AcelRx Pharmaceuticals(ACRX) - 2019 Q2 - Quarterly Report

Forward-Looking Statements This section identifies forward-looking statements in the Form 10-Q, cautioning readers about inherent risks and uncertainties that may cause actual results to differ - Forward-looking statements are identified by words like "may," "will," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing" [6] - Key factors affecting objectives include commercialization success of DSUVIA, regulatory approval and compliance (REMS), market acceptance, sales and marketing capabilities, manufacturing, competition, regulatory approval for DZUVEO/Zalviso, and intellectual property [6][7] - Readers are cautioned not to regard these statements as a representation or warranty, as they are estimates and assumptions as of the filing date, and the company does not undertake to publicly update them except as required by law [8] PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents AcelRx Pharmaceuticals' unaudited condensed consolidated financial statements and accompanying notes Condensed Consolidated Balance Sheets | Metric | June 30, 2019 (Unaudited) | December 31, 2018 | | :----------------------------------- | :------------------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $65,071 | $87,975 | | Short-term investments | $26,475 | $17,740 | | Total current assets | $96,818 | $107,994 | | Total Assets | $115,112 | $120,533 | | Liabilities and Stockholders' (Deficit) Equity | | | | Total current liabilities | $8,285 | $15,928 | | Total liabilities | $133,531 | $116,280 | | Total stockholders' (deficit) equity | $(18,419) | $4,253 | | Total Liabilities and Stockholders' (Deficit) Equity | $115,112 | $120,533 | - Total current assets decreased from $107,994 thousand at December 31, 2018, to $96,818 thousand at June 30, 2019 [10] - Stockholders' equity shifted from a positive $4,253 thousand at December 31, 2018, to a deficit of $(18,419) thousand at June 30, 2019 [12] Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $941 | $818 | $1,206 | $1,161 | | Total operating costs and expenses | $14,302 | $7,971 | $26,885 | $16,583 | | Loss from operations | $(13,361) | $(7,153) | $(25,679) | $(15,422) | | Total other income (expense) | $952 | $(3,386) | $(404) | $(6,709) | | Net loss | $(12,412) | $(10,541) | $(26,086) | $(22,133) | | Net loss per share, basic and diluted | $(0.16) | $(0.20) | $(0.33) | $(0.43) | | Shares used in computing net loss per share, basic and diluted | 78,902,470 | 51,841,550 | 78,845,944 | 51,388,762 | - Net product sales for DSUVIA began in Q1 2019, generating $55 thousand for the three months and $102 thousand for the six months ended June 30, 2019 [15] - Selling, general and administrative expenses significantly increased by 187% for the three months and 169% for the six months ended June 30, 2019, compared to the prior year, primarily due to DSUVIA commercialization efforts [15][160] - Non-cash interest income on liability related to future royalties was $996 thousand for the three months ended June 30, 2019, a significant change from an expense of $(2,995) thousand in the prior year, due to a material revision in estimates of future payments to PDL [15][163][164] Condensed Consolidated Statements of Stockholders' (Deficit) Equity | Metric | Balance as of Dec 31, 2018 | Balance as of June 30, 2019 | Balance as of Dec 31, 2017 | Balance as of June 30, 2018 | | :----------------------------------- | :------------------------- | :-------------------------- | :------------------------- | :------------------------- | | Common Shares | 78,757,930 | 78,914,170 | 50,899,154 | 53,327,187 | | Common Stock Amount | $78 | $79 | $51 | $53 | | Additional Paid-in Capital | $349,194 | $352,454 | $261,310 | $270,984 | | Accumulated Deficit | $(345,019) | $(370,952) | $(297,870) | $(320,003) | | Total Stockholders' Equity (Deficit) | $4,253 | $(18,419) | $(36,509) | $(48,966) | - The adoption of ASU No. 2016-02 resulted in a cumulative effect adjustment of $153 thousand to the accumulated deficit as of January 1, 2019 [16][65] - Net loss for the six months ended June 30, 2019, was $(26,086) thousand, contributing to an accumulated deficit of $(370,952) thousand [15][16] Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(25,559) | $(13,784) | | Net cash used in investing activities | $(10,246) | $(9,631) | | Net cash provided by financing activities | $12,901 | $3,786 | | Net decrease in cash and cash equivalents | $(22,904) | $(19,629) | | Cash and cash equivalents—End of period | $65,071 | $33,273 | - Cash used in operating activities increased to $(25,559) thousand for the six