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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome to the AcelRx Third Quarter 2023 Financial Results Conference Call. This call is being webcasted live via the Events page of the Investors section of AcelRx's website at www.acelrx.com. This call is property of AcelRx. Any and any recording, reproduction or transmission of this call without the expressed written consent of AcelRx is strictly prohibited.
As a reminder, this webcast is being recorded. You may listen to a replay of this webcast by going to the Investors section of AcelRx's website. And now I would like to turn the call over to Raffi Asadorian, AcelRx Pharmaceuticals' Chief Financial Officer.
Thank you for joining us on the call today. This afternoon, we announced our third 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 Vince Angotti, our Chief Executive Officer; and Dr. Pam Palmer, AcelRx's Founder and Chief Medical Officer.
Before we begin, I want to remind listeners that during this call, we will 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. These documents can be found on our website within the Investors section. I will now hand the call over to Vince.
Thank you, Raffi, and good afternoon, everyone. Today, we look forward to updating you on Niyad, AcelRx's lead nafamostat program as well as other highlights of our business. For those of you who have followed AcelRx over time, you know that our focus on product candidates for use in the medically supervised setting has greatly evolved from acute pain. We're now at a stage where we're focusing our expertise in drug development on a very different area of unmet medical need, specifically dialysis.
Our lead product candidate, Niyad, is a novel anticoagulant for use during dialysis and has received the Breakthrough Device designation from the FDA. At the close of the third quarter, we were pleased to receive approval for our Niyad IDE, allowing us to proceed with the registrational study for what could potentially become the first FDA-approved regional anticoagulant for the dialysis circuit. We recently completed our investigators meeting where the participants expressed excitement at the prospect of the near-term availability of an ultra-short-acting anticoagulant for use in CRRT.
We'll now proceed with our registrational study known as the NEPHRO CRRT study. The nafamostat efficacy in Phase III registrational continuous renal replacement therapy study. This 166-patient study will evaluate Niyad versus placebo, measuring clinical endpoints that have been agreed upon with the FDA. Based on the results from this study, we plan to submit a premarket approval, or PMA, application in the second half of 2024.
In terms of market opportunity, we estimate Niyad to have a peak annual sales potential of over $200 million in the U.S., and this is attributed to just the inpatient and outpatient dialysis markets, excluding use in any other extracorporeal circuits. Note that our estimate and peak sales potential assumes modest penetration into these markets, specifically attaining only about a 20% share of the current in-hospital CRRT market and 6% of the dialysis market outside of the hospital.
Our interactions with leaders in the field of nephrology have 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. In fact, as announced yesterday, we're hosting a key opinion leader panel discussion on December 6, with thought leaders in nephrology and critical care to discuss the use of anticoagulation in dialysis circuits and the NEPHRO Study protocol.
At this point, I'd like to turn it over to Dr. Palmer to briefly expand on this.
Thank you, Vince. Good afternoon, everyone. As Vince mentioned, we are hosting a KOL panel discussion on Wednesday, December 6, with experts from 2 prestigious institutions. Joining us for this event are Dr. Laurence Busse of Emory University School of Medicine and Dr. David Boldt of UCLA School of Medicine. They are experts in continuous renal replacement therapy and our principal investigators in the NEPHRO CRRT Study.
The panel discussion will focus on the current approach to anticoagulation in the dialysis circuit informed by our market research study, for which both physicians are coauthors on this study to manuscript recently submitted for publication. We will also discuss the NEPHRO Study protocol with doctors Busse and Boldt at this event. A live question-and-answer session for analysts will follow the panel discussion.
With Niyad's breakthrough device designation, open discussion with the FDA allowed an efficient IDE submission, an agreement with respect to the protocol's patient population, key endpoints and inclusion/exclusion criteria. The primary endpoint of the study is assessing the activated clotting time, or ACT, resulting from the administration of Niyad to the dialysis circuit compared to the ACT in the placebo sailing group over the first day of CRRT. We believe that this should be a straightforward primary endpoint to achieve since those patients on placebo will not be receiving any anticoagulant and therefore, their ACT would not be expected to increase. Secondary endpoints include duration of filter life before clotting occurs and the number of transfusions required due to red blood cell or platelet loss.
