Hello, welcome to the AcelRx First Quarter 2023 Financial Results Conference Call. This call is being webcast live via the Events page on the Investors section of AcelRx’s website, www.acelrx.com. This call is property of AcelRx, and any recording, reproduction or transmission of this call without the expressed written consent of AcelRx is strictly prohibited. As a reminder, today’s webcast presentation is being recorded. You may listen to a replay of this webcast by going to the Investors section of AcelRx website. I would now like to turn the call over to Raffi Asadorian, AcelRx Chief Financial Officer.

Thank you for joining us on the call today. This afternoon, we announced our first quarter 2023 financial results and associated business updates in a press release. This press release can be found within the Investors section of our website. With me today are Vincent Angotti, our Chief Executive Officer; Dr. Pam Palmer, AcelRx’s Co-Founder and Chief Medical Officer. Before we begin, I want to remind listeners that during this call, we will likely 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 AcelRx. 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. I’ll now hand the call over to Vince.

Thank you, Raffi, and good afternoon, everyone. We’re excited to provide an update to you today during this transformative time for AcelRx marked not only by the divestment of DSUVIA, but also by submitting a request for an Emergency Use Authorization to the FDA in April for Niyad, our lead nafamostat program. This amends a prior EUA submission to the FDA by Lowell Therapeutics, which received an encouraging response from the agency, but requested certain CMC information that was manufacturing related. These requests were addressed by the primary amendments to our recent EUA submission. Niyad is being developed for use in the U.S. as a novel anticoagulant for dialysis circuits. We cannot stress enough how important the availability of an alternative anticoagulant is for dialysis patients, including those undergoing continuous renal replacement therapy or CRRT. This is because clotting of the circuit filter during CRRT can occur resulting in major complications to the patient. Our interactions with leaders in the field of nephrology during our recent advisory board meeting reinforced the urgent medical need for an alternative anticoagulant for use during CRRT. And this combined with our recently conducted U.S. quantitative research reaffirms the market potential for Niyad. At this point, I’d like to turn it over to Dr. Palmer to help explain the risks of not using an anticoagulant with inpatient dialysis.

Thank you, Vince. As a result of not using anticoagulants in the dialysis circuit, patients can experience a low quality dialysis due to a clotted filter. In addition, when the clotted filter is changed, loss of red blood cells and platelets removed with the filter can often result in the patient requiring a transfusion. For these reasons, the international CRRT guidelines recommend the use of an anticoagulant infused into the dialysis circuit, but despite this, U.S. physicians do not always use anticoagulants in patients undergoing CRRT. Our recent quantitative market research indicates 29% of patients undergoing CRRT get no anticoagulation in the dialysis circuit. So why would physicians not use an anticoagulant in some patients, even though it’s the internationally recommended standard of care? As we were told by many physicians at the recent Annual Acute Kidney Injury and CRRT meeting held at the end of March in San Diego, they are stuck with in their words two bad options for CRRT anticoagulation, heparin and citrate. The ladder of which was made available under an EUA at the start of COVID. Heparin has a relatively long half-life and recirculates back into the patient and can cause systemic bleeding as well as other issues. Regarding citrate, it is difficult to use, requires calcium levels to be drawn every four hours, requires intensive nursing time, and our recent market research indicates physicians are concerned about its use due to its side effects, which include hypocalcemia, citrate safety, alkalosis and other complications including ventricular arrhythmias. Not surprisingly, when talking to one ICU physician from a major academic center who was at the recent AKI and CRRT meeting, he told us his hospital does not use any anticoagulant during CRRT at all due to the risks of both heparin and citrate, even though it is against the international standard of care. Our recent study of 150 physicians specializing in CRRT showed that across the Board heparin was used in 43% of patients and citrate was used in 28% of patients, leaving 29% of patients with no anticoagulant due to the risks of the other two agents. Given the issues and fears physician have with available – the two available anticoagulant options, this is not surprising and demonstrates a large unmet need for an easy to use, short half-life anticoagulant such as Niyad. We plan to submit this quantitative market research for peer-reviewed publication this quarter.

