In the U.S. there are approximately 12 million surgical procedures annually, resulting in patients experiencing moderate-to-severe pain, with an additional 7.4 million hospital inpatients experiencing moderate-to-severe acute pain from other, non-post surgical, medical conditions. Post-operative pain is generally underestimated and undertreated. Approximately 70% of surgical patients experience a certain degree (moderate, severe or extreme) of post-operative pain. The results of inadequate treatment include increased morbidity and mortality, mostly due to respiratory and thromboembolic complications, increased hospital stay, impaired quality of life, and development of chronic pain. The majority of these postoperative patients typically receive intravenous self-administered patient-controlled analgesia pumps (PCA) to manage their moderate to severe pain. IV PCA with morphine or hydromorphone is currently the standard of care allowing patients to manage their own medication to suit their pain needs. However, several limitations exist opening the door for innovative therapies to potentially reap the rewards. AcelRx (NASDAQ:ACRX) is a specialty pharmaceutical company developing an innovative therapy that could potentially challenge the current standard of post-operative care. AcelRx has set the stage for success with an experienced management team, sufficient cash to fund operations, a lead product with superior efficacy and safety compared to the current standard of care, and large insider and institutional ownership. This article will demonstrate why I believe AcelRx is one of the lowest risk-high reward biotechs around.
AcelRx 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 is Zalviso (Sufentanil NanoTab PCA System) or ARX-01. Zalviso has successfully completed three Phase III clinical studies in post-operative pain following abdominal or orthopedic surgery. The company has 3 other products in development and each have successfully completed a Phase II clinical study. ARX-02 Sufentanil NanoTab BTP Management System for cancer breakthrough pain (BTP). ARX-03 is a NanoTab product administered sublingually to provide mild sedation, anxiety reduction and pain relief prior to a painful procedure in a physician's office. ARX-04 a sublingual sufentanil product candidate designed to provide a non-invasive, fast-onset treatment for patients with moderate-to-severe acute pain, both on the battlefield and in civilian settings of trauma or injury. Post-operative pain treatment is a large growing market that exceeds $5 billion in annual sales based on estimates for the U.S., Japan and the five largest EU countries combined. When the additional non post-surgical patients are factored in the market size increases to over 8 billion.
Zalviso (Sufentanil NanoTab PCA System) is designed to manage moderate to severe pain in the hospital setting and specifically to address the limitations patients encounter with IV PCA. The NanoTab is a tiny sublingual pill containing the opioid Sufentanil. Sufentanil is a powerful synthetic opioid analgesic drug, approximately 5 to 10 times more potent than its analog, fentanyl. Cartridges containing 40 NanoTabs are loaded into the PCA system allowing patients to deliver their medication as needed within the pre-programmed settings of the device. The Sublingual route of delivery minimizes the risk of IV-related analgesic gaps and eliminates the risk of IV complications. The Pre-programmed PCA system designed for sufentanil NanoTab delivery eliminates the risk of pump programming errors. Zalviso produced a significantly faster onset of pain relief and reduction in pain intensity compared to IV PCA morphine that separated at 45 minutes and achieved statistical significance at 1, 2 and 4 hours (p<0.01). In three Phase III studies completed with sufentanil NanoTabs, the average time interval between doses was approximately 80-90 minutes. This time interval is impressive and demonstrates the durability of an analgesic effect compared to IV PCA of 20-40 minutes intervals between doses.
On 11/15/12 the company reported top line results from the first of three Phase III clinical trials. Utilizing a randomized, open-label, parallel-group design, this first study enrolled 359 adult patients at 26 U.S. sites and compared efficacy and safety of sublingual Sufentanil NanoTab PCA System (15 mcg/dose) to the current standard of care, IV PCA with morphine (1 mg/dose) for the treatment of acute post-operative pain immediately following major abdominal or orthopedic surgery. Top-line results of the Phase III clinical trial demonstrated that the Sufentanil NanoTab PCA System was non-inferior (p<0.001) to IV PCA morphine for the primary endpoint of PGA over the 48-hour study period as determined by the combined percentage of patients with PGA ratings of "good" or "excellent" (78.5% vs. 66.1% respectively). The NanoTab System was statistically superior to IV PCA morphine for the PGA endpoint (p=0.009). This statistically superior PGA was also seen at the 24-hour and 72-hour time points. Additionally, the percentage of patients rating the NanoTab System as "Excellent" were higher than those rating IV PCA morphine as excellent (42.9% vs. 30.6%, p=0.016) Nurses setting up the different treatments for use and managing patients in the study reported that they had greater satisfaction (3.93 vs. 3.32 out of 5, p<0.001) and overall ease of care (4.26 vs. 3.82, p=0.018) with the Sufentanil NanoTab PCA System compared to IV PCA morphine. Likewise, patients in the study reported that they had greater Overall Satisfaction (4.15 vs. 3.83 out of 5, p=0.003) and greater Overall Ease of Care (4.45 vs. 4.07, p<0.001) with the NanoTab System compared to IV PCA morphine. Two pivotal placebo studies also demonstrated significant efficacy of Zalviso compared to placebo, and adverse events between the two studies were mild to moderate and similar between the treatment group and placebo. The strong Phase III data allowed the company to submit the NDA for Zalviso to the FDA on September 30th this year. Below is a list table that summarizes how Zalviso could address certain unmet needs of IV PCA
Key Features and Potential Benefits of Zalviso
Unmet Need- Current Standard of Care (IV PCA)
Preprogrammed PCA system designed for sufentanil NanoTab delivery eliminates the risk of pump programming errors.
