AcelRx Pharmaceuticals Reports Fourth Quarter and Full Year 2013 Financial Results

  AcelRx Pharmaceuticals Reports Fourth Quarter and Full Year 2013 Financial
                                   Results

PR Newswire

REDWOOD CITY, Calif., March 3, 2014

REDWOOD CITY, Calif., March 3, 2014 /PRNewswire/ --AcelRx Pharmaceuticals,
Inc. (Nasdaq: ACRX), a specialty pharmaceutical company focused on the
development and commercialization of innovative therapies for the treatment of
acute and breakthrough pain, today reported financial results for the three
and twelve months ended December 31, 2013.

"AcelRx made strong progress in 2013 with the successful completion of the
Zalviso™ (sufentanil sublingual NanoTab system) Phase 3 program, the filing
and acceptance of the NDA for Zalviso, the execution of a commercial
partnership agreement with Grunenthal for Zalviso that covers Europe and
Australia, and agreement with FDA on a Phase 3 program for ARX-04, an
investigational single-dose sublingual sufentanil NanoTab for
moderate-to-severe acute pain," stated Richard King, president and CEO of
AcelRx. "As we begin 2014, we are advancing our U.S. commercial capability
and preparing for a potential Zalviso approval in third quarter of 2014. We
are also readying Zalviso for MAA filing in Europe, and preparing to initiate
a Phase 3 clinical program for ARX-04 in the second half of this year."

Fourth Quarter and Full Year 2013 Financial Results

Net income for the fourth quarter of 2013 was $17.8 million, or $0.41 per
share, compared with a net loss of $10.5 million, or $0.41 per share for the
fourth quarter of 2012. During the fourth quarter of 2013, AcelRx received a
$30.0 million upfront payment from Grunenthal GmbH associated with the Zalviso
commercialization agreement in the EU and Australia, of which $27.4 million
was recognized as revenue in the quarter. Excluding the $27.4 million of
revenue recognized from the Grunenthal collaboration, and excluding a $1.2
million one-time non-cash charge associated with the Hercules debt
renegotiation and $0.7 million non-cash expense resulting from the liability
accounting related to warrants issued in connection with the PIPE financing
completed in June 2012, the net loss for the fourth quarter of 2013 was $7.7
million, or $0.18 per share.

During the fourth quarters of 2013 and 2012, AcelRx recognized revenue of
$27.6 million and $1.7 million, respectively. The fourth quarter of 2013
revenue includes $27.4 million of revenue recognized from the $30.0 million
upfront payment from Grunenthal and $0.2 million of reimbursement for work
completed under a research grant from the U.S. Army Medical Research and
Materiel Command (USAMRMC), for development of ARX-04. Fourth quarter of 2012
revenue consisted of $1.7 million in reimbursement for work associated with
the USAMRMC grant.

Research and development (R&D) expenses for the quarter ended December 31,
2013 totaled $4.3 million, compared with $7.8 million for the quarter ended
December 31, 2012. The decrease in R&D expense reflects completion of the
Phase 3 development for Zalviso by the third quarter of 2013.

Selling, general and administrative (SG&A) expenses were $3.3 million for the
fourth quarter of 2013, compared with $1.9 million for the fourth quarter of
2012, due primarily to an increase in commercial activities related to
Zalviso, including increased market research activities and the initial build
of internal marketing capabilities. Fourth quarter 2013 SG&A expense of $3.3
million includes $1.0 million in marketing costs.

Other income and expense includes a $0.7 million non-cash charge in the fourth
quarter of 2013 resulting from the liability accounting related to warrants
issued in connection with the PIPE financing completed in June 2012. The
primary determinant of this charge was an increase in share price during the
fourth quarter of 2013 and its resulting impact on the Black-Scholes valuation
of these warrants. Additionally, in connection with the renegotiated debt
with Hercules, AcelRx recorded in the fourth quarter a $1.2 million non-cash
charge for the extinguishment of the original Hercules loan that was paid off
upon the signing of the new debt arrangement.

For the twelve months ended December 31, 2013, AcelRx reported a net loss of
$23.4 million, or $0.59 per share, compared with a net loss of $33.4 million,
or $1.51 per share for the same period in 2012. Excluding the $27.4 million
recognized from the Grunenthal upfront payment, the $14.1 million in non-cash
expense resulting from the liability accounting related to the warrants issued
in connection with the PIPE financing completed in June 2012 and the $1.2
million one-time, non-cash charge associated with our debt renegotiation,
adjusted net loss for 2013 was $35.5 million, or $0.89 per share.

R&D expenses for 2013 totaled $26.3 million, compared with $24.9 million in
2012. The increase for 2013 over 2012 was primarily due to expenditures
related to the Zalviso Phase 3 clinical trials that were at their highest
levels in the first and second quarters of 2013. SG&A expenses were $9.9
million for 2013, compared with $7.2 million in 2012, due primarily to an
increase in stock based compensation and commercial activities related to
Zalviso, including increased market research activities and the initial build
of marketing capabilities.