Thanks for that, Pam. As a result, we believe the majority of the target population for Niyad consists of patients that are receiving no anticoagulant as well as the 28% that are receiving citrate totaling 57% of CRRT patients and to mono degree patients at risk on heparin. In terms of market opportunity, we estimate Niyad to have a peak annual sales potential of $200 million in the U.S. attributed to just the inpatient and outpatient dialysis markets, excluding use in any other extracorporeal circuits. Our estimate in peak sales potential comes from modest penetration into these markets, specifically attaining only about a 20% share of the current in the hospital CRRT market and 6% of the dialysis market outside of the hospital. Recently, we’ve agreed to terms with the manufacturer for the supply of the active pharmaceutical ingredient in Niyad being the nafamostat mesylate that’ll allow us to scale up the production of this product candidate. We look forward to initiating a single registrational trial in the second half of this year, of which the primary endpoints have already been agreed upon by FDA for 160 patient study. In addition, after already receiving an ICD-10 CMS procedural code to facilitate reimbursement, we’re proceeding with early commercial planning. We anticipate that we’ll need only a small sales force for Niyad. As such, we’re evaluating the use of an in-house sales team versus external commercialization partners with nephrology and/or ICU experience. Remind you that if approved Niyad would be the only regional anticoagulant approved for this indication in the United States. Now let’s turn to our pre-filled syringe portfolio. We plan to follow new drug applications or NDAs for our ephedrine and phenylephrine pre-filled syringes. The first filing will be Fedsyra, our pre-filled syringe of ephedrine anticipated by the end of…

Thanks, Vince. Sales of DSUVIA in the first quarter were $0.5 million, which was a 7% increase over the first quarter of last year, and a 111% increase over the fourth quarter of 2022, despite only having three sales representatives promoting DSUVIA during the quarter. With the experience and resources that Alora Pharmaceuticals has in sales and marketing, we expect continued momentum in sales with their ownership of DSUVIA. Revenues in the first quarter are not reflected in our statement of operations due to the specific accounting treatment and presentation of the now divested DSUVIA business. All sales and expenses related to DSUVIA are reflected in a single line item entitled net loss from discontinued operations in our statement of operations and the individual line items will be disclosed only in the notes to the financial statements. Cash and cash equivalents totaled $13.4 million at the end of the quarter. Our combined R&D and SG&A expenses in the first quarter, excluding DSUVIA related expenses, since these are now reported within the net loss from discontinued operations line item totaled $5.3 million compared to $4.9 million in the first quarter of 2022. Including the DSUVIA related expenses within the loss from discontinued operations, these expenses have declined $2.3 million in Q1 2023 compared to Q1 2022. Q1 2023 combined R&D and SG&A expenses included $0.6 million non-cash stock based compensation expense. Our estimated combined R&D and SG&A expense in 2023, excluding non-cash related expenses is in the $16 million to $20 million range, depending upon the timing of the receipt of a potential emergency use authorization for Niyad and other discretionary costs. We expect to continue to closely monitor our discretionary expenses during the year to extend the cash runway as we await potential upcoming significant milestones. I’ll now turn the call back over to Vince.

Thank you, Raffi. I’d now like to open the line for any questions you might have. Operator?

We’ll now begin the question-and-answer session. [Operator Instructions] Our first question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.

Hi. Thanks for taking my question and congratulations on all the progress. Maybe just one from me, how should we think about a potential Niyad launch trajectory given little bit EUA and sort of this – there is this need, do we think about this as a normal hospital product launch trajectory or do you think there’s possibility of maybe bending that curve a little bit just given the need for this product? Thank you.