months ended June 30, 2019, from $(13,784) thousand in the prior year, reflecting increased operating losses and inventory build-up [17][173][174] - Cash provided by financing activities was $12,901 thousand, primarily from $24.8 million in net proceeds from the Oxford Loan Agreement, offset by debt repayments [17][178] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering the company's organization, significant accounting policies, and specific financial line items 1. Organization and Summary of Significant Accounting Policies - AcelRx is a specialty pharmaceutical company focused on developing and commercializing innovative therapies for acute pain in medically supervised settings, specifically DSUVIA/DZUVEO and Zalviso, both utilizing sublingual sufentanil [20] - DSUVIA was FDA-approved in November 2018 for acute pain in certified medically supervised healthcare settings and commercially launched in Q1 2019, with distribution restricted by a REMS program [20][21][22] - Zalviso is approved in Europe and commercialized by Grünenthal GmbH; the company is evaluating the timing for resubmission of its NDA for U.S. regulatory approval [20][23] - The company adopted ASU No. 2016-02 (Leases) effective January 1, 2019, resulting in the recognition of operating lease right-of-use assets and liabilities on the balance sheet [34][64][65] 2. Investments and Fair Value Measurement | Metric | June 30, 2019 Fair Value | December 31, 2018 Fair Value | | :----------------------------------- | :----------------------- | :--------------------------- | | Cash and cash equivalents | $65,071 | $87,975 | | Short-term investments | $26,475 | $17,740 | | Total cash, cash equivalents and investments | $91,546 | $105,715 | - As of June 30, 2019, the company held $88,528 thousand in assets measured at fair value, primarily commercial paper ($88,242 thousand, Level II) and money market funds ($286 thousand, Level I) [75] - A Level III contingent put option liability, associated with the Loan Agreement, was valued at $657 thousand as of June 30, 2019, increasing from $121 thousand at December 31, 2018 [75][76] 3. Inventories | Metric | June 30, 2019 | December 31, 2018 | | :---------------- | :------------ | :---------------- | | Raw materials | $1,422 | $694 | | Work-in-process | $273 | $160 | | Finished goods | $1,149 | $0 | | Total | $2,844 | $854 | - Total inventories increased from $854 thousand at December 31, 2018, to $2,844 thousand at June 30, 2019, with finished goods appearing for the first time in 2019 [79] - All Zalviso inventories are carried at net realizable value because contractual transfer prices from Grünenthal are less than direct manufacturing costs [33] 4. Revenue | Revenue Source | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | | :----------------------------------- | :------------------------------- | :----------------------------- | | Performance obligations satisfied – Amended Agreements | $728 | $835 | | Royalty revenue | $158 | $269 | | Net product sales | $55 | $102 | | Total revenue | $941 | $1,206 | - As of June 30, 2019, approximately $3.3 million of deferred revenue is attributable to a discount on future manufacturing services under the Amended Agreements, expected to be recognized through 2029 [80] - The DoD Contract period of performance ended on February 28, 2019, resulting in no contract and other revenue for the three and six months ended June 30, 2019, compared to $467 thousand and $536 thousand in the prior year periods, respectively [15][148] 5. Collaboration Agreement - Under the Amended License Agreement, AcelRx is eligible to receive approximately $194.5 million in additional milestone payments ($28.5 million for regulatory/development, $166.0 million for net sales targets) [85] - Grünenthal will pay tiered royalties and supply/trademark fees in the mid-teens to mid-twenties percent range on net sales of Zalviso, with a portion of royalties paid to PDL due to the Royalty Monetization [85] - Revenue recognized under the Amended Agreements increased to $0.9 million and $1.1 million for the three and six months ended June 30, 2019, respectively, from $0.3 million and $0.6 million in the prior year periods, primarily due to increased orders from Grünenthal [88][146] 6. Long-Term Debt - On May 30, 2019, the company repaid its $8.9 million outstanding obligations under the Prior Agreement with Hercules, incurring a $0.2 million loss on debt extinguishment [89][161] - A new Loan Agreement with Oxford Finance LLC provided $25.0 million in principal, with net proceeds of $15.9 million after repayment of the Prior Agreement and loan initiation