of healthy volunteers, it was shown that two sublingual administrations of a Zalviso 15mcg sufentanil tablet dosed 20 minutes apart were equivalent to one sublingual administration of an ARX-04 30mcg sufentanil tablet. The significance of this study is that we believe we can include approximately 300 patients from the Zalviso clinical program in the ARX-04 safety database. The ARX-04 safety database required by the FDA is 500 patients and, therefore, we believe this demonstration of dose equivalency will allow for a significant reduction in the number of patients necessary to enroll in the ARX-04 Phase 3 clinical program. We intend to initiate our Phase 3 clinical study for ARX-04 before the end of 2014.

Conference Call
AcelRx will conduct a conference call and webcast today, August 11, at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss its financial results and program updates.  To listen to the conference call, dial in approximately ten minutes before the scheduled call to (800) 860-2442 for domestic callers, (866) 605-3852 for Canadian callers, or (412) 858-4600 for international callers.  Those interested in listening to the conference call live via the Internet may do so by visiting the Investors section of the company's website at www.acelrx.com and selecting the Webcast link for the Q2 2014 earnings conference call.  A webcast replay will be available on the AcelRx website for 90 days following the call by visiting the Investors section of the company's website at www.acelrx.com.

About Zalviso™
Zalviso is an investigational pre-programmed, non-invasive system to allow hospital patients with moderate-to-severe acute pain to self-dose with sublingual sufentanil tablets to manage their pain.  Zalviso consists of sufentanil tablets delivered by the Zalviso System, a needle-free, handheld, patient-administered, pain management system (together, "Zalviso").  Zalviso is designed to help address certain problems associated with post-operative intravenous patient-controlled analgesia, by offering:            

• A high therapeutic index opioid: Zalviso uses sufentanil, an opioid that has a high therapeutic index. The therapeutic index is the ratio of the effective dose versus the lethal or toxic dose. In animal studies, the therapeutic index for sufentanil was approximately 100 times larger than fentanyl and 300 times larger than morphine.
• A non-invasive route of delivery: Zalviso utilizes a sufentanil tablet which allows for a sublingual (under the tongue) route of delivery. Sufentanil is highly lipophilic which provides for rapid absorption in the fatty cells (or mucosal tissue) found under the tongue and for rapid transit across the blood-brain barrier to bind the mu-opioid receptors in the brain. The sublingual delivery used by Zalviso provides rapid onset of analgesia. The sublingual delivery system also eliminates the risk of IV-related analgesic gaps and IV complications, such as catheter-related infections. In addition, because patients do not require direct connection to an IV PCA infusion pump through IV tubing, Zalviso allows for ease of patient mobility.
• A pre-programmed PCA solution: Zalviso allows patients to self-dose sufentanil sublingual tablets via a pre-programmed, secure system designed to eliminate the risk of programming errors.

About AcelRx Pharmaceuticals, Inc.
AcelRx Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of acute and breakthrough pain.  AcelRx's lead product candidate, Zalviso, is designed to improve the management of moderate-to-severe acute pain in adult patients in the hospital setting by utilizing a high therapeutic index opioid, through a non-invasive delivery route via a pre-programmed, patient-controlled analgesia device. AcelRx has announced positive results from each of the three completed Phase 3 clinical trials for Zalviso, and has submitted an NDA to the FDA seeking approval for Zalviso in the treatment of moderate-to-severe acute pain in adult patients in the hospital setting and on July 25th, received a Complete Response Letter from the FDA.  AcelRx plans to initiate a Phase 3 clinical trial for ARX-04, a product candidate for the treatment of moderate-to-severe acute pain in a medically supervised setting, by the end of 2014. The Company has two additional pain treatment product candidates, ARX-02 and ARX-03, which have completed Phase 2 clinical development.  For additional information about AcelRx's clinical programs, please visit www.acelrx.com.

Forward-Looking Statements
This press release contains forward-looking statements, including, but not limited to, statements related to the Company's Zalviso NDA and the Complete Response Letter (CRL), our plans to address the issues raised in the CRL, our anticipated resubmission of the Zalviso NDA to the FDA, including the scope of the resubmission and the timing of the resubmission and FDA review time, planned initiation of the Phase 3 clinical trial for ARX-04, approval of marketing authorization of Zalviso in Europe, and the therapeutic potential of AcelRx's product candidates, including Zalviso. 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: 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 the United States and Europe; AcelRx's ability to build an effective commercial organization; its ability to obtain sufficient financing to commercialize Zalviso and proceed with clinical development of ARX-04; the success, cost and timing of all product development activities and clinical trials, including the planned Phase 3 ARX-04 trial; the market potential for its product candidates; and other risks detailed in the "Risk Factors" and elsewhere in AcelRx's U.S. Securities and Exchange Commission filings and reports, including its Quarterly Report on Form 10-Q filed with the SEC on May 8, 2014. AcelRx 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.

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SOURCE AcelRx Pharmaceuticals, Inc.