Yes. So I think the key to your question, Brandon, and thank you for this, what is a normal hospital trajectory? And they’ve been all over the map, but historically, what I think you’re alluding to is probably slower uptake due to P&T Committees and the time involved with the evaluation of the product from an efficacy and cost standpoint. I would venture to say with those sites that we’ve already interacted with, you would see within that target population that target set of institutions a faster uptake because of their knowledge in nafamostat, their historical not experience but education on the product and anticipation for it coming to the U.S. I think the other key to this, and I’ll ask Dr. Palmer to comment on it. Is this isn’t – as we have learned a typical P&T routine calendaring mechanism for approval within the hospitals. Dr. Palmer, can you please comment on those that are critically involved with this and how that would typically operate?

Yes. What we found out from talking to these large institutions and the smaller ones as well, is that there’s only one or two docs who are really calling all the shots for CRRT anticoagulation in any of these institutions. So this isn’t something that goes in front of a 25 panel P&T committee and has to get on the calendar and has to be debated. The decision really is made by the folks who are running the CRRT program as to what exactly they want. And if they ask for it, they get it. So it’s going to be quite different, I think than something like DSUVIA for example, which is just a opioid for pain management and would be broadly used. This is very specific use drug that will be basically dictated by just a few folks.

I think, Brandon, I’ll follow-up your question. As you’re talking about bending the curve of potentially adoption, and again ask Dr. Palmer to comment on this. As we’ve been designing the study and working with those that are going to be investigators on the trial, we were expecting maybe 9 months to 12 months in life for enrollment. The communication back to us is they feel like they can accelerate that. And Dr. Palmer, maybe you can comment on how they’re talking about velocity of enrollment.

Yes. I think that even with our quantitative market research and sort of hearing from 150 U.S. physicians, when you really talk to them one-on-one, they really don’t like heparin and they really don’t like citrate either although it’s sort of a necessary evil when a patient can’t tolerate heparin. They have told us that their use of CRRT has escalated since COVID and has remained escalated, and that’s certainly what our quantitative market research shows as well. So it’s – they’re seeing enrollment of this study, which again remembers only 80 active and 80 placebo patients, so it’s only a total of 160 for the study. They’re basically saying this can happen in a few months. So we’re really sort of having to rethink about how quickly we’re going to be able to get this clinical trial done.

Brandon, does that help answer your question?

Very helpful. Thanks so much.

Okay. Thank you.

Our next question comes from Ed Arce with H.C. Wainwright. Please go ahead.

Hi everybody, it’s Thomas Yip asking a couple of questions for Ed. So first, good to hear that [indiscernible] was filed. Can you give us some details when was the following formally accepted, and just trying to figure out the timing of the next steps if you can go over them?

Sure. So the filing occurred in the second half of April towards the end of April, and we got confirmation of receipt of that filing within 24 hours. The difference between an EU filing and typically an NDA filing is the NDA filing has to go through an electronic portal that requires some significant work. This is a less formal submission. We direct it to an e-mail with a pretty significant file that goes directly to the project manager. So it occurred in late April. We got confirmation of receipt very shortly thereafter.

Okay. So can you remind us, so let’s see, so 30 days, so when should you expect a response from the agency regarding when session should be expected?

And I’ll have Dr. Palmer weigh on this as well, but there is no set timeline with EUAs as there would be with a classic NDA submission where you have a PDUFA fee involved in regulatory restrictions on time for review, whether it’s a year, whether it’s 10 months, et cetera. I think the important aspect of ours is it does have already FDA breakthrough designation, so while we can’t handicap with the timing on the feedback will be – we do know that it gets that priority designation then based off of the breakthrough label that it has received. Dr. Palmer, did you have any additional color you might want to add to that?

No, you’re right. I mean, we don’t have any specific date. There isn’t any specific timelines that they’re held to for EUAs, but we’re moving very quickly forward with the clinical trial prep. We’re working final touches on investigator brochure. We’ve selected our CRO. We’re going forward with the protocol and we’re just moving very fast in that we think that’ll be quick. So regardless of sort of what happens with the EUA and the timing of that, we’re moving very fast towards the clinical trial and hope to get that wrapped up very quickly as well.