costs [91][161] - The Loan Agreement has an interest rate based on LIBOR plus 6.75%, with interest-only payments until July 1, 2020 (extendable to July 1, 2021), and is secured by all company assets except intellectual property [93][95] - A contingent put option liability related to the Oxford Loan Agreement was valued at $0.7 million as of May 30 and June 30, 2019, and is revalued each period with changes recognized in other income (expense) [96] 7. Leases - The company adopted ASU No. 2016-02 (Leases) on January 1, 2019, recognizing operating lease right-of-use assets of $4,730 thousand and corresponding liabilities [64][65] - Net lease costs for the three and six months ended June 30, 2019, were $190 thousand and $384 thousand, respectively, after accounting for sublease income [102] | Year | Total Future Minimum Lease Payments | | :----------------------------------- | :---------------------------------- | | 2019 (remaining six months) | $670 | | 2020 | $1,468 | | 2021 | $1,505 | | 2022 | $1,345 | | 2023 | $1,386 | | Thereafter | $116 | | Total future minimum lease payments | $6,490 | 8. Liability Related to Sale of Future Royalties - In September 2015, AcelRx sold 75% of European Zalviso royalties and 80% of the first four commercial milestones (up to $195.0 million cap) to PDL for $65.0 million [110] - A material revision to estimates of future payments to PDL during Q2 2019 resulted in a prospective average interest income rate of approximately 4.2% on the liability, down from an effective interest expense rate of 13.0% from inception through December 31, 2018 [111][112] - The company now estimates future payments to PDL will be approximately $36 million, potentially leading to a contingent gain of approximately $29 million upon expiration of the liability [111] 9. Warrants - On May 30, 2019, AcelRx issued warrants to Oxford Finance LLC, exercisable for 176,679 shares of common stock at $2.83 per share, expiring in May 2029 [116][118] - The fair value of these warrants was estimated at $0.4 million at issuance, calculated using the Black-Scholes option-valuation model, and recorded as a discount to the loan within stockholders' deficit [117] 10. Stock-Based Compensation | Functional Area | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $68 | $74 | $129 | $161 | | Research and development | $233 | $377 | $457 | $809 | | Selling, general and administrative | $1,045 | $597 | $1,867 | $1,158 | | Total | $1,346 | $1,048 | $2,453 | $2,128 | - Total stock-based compensation expense increased to $1,346 thousand for the three months and $2,453 thousand for the six months ended June 30, 2019, compared to the prior year periods [119] - As of June 30, 2019, there were 1,895,351 shares available for grant under the 2011 Equity Incentive Plan and 773,754 shares available under the ESPP [119] 11. Stockholders' Equity - On May 9, 2019, the company increased the aggregate offering price of common stock available for sale under its ATM Agreement by $40.0 million, bringing the total remaining to $46,564,331 as of June 30, 2019 [120] - No sales of common stock occurred under the ATM Agreement during the three and six months ended June 30, 2019 [120] 12. Net Loss per Share of Common Stock | Metric | June 30, 2019 | June 30, 2018 | | :----------------------------------- | :------------ | :------------ | | RSUs, ESPP and stock options to purchase common stock | 14,090,688 | 11,779,042 | | Common stock warrants | 176,679 | 176,730 | - Common stock equivalents, including RSUs, ESPP, stock options, and warrants (totaling 14,090,688 for June 30, 2019), were excluded from diluted net loss per share calculations because their effect would have been antidilutive [121][122] - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information and SEC rules [29] - Operating results for the three and six months ended June 30, 2019, are not necessarily indicative of the full year's results [30] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, results of operations, and liquidity, including key performance factors About AcelRx Pharmaceuticals, Inc. - DSUVIA was FDA-approved in November 2018 for acute pain in certified medically supervised healthcare settings and launched commercially in Q1 2019, with distribution restricted by a REMS program [125][126] - DSUVIA is designed to provide rapid, non-invasive analgesia, avoiding IV administration errors, and is suitable for emergency rooms, surgical centers, and battlefield casualties [125][127] - Zalviso is approved and marketed in Europe by Grünenthal for moderate-to-severe acute pain in hospitalized adults, delivered via a patient-controlled