Q3 2021 AcelRx Pharmaceuticals Inc Earnings Call

Operator: Welcome to the XLRX third quarter 2021 earnings call. This call is being webcast live on the events page of the investor section of XLRX's website at www. This call is the property of XLRX, and any recording, reproduction, or transmission of this call without the express written consent of XLRX is strictly prohibited. As a reminder, this call is being recorded. You may listen to a webcast replay of this call by going to the Investor section of XLR's website. I'll now turn the call over to Rafi Asidorian, XLRX's chief financial officer.

Welcome to XO Rx third quarter, 2021 earnings call.

This call is being webcast live on the events page of the investors section of XO, our axis website at Www Dot X L Rx dotcom.

This call is the property of X L Rx and any recording reproduction or transmission of this call without the express written consent of excellent Rx is strictly prohibited.

As a reminder, today's call is being recorded you may listen to a webcast replay of this call by going to the investors section of XR Xs website I'll now.

I would like to turn the call over to Rafi asset Dorian excellent axis Chief Financial Officer.

Raffi Mark Asadorian: Thank you for joining us this morning. Earlier today, we announced our third quarter financial results and some important business updates in a press release, and the slide presentation accompanying this call is available in the investor section of our website. With me today is Vince Angadi, our chief executive officer, and Dr. Pam Palmer, our chief medical officer. Before we begin, I'll remind listeners that, within the meaning of the federal securities laws, forward-looking statements involve risk and uncertainties regarding the operations and future results of Accelerate.

Thank you for joining us this morning.

Earlier today, we announced our third quarter financial results.

And some important business updates and our press release this press release and the slide presentation accompanying this call are available in the investors section of our website.

With me today is Vince Angotti, our Chief Executive Officer, and Dr. Pam Palmer, our Chief Medical Officer.

Before we begin I'll remind listeners that during this call we will make forward looking statements within the meaning of the federal Securities laws.

These forward looking statements involve risks and uncertainties regarding the operations and future results of accelerates.

Raffi Mark Asadorian: Please refer to our press release, in addition to the company's periodic, current, and annual reports filed with the Securities and Exchange Commission for a discussion of the risks associated with such for the. I'll now hand the call over to Vince. Thank you, Rafi. And good afternoon, everyone.

Please refer to our press release in addition to the company's periodic current and annual reports filed with the Securities and Exchange Commission.

For a discussion of the risks associated with such forward looking statements.

I'll now hand, the call over to Vince.

Thank you Rafi and good afternoon, everyone.

Vincent J. Angotti: In alignment with our strategy to consolidate commercial and late-stage development programs in medically supervised settings, we're very excited to announce our agreement to acquire Lull Therapeutics, which provides us with an asset that has the potential to address unmet medical needs across many different disease states and therapeutic areas. The market potential for the asset in these areas is significant, and provides portfolio diversification to support profitable growth into the future. However, initial focus was on its use as a regional, anticoagulant, and dialysis circuit, for which the FDA has assigned breakthrough device designation status.

In alignment with our strategy to consolidate commercial and late stage development programs in medically supervised settings. We're very excited to announce our agreement to acquire <unk> Therapeutics, which provides us with an asset that has the potential to address unmet medical needs across many different disease states and therapeutic areas.

The market potential for the asset in these areas is significant.

It provides portfolio diversification to support profitable growth into the future.

We're focused initially on the Chu said, he regional anti Coagulants and dialysis circuits for which the FDA has assigned breakthrough device designation status.

Vincent J. Angotti: This pipeline expansion momentum comes at a time when the SUVI is gaining solid traction in the plastic surgery and cosmetic procedural specialties, which has driven our strong growth in approvals leading to October being our highest commercial order month since long. We continue to focus on all four pillars of our strategy, and on the call today, I'll provide details around the acquisition and its fit within an Acceler, update you on the progress with DSUIA, as well as the DOD, and discuss other assets recently brought to the portfolio. So first, let's start with the Lowell acquisition.

This pipeline expansion momentum comes at a time with the <unk> is gaining solid traction in the plastic surgery and cosmetic procedural specialties, which has driven our strong growth in approvals leading to October being our highest commercial order months since launch.

