Talphera Q2 2023 Earnings Call Transcript

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August 10, 2023

There are 7 speakers on the call.

Operator

Welcome to the ExelRx Second Quarter 2023 Financial Results Conference Call. This call is being webcast live via the Events page of the Investors section of AcelRx's website at www.accelerx.com. This call is the property of XcelRx and any recording, reproduction or transmission of this call without the expressed Written consent of XcelRS is strictly prohibited. As a reminder, today's webcast presentation is being recorded. You may listen to a replay of this webcast by going to the Investors section of AcelRx's website.

Operator

I would now like to turn the call over to Raffi as Fedorian, AcelRx's Chief Financial Officer. Please go ahead.

Speaker 1

Thank you for joining us on the call today. This afternoon. We announced our Q2 2023 financial results and associated business updates in a press release. This press release can be found within the Investors section of our website. With me today are Vince Angotti, our Chief Executive Officer and Doctor.

Speaker 1

Pam Palmer, AcelRx's Founder and Chief Medical Officer. Before we begin, I want to remind investors listeners that during this call, we will likely 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 AcelRx. 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. These documents can also be found on our website at www.acelerex.com.

Speaker 1

I will now hand the call over to Vince.

Speaker 2

Thank you, Raffi, and good afternoon, everyone. We're excited to provide an update to you today on the progress related to our transformation, including the divestment of DSUVIA and the advancement of our late stage pipeline assets with near term commercial potential. Specifically, our product candidates NIAID, on AcelRx's lead nifamistat program and our prefilled syringes. In addition to the portfolio evolution, Recently, we were able to close a capital raise led by new investors of up to $26,300,000 with $10,000,000 immediately available to us. This allows us to continue the momentum with our pivotal near term milestones.

Speaker 2

Our lead product candidate, NIAID, has received FDA device breakthrough designation and is being developed for use in the U. S. As a novel on anticoagulant for dialysis circuits. If approved, NIOD would be the only regional anticoagulant approved for this indication in the U. S.

Speaker 2

As a reminder, if anticoagulants are not used in the dialysis circuit, Patients can experience a low quality dialysis due to a clotted filter. And importantly, when the clotted filter is changed, Loss of red blood cells and platelets removed with the filter can often result in the patient requiring a transfusion. The international guidelines for continuous renal replacement therapy or CRRT and recommend the use of an anticoagulant infused into the dialysis circuit. But despite this, U. S.

Speaker 2

Physicians do not always use anticoagulants in patients undergoing CORT because of the limitations of the currently available agents. Incredibly, our recent U. S. Quantitative market research indicates 29% of patients undergoing CRRT Get no anticoagulation in their dialysis circuit, which puts them in a situation of receiving treatment that is below

Speaker 3

on the

Speaker 4

standard of care.

Speaker 2

Our interactions with leaders in the field of nephrology and critical care medicine have reinforced the urgent medical need for an alternative anticoagulant for use during CRRT. And this combined with our recently conducted U. S. Market research reaffirms the potential for NIAID. Now in April, we submitted a request for an emergency use authorization or EUA to the FDA for NIAID.

Speaker 2

Our submission amends a prior EUA submission to the FDA, which received an encouraging response, but the agency requested certain manufacturing related CMC information. We address these requests in the primary amendments to our submission and we now await FDA response. In terms of market opportunity, we estimate NIAID to have a peak annual sales potential of $200,000,000 in the U. S. And this is attributed to just the inpatient and outpatient dialysis markets, excluding any other use in other extracorporeal circuits.

Speaker 2

Note that our estimate and peak sales potential comes from a modest penetration into these markets, specifically attaining only about a 20% share of the current in hospital CRRT market and 6% of the dialysis market outside of the hospital. We're proceeding with early commercial planning after already receiving an ICD-ten CM centimeters centimeters centimeters

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centimeters centimeters centimeters S procedural code to facilitate reimbursement. Finally, with our contract manufacturers, we have continued to advance the production of NIAID. And based on accelerated stability data of 6 months, We expect product to be stable for 2 years at room temperature. At this point, I'd like to turn it over to Doctor. Palmer to discuss the upcoming NIAID clinical trial in more detail.

Speaker 2

Pam?