sublingual system; its NDA resubmission for the U.S. is currently being evaluated [128][129][131][133] Financial Overview - The company has incurred net losses and negative cash flows from operations since inception and expects to continue incurring losses until DSUVIA gains market acceptance and generates significant revenues [134] - Net loss for the six months ended June 30, 2019, was $26.1 million, increasing from $22.1 million in the prior year, resulting in an accumulated deficit of $371.0 million [139] - Cash, cash equivalents, and short-term investments totaled $91.5 million as of June 30, 2019, down from $105.7 million at December 31, 2018 [139] - The company expects a significant decrease in DSUVIA cost of goods sold from 2020 due to the installation of a high-volume automated packaging line [135] Critical Accounting Policies and Significant Judgments and Estimates - The company's financial statements require management to make estimates and assumptions, which are evaluated on an ongoing basis [140] - Significant changes include the adoption of ASU No. 2016-02 (Leases) and updates to the "Non-Cash Interest Income (Expense) on Liability Related to Sale of Future Royalties" policy [141] Results of Operations This section analyzes revenues, cost of goods sold, and operating expenses, highlighting DSUVIA's commercial launch impact Revenue | Revenue Source | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net product sales | $55 | $0 | $102 | $0 | | Collaboration agreement | $886 | $351 | $1,104 | $625 | | Contract and other | $0 | $467 | $0 | $536 | | Total revenue | $941 | $818 | $1,206 | $1,161 | - Net product sales of DSUVIA commenced in Q1 2019, generating $55 thousand and $102 thousand for the three and six months ended June 30, 2019, respectively [145] - Collaboration agreement revenue increased due to higher orders from Grünenthal, but its impact on cash flows is minimal due to the 2015 Royalty Monetization with PDL [146] - Contract and other revenue from the DoD ceased in 2019 as the contract period ended on February 28, 2019 [148] Cost of goods sold | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $1,810 | $749 | $3,040 | $1,863 | - Cost of goods sold increased by 142% for the three months and 63% for the six months ended June 30, 2019, compared to the prior year, driven by DSUVIA commercial sales and higher indirect costs [151] - The company anticipates negative gross margins on Zalviso product delivered to Grünenthal due to predetermined transfer prices being less than direct manufacturing costs and high indirect costs at low volumes [149][153] Research and Development Expenses | Drug Indication/Description | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | DSUVIA | $130 | $869 | $276 | $1,485 | | Zalviso | $158 | $105 | $339 | $502 | | Overhead | $875 | $2,304 | $1,925 | $4,804 | | Total R&D expenses | $1,163 | $3,278 | $2,540 | $6,791 | - Total R&D expenses decreased by 65% for the three months and 63% for the six months ended June 30, 2019, compared to the prior year, mainly due to reduced overhead and near completion of DSUVIA/Zalviso development programs [157] Selling, General and Administrative Expenses | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling, general and administrative expenses | $11,329 | $3,944 | $21,305 | $7,929 | - SG&A expenses increased by $7.4 million (187%) for the three months and $13.4 million (169%) for the six months ended June 30, 2019, primarily due to increased personnel (54 new employees) and programs for DSUVIA commercialization [160] Other Income (Expense) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest expense | $(500) | $(586) | $(876) | $(1,229) | | Interest income and other income (expense), net | $456 | $195 | $1,083 | $331 | | Non-cash interest income (expense) on liability related to sale of future royalties | $996 | $(2,995) | $(611) | $(5,811) | | Total other income (expense) | $952 | $(3,386) | $(404) | $(6,709) | - Non-cash interest income on the royalty monetization liability increased by $3,991 thousand for the three months and $5,200 thousand for the six months ended June 30, 2019, due to a material revision in estimates of future payments to PDL [161][163][164] - Interest expense decreased due to principal payments on the Prior Agreement, while interest income increased due to a larger average investment balance [161][162] Liquidity and Capital Resources AcelRx faces ongoing losses and negative cash flows, requiring additional capital for DSUVIA and Zalviso commercialization Liquidity - As of June 30, 2019, cash, cash equivalents, and investments totaled $91.5 million, a