Got it. Got it, and thanks for the additional details. And then perhaps beyond the EUA, the registrational study for full approval, can you tell us what else is muted to get this study launched and I believe in the second half of this year. And what’s your estimated total spend on this registrational study?

I’ll have Dr. Palmer answer the first part of that question. And Raffi then maybe you can comment on the finances.

Yes. There’s – we’re just working towards getting access to that final batch of drug that we’re going to use for the clinical trial. And like I said, putting finishing touches on the protocol investigator brochure. We’re going to kick off the clinical research organization, the CRO that we selected, and we’re moving forward. So there’s really nothing that has stalled us out at all.

And Pam, would you comment that the enthusiasm for the participation is strong based off of our personal interactions with those potential investigators?

Yes. We’ve met with them both in-person at that meeting we mentioned down in San Diego, the AKI, CRRT meeting, as well as an ad board that we held a week later, and they are chomping at the bit, they’re very excited to get access to this product and to be enrolled in the clinical trial and promised they can get it done very quickly. So it’s just a matter of contracting with the sites and getting first patient enrolled and we’re off to the races.

And Pam, can you remind as well the primary endpoints of the study, so everyone’s aware of the agreement we have with the FDA and those endpoints points?

Sure. So as I mentioned earlier, its 80 active versus 80 placebo, and the primary endpoint is the activated clotting time over the first 24 hours. And so I think we feel very fortunate to have a pretty standard quantitative endpoint. It’s an objective endpoint that’s easily measured, comparing a very powerful anticoagulant to saline. So we’re very excited about the odds of hitting this clinical trial out of the ballpark.

And then Raffi, you may be the second portion of the question on the finances?

Yes. So the estimated cost that we have Thomas for the clinical study is about $7 million and that – if it’s accelerated, it’ll be a bit less, but that’s what we’re estimating right now.

Got it. Thank you so much for taking our questions, looking forward in progress for Niyad.

Thanks, Thomas.

Thank you.

Our next question comes from James Molloy with Alliance Global Partners. Please go ahead.

Hey guys, good afternoon. Thank you for taking my questions. Looking at the 29% no anticoagulant, 28% citrate markets, can you walk through where you guys see the pull coming from each of those markets? Should you get approval from Niyad and how does an EUA approval versus a full approval potentially impact your ability to enter into those markets?

Yes. So I’ll comment on the first part of that question. So we see the pull primarily coming from the no anticoagulant and citrate markets in bulk to a much lesser degree, the heparin market. Well, just because it’s inexpensive been around a while, and if a patient could tolerate it, it makes sense for them to actually use that. Although, as Dr. Palmer mentioned in our recent interactions with our advisory team, there was less satisfaction with heparin than we had originally anticipated. So I think the quote Dr. Palmer utilizes these physicians said, we have two bad choices right now, and they’re just trying to make the best of it between heparin and citrate. So when we consider those markets, the larger pull from the no anticoagulation in the citrate market, which again citrates only available today under an EUA, we’re estimating a market share penetration within the CRRT space only. That being the in-hospital dialysis where they’re receiving the dialysis for call it five to seven days, 24 hours a day at just over 19% market penetration. That’ll account for about half of the $200 million in sales at peak sales that we’ve currently estimated and obviously it appears a bit conservative. When we think about the market outside of the hospital, the classic dialysis, where the patients are going in and calling it 3 times a week for maybe three to five hours a session. Very, very, very large market of which we would get a smaller percentage, only about 5% to 6% of that market realizing that many of them in that particular may not need anticoagulation. Again, it’s shorter-term, but there’s a small portion of small subset according to our specialists that say, we’ll need it. So again, a modest penetration in that market of only about 6%, that makes up the other $100 million. So that gets us to your $200 million total in our preliminary forecast to date for peak sales, which again, we feel are more than reasonable and modest based off of our calculations and experience so far talking with the physicians. I think you had mentioned the second part of that, James, was EUA versus FDA approval?

Yes.