Speaker 5

Thank you, Vince. Good afternoon, everyone. First, before I discuss the study in detail, I would like to say that we have recently submitted for publication on the quantitative market research study that was performed at the end of last year and 8 of the country's top CRRT experts and have co authored this study report with us. They were helpful in interpreting the study results and continue to emphasize to us how important NIAID could be to address the problems of the currently used agents. In fact, The clinical benefits of nifamistat have recently been published in a meta analysis of almost 3,000 patients.

Speaker 5

The study shows that compared to nifamistat anticoagulation during CRRT, conventional anticoagulants increased mortality by 25% and using no anticoagulant increased mortality by 31%. Conventional anticoagulants also increased the rate of bleeding by 45% compared to nifamistat. Filter life was decreased by 10.5 hours when no anticoagulant was used compared to nifamistat. Therefore, lower mortality, less bleeding and longer filter life or associated with nifamistat use, making this anticoagulant a potentially exciting new option for CRRT. Finally, turning to the NIAID trial, the study's patient population, key endpoints and inclusion exclusion criteria have previously been reviewed by the FDA since NIAID has breakthrough device designation.

Speaker 5

This prospective double blinded trial will be conducted in up to 10 U. S. Hospital intensive care units and will enroll approximately 160 patients equally divided between NIAID and placebo groups. NIAID is being regulated by the FDA as a device given that the mechanism of action of NIAID is on the dialysis circuit and not in the patient. Device studies typically require much lower patient exposures than drug studies do, which is an advantage for us to quickly and inexpensively move NIAID towards approval.

Speaker 5

Patients who require CRRT for acute kidney failure and who cannot tolerate heparin or at a higher risk of bleeding are eligible for enrollment in the study. Our quantitative market research shows us that in the U. S, Heparin is used in approximately 40% of patients on CRRT and therefore approximately 60% of patients on CRRT would be able to qualify for the study. The risk with heparin is that although it is injected into the dialysis machine, in the same quarter. It has a much longer half life than nifamistat, up to 2 hours or longer, whereas nifamistat has a half life of 8 in minutes.

Speaker 5

The heparin therefore circulates back into the patient and can risk bleeding side effects, which can be catastrophic. Heparin also has the risk of inducing a sudden decrease in the patient's platelet count, which is termed heparin induced on thrombocytopenia or HIT. Furthermore, many patients who are in the ICU have low levels of anti thrombin 3, which is required for heparin to have its anticoagulation effect on blood. The blood of these patients would therefore continue to clot in the circuit, even though heparin is being infused. Patients in the study must complete at least 3 days on CRRT and up to a total of 7 days if needed.

Speaker 5

The primary endpoint for this study is the activated clotting time or ACT over the first 24 hours of dialysis. Anticoagulants increase the time for the patient's blood to clot and ACT is a rapid bedside test that shows this clotting time. Patients can only enter a study if they have an ACT that is below a specific threshold prior to study drug dosing. The infusion rate of nifamistat or saline is to be titrated up until the patient's ACT is prolonged to approximately 200 seconds. If the ACT does not increase, then the maximal study drug infusion will be infused for the remainder of the study.

Speaker 5

This likely will occur in the placebo group as these patients' ACT would not be expected to increase as they will not be receiving an anticoagulant. With that said, comparing the elevated ACT resulting from NIAID to the ACT in the placebo saline group over the 1st day of CRRT should be a straightforward primary endpoint to achieve. Secondary endpoints include duration of filter life before clotting occurs and the number of transfusions required. We are diligently working with our contract research organization and are excited to have the 1st patient enrolled towards the latter part of this year. Feedback that we have heard from the prospective clinical sites is that enrollment should be robust such that the study would complete mid next year.

Speaker 5

I will now turn the call back over to Vince.

Speaker 2

Thank you, Pam. We're very confident in the success of this study as it is evaluating the activated clotting time of a powerful anticoagulant versus saline. In addition, nifamistat has decades of successful use in tens of thousands of patients outside of the U. S. With a favorable safety profile.

Speaker 2

Based on study timing, we plan to prepare a PMA submission to the FDA next year for the potential launch in 2025. Now let's move to our prefilled syringe candidates. The need for prefilled syringes is clear since their availability offers a significant improvement and advantage for the overall healthcare system, including less waste, improved safety and the convenience of not having to dilute and prepare the syringe in advance of procedures. Our highest priorities remain readiness for a potential EUA and completing the clinical study as efficiently as possible. And accordingly we are currently evaluating the timing of the NDA submission for FEDCERA within 2023.