As a reminder, Niyad is being regulated by the FDA as a device. Since the mechanism of action of Niyad is within the dialysis circuit and not the patient. This serves as an advantage for us to efficiently move Niyad towards approval since device studies typically require much lower patient exposures than drug studies. The feedback that we have heard from clinical sites is that enrollment should be robust, allowing top line data mid-2024 and a PMA submission soon thereafter.
I will now turn the call back over to Vince.
Thank you, Dr. Palmer. Knowing that nafamostat has been a standard of care for CRRT in South Korea and Japan, with decades of use and a favorable safety profile, we're confident in the success of this study as it is evaluating nafamostat versus saline as the placebo for activated clotting time. As Dr. Palmer stated, based on study timing, we plan to prepare a PMA submission to the FDA in the second half of next year. This would enable us to potentially launch Niyad in the first half of 2025. We're proceeding with early-stage commercial planning after already receiving an ICD-10 CMS procedural code to facilitate reimbursement.
Now just a few words on our prefilled syringe candidates. The need for prefilled syringes is clear since their availability offers a significant improvement and advantage for the overall health care system, including less waste, improved safety and the convenience of not having to dilute and prepare the syringe in advance of procedures. Our Fedsyra prefilled syringe containing the anti-hypotensive ephedrine is the first of 2 prefilled syringe product candidates in our pipeline that is closest to an NDA filing. Following our capital raise in the second quarter, we have continued to prioritize resources on the development of Niyad and are evaluating the timing of the NDA submission for Fedsyra.
AcelRx has evolved quite a bit over the past 18 months, and we're now a very different company than we were just a few years ago. To round out our transformation, the transition of DSUVIA to Alora Pharmaceuticals is still ongoing, and AcelRx continues to support Alora to facilitate their success. We expect their focus to turn to commercial activities early next year to supply chain transition is completed. As a reminder, AcelRx is being reimbursed by Alora for all support provided during the transition.
We continue to lead the relationship with the Department of Defense, or DoD, to ensure continued engagement. The DoD is the single largest DSUVIA customer and has been recently placing orders on a more regular basis. Third quarter DSUVIA demand from the DoD was comparable to the second quarter, but revenue recognition was impacted by the timing of certain shipments. In addition, the DoD has entered into a contingency contract with a wholesaler who must now maintain a minimal amount of inventory on hand, with rapid replenishment requirements.
Finally, the completion of the DSUVIA early evaluation of pain, or DEEP trial, sponsored by the DoD at the University of Pittsburgh Medical Center will be a key milestone. This study is expected to be completed in the first quarter of next year. And of note, the DoD granted UPMC a total of $11 million, including support of the DSUVIA trial, the results of which may lead to additional DoD branches adopting DSUVIA. As a reminder, we received a 75% royalty on all sales to the DoD, a 15% royalty on non-DoD commercial sales and up to $116.5 million in sales-based milestone payments from those commercial sales.
Now I'll hand the call over to Raffi to take you through the details of our third quarter financial results.
Thank you, Vince. We ended the quarter with $13.4 million in cash and short-term investments. This includes the capital raised through the financing closed in July with new and existing health care investors. This financing provides capital of up to $26 million upon the exercise of the milestone-based warrants, including $10 million of gross proceeds that were made immediately available. These new investors appreciate the value of Niyad and have been extremely supportive of management as Niyad development progresses and with the clinical study about to begin.
Revenues for the third quarter of $0.1 million were generated primarily from royalties on the sales of DSUVIA, principally from sales to the Department of Defense on which we earn a 75% royalty from Alora. As Vince mentioned, the quarter was negatively impacted by timing of shipments in the quarter, which are expected to be realized in the fourth quarter of this year.
Our combined R&D and SG&A expenses in the third quarter totaled $3.4 million compared to $4.5 million last year, and excluding noncash related expenses, was $3 million in Q3 2023. We remain on track to stay within the range of our full year 2023 combined R&D and SG&A expense guidance, excluding noncash expenses of $16 million to $20 million. We expect fourth quarter R&D and SG&A expenses, excluding noncash expenses to increase from the third quarter as we begin our clinical study. We anticipate top line data of this clinical study by the middle of next year, so we expect expense levels over the next several quarters to be higher than levels we've seen over the last 2 quarters. We will provide further financial guidance for 2024 at a later date.