I think under an EUA you’ll be more apt to work with the institutions that have the larger centers and that they have a current specific protocol, whether it’s for citrate or for heparin, and have multiple machines kind of running at the same time. When I say multiple, not two or three, but 10 to 20, some of these institutions have 20 to 30 machines or even more. Those were where we would primarily advance our efforts early on because they tend to house the specialists or the thought leaders nationally and internationally within those institutions. And we would’ve limited resources at least to the start of the launch to penetrate anything beyond those large thought leader institutions. Whether it’s a fair amount of business outside of those, they’re spread a little bit more thinly and it’ll take more time to educate those particular institutions. I hope that helps answer the question on a ramp for EUA versus full approval. I think its full approval, and especially if we have a partner involved then we’ll be blanketing the U.S. in a more uniformed fashion. And I do want to reiterate that we are talking with partners as we speak for both ex-U.S. and U.S. commercialization.

Well, quick maybe a follow-up on that if I could please, on the three batches, the heparin, the citrate, and the no anticoagulant, the three groups of doctors out there. I presume in your estimates, you guys don’t have anything coming from the heparin group to be conservative, but of the sort of the 28% or in citrate rate, do you guys think you’ll get half of that or third of that and then of the no anticoagulant think you’ll get half of that or three quarters of that group, or I was sort of wondering how that breakdown with that $100 million, $200 million comes from within those groups again assuming the model…

Yes, to give you more specific – sorry about that. I should have been more specific. Raffi, you can give us some more of the details.

Yes. And without getting into all those details in terms of market penetration on each James, the – like Vince said, the biggest is going to come from that citrate and the no anticoagulation markets and that’s going to be probably close to 70% of the – 75% of that total peak sales opportunity. The heparin though, it there is, as we’ve been talking also to some of these physicians, they’ll use heparin, they don’t like it, but they’ll use it, if there’s nothing else available because citrate is so complex to use. They have to use, they feel like they have to use something, but citrate is so complex that they can’t use it. So we do expect to get some share out of that heparin market. It’s just not nearly as much as the citrate and no anticoagulant market.

Okay. Thank you for that. And then maybe my final question would be, I’m sure you guys are well aware, the challenges facing smaller companies with single products in the bag, even though obviously this is a much smaller sales force here. So a lot of the issues can be avoided, but what are your thoughts on bringing in additional products and how does that opportunity look for potentially in license something to put something else in the bag of this sales force?

Right now, honestly, we got our hands full because with the Niyad potential EUA, the completion of that study, et cetera. Niyad is clearly our primary focus, but we got things right on the back end of it with the two prefilled syringes. And again, while that won’t use much sales force, it’ll be contracting, but we’ll have other potential revenue streams from that as well. I think the other key, as far as licensing in, we’re always on the lookout for licensing in, but I think you have to remember that nafamostat or Niyad LTX-608 is a pipeline and a product with multiple other potential indications that we could pursue moving forward. We want to get these under our belt, get the revenue streams working accordingly the income statements, moving in the right direction and while will be opportunistic on bringing in additional products, we also don’t want to eliminate the opportunity to advance nafamostat or LTX-608 for the other indications.

Great. Thank you for taking my questions.

It take some of the pressure off before where we had no pipeline, we were only at the studio company, now we’ve got multiple avenues to head with the current assets within our portfolio.

Great. Thank you again.

Thanks, James.

This concludes our question-and-answer session. I would like to turn the conference back over to Vincent Angotti for any closing remarks.

Thanks, Jordan, and thanks to all of you for joining us today and your continued support of AcelRx. We’re clearly excited about the transformation through the progress we’ve made with Niyad in our pre-filled syringes. We’re going to remain focused on driving long-term shareholder value as a newly focused company with late-stage development, what we believe as high value assets going forward. We’ll look forward to answering any additional questions you might have offline and we’ll certainly continue to share with you our future developments and I’m excited about the progress we’ve made. So Jordan, thank you, and thank you all for attending.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.