We continue to focus on all four pillars of our strategy and on the call today I'll provide details around the acquisition and its fit within accelerates.

You on the progress with the studio as well as the Dod.

And discuss other assets recently brought to the portfolio.

So first let's start with the lull acquisition.

Vincent J. Angotti: We're thrilled to bring Nyad, Lowell's key asset, into the AccelerX portfolio and believe it has the potential to create significant value. Nyad is a lyophilized form of nephamistat, a broad-spectrum, synthetic, Searing protease inhibitor with anticoagulant, anti-inflammatory, and potential antiviral activity. NIA is being developed as a regional anticoagulant for the dialysis circuit during continuous renal replacement therapy for acute kidney injury patients in the hospital. Niat has received breakthrough device designation status from the FDA and is being regulated as a device by the FDA due to its mechanism of action.

We're thrilled to bring NIAD, most key asset and TD accelerates portfolio and believe it has the potential to create significant value.

NIAD and investigational product is allowed for life form of MS. Famous that a broad spectrum synthetic serine protease inhibitor with anti coagulant anti inflammatory and potential anti viral activities.

Now it is being developed as a regional anti coagulants the dialysis circuit during continuous renal replacement therapy for acute kidney injury patients in the hospital.

<unk> has received breakthrough device designation status from the FDA and is being regulated as a device by the FDA due to its mechanism of action.

Vincent J. Angotti: The Second Intent Indication for NIAD is as a regional anticoagulant for the dialysis circuit for chronic kidney disease patients undergoing intermittent hemodialysis and outpatient dialysis centers. The market opportunity for these first two potential indications, for which there are currently no FDA-approved products, is significant, we believe, provide us with the peak sales potential of over $200 million annually. The currently used anticoagulants are heparin, which is used off-label, and citrate, which has an emergency use authorization.

Second intended indication for NIAD is there's a regional anti coagulate for the dialysis circuit for chronic kidney disease patients undergoing intermittent hemodialysis and outpatient dialysis centers.

The market opportunity in just these first two potential indications for which there are currently no FDA approved products is significant we believe products provide us with the peak sales potential of over $200 million annually.

The currently used anti Coagulants, our heparin, which is used off label and citrate, which has an emergency use authorization.

Vincent J. Angotti: There are significant risks with both of these drugs, and the FAMISD Act can potentially mitigate some of these risks. There may be other potential uses for this unique protease inhibitor that are particularly relevant during the current pandemic; we will evaluate the further development of LTX, 608.

There are significant risks with both of these drugs, which is the famous that could potentially mitigate.

There may be other potential uses for this unique protease inhibitor that are particularly relevant during the current pandemic.

We'll evaluate the further development of <unk> <unk>.

So weight loss proprietary IV formulation of <unk> for these indications.

Vincent J. Angotti: Laws proprietary IV formulation of Nefamostat for these indications. Femostat has been approved in Japan and South Korea as a regional anti-coagulant for the dialysis circuit, disseminated intravascular coagulation, and pancreatitis with a well-documented safety and efficacy profile. And like DeSuvia, Nyad has a place in the hospital setting but also provides an opportunity in other medically supervised settings outside the hospital. A significant amount of work has advanced NIAD along the current regulatory path for regional anti-coagulation of the dialysis circuit for patients in hospitals, with a single registration study expected to begin late next year and its primary endpoint already agreed upon with the FDA.

The firm is that it's been approved in Japan, and South Korea, as a regional anticoagulant for the dialysis circuit.

Disseminated intravascular coagulation and pancreatitis with a well documented safety and efficacy profile.

And like the Subia not yet is it placed in the hospital setting, but also provides an opportunity and other medically supervised settings outside the hospital.

A significant amount of work has advanced NIAD, along the current regulatory path for regional anticoagulation of the dialysis circuit for patients in the hospital with a single registration study expected to begin late next year and its primary endpoint already agreed upon with the FDA.

Vincent J. Angotti: We believe there is a clear pathway to approval given its breakthrough designation status in the unmet need, along with the numerous years of safety and efficacy data supporting its use. XU. Additionally, Lull has already been provided with a NID-specific ICD10 code for reimbursement, which will support the commercial launch and clinical adoption. The regulatory timeline for a PMA submission to the FDA is approximately 30 months from the time of transaction closing, which is expected this quarter, and the total estimated cost to approval is approximately $12 million.