I'll now turn the call back to Vince.
Thanks, Raffi. Now I'd like to open the line for any questions you might have. Operator?
[Operator Instructions] And our first question comes from Ed Arce with H.C. Wainwright.
This is Thomas asking a couple of questions for Ed. So first question for the NEPHRO CRRT Study. Can you discuss what's your estimated timeline to -- for enrollment in order for the next 2024 readout? And also given the start day as we approach the end of the year, how -- do you anticipate a slower pace around Christmas and New Year time frame?
Yes. It's Pam here. These are ICU patients. So in fact, the holidays really don't affect their enrollment whatsoever. They have acute kidney failure, unfortunately, sort of regardless of the time of year. So we don't anticipate coming into the end of the year here, your normal clinical trial slowdown that you would see with many studies. With -- it's a small study. So as far as last patient out until top line data, there shouldn't be a large delay, but we'll be making sure we clean up the database as time goes on. And so there shouldn't be a large lag. So we're expecting the study to end sort of mid-next year and then also have top line data soon thereafter at about the same time.
Understood. Perhaps more detail around the NEPHRO CRRT Study. Of the 10 ICU centers that were selected for this study, can you describe some major attributes for the selection?
The patient selection?
The site selection.
The site selection, sorry. The site selection are actually major academic centers. They are the top names in this field. In fact, many of them were our advisers or are our advisers when we took on Lowell and looked at this protocol and had to reach out to folks who are knowledgeable in this area to help us define inclusion/exclusion criteria, et cetera. Also, when we did our quantitative market research to help us analyze that data we relied on these folks. So they're also the co-authors in that manuscript that's been submitted. So that's really who we're leaning on for the clinical trials as well. And they're sort of -- they all know each other, they're all friends, and it's a small tight-knit community, and it's the major centers, Emory, UCLA, various centers like that.
Got it. And then perhaps just one last question from us, and then we'll jump back on the queue. But assuming NEPHRO CRRT's study data positive, which we will expect to be a key component of PMA. Can you outline what are some other major components of the PMA for Niyad?
Maybe talk about -- components or end points of the study, you mean components of the PMA?
Yes. Yes, components of the PMA in addition to the registrational study data?
Yes. Yes. So there's going to be just a couple of preclinical tox studies that are very short and easy to run. We'll be doing that concurrently with the trial. And of course, there's our stability data as well that we're actually generating right now.
Maybe expand on the secondary endpoints, just quickly. I know we mentioned them, but just to reinforce what he asked.
Yes. For the clinical endpoints on the trial, the primary endpoint is activated clotting time over the first 24 hours. And then the secondary endpoint is looking at that same activated clotting time over the first 72 hours, along with the number of transfusions, filter changes due to clotting, et cetera, the first 72 hours. So all the primary and secondary endpoints are over within 72 hours, and therefore, a completer is somebody who's gone through the study for at least those 3 days. They can be enrolled up to 7 days per the protocol, but they will be considered a completer after just 3.
The next question comes from James Molloy with Alliance Global Partners.
I had a question on -- I'm presuming good data and ultimate FDA approval. Can you walk through a little bit the opportunity to potentially taking from heparin or citrate. And obviously, there's 30% of people out there, no anticoagulant, citrate is where you're going to be trying to grab from as well. Is there an opportunity to try to take from the 43% of heparin as well?
Yes. So you know that that's considered often a standard of care. One thing I'll ask Pam to do quickly is -- and then we'll address that question further, is maybe you can comment, Pam, on what is considered standard of care at many of these clinical sites that are involved in the trial to give them some type of flavor.