As of December 31, 2013, AcelRx had cash, cash equivalents and investments of
$103.7 million, compared to $59.8 million at December 31, 2012. In July 2013,
AcelRx raised approximately $47.9 million in net proceeds through the issuance
of 4.37 million shares of common stock in an underwritten public offering. In
December 2013, AcelRx received an upfront licensing fee of $30 million from
Grunenthal GmbH under the terms of a collaboration agreement for Zalviso in
Europe and Australia and an additional $6.0 million, net of payments to
Hercules, from the renegotiated debt agreement. 

Review of Recent Accomplishments and Corporate Update

  oThe Zalviso New Drug Application (NDA) was accepted for filing by the FDA
    on November 26, 2013. The acceptance indicates the FDA has determined that
    the application is sufficiently complete to permit a substantive review
    and the FDA has subsequently confirmed a PDUFA action date of July 27,
    2014. The NDA seeks approval of Zalviso for the management of
    moderate-to-severe acute pain in adult patients in the hospital setting.
  oAcelRx and Grunenthal GmbH announced a commercial collaboration in
    December 2013 covering the territory of the European Union, certain other
    European countries and Australia for Zalviso for potential use in pain
    treatment within or dispensed by a hospital, hospice, nursing home or
    other medically supervised setting. Under the terms of the agreement,
    AcelRx received an upfront cash payment of $30.0 million and is eligible
    to receive approximately $220.0 million in potential additional milestone
    payments, based upon successful regulatory and product development efforts
    and net sales target achievements. Grunenthal will also make tiered
    royalty, supply and trademark fee payments in the mid-teens to the
    mid-twenties percent range on potential net sales of Zalviso in the
    Grunenthal territory.
  oIn December 2013, AcelRx completed an end of Phase 2 meeting with the FDA
    to seek the agency's feedback on future development plans for ARX-04. The
    FDA requested a 500 patient safety database, consisting of 100 patients
    exposed to multiple doses and 400 patients exposed to a single dose of
    ARX-04. The FDA confirmed that the Phase 2 bunionectomy trial could be
    considered as an adequate and well-controlled study. Consistent with FDA
    guidance at the meeting, AcelRx plans a single additional Phase 3
    registration trial, to be conducted in a visceral, or soft tissue, model
    of pain, the primary endpoint for which will be Summed Pain Intensity
    Difference over 12 hours (SPID-12). AcelRx plans to begin this Phase 3
    study during the second half of the 2014 and expects that top-line results
    should be available during the second half of 2015.
  oIn December 2013, AcelRx entered into a new amended and restated credit
    facility with Hercules Technology Growth Capital, Inc. that extended
    AcelRx's previous relationship with Hercules, which was established in
    June 2011. The new Hercules credit facility provides for up to $40.0
    million of new loans. Upon the closing of the new credit facility, AcelRx
    drew the initial tranche of $15.0 million, $9.0 million of which was used
    to pay the outstanding balance and fees of the prior Hercules credit
    facility.

Financial Outlook

AcelRx records as revenue the reimbursement received pursuant to the 2011 $5.6
million USAMRMC grant. Recognition of revenue from this grant has resulted in
recorded revenues of $5.6 million through December 31, 2013 with no funding
remaining on the USAMRMC grant. 

AcelRx expects the first of the Grunenthal regulatory milestones to be
triggered with the planned submission of the MAA in mid-2014, resulting in a
$5.0 million milestone payment anticipated in the third quarter of 2014.

AcelRx forecasts that quarterly R&D expenses through the end of 2014 will be
relatively consistent across all quarters with total R&D expenses expected to
be in the range of $27 to $29 million for the year.

Additionally, AcelRx anticipates general and administrative expenses,
excluding sales and marketing costs, will increase gradually quarter over
quarter in 2014 as the company builds infrastructure to support Zalviso's
commercial activities. Consistent with planned commercial preparation, sales
and marketing costs are expected to accelerate over the remaining quarters of
2014 as the company prepares for the possible approval and the planned
commercial launch of Zalviso. In 2014, total SG&A costs in the $21 to $23
million range are anticipated, assuming FDA approval for Zalviso in the third
quarter of 2014. 

Total operating expenses for 2014 are anticipated to be in the range of $48 to
$52 million. 

AcelRx believes its current cash, cash equivalents, investments and cash
available under credit facilities are sufficient to fund operations at least
through 2015, excluding any potential proceeds from Grunenthal milestones.

Conference Call

AcelRx will conduct a conference call and webcast today, March 3, 2014 at 4:30
p.m. Eastern time (1:30 p.m. Pacific time) to discuss its financial results
and program updates. To listen to the conference call, dial in approximately
ten minutes before the scheduled call to (877) 870-4263 for domestic callers,
(855) 669-9657 for Canadian callers, or (412) 317-0790 for international
callers. Those interested in listening to the conference call live via the
Internet may do so by visiting the Investors section of the company's website
at www.acelrx.com and selecting the webcast link for the Q4 2013 earnings
conference call. A webcast replay will be available on the AcelRx website for
90 days following the call by visiting the Investors section of the company's
website at www.acelrx.com.

About AcelRx Pharmaceuticals, Inc.