We believe there is a clear pathway to approval given us breakthrough designation status and the unmet need.

Along with the numerous years of safety and efficacy data supporting its use ex U S.

Importantly.

LOE has already been provided with an <unk> specific ICD 10 codes for reimbursement, which will support the commercial launch and clinical adoption.

The regulatory timeline for PMA submission to the FDA is approximately 30 months from the time of transaction closing, which is expected this quarter and total estimated cost of approval is approximately $12 million.

Vincent J. Angotti: We expect to have an investor and analyst day with KOLs early next year, at which time we will provide much more insight to the clinical and market potential of the asset, as well as the other commercial and near-commercial assets in our portfolio. AccelerX will exchange $6.5 million of its common stock plus net cash acquired for 100% of both outstanding shares at closing.

We expect to have an investor and analyst day with Kols early next year at which time, we'll provide much more insight into the clinical and market potential of the asset as well as the other commercial and near commercial assets in our portfolio.

So our actual exchange $6 $5 million of its common stock plus net cash acquired for 100% was outstanding stock at closing and.

Vincent J. Angotti: In addition, each stockholder will receive a contingent value writer CVR that is payable upon the achievement of various regulatory and sales-based milestones through 2030, an amount up to $26 million. CVRs are payable in cash or stock at the option of AccelerX. And needless to say, we're excited about this unique asset, which has already proven its therapeutic benefit again outside the U.S. This acquisition, as well as the two innovative pre-filled syringe products licensed from Agatot in July, are expected to be key growth drivers in the coming years as the products are approved.

In addition, each stockholder will receive a contingent value right or CVR that is payable upon the achievement of various regulatory and sales based milestones through 2030, an amount up to $26 million.

The CVR payable in cash or stock at the option of accelerates and Needless to say we're excited about this unique asset which has already proven its therapeutic benefit again outside the U S.

This acquisition as well as the two innovative pre filled syringe products licensed from August and July are expected to be key growth drivers in the coming years as the products are approved.

Vincent J. Angotti: We continue to advance the regulatory process for the pre-filled ephedrine and phenolephrine syringe products and expect a meeting with the FDA in January to discuss our proposed roadmap to an NDA filing and that's the target of approval in 2023. We'll provide further updates after a requested meeting with the FDA. Now, let's move now to De Suvia.

We continue to advance the regulatory process for the pre filled ephedrine and phenylephrine syringe products and expect a meeting with the FDA in January to discuss our proposed roadmap to an NDA filing and estimated approval in 2023.

We'll provide further updates after a request a meeting with the FDA.

Let's move now to the <unk>.

Vincent J. Angotti: As you may recall, the previous sales growth is expected from three primary areas. One is the Department of Defense. Two, medically supervised settings in the U.S. And three, partnering with others in specialties and geographic regions outside the U.S. Department of Defense continues to lag behind our expectations as to when they will begin their purchases of the Susuia for the Cets kits and outfits, or SKOs for deploying troops. Their internal administrative and logistical issues, as we mentioned a couple of quarters ago, have still not been cleared, and we're therefore still waiting for these purchases to begin.

As you May recall the studio sales growth is expected from three primary areas one the department of defense.

<unk> sells to medically supervised settings in the U S and three partnering with others and specialties and geographic regions outside the U S.

The department of Defense continues to lag behind our expectations as to when they will begin their purchases of the CB for the sets kits and outfits or <unk> for deploying troops.

There are internal administrative and logistical issues. We mentioned a couple of quarters ago has still not been clear and were therefore still waiting for these purchases to begin.

Vincent J. Angotti: As you may recall, the expectation was and remains for the initial stocking orders to be approximately $30 million over three years. The purchases thus far made by the U.S. Army have been mainly under their pre-positioned stockpile program. There were no sales to the U.S. Army in the third quarter as budgets were all diverted to support the troop withdrawal from Afghanistan.

As you May recall, the expectation was and remains for the initial stocking orders to be approximately $30 million over three years.

The purchases thus far it made by the U S Army have been mainly under their pre positioned stockpiling program.

There were no sales to the U S Army in the third quarter as budgets were all diverted to support the troop withdrawal from Afghanistan. However, the.

