AcelRx Provides Business Update And Reports Third Quarter And Nine Months 2015 Financial Results

REDWOOD CITY, Calif., Oct. 29, 2015 /PRNewswire/ -- AcelRx Pharmaceuticals, Inc. (Nasdaq: ACRX), a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of acute pain, today provided a business update and reported financial results for the three and nine months ended September 30, 2015.

Business highlights include:

• On September 9, 2015, AcelRx announced that ARX-04 (sufentanil sublingual tablet, 30 mcg) met primary and secondary endpoints in a multi-center, double-blind, placebo-controlled Phase 3 trial (SAP301) in patients with moderate-to-severe acute pain following ambulatory abdominal surgery. Results demonstrated that patients receiving short-term treatment with ARX04, administered via a disposable, pre-filled, single-dose applicator (SDA), experienced significantly greater pain reduction compared to placebo, as measured by the time-weighted summed pain intensity difference over the first 12 hours of treatment (SPID-12) (p<0.001).
• On September 22, 2015, AcelRx announced that the European Commission (EC) approved Zalviso (sufentanil sublingual tablet system) for the management of acute moderate-to-severe post-operative pain in adult patients in a hospital setting. The marketing authorization is granted for the 28 EU member states as well as for the European Economic Area (EEA) countries, Norway, Iceland and Liechtenstein. Grunenthal GmbH (Grunenthal), AcelRx's commercial partner in Europe and Australia, expects the product to be available to Western European patients in the first half of 2016. The approval triggered a $15.0 million milestone to AcelRx from Grunenthal which the company expects to receive in Q4 2015.
• On September 21, 2015, AcelRx announced the monetization of the expected royalty stream from the sales of Zalviso in the European Union by Grunenthal. AcelRx received $65.0 million from the royalty sale to PDL BioPharma, Inc. (NASDAQ: PDLI).  PDL will receive 75% of the European royalties due under the Grunenthal Collaboration and License Agreement (CLA) as well as 80% of the first four commercial milestones, subject to a capped amount of $195 million. AcelRx will receive 25% of the royalties from product sales, 20% of the first four commercial milestones, and 100% of the remaining commercial and development milestones under the CLA with Grunenthal.

"The third quarter of 2015 was marked by considerable progress for AcelRx. The approval of Zalviso in Europe, positive Phase 3 results for ARX-04 and the monetization of a portion of the expected royalty stream from sales of Zalviso in Europe are tremendous accomplishments," commented Howie Rosen, interim chief executive officer of AcelRx. "In the fourth quarter we are continuing to make progress, having started a study of ARX-04 in the emergency room. The study is designed to provide experience in this setting and to help add to the safety database requirements necessary to file the NDA for ARX-04. In addition, based on the teleconference we held with the FDA in early September regarding the regulatory path for Zalviso, we have submitted a protocol for an additional clinical study to address concerns raised by the FDA and to assess the overall performance of the device. Pending comments on the protocol from the FDA, we are preparing to initiate this study the first quarter of next year."

Third Quarter Financial Results

Net income for the third quarter of 2015 was $5.1 million, or $0.11 basic and diluted net income per share, compared to net income of $0.7 million, or $0.02 basic net income per share, and $0.13 diluted net loss per share for the third quarter of 2014. The increase in net income and net income per share was primarily due to revenue recognized under AcelRx's CLA with Grunenthal for Zalviso, and AcelRx's contract with the Department of Defense (DoD) for ARX-04 development. In addition, general and administrative expenses decreased as a result of the cost reduction plan implemented at the end of March 2015, while other income decreased in the third quarter of 2015, as compared to the third quarter of 2014. Common shares used in calculating earnings per share were 44.4 million for basic EPS and 45.0 million for diluted EPS in the third quarter of 2015, compared to 43.5 million for basic EPS and 44.3 million for diluted EPS in the third quarter of 2014.

For the third quarter 2015, AcelRx recognized revenue under the Grunenthal CLA of $13.9 million. As mentioned above, we are entitled to receive a milestone payment of $15.0 million related to the approval of the Marketing Authorization Application (MAA), of which $13.2 million was recognized as revenue during the third quarter of 2015. In the third quarter of 2014, we received a milestone payment of $5.0 million related to the MAA submission, of which $4.6 million was recognized as revenue.

Revenue attributable to the research and development work performed under the DoD contract, was $1.6 million for the third quarter of 2015. There was no such revenue recognized for the third quarter of 2014.

Research and development expenses for the third quarter of 2015 were $5.4 million, as compared to $5.2 million for the third quarter of 2014. Research and development expenses during the third quarter of 2015 included an increase of $0.4 million in ARX-04 costs primarily due to the initiation of the SAP302 study, and $0.7 million in research and development overhead expenses, compared to the third quarter of 2014. These increases were partially offset by a $0.9 million reduction in Zalviso development program expenses in the third quarter of 2015 as compared to the third quarter of 2014.

General and administrative expenses were $2.9 million for the third quarter of 2015, compared with $4.7 million for the third quarter of 2014. General and administrative expenses in the third quarter of 2014 included Zalviso-related market research and pre-commercialization costs of $1.5 million. There were no corresponding expenses in the third quarter of 2015.  

Other income and expense included $0.3 million in non-cash income in the third quarter of 2015, as compared to $6.4 million in the third quarter of 2014, resulting from the accounting related to the PIPE warrants, which are considered a liability for accounting purposes and remeasured at the end of each reporting period utilizing the Black-Scholes valuation model. As of September 30, 2015, there were approximately 0.5 million PIPE warrants outstanding. In addition, other income and expense included $0.5 million in impairment charges related to leasehold improvements in our corporate offices and we recognized $0.3 million in non-cash interest expense related to the royalty monetization completed in the third quarter of 2015.

The royalty monetization results in a taxable gain of more than $60.0 million, the majority of which is expected to be offset with net operating loss carryforwards; however, AcelRx is expected to be subject to U.S. federal alternative minimum taxes in 2015, as reflected in our provision for income taxes in the third quarter of 2015.

Year-to-Date Financial Results

For the nine months ended September 30, 2015, AcelRx reported a net loss of $13.9 million, or $0.31 basic net loss per share and $0.37 diluted net loss per share, compared to a net loss of $19.5 million, or $0.45 basic net loss per share and $0.63 diluted net loss per share for the same period in 2014. Common shares used in calculating earnings per share were 44.2 million for basic EPS and 44.4 million for diluted EPS in the nine months ended September 30, 2015, compared to 43.3 million for basic EPS and 44.3 million for diluted EPS in the nine months ended September 30, 2014.

AcelRx recognized revenue of $14.5 million under the Grunenthal CLA in the nine months ended September 30, 2015, primarily related to the milestone for approval of the Zalviso MAA, while during the nine months ended September 30, 2014, AcelRx recognized revenue of $5.0 million under the Grunenthal CLA, primarily related to milestone payment for the Zalviso MAA submission. Revenue attributable to the research and development work performed under the DoD contract, was $3.0 million for the nine months ended September 30, 2015. There was no such revenue recognized for the nine months ended September 30, 2014.

Research and development expenses in the nine months ended September 30, 2015 were $19.0 million, compared to $17.2 million in the nine months ended September 30, 2014.

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