Speaker 2

We believe that the market opportunity is very attractive for our prefilled syringes. We expect the FEDSierra commercial efforts to require minimal resources as they are planned primarily through contracting with group purchasing organizations and hospital networks. Finally, after closing the DSUVIA divestment on April 3, we stated that we anticipated the transitioned to Allure Pharmaceuticals to be ongoing for about 6 months from closing. This is progressing as planned and AcelRx is being reimbursed for transition services. We continue to lead the relationship with the Department of Defense or DoD to ensure continued engagement and expected sales to that important customer.

Speaker 2

Our continued efforts with the Department of Defense for distributor are beginning to gain traction. The DoD has entered into a contingency contract with a wholesaler who must now maintain a minimum amount of inventory on hand with rapid replenishment requirements. In addition, the completion of the ongoing DSUVIA clinical trial being performed by the U. S. Army at the University of Pittsburgh Medical Center or UPMC will be a key milestone.

Speaker 2

The DSUVIA Early Evaluation of Pain or DEEP study is an open label, 3 year perspective randomized interventional trial comparing the standard pain medication used in an emergency department for moderate to severe pain with DSUVIA for trauma patients in a hospital setting. This study is expected to be completed early in the Q1 of 2024, the results of which could accelerate DSUVIA sales. By way of background, the study is being conducted in association with a UPMC research network called LITEs, L I t e s, which stands for Linking, Investigations, Trauma and emergency services. Of note, the DoD granted $11,000,000 to support LIGHTS in this DSUVIA trial. We remind you that in addition to the 15% royalty on commercial sales by Alora, we'll retain 75% royalties on all net sales to the DoD, DSUVIA's single largest customer, which is a significant upside of our agreement.

Speaker 2

In addition, we're entitled up to $116,500,000 in sales based milestones from Alora. As a note, DoD sales were the majority of the 2nd quarter DSUVIA sales. Allora's commercial training will be completed this month. In summary, as we move through the second half of this year, we're highly focused on our largest near term potential value drivers, which include initiating the NIAID clinical study expected to begin enrollment in Q4, a data readout from this study expected in the middle of in the Q2 of 2019 and the PMA submission in the second half of next year. We also await feedback from the FDA on our NIAID EUA request submitted in April.

Speaker 2

And finally, we continue to assess the timing of our NDA submission for FEDSIRA and its potential approval in 2024 as well. Now I'll hand the

Speaker 1

call over to Raffi to take you through the

Speaker 2

details of our Q2 financial results. Raffi?

Speaker 1

Thank you, Vince. We're very pleased to close on the financing last month that provides AcelRx up to approximately $26,000,000 should the milestone based warrants all be exercised. Initial gross proceeds totaled $10,000,000 and the warrants have a milestone based acceleration feature that should certain milestones be achieved trigger a 45 day exercise period for the holder. There were 2 series of warrants, Series A, which included a milestone of the receipt of an emergency use authorization for NIAID or approval of the PMA and Series B, which included a milestone of a positive data readout from the NIAID clinical study or approval of the PMA. Our team is highly focused on achieving these milestones.

Speaker 1

And as previously mentioned, we expect the NIAID clinical study to start later this year with a data readout by mid next year. The addition of new healthcare investors, including Nantahala Capital Management, demonstrates confidence in our programs and the opportunity and potential available with the portfolio of assets we have. The Q2 was transformative to AcelRx. We completed the divestment of DSUVIA to Alora in April, which allows us to focus resources on the development of our portfolio of late stage assets. We are confident that Allora is the right partner for DSUVIA given their experience with hospital sales and production and supply of controlled substances.

Speaker 1

We are continuing to work with Allora on all aspects of the transition of DSUVIA, including regulatory, supply chain and commercial activities. We expect the commercial teams to complete training in the Q3, which will provide their teams a catalyst to begin renewed commercial activities for DSUVIA. Revenues for the Q2 of $300,000 were generated primarily from royalties on the sales of DSUVIA, principally from the sales to the Department of Defense on which we earn a 75% royalty from Alora. Cash and cash equivalents were $7,400,000 at the end of the quarter or $17,400,000 on a pro form a basis, including the $10,000,000 of gross proceeds received from the July financing. Concurrently with the Our combined R and D and SG and A expenses in the 2nd quarter totaled $4,200,000 compared to 5 $100,000 last year and excluding non cash stock based compensation was $3,800,000 in Q2 in 2023.

