AcelRx Pharmaceuticals, Inc.

Welcome to the Accelerex fourth quarter and full year 2020 conference call. This call is being webcast live on the events page of the investor relations section of Accelerex's website at accelerex.com. This call is the property of Accelerex and any recording, reproduction, or transmission of this call without the express written consent of Accelerex 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 investor section of XLRX's website. I would now like to turn the call over to Rafi Asadorian, XLRX Chief Financial Officer. Please go ahead.

Thank you for joining us this afternoon. Earlier today, we announced our previously released fourth quarter and full year 2020 financial results in a press release. This press release and the slide presentation accompanying this call are available in the investor section of our website. With me today is Dr. Pam Palmer, our chief medical officer. Unfortunately, Vince Angotti, our chief executive officer, is unable to join us today due to a family emergency. 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 Accelerex. 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. Let's get started as we have a long call today. Like most companies during this pandemic, we have adapted and found ways to continue advancing the long-term value of Accelerex and commercial launch of Desuvia, despite the obvious challenges with access to hospitals, physicians, and decision makers. As a result, we've successfully achieved many of the objectives set out at the beginning of 2020 and believe that in the post-COVID environment, Desuvia is well-positioned for success due to the need for efficiencies at ASCs and hospitals, the progress of our partnerships, and the readout of additional clinical data through the course of 2021. We've learned from the real-world use of Desuvia that in addition to Desuvia being an effective and well-tolerated analgesic to manage acute pain, Desuvia also supports opioid stewardship in that it reduced overall perioperative opioid requirements in patients from two separate peer-reviewed published studies. Importantly, these studies showed data that supported for the first time economic benefits to hospitals and surgery centers, which is resonating with physicians as well as hospital administrators. Later, I will discuss the importance of this data and our continued focus on supporting investigator-initiated studies where we see significant potential for Desuvia to help new patient populations. I will also update you on the progress in each of our four pillars providing a foundation for revenue growth. In addition, we have a special guest with us today who is one of our physician experts in oral and dental anesthesiology, Dr. Steven Yun. Zimmer Biomet is gearing up for its formal launch of Desuvia. into the oral and dental surgery space, and we thought it would be helpful for our investors to hear about Dr. Yun's experiences with Dissuvia. Pam will provide a further introduction to Dr. Yun later in the call. The pandemic has had many unanticipated effects on the world and impacted each of us in different ways. With regards to Accelerex, the three main impacts we have experienced are one, cancellation or delays of formulary committee meetings, two, restrictions on pharmaceutical representatives or any outside visitors entering the institutions to educate healthcare providers, and three, delays of elective surgeries. With regards to the last point, the elective surgery backlog has grown significantly over the last year. A May 2020 study of orthopedic surgery volumes by the Journal of Bone and Joint Surgery suggested that even under the most optimistic scenario, the United States may face a cumulative backlog of more than a million total joint and spine surgery cases. With the rollout of vaccines, many industry insiders believe these elective surgeries will start ramping in the second half of 2021. We believe this expected return of surgeries provides an opportunity as the surgical environment has been the initial primary use for Desuvia. I'll provide an update on some 2021 guidance that includes this growth expectation and the number of expected formulary approvals by the end of the year. Before looking forward, let's review the progress made and objectives achieved in 2020 in each of our four pillars. The first pillar is centered on the Department of Defense. We made significant progress in 2020, with Milestone C approval received in April, joint deployment formulary approval received in September, and finally, a four-year, $3.6 million contract received from the U.S. Army to develop clinical practice guidelines. In addition, we continued to penetrate the military treatment facilities, or hospitals, based here in the U.S., as the benefits of DSUVIA across the military are being better understood. As a reminder, the Milestone C approval means DSUVIA will be packed out in the U.S. Army SKOs, or sets, kits, and outfits for all deploying troops. We continue working with the Army on all the complex logistics and administrative matters to improve this process, which has taken time. Regardless, once the logistics are finalized, we still believe that the initial stocking for all SKOs will approximate $30 million in revenue over three years. We do not yet have any guidance on what this will translate into for revenues in 2021, but we expect these final logistics to be worked out in the near term. Our focus will remain on educating and training the U.S. Army teams so they are prepared as D'Souvia ships to deploying troops. Separately, military treatment facilities continue to be a focus as many of these physicians rotate into deployment, which provides an opportunity for more healthcare providers within the military to learn about the benefits of D'Souvia. The second pillar is concentrated on large specialty markets accessed through partnerships. A significant accomplishment in 2020 was the exclusive Zimmer Biomet oral and dental surgery partnership announced in July. Zimmer Biomet has just started to begin promotion with the trained 31 sales representatives that is expected to expand to the broader 200-plus sales representatives later this year, particularly after Zimmer Biomet Dental receives their wholesaler drug licenses. As a reminder, this opportunity approximates 7.5 million applicable Desuvia procedures. We believe the potential is significant to reach a large proportion of these customers given Zimmer Biomed Dental's customer base and established relationships in this space. Once a full promotional effort is made with their sales force, we believe growth will ramp quickly. Dr. Yun will discuss his experience with Dissuvia in this setting to provide a better idea of the types of procedures that can benefit from Dissuvia. Also within this pillar are other potential specialties such as plastic surgery, emergency medical services, and many others. Plastic surgery has been one of our fastest growing specialties in the first quarter of this year given the unique pharmacokinetic characteristics. of D'Souvia and how these procedures are being performed. And this has been accomplished with only two sales representatives making virtual sales calls initiated in the fourth quarter. Our third pillar, which is the primary focus of our internal commercial organization, is hospitals and surgery centers. While COVID has certainly had an impact on our progress in this pillar, the publications of the new real-world clinical data have provided a rationale of how Desuvia can help address the backlog in elective procedures moving forward. Importantly, in 2021, we believe the ongoing investigator-initiated trials at some of the most prestigious hospitals in the U.S. and new studies being evaluated will provide further evidence of Desuvia's potential to change the paradigm of pain management for surgeries. Selling into hospitals and surgery centers has a long lead time, and this was only exacerbated during the pandemic. With the data showing real-world use of Desuvia supporting opioid stewardship and efficiencies in the perioperative setting, now there is more information that healthcare providers are able to evaluate for upcoming formulary and purchasing decisions. One example of the benefits of this data was our recent partnership with the National Rural Health Association, which identifies opioid stewardship as one of their four critical priority areas. After reviewing the available publications with this clinical data, they decided to enter into a partnership with us to help support this effort. As we've previously announced, there are ongoing investigator-initiated studies being performed at Harvard Brigham and Women's Hospital, the Cleveland Clinic, University Hospitals of Cleveland, as well as at the Newport Plastic and Reconstructive Surgery Center. These are well-regarded institutions, all focused on different studies in patient populations. We believe the data from these ongoing studies will demonstrate the effectiveness and benefits DeSuvia provides over current standards of care. We expect data from these studies to read out later this year. And coupled with the opening up of elective surgeries expected in the second half of the year, we believe it will provide further momentum for the use of Desuvia. Knowing how important new data is for driving adoption by healthcare providers, we are reviewing many other study requests with several focused on orthopedic surgeries, which has been one of the fastest increasing specialties along with plastic surgeries. The benefits being seen from orthopedic surgeons while using Desuvia include faster discharge time for patients and overall reduction in opioid utilization in the PACU. These physicians also report patients are more clear-headed, which is consistent with Dysuvia's lack of cognitive impairment as assessed in our registration trials. The orthopedic surgery market will be a key specialty for Dysuvia in 2021. In addition to orthopedic studies, we continue to receive strong interest for investigator-initiated trials in other areas, including proposed studies in sickle cell patients presenting to the emergency department and retinal surgery in the elderly. With COVID delaying formulary reviews, as mentioned on our last quarter call, we shifted our commercial team's focus to the accounts that had already reviewed and approved to SUVIA for use. As a result, in the fourth quarter, 90% of all orders shipped were for reordering customers. Before providing a further operational and financial update, I would like to hand the call over to Pam to introduce Dr. Young.

