AcelRx Pharma: Pain Drug Developer With A Pair Of Q1 2013 Phase III Catalysts

| About: AcelRx Pharmaceuticals, (ACRX)
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AcelRx Pharmaceuticals (NASDAQ:ACRX) is a pain drug developer with lead product candidate Sufentanil NanoTab PCA System (ARX-01) (sublingual patient-controlled pain relief in a hospital setting) that is being evaluated in a pair of ongoing pivotal Phase III clinical trials ( IDs NCT01539642 and NCT01660763) as outlined below.

Last month, ACRX reported that the first of three pivotal Phase III clinical trials met the primary endpoint of non-inferiority vs. patient-controlled analgesia or PCA morphine (IV pump system) for patient-directed, post-operative pain control. The less invasive and less complex route of sublingual pain drug delivery in the hospital setting would be a major improvement over the current use of IV-based pain pumps that must be programmed and are more invasive to the patient as an IV line must be kept open and free of infection.

The Company expects to report results from the remaining two pivotal Phase III clinical trials during Q1 2013 following abdominal surgery and hip or knee replacement to support a planned NDA filing during Q3 2013 along with a centralized European approval filing to follow.

ACRX is also evaluating Sufentanil Single-Dose NanoTab (ARX-04) in a Phase II clinical trial ( ID NCT01710345) that began early last month. The Company expects to enroll about 100 subjects following bunionectomy (type of foot surgery) w/ estimate for results during H2 2013. This pain drug is being developed with $5.6 million in US Army Medical Research grant support.

Below is a summary of the financial highlights for ACRX as of the most recently reported Q3 2012 results:

- As of 9/30/12, ACRX reported cash and equivalents of $23.4 million.

- As of 10/15/12, ACRX reported 22.6 million shares of common stock outstanding with $17.7 million in total debt.

- ACRX used $18.8 million in cash to fund operations during the first nine months of 2012.

- In early June, ACRX closed a $10 million private placement that included some of the Company's Board members for the sale of units priced at $3.40 that resulted in the issuance of 2.9 million shares of common stock and five-year warrants for the potential purchase of 2.6 million additional shares of common stock @$3.40/share.

- Earlier this month, ACRX priced a much larger public offering for the sale of approximately 14.4 million shares of common stock at $3.31 - increasing the number of outstanding shares of common stock by over 50% to about 37 million while significantly strengthening the Company's balance sheet with estimated net cash proceeds of $44.2 million.

- Earlier this month, a SEC 13G filing was made to report a new 5 million share, 14.25% ownership stake (non-activist) in ACRX by Perceptive Advisors.

Given the completion of the public offering to provide a strong cash runway of 12+ months through the planned US and EU regulatory approval filings later next year and positive results in the first Phase III trial, shares of ACRX are poised for a strong run-up (mid-upper $4 target) heading into results from the remaining two Phase III trials for lead pain drug candidate, Sufentanil NanoTab PCA System. The significant increase in shares outstanding should also improve the liquidity (trading volume) in ACRX since the float was very low prior to the offering due to a high level of insider ownership.

I estimate a high probability (i.e. 80%) of success in the remaining Phase III trials given the positive results versus active comparator (IV morphine) in the first Phase III trial and design of the remaining trials (i.e. compared to placebo) with the potential for a spike to the $5-6 range on positive results in the two remaining trials; although a run-down back toward the $4-5 range seems likely after both trials given no major expected catalysts remain until the regulatory approval filings are submitted (3Q13 estimate).

In the unexpected event that the remaining Phase III trial(s) fail, shares of ACRX are likely to decline significantly (i.e. over 70%) given Sufentanil NanoTab PCA System is the Company's late-stage product candidate with no other late-stage pipeline assets. However, failure in the remaining Phase III trials appears unlikely given success in the first Phase III trial vs. IV morphine PCA pump and the design of the remaining trials vs. placebo.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.