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AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) Is Gearing Towards An Unmet Need Opioid Approval

AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) just put out data from its lead painkiller study, and the company is up more than 10% mid market US on the release. The data has been highly anticipated, and the response suggests a number of market participants were waiting, finger on the buy trigger, waiting to pull if the numbers hit expectations.

So the company is up, and it looks like the close of play will bring with it further gains, but what does it mean for the company longer term? Let’s take a look.

First, the drug in question. Its an opioid based treatment called ARX-04, and it’s being developed for patients experiencing moderate to severe acute pain following a surgical procedure. The drug is designed to fill a few different current unmet needs – primarily, as a pain management too in an ambulatory pain environment that doesn’t have high toxicity and (in turn) doesn’t have tolerability issues; and second, the same tolerability features but in a high risk of liver and other organ failure patient population that have just undergone surgery.

It’s this latter indication that the latest trial addressed, and to put cover the data in a sweeping single statement – the numbers look great. The primary and secondary endpoints related to efficacy, and they showed a reduction in pain intensity (measurement starting at 30 minutes after the first dose of the drug), followed by 27%, 49%, and 57% reductions in mean pain intensity (1 hour, 2 hours, and 12 hours, respectively) from a baseline mean pain score of 6.2.

Tolerability was just as good, with no AEs recorded as significantly different between patients with at-risk liver function and patients with no risk. Vital signs remained strong across the study, and no opioid reversal agents had to be administered (which would be indicative of a tolerability issue).

Further, and building on the case for an FDA green light come registration, this phase III is just one of three separate phase III trials designed to underpin the drug’s NDA. The other two looked at ambulatory surgery (i.e. military, combat setting response) and emergency room treatment respectively. Both, just as did this one, hit on the primary and secondaries.

So the drug is a shoo-in for approval, right? Well, not so fast. Opioid abuse is a big issue in the US, and one of the reasons physicians are wary of using them in this type of transitory setting (i.e. a setting in which the pain management is short term as opposed to chronic) is that the introduction can serve as a gateway to dependence. As such, the FDA is actively trying to reduce the number of opioids administered, and markets (and physicians) are shifting to accommodate these efforts. We’re not at the point where the agency isn’t going to approve any more opioid based drugs – they are still very relevant and there’s a great need for them when used correctly – but the landscape is changing, and this will likely play into the agency’s decision when it comes to assessing the risk-benefit of drugs like this going forward.

On a more positive note, cash on hand is far better than many junior biotechs in this position, coming in at just shy of $98 million at last count (June 30, 2016) so there’s no immediate concern over any dilutive raises. If the drug picks up approval, AcelRx should be able to kick off a pretty well rounded marketing campaign (physician education, sales force recruitment, that sort of thing) with the cash it holds, and will only likely need to raise further down the line as it expands. If the revenues start to drip in sooner rather than later, a raise might not be necessary at all.

Debt is low – $7 million long term and $13 million short term – so there should be no capital servicing issues near term.

What’s the takeaway here?

AcelRx just closed out a wide ranging development program, and now has data from three successful phase III trials that support the efficacy and tolerability of its lead pain management candidate. The drug is an opioid, which might play into the FDA’s decision somewhat, but chances are we will see a green light for commercialization and a marketing effort before the third or fourth quarter next year. The company expects to submit an NDA before the close of 2016, and this submission is the next upside catalyst.


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