AcelRx Pharmaceuticals, Inc.

Welcome to the XLRX second quarter 2022 earnings call. This call is being webcast live on the events page of the investor section of XLRX's website at www.xlrx.com. This call is the property of XLRX. Any recording, reproduction, or transmission of this call without the express written consent of XLRX 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 on the call today. This afternoon, we announced our second quarter 2022 financial results. and some business updates in a press release. This press release and the slide presentation accompanying this call are available within the Investors section of our website. With me today are Vince Angotti, our Chief Executive Officer, and Dr. Pam Palmer, our Chief Medical Officer. Before we begin, I'll remind listeners that during the call, we will make forward-looking statements within the meeting 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 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. Since the first quarter, we've been focused on advancing our newly acquired assets through the regulatory approval process, specifically our product candidate NIAID that was obtained through our acquisition of Lowell Therapeutics earlier this year, as well as our pre-filled syringe product candidates that were in license from Agatant last year. These programs are a top priority for us as we believe they have a near-term as well as long-term value. We're pleased to report another quarter of commercial unit sales volume growth for Desuvia, the fifth consecutive quarter, since focusing our commercial efforts on procedural suites and specifically on specialty settings such as plastic and cosmetic surgery, ENT, and oral maxillofacial surgery. We're also in discussions with potential national accounts that operate in these specialties for broader use across their networks. which could provide us with a consistent recurring revenue stream. In addition, as mentioned on our first quarter earnings call for 2022, we remain in discussions with potential partners having more commercial resources to amplify the expected growth for Desuvia. Finally, our European partner, Agatant, is on track to launch Desuveo, which is the European branded name for our sephentinal sublingual tablets, later this quarter in Europe. Now, following our strategic acquisition of Law Therapeutics in January, we've prioritized our focus on NIAID, our first Nifamistat product, which is being developed for use in the US as an anticoagulant for extracorporeal circuits, such as for use during dialysis. The Law acquisition also added a family of additional Nifamistat product candidates to our portfolio, that target a diverse group of potential applications. NIAID is a lyophilized form of nifamistat that is being regulated as a device by the FDA, given that its mechanism of action takes place within the extracorporeal circuit to anticoagulate the filter. Nifamistat is approved and widely used as an anticoagulant for dialysis in Japan and South Korea, but it's never been developed for such use in the United States. In the near term, we're focused on obtaining an emergency use authorization, or EUA, for NIAID for use as an anticoagulant for extracorporeal circuits expected next year. Subsequently, we'll seek full FDA approval after conducting a single registration study of 160 patients with endpoints already agreed upon with the agency. And while there are many potential opportunities and other extracorporeal circuits, the near-term opportunity that we're targeting is patients undergoing dialysis, where we believe NIAID could address a significant unmet need. Based upon our market research, we believe that the potential peak sales for NIAID could exceed $200 million annually. And this amount is attributed to just the inpatient and outpatient dialysis markets, excluding any use in other extracorporeal circuits. Furthermore, the potential target market indications for our intravenous ephemostat product candidates, collectively referred to as LTX608, are also significant. We have filed U.S. and international patent applications directed to those target indications, including antiviral indications, disseminated intravascular coagulation, or DIC, acute respiratory distress syndrome, or ARDS, and acute pancreatitis. Our plan is to submit our EUA for NIAID to the FDA once our first CGMP lot has been produced, which is currently underway with our contract manufacturer. Based on our interactions with the FDA to date, we're optimistic about the prospects of receiving this authorization given the recognized significant unmet medical need. In this regard, I'd like to read a few selected quotes from our FDA correspondence last year regarding our proposed EUA to provide context as to why we're so optimistic about NIAID. Quote, we believe that your device has the potential to address an unmet need in patients who cannot tolerate heparin or who are treated in facilities that are ill-equipped for use of a citrate anticoagulant, end quote. This comment highlights the complexity of the use of citrate in these procedures, which is likely the main reason why only 5% of continuous renal replacement therapy or CRRT procedures utilize citrate as an anticoagulant despite the fact that citrate has been granted in EUA. The FDA noted further drawbacks to the use of citrate for certain compromised patients, commenting, quote, additionally, we recognize that there may be an unmet need for patients who also cannot tolerate citrate due to another condition such as liver disease, end quote. Furthermore, the FDA stated, quote, we believe that you have provided significant evidence demonstrating that the potential benefits of the NIAID device could be greater than the reasonably foreseen risks, end quote. Accordingly, you can certainly see why we're so excited about the prospects of bringing NIAID to the market through an EUA, as we believe it can provide benefits during any type of dialysis procedure and for use in other extracorporeal circuits. Now we finalized agreements to develop and produce the initial batches of NIAID with contract manufacturing partners, which allows us to remain on track for our EUA filing in the first half of next year. We also have a path that could help accelerate our internal timelines. Importantly, the