Zalviso produced a significantly faster onset of pain relief and reduction in pain intensity compared to IV PCA morphine that separated at 45 minutes and achieved statistical significance at 1, 2 and 4 hours (p<0.01).
Due to the narrow therapeutic window for opioids and the complexity of IV PCA, the potential for patient harm due to medication delivery errors is high. The most common and serious types of errors involve human factors, such as mistakes in programming or administering the wrong dose.
In three Phase III studies completed with Sufentanil NanoTabs, the average time interval between doses was approximately 80-90 minutes. This compares favorably to the typical re-dosing intervals for IV PCA of 20-40 minutes demonstrating the durability of analgesic effect.
Due to the brief duration of effective analgesia that results from each IV PCA dose, patients need to frequently re-dose to maintain analgesia. Based on the mean use of morphine during the first 24 hours of PCA use, a retrospective study of patients receiving IV PCA morphine suggested that patients needed to re-dose every 20-40 minutes to maintain analgesia.
In our active comparator Phase III study, there was statistically fewer patients in the Zalviso group that experienced oxygen desaturation to a level less than 95% compared to the IV PCA morphine group (p=0.028).
Published data indicates a high rate of somnolence (approximately 50%) and oxygen desaturation (approximately 10%) using standard IV PCA with standard opioids such as morphine.
Postoperative pain treatment is a large growing market that exceeds $5 billion in annual sales, based on estimates for the U.S., Japan and the five largest EU countries combined. When the additional non-post surgical patients are factored in the market size increases to over 8 billion. It won't be easy to unseat the current standard of care, but Zalviso Phase III studies demonstrated superior efficacy and safety and combined with the additional benefits to patients and nurses the therapy will be a worthy competitor.
The ARX-02 Sufentanil NanoTab™ BTP Management System is a potential new treatment option for cancer patients who suffer from BTP. ARX-02 demonstrated a rapid onset of pain relief (10 minutes) in Phase II clinical studies. Cancer patients in the United States experience episodes of pain that "break through" the regular baseline pain medication. Typically, this breakthrough pain (BTP) reaches maximum intensity within 5-10 minutes after onset, and the pain flare lasts 15-60 minutes. The occurrence of these BTP episodes is unpredictable, and patients may experience several episodes per day.
Key features and benefits of ARX-02
Limitations of currently available products
Improved pharmacokinetics with a consistent Tmax (time to maximum plasma concentration) and a short elimination half-life, closely matching the timing of a BTP episode. This could minimize over-medication once the pain flare has resolved and allows for re-dosing during subsequent BTP events.
Inconsistent Tmax that ranges from 20 to 240 minutes, and can result in erratic onset of action and the potential for dose-stacking.
Effective and well tolerated for the management of BTP. The majority (86%) of patients achieved an effective and tolerable dose during titration in the Phase II study.
Local adverse events, such as dental caries and oral mucosal irritation.
Packaging technology that enhances patient safety by reducing the possibility of misuse or abuse, while providing healthcare professionals with usage data.
Drug packaging that lacks effective deterrence against abuse and misuse
Rapid onset of pain relief (10 minutes after dosing in Phase II clinical studies).
long elimination half-lives
ARX-02 provides Sufentanil, an alternative opioid for treatment of BTP. Sufentanil may provide efficacy and/or safety advantages in certain patient populations
The prescription volume for oral trans mucosal products for the management of cancer BTP is estimated to be 220,000 prescriptions per year. AcelRx has already completed an end-of-Phase II meeting with the FDA.
ARX-03 is a NanoTab product candidate designed to be administered sublingually to provide mild sedation, anxiety reduction and pain relief prior to a painful procedure in a physician's office. AcelRx reported positive results from a Phase II trial assessing the safety, tolerability, and efficacy of ARX-03 in patients undergoing elective low-volume liposuction procedure. Also, AcelRx completed an end-of-Phase II meeting with FDA.