Yes. Well, and I think that 43% that James mentioned, it comes from our quantitative market research where we asked 150 physicians, about half were nephrologists and half are critical care specialists, what is the current state of the state-of-the-art with anticoagulations as it relates to CRRT and 43% said -- 43% of the patients are getting heparin. And the rest of it, the other 60% is split evenly between getting no anticoagulant or getting citrate. And so each of these sites that we're actually enrolling in the study, there is no United States sort of standard of care. They're sort of all over the map, and they'll admit that. We've got sites that don't use any anticoagulation at all. We have sites that are only using citrate. We have sites that are only using heparin or nothing. And it's -- so it's really interesting how when you don't have good options, you have a very sort of fractured approach to clinical protocols. So we're really hoping with nafamostat to streamline that and finally give them a good option that they can use in many patients. So I think we'll be pulling mainly from the -- commercially, we'll be looking at folks who aren't using anything or using citrate, and we'll break into that market. But I actually believe that there's many folks that are getting -- that are using heparin in patients they otherwise don't think it's really a good option, and I think we could also erode into that as well.
So when we've communicated commentary about our potential peak sales, the bulk of that is really coming from citrate, no anticoagulation. So anything we generate from those patients that are where the site is utilizing heparin at risk because they're either ill-equipped to use citrate and don't want to not anticoagulate. We think that there's opportunity to get that. But that has not really been a significant or any part of our projections to date. So that would certainly be upside.
All right. I think you guys talked a little bit about the potential for -- potential to go into the intermittent hemodialysis market. Can you talk a little bit has your thinking evolved on that at all? Is there an opportunity there to go to that space beyond the continuous?
Yes. I mean it's extracorporeal circuit, it's got the same problem that CRT has. Blood hits a foreign object and it starts to clot, and there's not any really good options for that as well. The patients with intermittent hemodialysis tend to not be as sick as the folks who require continuous renal replacement therapy. So many more of them can tolerate heparin. So that's why it was not as big a market as far as the percentage, but the actual denominator is much larger than CRRT. So that is something that would benefit from nafamostat as well, and we've just got to make sure that we're blocking and tackling in all those arenas.
Jim, I'm going to circle back to the previous segment of that question as well, where you asked, in particular on CRRT, is there an opportunity potentially to take any of that market share away from heparin. I think it's important to understand, and Dr. Palmer, you can comment on this. When patients -- or I'm sorry, the sites are going to use nafamostat, can you clarify, is there any new training or difference relative to what they typically do with heparin when they utilize nafamostat?
No. And that's the beauty of nafamostat is that it's as simple to initiate as heparin. And that's why heparin has been used for so long. It's very simple. Citrate avoids the bleeding risk that heparin has but it's got so many other risks, and it's very difficult to run for these sites. And so, to simplify the treatment, get back to something as simple as heparin, which is understand nafamostat would do with potentially much less bleeding and some of the other problems with heparin like heparin-induced thrombocytopenia or heparin resistance. It's just -- it really is going to make it hopefully be an anticoagulant that is easy to use in all the patients and straightforward with the nurses and will be rapidly adopted.
Okay. Maybe last question for me, then I'll hop back in the queue. Looking down the road, is there other opportunities that you guys are seeing beyond, obviously, the prefilled syringes to complement nafamostat and your sales team?
Yes. So first of all, we'll be evaluating the potential development opportunities with LTX-608 where they've already been proven ex-U.S. Pam, some of those disease states again are...
Yes. Acute pancreatitis, disseminated intravascular coagulation.
Are actually approved indications ex U.S., and there's other potential applications as well. So again, I'll reiterate that LTX-608 really is a pipeline and a product for us. And our goal, of course, in the short term is to get it across the finish line as efficiently as we can over the course of this next year. Beyond that, we are in business development discussions. We have the business development discussions, in particular, ex U.S. for some parties that are interested in Niyad. So we'll continue to evaluate those opportunities moving forward, but want to be sure that we absolutely maximize the value of this asset for our shareholders.
This will conclude our question-and-answer session. I'll turn the conference back over to Vince for any closing remarks.
Thank you, operator. And thank you all for joining us today and for your continued support of AcelRx. We remain focused on driving long-term shareholder value, absolutely with targeted investment in our late-stage development high-value assets. Please feel free to contact us after the call if you have any additional questions, and we look forward to sharing our future and in particular, near future developments. Thank you.
The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.