Speaker 1

Our estimated full year 2023 combined R and D and SG and A expenses, excluding non cash related expenses remains in the $16,000,000 to $20,000,000 range. As a reminder, all historical sales and expenses related to DSUVIA are reflected in a single line item entitled net loss from discontinued operations. There were minimal DSUVIA related expenses in the Q2 of this year given the DSUVIA divestment closed at the beginning of the quarter. I'll now turn the call back to Vince.

Speaker 2

Thank you, Raffi. And I'd like to open the line for any questions you might have. Operator?

Operator

We will now begin the question and answer session. Before pressing the keys. The first question comes from Ed Arce of A. C. Wainwright.

Operator

Please go ahead.

Speaker 4

Hi, good afternoon, everyone. This is Thomas. You're asking a couple of questions for Ed. Thank you for taking my questions. First, regarding the EUA for NIAID that was submitted to April.

Speaker 4

I know it was mentioned that the timing is not very precise, but is the decision still expected this year?

Speaker 2

Yes, it's a good question. There's no regulatory guidelines as you aware of Thomas for responses on an EUA, but we've done a lot of Research on EUAs that have been submitted over the course of the past couple of years. And what we have found is that outside of the vaccines for that were approved under EUA quickly. The balance of the EUA submitted took on average around 6 months for review time. So if you consider our submission in early April and you consider 6 months as some type of guideline.

Speaker 2

The answer would be yes, typically we would expect to hear this year, but there's no guarantees on that.

Speaker 4

Got it. And then the other part of the equation is the full P and A approval that's the support by the restitutional study that is expected to begin later this year. Can you talk to any interaction with the FDA specifically regarding what endpoints that will be agreed with to support their approval.

Speaker 2

Yes, Thomas, thanks for the question. We'll Have Pam answer that question.

Speaker 5

Yes. So the agreed upon primary endpoint, again, this is after meetings with the FDA, Is the activated clotting time over the 1st 24 hours. And that's important because although a number of studies from nifamistat that have been published, from Japan and South Korea, You know, have looked at other primary endpoints such as filter life or amount of bleeding, etcetera. The FDA actually likes the primary endpoint to be a measure of what the drug or device is actually accomplishing. So in this situation, it's an anticoagulant, so they want to see a coagulation time as the primary endpoint.

Speaker 5

Our secondary endpoints are the clinical ramifications of anticoagulating the circuit, which means filter time before it clots. Any They also look at ACT over days 23. So those are important secondary endpoints. And there's other types of things we're looking at urea clearance and things like that. So there's a number of endpoints that have been agreed with them, Primary endpoint is the activated cladding time over the 1st 24 hours.

Speaker 2

And I think Thomas, what I'd like to just reemphasize on that, As Pam mentioned in our prepared comments was it will be our activated clotting time, R being NIAZ versus saline. So you have a powerful anticoagulant over those first 24 hours being administered for CRT versus a placebo. So we're confident in NIAID's ability to perform clearly against a placebo control arm.

Speaker 4

Okay. Understood that. Thank you for the additional details. Perhaps Switching gears to the revenue, the royalty revenue for DSUVIA so far from Alora. It was noted that it was mostly related to DMD sales royalty.

Speaker 4

How should we look at DSUVIA royalty revenue within the next 12 months or so?

Speaker 1

Yes. So As mentioned, the majority of those DSUVIA sales on which we earned revenues was related to the DoD. And given that Allora is still transitioning, we are working on the transition with them. We would expect that to be for the Q3, pretty similar because they're just now, as we mentioned, they're finishing up their training in the Q3. They're continuing that transition and then the renewed kind of activities on the commercial front on their end Probably going to begin sometime in Q4.

Speaker 1

So I would expect DoD sales to be the primary driver this year of our royalty to revenues. And I think as Vince mentioned, there's a lot of activities going on with the DoD. So Hopefully, it's consistent and growing. But again, that's we're not controlling outside of that those revenues. But we do expect Alora will be ramping up by the end of this year in terms of commercial activities.

Speaker 4

Got it. Thank you. Perhaps one more question from us on Sarah, regarding the regulatory process, how can you outline what are the major steps You mentioned approval expected in 2024. What are the major moving parts that are still ongoing to get to that point?