decrease from $105.7 million at December 31, 2018, primarily due to funding operations [167] - The company anticipates existing capital resources will meet operational requirements through at least the end of Q3 2020, but additional capital will be needed for full commercialization of DSUVIA and Zalviso [167][306] - The company has $46.6 million of common stock remaining to be sold under its ATM Agreement as of June 30, 2019 [168] Cash Flows | Metric | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(25,559) | $(13,784) | | Net cash used in investing activities | $(10,246) | $(9,631) | | Net cash provided by financing activities | $12,901 | $3,786 | - Cash used in operating activities increased to $25.6 million for the six months ended June 30, 2019, reflecting a $26.1 million net loss and a $2.0 million increase in inventories [173] - Cash provided by financing activities was $12.9 million, primarily from $24.8 million in net proceeds from the Oxford Loan Agreement, offset by debt repayments [178] Operating Capital and Capital Expenditure Requirements - Future capital requirements are highly variable, depending on DSUVIA/Zalviso commercialization expenditures, manufacturing costs, regulatory outcomes, and potential litigation [180][181] - If adequate funds are not available, the company may need to reduce its workforce, scale back commercialization efforts, or seek less favorable partnerships [308][309] Off-Balance Sheet Arrangements - The company has no off-balance sheet arrangements or holdings in variable interest entities as of June 30, 2019 [183] Item 3. Quantitative and Qualitative Disclosures About Market Risk There were no material changes to the company's market risk disclosures during the six months ended June 30, 2019, from those previously reported in its Annual Report on Form 10-K - No material changes to market risk disclosures were reported for the six months ended June 30, 2019 [184] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2019, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of June 30, 2019 [186] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter [187] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings but acknowledges that future involvement could materially adversely affect its business, financial condition, results of operations, or cash flows - The company is not currently involved in any material legal proceedings [188] - Future material legal proceedings could have a material adverse effect on the business [188] Item 1A. Risk Factors This section details various risks and uncertainties that could materially harm the company's business, financial condition, and stock price Risks Related to Commercialization of DSUVIA and Zalviso - Commercial success of DSUVIA is highly dependent on market acceptance by physicians, patients, and the healthcare community, effective sales and marketing, manufacturing, and compliance with the REMS program [191][193] - Competition from existing and future pain medications, including IV-opioids and NSAIDs, poses a significant risk to DSUVIA and Zalviso's commercial potential [217][218] - Failure to obtain timely formulary approvals from hospitals and other healthcare facilities, or adequate government/third-party payer reimbursement, could materially adversely affect profitability [219][221] - Increased scrutiny and investigations into opioid commercial practices by government agencies and private parties could lead to significant legal costs, fines, and reputational harm [208][209] Risks Related to Clinical Development and Regulatory Approval - Existing and future legislation, including changes related to opioid regulation (e.g., FDA's new benefit/risk framework), may increase the difficulty and cost of commercializing products and affect pricing [231][242] - Delays or failure to receive FDA approval for Zalviso in the U.S. could prevent revenue generation, as regulatory agencies may disagree with trial designs, interpretations of data, or require additional studies [247][260] - DSUVIA and Zalviso are drug/device combination products, which introduces regulatory uncertainties and potential delays in the approval process [271] - Both DSUVIA and, if approved, Zalviso require REMS programs, which impose distribution restrictions and increase commercialization costs [286] Risks Related to Our Financial Condition and Need for Additional Capital - The company has incurred significant net losses since inception, with an accumulated deficit of $371.0 million as of June 30, 2019, and expects to continue incurring losses [287] - The company will require additional capital for full