FDA has assigned NIAID with a breakthrough device designation, which provides us with several advantages as we work toward gaining regulatory approval. the most salient being additional FDA input during development and during the submission process, as well as a priority review once the regulatory submission for the device is filed. Further, CMS has already assigned an ICD-10 procedural code for NIAID's use in the extracorporeal circuit, and this will facilitate reimbursement for the product if and when it's approved in the U.S. If approved, NIAID would be the only regional anticoagulant labeled for use in this indication in the United States. I'll remind you that in May, we held a KOL webinar on NIAID, a replay of which is currently available on the investor section of our website. And we'd encourage you to listen to it to learn about NIAID and, more generally, the utility of Nifamistat in South Korea and Japan throughout its decades of use to date. Consistent with our priority to advance our pipeline of late-stage assets, we continue to progress toward filing NDAs for our Phedron and phenylephrine pre-filled syringe product candidates licensed from Agaton. The first candidate for which we plan to file an NDA is PFS01, our Phedron pre-filled syringe. After meeting with the FDA last quarter to clarify our regulatory strategy, we remain on track with our efforts and are keen to advance this program towards commercialization. With two planned NDA filings in 2022, we expect our pre-filled syringes will be our next FDA-approved products that a commercial launch could occur as soon as next year. The market opportunity for these assets exceeds $100 million, and we believe we'll be able to obtain a large share of this market with minimal investment since much of the commercialization efforts are expected to be through contracting with group purchasing organizations and hospital networks. As mentioned previously, Vesuvia has continued to demonstrate solid growth in the procedural suite market, even with our very limited commercial team. As communicated last quarter, we initiated a realignment of our cost structure to generate expected annual savings of approximately $9 million, and we continue to assess how we can further reduce our annual expenses. We strongly believe in Desuvia's benefits to patients, as well as to the overall health care system, which is underscored by the feedback we're receiving from the expanding group of health care providers who have administered Desuvia to patients undergoing painful procedures. This value is also endorsed by the numerous recent real-world studies that have been and continue to be published, telling the advantages of using Desuvia in various medically supervised settings. We remain steadfast that Desuvia's full potential as a unique analgesic can be maximized by a partner with more resources, and at STOTCH, we remain in discussions with potential entities that have a more robust commercial presence to help maximize Desuvia's value. As you can see on the slide, the adoption of Desuvia for use in procedural suites for specialties such as plastic surgery, oral maxillofacial, and ENT remains the largest driver of use. This is an important market in terms of volume since an increasing number of painful procedures are now being performed to procedural suites as this setting is more cost-effective, convenient, and safer than hospitals. The procedural suite market represented 75% of all commercial sales for Dysuvia in the second quarter of 2022. increasing from 71% in one Q of 2022 and from 38% in two Q of 2021. As we've previously stated, we believe that working with a commercial partner on Desuvia will be imperative to gain rapid uptake in the high growth procedural suite areas. In the meantime, we continue to maximize the value of our small virtual sales team focused on procedural suites, which we believe is the most efficient approach. So far, there have been numerous publications about Dysjuvia, ranging from its application in the battlefield to its civilian use in multiple surgical settings when administering Dysjuvia for painful procedures. As we mentioned in our press release today, an abstract has also been accepted for a podium presentation at Plastic Surgery, the meeting 2022, to be held from October 27 through 30 in Boston, Massachusetts. This is the premier educational and networking event of the year for both domestic and international plastic surgeons. Beyond the procedural suite setting, Desuvia's single largest customer is the Department of Defense. This large customer has many different purchasing points from many different areas. We continue to believe the largest opportunity within the DoD for Desuvia is the US Army's use within sets, kits, and outfits, or SKOs. Two years after achieving Milestone C approval, a key gateway to having Desuvia approved for use across all the U.S. Army SKOs, we believe we're finally making good progress in Desuvia's broader adoption within the U.S. Army. This momentum started with commentary published in the Journal of Military Medicine, highlighting the favorable aspects of Desuvia for use in the military setting. and recent communications with critical decision-makers within the U.S. Army. Furthermore, a recent Armed Services Committee report directs the Chairman of the Joint Chiefs of Staff to brief the House on the timeline and process being used to integrate recently FDA-approved, government-funded combat medications for inclusions in SKOs. It also cites the potential use of these medications by allied and partner militaries. Also, as mentioned last quarter, the Department of Defense, or DOD, has initiated two studies that were originally planned to commence over 24 months ago. We believe that initiation of these two studies, the recent military publications, and language in the Armed Services Committee report further confirmed the growing momentum for D'Souza's military use. In the meantime, the Army continues to make purchases for their stockpiling program. And finally, Agaton is readying for Dezuvaio to launch in Europe in the coming months. We'll look forward to monitoring the uptake of this important drug in the new market. I'll now hand the call over to Rafi to take you through the second quarter financial results.