Speaker 2

Yes. We pretty much completed that project as it relates to readiness for the NDA. So we've got the package prepared. It'll be a matter of paying the PDUFA fee and submitting it through their electronic portal. As we mentioned to try to continue stressing, NIAID is the absolute priority for us.

Speaker 2

And we're trying to pull every lever we can with the resources available to us to be able to We still plan to submit the FEDSierra application before the close of this year, but we want to keep that flexibility of our resources available to expose any possibility to continue to accelerate NIAID. So the simple answer to your question, Thomas, is We're ready for that one. It's all about doing everything we can to accelerate The Movement and Investment on NIAID.

Speaker 4

Got it. Thank you, everybody, for taking the questions and definitely looking forward to the EOA decision on May 8 this year.

Speaker 2

Yes, us as well. Thank you, Thomas.

Operator

The next question comes from Jim Molloy of Alliance Global. Please go ahead.

Speaker 6

Hello. This is Laura Sorel calling in for Jim Malloy. Thank you for taking our questions. So for NIAID, will you still run the registrational study that's being planned to be started before the end of the year, even if you end up getting the EUA or do you think the FDA will still require a confirmatory Phase 3 trial to be conducted regardless of EUA status?

Speaker 2

That's a great question, Laura. Pam, do you want to comment on the requirements even beyond an EUA for registrational trials?

Speaker 5

Yes, we will absolutely conduct the registrational trial. I mean, FDA gives out EUAs with the tacit understanding that the sponsor will actually move towards a full approval. And in fact, When the public health emergency ended in May, the FDA put on notice all of the current people who had a UAs that they had to get their products approved to the normal regulatory pathway within 2 years. So it is not a way to avoid a Phase 3 study or a full approval. So we will absolutely keep on our same timelines regardless if we get the EUA or not.

Speaker 2

I think it's important to emphasize in that and we did that on the last call that whether the public health emergency Timing changed or not, the ability for the FDA to continue to move forward with the review of those submitted and actually you could continue to submit EUA is moving forward, so it's really unrelated.

Speaker 6

Got it. And then also, I know focus right now is on NIAID, but, for your other for LTX608 candidate, Do you have any prospective timelines on when Phase 2 trials might begin on its designated indications of DIC or COVID or ARDS?

Speaker 2

No. Right now, we're going to continue to remain focused on getting this first indication across the finish line with Anticoagulation of the dialysis circuit as well as our prefilled syringe candidates. I think those on the table for us are enough for our resources to do as efficiently as possible right now. So our focus will remain there.

Speaker 6

Understood. Thank you for taking the questions.

Speaker 2

Thank you, Laura.

Operator

This concludes our question and answer session. I would like to turn the conference back over

Speaker 2

to Vince.

Operator

To Vince, I'm sorry, and for closing remarks.

Speaker 2

Thank you, operator. And again, thank you for joining us today and for your continued support of AcelRx. We remain absolutely focused on driving long term shareholder value as a newly focused company with late stage development, high value assets going forward. We're very pleased that our plan has attracted new investors and we look very much forward to the key milestones outlined for not only the balance of 2023, but throughout 2024 as well. So please feel free to contact us after the call if you have any additional questions and we look forward to sharing our future developments.

Speaker 2

We believe it's very exciting moving forward. Thank you.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now

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Key Takeaways

  • Following the April divestment of DSUVIA, AcelRx is fully refocusing on its late‐stage pipeline, led by the dialysis circuit anticoagulant NIAID (nifamistat) and its range of prefilled syringes.
  • NIAID has received FDA Breakthrough Device designation, with an amended EUA submitted in April and a pivotal 160-patient, double-blind trial set to begin in Q4 2023 aiming for a PMA submission in 2H 2024.
  • Market research estimates a US peak annual sales opportunity of roughly $200 million for NIAID, driven by only a 20% share of the in-hospital CRRT market and 6% of the outpatient dialysis segment.
  • The prefilled syringe program is NDA-ready for submission by year-end 2023, targeting a potential 2024 approval and low-resource commercialization via group purchasing organizations and hospital networks.
  • AcelRx closed a financing of up to $26.3 million (with $10 million immediately available), leaving pro-forma cash of $17.4 million and reaffirming full-year 2023 R&D and SG&A guidance of $16–20 million.
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Earnings Conference Call
Talphera Q2 2023
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