commercialization of DSUVIA and Zalviso, and existing capital resources are unlikely to be sufficient for long-term operations [306] - The terms of the loan agreement with Oxford impose restrictive covenants, including limitations on dividends and maintaining minimum cash, and a breach could lead to acceleration of debt [311][312] - The company is substantially dependent on Grünenthal for Zalviso's European commercialization and has monetized a majority of its royalties, limiting direct revenue impact [293][296] Risks Related to Our Reliance on Third Parties - Reliance on third-party manufacturers for DSUVIA and Zalviso entails risks including inability to meet specifications, manufacturing capacity issues, compliance with cGMP, and supply chain disruptions [319] - The company relies on limited, and in some cases single, sources for API and specialized manufacturing equipment, making it vulnerable to supply interruptions or process changes [322][325] - Delays or failures by CROs in conducting clinical trials could extend timelines, increase costs, and jeopardize regulatory approval [335][337] Risks Related to Our Business Operations and Industry - Sufentanil-based products are Schedule II controlled substances, subject to extensive DEA regulation and quota systems, which could delay or stop commercial sales if quotas are not met [339][340] - Relationships with healthcare professionals and partners are subject to anti-kickback, fraud and abuse, and other healthcare laws, with potential for substantial fines and penalties for non-compliance [341][345] - Significant disruptions of IT systems or data security incidents could result in financial, legal, regulatory, business, and reputational harm [354][356] - The company's success depends on retaining key executives and attracting qualified personnel, facing intense competition in the industry [359] Risks Related to Our Intellectual Property - The company owns 73 issued patents worldwide covering its sufentanil sublingual tablet and delivery devices, expected to provide coverage until at least 2027-2031 [366] - Commercial success depends on defending current patents against third-party challenges and expanding the patent portfolio, but patent positions are highly uncertain and involve complex legal questions [368][370] - Patent infringement litigation is expensive and time-consuming, potentially delaying market entry and requiring significant resources for defense or licensing [372][376] - Trade secrets are difficult to protect, and failure to adequately prevent disclosure could enable competitors to use proprietary information [385] Risks Related to Ownership of Our Common Stock - The market price of common stock is highly volatile, influenced by factors such as commercialization success of DSUVIA, funding availability, regulatory developments for Zalviso, and general industry perception of opioid manufacturers [391][392] - Future sales of additional equity securities, including under the ATM Agreement, could result in dilution for existing stockholders and cause the stock price to fall [398][399][310] - The company does not intend to pay cash dividends in the foreseeable future, and is prohibited from doing so under the terms of the Loan Agreement [404][405] - The risk factors include substantive changes or additions from the prior Annual Report on Form 10-K [190] - The company's operations and financial results are subject to various risks and uncertainties that could materially harm the business and stock price [189] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item incorporates by reference information regarding warrants from a Current Report on Form 8-K filed on June 3, 2019 - Information regarding warrants is incorporated by reference from a Form 8-K filed on June 3, 2019 [411] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - No defaults upon senior securities were reported [411] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable [411] Item 5. Other Information No other information is reported under this item - No other information is reported [411] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and certifications - Exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Stock of the Registrant, Non-Employee Director Compensation Policy, and various certifications (CEO, CFO) [412][414] - XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are included [414] SIGNATURES The report is duly signed on behalf of AcelRx Pharmaceuticals, Inc. by Raffi M. Asadorian, Chief Financial Officer, on August 5, 2019 - The report was signed by Raffi M. Asadorian, Chief Financial Officer, on August 5, 2019 [416]