AcelRx Pharmaceuticals, Inc. (NASDAQ:ACRX) Q1 2023 Earnings Conference Call May 10, 2023 4:30 PM ET Company Participants Raffi Asadorian – Chief Financial Officer Vincent Angotti – Chief Executive Officer Pam Palmer – Co-Founder and Chief Medical Officer Conference Call Participants Brandon Folkes – Cantor Fitzgerald Thomas Yip – H.C. Wainwright James Molloy – Alliance Global Partners Operator Hello, welcome to the AcelRx First Quarter 2023 Financial Results Conference Call. This call is being webcast live ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-35068 ACELRX PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 41-2193603 (State or other jurisdictio ...

Financial Data and Key Metrics Changes - AcelRx reported full year 2022 DSUVIA sales of $1.8 million, a 76% increase over 2021 despite reduced commercial investment [14] - The company ended 2022 with $20.8 million in cash and investments, and a debt balance of $5.4 million [15] - Combined R&D and SG&A expenses for Q4 2022 totaled $7.3 million, up from $6.9 million in Q4 2021 [15] Business Line Data and Key Metrics Changes - The divestment of DSUVIA to Alora Pharmaceuticals is expected to enhance sales through a 15% royalty on net commercial sales and $116.5 million in sales-based milestones [3] - The focus has shifted to the lead program, Niyad, which has FDA breakthrough designation and is being developed as an anticoagulant for extracorporeal circuits [6][9] Market Data and Key Metrics Changes - Market research indicates that 60% of CRRT patients currently receive no anticoagulant or use citrate, highlighting a significant opportunity for Niyad [8][29] - Niyad is estimated to have a peak sales potential of $200 million, specifically in the inpatient and outpatient dialysis markets [9][12] Company Strategy and Development Direction - AcelRx aims to leverage its expertise in drug development to focus on high-value assets, particularly the Niyad program and prefilled syringes [13] - The company plans to submit an EUA for Niyad in Q2 2023 and initiate a registrational trial in the second half of 2023 [10][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term value creation from the DSUVIA transaction and the potential for increased sales under Alora's management [14] - The company is focused on efficient cash management while advancing its late-stage pipeline, including Niyad and Fed Sera [13][16] Other Important Information - AcelRx has completed the production of the initial development batch of Niyad and is preparing for stability product testing [9] - The company has received an ICD-10 CMS procedural code for reimbursement related to Niyad [9] Q&A Session Summary Question: Can you discuss who drives military procurement for DSUVIA and current DoD orders? - The military procurement process is decentralized across different branches, with relationships fostered over time to ensure supply during potential escalations [20][21] Question: What are the steps remaining for submitting the EUA for Niyad? - The company is confident in the EUA submission process, with most of the package ready and focusing on CMC [23][24] Question: What are the expectations for commercial traction under the EUA for Niyad? - The target market for Niyad includes patients receiving no anticoagulant and those using citrate, representing a significant opportunity [28][29] Question: When is the registrational trial for Niyad expected to commence? - The registrational trial is expected to start in the second half of 2023, with endpoints already agreed upon with the FDA [49][48]

Acquisition and Divestment - The company acquired Lowell Therapeutics, Inc. for approximately $32.5 million, with up to $26.0 million in contingent consideration based on regulatory and sales milestones[17]. - The company has divested its sufentanil sublingual products (DSUVIA and DZUVEO) to Alora Pharmaceuticals, expecting to close the deal in April 2023[15]. - The company plans to divest DSUVIA to Alora in April 2023, which will continue to commercialize the product and pay sales-based milestone payments[40]. - Alora will assume all manufacturing and supply chain activities for DSUVIA upon closing the divestment[54]. Product Development and Regulatory Approvals - Niyad™ has received Breakthrough Device Designation from the FDA and is being developed as a regional anticoagulant for injection into the extracorporeal circuit, with an EUA submission planned for Q2 2023[18][19]. - The FDA has provided guidance for a single registrational study for Niyad, which will involve 160 adult patients across 10 clinical sites[19]. - The PMA application process for Class III devices typically takes between one and three years, but can be significantly longer due to additional information requests or clinical trials[75]. - The FDA's review of a PMA application generally takes 180 days, but often extends beyond this period due to the complexity of the application[74]. - Niyad, a Class III medical device, is under FDA's Breakthrough Device Designation, which aims to expedite the review process for devices that offer significant advantages over existing treatments[71][78]. Financial Performance and Capital Needs - The company has incurred significant losses since inception and anticipates continued losses, requiring additional capital to fund operations[8]. - The company has not yet generated significant product revenue and may never achieve profitability[8]. - The market price of the company's common stock has historically been volatile, and significant sales of shares could impact stock price negatively[9]. - The company anticipates continued pressure from third-party payers to offer larger discounts or rebates to maintain acceptable reimbursement levels for its products[94]. Market Opportunities and Sales Potential - The peak sales potential for Niyad, an anticoagulant product, is estimated to exceed $200 million annually in the U.S. for CRRT and IHD applications[34]. - The peak sales potential for nafamostat in treating ARDS and DIC could range from nearly $700 million to up to $1.4 billion, depending on clinical study outcomes[35]. - The market opportunity for the pre-filled syringe products is estimated to exceed $100 million if approved, addressing the need for ready-to-use formulations in hospitals[36]. - DSUVIA, a sufentanil product, is approved for acute pain management in medically supervised settings, with a target patient population of over 90 million in the U.S.[37]. Compliance and Regulatory Risks - Manufacturers must comply with cGMP requirements throughout the manufacturing process, which includes extensive documentation and validation systems to ensure product safety and efficacy[69]. - The FDA can withdraw product approval if compliance with regulatory standards is not maintained, which may result in administrative actions such as fines or product recalls[70]. - Compliance with federal and state healthcare laws, including the Anti-Kickback Statute, is critical for pharmaceutical and medical device manufacturers to avoid legal repercussions[85][86]. - The company may be subject to civil penalties if found in violation of health regulatory laws, which could adversely affect operations and financial results[92]. Employee and Organizational Structure - As of December 31, 2022, the company employed 19 full-time employees, with approximately 80% working from the corporate office in Hayward, CA[105]. - The company conducts annual pay equity analyses and offers competitive salaries, stock options, and comprehensive benefits to its employees[105]. - The company has no employees under collective bargaining agreements and maintains a good relationship with its workforce[106]. Healthcare Policy and Market Environment - Legislative and regulatory changes in the healthcare system may impact the company's ability to commercialize products profitably, including potential controls on government-funded reimbursement for drugs[95]. - The Affordable Care Act and subsequent reforms, such as the Inflation Reduction Act of 2022, may lead to lower negotiated prices for the company's products compared to non-governmental payers[100]. - The Biden administration's executive order in July 2021 aims to promote competition in the American economy, specifically targeting prescription drug pricing[103]. - Future healthcare reform proposals may impose direct governmental price controls, potentially adversely impacting the company's business[104].