Thank you, Rafi. We are fortunate to have with us today the anesthesiologist who first recognized the important benefits that Desuvia could bring to oral surgeons and their patients. And we're also excited about the collaboration with Zimmer Biomed. Dr. Steven Young is a board-certified anesthesiologist who specializes in providing dental office anesthesia for complex oral surgery cases. He is an examiner and expert consultant for the Dental Board of California, clinical professor of Western University of Health Sciences, and a lecturer at the Loma Linda School of Dentistry. He is also a safety inspector for the American Association for the Accreditation of Ambulatory Surgical Facilities. Dr. Yun knows firsthand how important consistent and effective levels of opioid analgesia are for the oral surgeon performing a lengthy surgery in his or her procedural suite. Usually, patients are not under general anesthesia during these lengthy procedures. and throughout the case, the oral surgeon will have to repeatedly stop to administer low-dose IV opioids. This is because the peaks and troughs of IV-administered drugs are inherently ineffective at providing stable levels of analgesia for cases lasting hours. Dr. Yun's direct observations during surgical cases of the unique pharmacodynamic profile of sublingually-administered dysovia and his knowledge of the high therapeutic index of sufentanyl make him uniquely qualified to discuss with you today the use of Desuvia in these oral surgery procedures. Before Dr. Yun discusses his experience with utilizing Desuvia in his dental anesthesia practice, I will cover some safety information about Desuvia. The following information is intended for investors, not healthcare professionals or patients. Desuvia is a Schedule II controlled substance that may only be dispensed to adult patients in a certified medically supervised healthcare setting for the management of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate. Risks include life-threatening respiratory depression, addiction, abuse, misuse, cytochrome P450-3A4 interaction, and risk from associated use with benzodiazepines or other central nervous system depressants. The most commonly reported adverse reactions are vomiting, dizziness, and hypotension. Insufficient data are available on the use of Desuvia in patients with severe liver or kidney impairment. Desuvia should be used with caution in such patients due to the importance of these organs in the metabolism and excretion of sufentanyl. Accelerex ensures proper use of Desuvia via physician education and the Desuvia Risk Evaluation and Mitigation Strategies, or REMS, program. Desuvia is only available to facilities that are part of the Desuvia REMS program. Facilities that administer Desuvia must be able to manage acute opioid overdose, train relevant staff on Desuvia, and implement policies and procedures to ensure the appropriate administration of Desuvia. Full safety information and the black box warning for Desuvia can be found at desuvia.com. Now I would like to hand the call over to Dr. Yun to share his insights into the use of Desuvia in oral surgery practices.