Vincent J. Angotti: However, purchases under this program have resumed and should return to historical levels in the coming period. Now let's move on to distributive sales in medically supervised settings, which made up all the product sales in the quarter. The increase in commercial, or non-D, sales of over 20% from the second quarter of this year was mainly driven by the early success we're seeing with the Suviant in the plastic surgery and cosmetic procedural suite. Importantly, these specialties operating in the procedural suite setting have been less impacted by COVID compared to hospitals and ambulatory surgery centers. Procedural suites have quickly become the ideal setting for an analgesic like Sudia, where patients are undergoing procedures without general anesthesia.

The purchases under this program have resumed.

And should return to historical levels in the coming periods.

Now, let's move to distribution sales in medically supervised settings, which made up all the product sales in the quarter.

The.

<unk> commercial or non Dod sales over 20% from the second quarter of this year was mainly driven by the early success, we're seeing with the shooting in the plastic surgery and cosmetic procedural suites.

Importantly, these specialties operating the procedural suites setting have been less impacted by COVID-19 compared to hospitals and ambulatory surgery centers.

Procedural suites have quickly become the ideal setting for an analgesic like the <unk>, where patients are undergoing procedures without general anesthesia and in fact, there's been a continued shift of many painful procedures first out of the hospitals and into the Acs and more recently, the ASC and into these procedure.

Vincent J. Angotti: In fact, there's been a continued shift of many painful procedures first out of hospitals and into ASCs, and more recently out of ASCs and into these procedural suites. Since the 1980s, office-based procedures have grown more than 100-fold. And then in the third quarter, while the COVID resurgence due to the Delta variant negatively impacted our hospital channel cells, plastic surgery and cosmetic surgery procedures drove the formula approvals, which in total reached 646 as of October 31, exceeding our year-end goal of 650.

Suites.

Since the 19 eighties office based procedures have grown more than 100 fold.

And then the third quarter, while the corporate resurgence due to the Delta negatively impacted our hospital channel sells plastic surgery and cosmetic surgery procedures drove the formulary approvals, which in total have reached 646 as of October 31, exceeding our yearend goal of $6 15.

Vincent J. Angotti: We believe this increase in approvals is a leading indicator that will begin driving an increase in commercial product sales growth. Importantly, we've learned that these specialties follow a single decision-maker model, meaning the plastic or cosmetic surgeon alone usually makes the decision-approved products for use in the procedural suite. This model avoids the multiple layers of committee approvals required to have the product approved for use within hospitals and ASEs and therefore drives much quicker adoption rates for the SUVIA one compared to hospitals. As an example, on average, our time from approval to first order in the procedural suites is only 15 days.

We believe this increase in approvals as a leading indicator that will begin driving an increase in commercial product sales growth rates.

Importantly, we've learned these specialties follow a single decision maker model.

Meaning the plastic with cosmetic surgeon alone usually makes a decision approved products for use in the procedural suite.

This model avoids the multiple layers of committee approvals required to have the product approved for use within the hospitals Nancy's and therefore drives much quicker adoption rates for the studio when compared to hospitals.

As an example on average our time from approval to first order and the procedural suites is only 15 days a stark contrast in the ASC and hospitals to take months and in some cases over a year.

Vincent J. Angotti: A stark contrast from the ASCs and hospitals that take months and, in some cases, over a year. Importantly, customers in the plastic surgery and cosmetic procedure specialties have quickly become a large portion of our top distributed users, demonstrating the depth of its potential. We believe the success we've seen in these specialties can be replicated in additional single-decision-maker procedural suites, such as E&T, Thurm, and others. As a result, we have recently shifted our commercial and medical education resources to focus more heavily on single decision-maker customers to ensure continued growth. As part of the refocused resources on this segment, we're

Importantly customers in the plastic surgery and cosmetic procedure specialties has quickly become a large portion of our top distributor users demonstrating the depth of its potential.

We believe the success we've seen in the specialties can be replicated in additional single decision maker procedural suites, such as E&P therm and others.

As a result, we have recently shifted our commercial and medical education resources to focus more heavily on a single decision maker customers to ensure continued growth.

As part of the refocused resources on this segment.