Key benefits of ARX-03
A non-invasive approach to mild sedation, anxiety reduction and pain relief
Sublingual product that is easy to administer
Rapid onset of effect. (Onset of sedation and anxiety reduction in 15-30 minutes was observed in the Phase II trial)
Physician or nurse administered
Patient discharge time is unaffected.
Each year in the United States, more than 100 million procedures that are potentially anxiety-inducing and painful take place in a physician's office. These procedures include interventional radiology procedures, diagnostic procedures such as breast and prostate biopsies, cosmetic procedures such as liposuction and dermal abrasions, and therapeutic procedures such as vasectomies and endometrial ablation procedures.
ARX-04 is a product candidate in development for the treatment of moderate-to-severe acute pain, consisting of Sufentanil, a high therapeutic index opioid, in AcelRx's proprietary NanoTab technology that enables rapid sublingual absorption when the NanoTab is placed under the tongue. Due to the product's fast onset it could have potential applications both on the battlefield and in civilian settings of trauma or injury. The product could also have potential applications in emergency situations where access to IV analgesics is not available. With a $5.6 million grant from the US Army Medical Research and Materiel Command (USAMRMC), ARX-04 has successfully completed Phase II clinical trials wherein we have identified the effective dose (30 mcg of sufentanil per NanoTab) to transition into Phase III.
CEO Richard King has an impressive resume to say the least. Most recently he was the CEO of Terica Inc., which was acquired by Ipsen Biopharmaceuticals for $450 million, a 104% premium to Terica's share price. Prior to Terica he served as vice president of commercial operations at Kos Pharmaceuticals. Kos was acquired for a hefty premium of 54% by Abbott. King has a B.S. in chemical engineering and received his MBA from Manchester business school, considered one of the top MBA programs in the world. The rest of the management team carries equally impressive credentials. For a more in depth look at the management team take a look at an article by Scott Matusow. The article discusses the details of 13 buyouts the current management team has been involved in. Scott and his team also make a strong case for the possibility of AcelRx to be acquired.
Cash to fund operations
AcelRx has 76 million in cash and cash equivalents as of 9/30 and the company believes it should be enough to carry them through 2015. On July 17th this year the company announced a proposed offering of common stock. The offering was not surprising given the success of the company's lead product Zalviso and additional cash needed to bring the product to market. What did surprise investors was the pricing of the offering announced the following day. The price was 11.65 for 4.37 million shares. A bold move by an experienced management team to price the offering 2% lower than the previous day's closing price. Unlike the majority of biotechs that plummet on news of dilution, AcelRx investors saw the move as a clear sign of confidence by management on the value of the company. The offering was closed within 5 days netting the company $47.9 million in cash. On the recent Q3 earnings call, management noted they believe current cash and cash equivalents and investments including funding from the recently completed public equity offering are sufficient to fund operations into 2015.
Stats on insiders and institutions
In the last 6 months, 2.5 million shares have been bought on the open market by insiders. The total shares held by insiders are roughly 21 million or about 49% of outstanding shares.
On September 30th AcelRx submitted their NDA for Zalviso to the FDA. The FDA typically responds within 60 days as to whether or not they will accept an NDA for review. AcelRx has completed pre-NDA meetings with the FDA drug and device divisions, which further add confidence that the NDA will be accepted. Upon acceptance the FDA will review the NDA for 10 months with a PDUFA date likely in the third quarter of 2014.
The company has been actively seeking a partner to license its products in hospitals outside the U.S. The NDA acceptance could be a trigger for potential partners, as it further de-risks the story.
The company plans to meet with the FDA later this quarter to complete an end of Phase II meeting and define the Phase III study. The result could draw additional grants from the U.S. Army medical research.
PDUFA for Zalviso
If the NDA is accepted for review, a PDUFA date should be set for the 3rd quarter 2014.
The company plans to file in the European Union (EU) after the U.S. submission.
The chart below looks at trading patterns based on positive catalysts over the past year. As you can see the stock reacts nicely to positive news and then tends to drop off.
AcelRx is one of the lowest risk biotech stocks with major catalysts on the horizon. An experienced management, strong clinical data, enough cash to operate well past the PDUFA date, strong insider buying and institutional ownership. Investors will be rewarded as the stock should gain significant momentum within a few days when the NDA is accepted. The additional catalysts plus the run up to the PDUFA date will propel the stock price to new highs. At today's price of $8 per share investors can buy the stock at a 32% discount to the recent July offering price of $11.65. With the current short interest of 24% any positive news could send shares up dramatically, as short sellers scramble to cover losses. I have a price target of $14 prior to the PDUFA date and $16-20 if approved. Investors should note the risks surrounding FDA drug approvals. While the data is strong there are no guarantees of FDA approval. Furthermore, if approved, Zalviso could face additional competition in the post-operative pain market.
Disclosure: I am long ACRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.