AcelRx Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on
the development and commercialization of innovative therapies for the
treatment of acute and breakthrough pain. AcelRx's lead product candidate,
Zalviso™, is designed to solve the problems associated with post-operative
intravenous patient-controlled analgesia which has been shown to cause harm to
patients following surgery because of the side effects of morphine, the
invasive IV route of delivery and the complexity of infusion pumps. AcelRx has
announced positive results from each of the three completed Phase 3 clinical
trials for Zalviso, and has submitted an NDA to the FDA seeking approval for
Zalviso in the treatment of moderate-to-severe acute pain in adult patients in
the hospital setting.AcelRx plans to initiate a Phase 3 clinical trial for
ARX-04, a product candidate for the treatment of moderate-to-severe acute pain
in a medically supervised setting, during the second half of 2014.The company
has two additional pain treatment product candidates, ARX-02 and ARX-03, which
have completed Phase 2 clinical development.For additional information about
AcelRx's clinical programs, please visit www.acelrx.com.

Forward Looking Statements

This press release contains forward-looking statements, including, but not
limited to, statements related to future financial results, including 2014
financial guidance and cash forecast, potential milestones and royalty
payments under the Gruenthal agreement, the process and timing of anticipated
future development of AcelRx's product candidates, including the timing of
potential approval for Zalviso, therapeutic and commercial potential of
Zalviso and the anticipated timing, therapeutic and commercial potential of
other AcelRx product candidates, including the timing of the Phase 3 trial for
ARX-04. These forward-looking statements are based on AcelRx's current
expectations and inherently involve significant risks and uncertainties.
AcelRx's actual results and the timing of events could differ materially from
those anticipated in such forward-looking statements as a result of these
risks and uncertainties, which include, without limitation, risks related to:
AcelRx's ability to receive regulatory approval for Zalviso, that fact that
FDA may dispute or interpret differently clinical results obtained to date;
any delays or inability to obtain and maintain regulatory approval of its
product candidates, including Zalviso, in the United States and Europe; its
ability to attract funding partners or collaborators with development,
regulatory and commercialization expertise; its ability to receive any
milestones or royalty payments under the Gruenthal agreement; its ability to
obtain sufficient financing to commercialize Zalviso and proceed with clinical
development of ARX-04; the success, cost and timing of all product development
activities and clinical trials, including the planned Phase 3 ARX-04 trial;
the uncertain clinical development process, including the risk that clinical
trials, have an effective design, enroll a sufficient number of patients, or
be completed on schedule, if at all; the market potential for its product
candidates; the accuracy of AcelRx's estimates regarding expenses, capital
requirements and needs for financing; and other risks detailed in the "Risk
Factors" and elsewhere in AcelRx's U.S. Securities and Exchange Commission
filings and reports, including its Quarterly Report on Form 10-Q filed with
the SEC on November 5, 2013. AcelRx undertakes no duty or obligation to
update any forward-looking statements contained in this release as a result of
new information, future events or changes in its expectations.

SELECTED FINANCIAL DATA
(in thousands, except per share data)
(unaudited)
                           Three Months Ended      Twelve Months Ended
                           December 31,             December 31,
                           2013         2012          2013         2012
Statement of Operations
Data
Revenue:
                           $       $        $       $     
Collaboration agreement                                     
                           27,370       -           27,370       -
Research grant            237          1,675         2,132        2,394
 Total revenue        27,607       1,675         29,502       2,394
Operating expenses:
Research and development   4,318        7,795         26,292       24,908
^(1)
General and administrative 3,306        1,909         9,877        7,199
^(1)
Total operating expenses   7,624        9,704         36,169       32,107
Loss from operations       19,983       (8,029)       (6,667)      (29,713)
Interest expense           (313)        (518)         (1,518)      (2,283)
Other income (expense),    (1,901)      (1,975)       (15,241)     (1,367)
net^(2)
                           $       $        $       $     
Net income (loss)                                            
                           17,769      (10,522)     (23,426)    (33,363)
Basic net income (loss)    $       $        $       $     
per common share                                         
                           0.41        (0.41)       (0.59)      (1.51)
Shares used in computing
basic net income (loss)    43,044       25,588        39,747       22,125
per common share
(1) Includes the following non-cash,
stock-based compensation expense:
 Research and   $       $        $       $     
development                                             
                           464          236           1,657       998
 General and    580          281           1,822        1,152
administrative
                           $       $        $       $     
 Total                               
                           1,044       517           3,479       2,150
(2) Other income and expense includes a $0.7 million and $14.1 million
non-cash charge for the three and twelve months ended December 31, 2013,
respectively, related to warrants issued in connection with a private
placement equity financing, completed in June 2012.
                           December     December 31,
                           31, 2013     2012
Selected Balance Sheet
Data
Cash, cash equivalents and $       $     
investments                             
                           103,663     59,763
Total assets               110,031      64,520
Total liabilities          36,872       30,673
Total stockholders'        73,159       33,847
equity



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SOURCE AcelRx Pharmaceuticals, Inc.

Website: http://www.acelrx.com
Contact: Jim Welch, Chief Financial Officer, 650.216.3511, jwelch@acelrx.com
 
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