Zalviso: The Good, The Bad And The Ugly Of The FDA's Complete Response Letter

| About: AcelRx Pharmaceuticals, (ACRX)


FDA sent a Complete Response Letter (CRL) late Friday.

Although no approval, no clinical trials requested.

Typical delay when no clinical trials are requested is 7-14 months.

Many of the concerns from the CRL were submitted as amendments which the FDA acknowledged they had not reviewed yet.

What is Zalviso exactly?

Zalviso is a drug-device combination being developed by AcelRx (NASDAQ:ACRX). This medication is a sublingual narcotic analgesia for post-operative patients. The drug itself is called Sufentanil and was originally created in 1974, so it is not technically a new medication on the market. AcelRx has paired the medication with a device that allows patients to administer the drug sublingually (underneath the tongue) to allow for a faster absorption, non-invasive, and more potent than other medications such as morphine. The goal is to decrease complications associated with typical IV pump analgesic medications, and since they do not require IV maintenance for administration, it allows higher patient mobility during prolonged care.

Zalviso has already been submitted for approval in Europe. In December AcelRx partnered with Grunenthal GmbH to market throughout Europe. AcelRx received $30 million with a total of $220 million available for milestones. AcelRx's submission for approval in Europe generated a $5 million milestone payment. Since December the company has also focused on the United States market and submitted Zalviso to the FDA. The FDA approval was expected on the 27th, and late Friday night the FDA sent the Complete Response Letter (NYSE:CRL).

The Ugly

The bad news first... from the press release from AcelRx, it appears Zalviso System was not approved. Based on the requests in the CRL, AcelRx expects to have a reply for the FDA and they aim to resubmit by the end of 2014. President and CEO Richard King expects to have a better idea of the time frame on approval after further discussion with the FDA. A conference call is set up for Monday morning at 8:30 AM. This might help give some guidance prior to market open.

Those who have been holding their shares long have been hoping for good news soon. This isn't quite the good news they were hoping for. Fortunately, this isn't bad news either, as it wasn't denied approval outright. The FDA wants more information on the system.

The Bad

The FDA has asked for a variety of extra information on the Zalviso System. According to the press release from the company, "requests include provision of bench data demonstrating a reduction in the incidence of optical system errors which require premature drug cartridge change, changes to the Instructions for Use for the device, and additional data to support the shelf life of the product."

While there may be further requests that were not outlined in the press release, it seems that these extra requests aren't exactly overwhelming. The information on optical system errors for premature drug cartridge changes ensures that all of the medication is delivered from the cartridge. Zalviso will be a controlled substance, and thus you wouldn't want any narcotic in the cartridge that gets discarded.

The shelf life request should be fairly simple to respond to as well, as the medication itself has been around for 40 years. There should be plenty of research on the shelf life already, although they may have it in a different form as it is now a new delivery route. The information found on this part of the request will help on the other pipeline drugs that AcelRx has, as each one is a sublingual version of Sufentanil that focuses on different specific care settings or pain events.

The company says that they added amendments to the NDA that should satisfy many of these requests. The FDA acknowledged that they have not reviewed the amendments prior to issuing the CRL. Communication between AcelRx and the FDA may help speed up the approval process if these amendments cover the requests from the FDA. More news from the company will help give guidance for the time table towards approval.

The Good

There were no further human trials that were requested by the FDA. While this isn't a de facto approval of the system, it shows that the FDA has enough faith in the prior clinical trials that they don't require any further to approve the drug system. This is a huge win for the company, as extra clinical trials would be lengthy and expensive. Since the drug has also been submitted in Europe, use overseas may help to provide some extra information on the device side of the requests from the FDA. This means that approval is on the horizon, as soon as these extra requests from the FDA have been addressed. AcelRx is still able to focus on milestones for the European market, which can help generate tremendous revenue for the company.

The drug itself is far superior to Morphine or Fentanyl, which are both standard for pain management in care settings. The drug has a faster onset time, less risk of respiratory depression and lower incident of cumulative side effects. The company is developing a pipeline that spreads the use of Sufentanil (the actual drug in the Zalviso system) across a variety of areas of care settings. Lessons learned in this current FDA process will help moving forward, but it seems that the focus from the FDA was on the hardware side, which doesn't factor in the other clinical trials. Ultimately, this is their first FDA approval, so while investors want to see the company get the approval on the first round, the learning curve and lack of hardware should make future FDA processes smoother.

Bottom Line

We have the Good, the Bad and the Ugly. Ultimately, the CRL provides the insight that the drug is going to be approved, and approved without any further required clinical trials. There are some fringe concerns about the system, but the core of the system isn't being brought into question. As investors, we were hoping for the approval on the 27th, but while this blanket approval didn't come today, it is going to be coming soon. A study shows the impact on approval times, finding that when no additional trials are requested, the delay is likely 7-14 months. If the FDA requests "long term" data, then the request is typically on the 14 month end of that range. With the fact that the company has already submitted amendments makes me believe that this will probably be fairly close to the 7 month range, if not sooner. Keep an eye on this stock, but check back around Q1-Q2 2015 for the final approval. This may give AcelRx time to focus on finding a marketing partner in the interim, as there is an extremely high probability of approval in that time frame.

Disclosure: The author has no positions in any stocks mentioned, but may initiate a long position in ACRX over the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Purchased September Calls.

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