Welcome to the AcelRx 2022 full year and fourth quarter financial results conference call. This call is being webcast live via the Events page on the investor section of AcelRx's website at www.acelrx.com. This call is the property of AcelRx, and any recording, reproduction, or transmission of this call without the express 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 investor section of AcelRx's website. If you require operator assistance, please press star then zero. I would now like to turn the call over to Raffi Asadorian, AcelRx Chief Financial Officer.
Thank you, Andrew. Thank you for joining us on the call today. This afternoon, we announced our full year and fourth quarter 2022 financial results and associated business updates in a press release. This press release can be found within the investor 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 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. This past year has been a transformative one for AcelRx. We're pleased to update you today after executing on our previously stated goal of divesting DSUVIA, our first commercial product, to Alora Pharmaceuticals. Alora is a well-resourced operation with extensive experience commercializing products in hospitals, expertise in the manufacturing and sales of controlled substances, and a team of over 200 salespersons. In addition to the 15% royalty on net commercial sales and the one hundred and sixteen and a half million dollars in sales-based milestones in our agreement with Alora, we're able to leverage our invested time and resources working with the Department of Defense, the single largest customer for DSUVIA, to a 75% royalty on DoD net sales.
In today's press release, we announced numerous publications and presentations on DSUVIA, including a presentation at the ANESTHESIOLOGY Annual Meeting 2022 by the Uniformed Services University of the Health Sciences on DSUVIA for battlefield pain management. In the presentation, the authors once again recommended the adoption of DSUVIA by the Department of Defense to improve pain management in the battlefield setting. These and other recent publications provide continued endorsement of the value of DSUVIA for acute pain management. The DoD has many different purchasing points across various areas of the armed services. We remain focused on the US Army, since the largest opportunity for DSUVIA is within their sets, kits, and outfits or SKOs for deploying troops. The DoD is a very important relationship, and we believe that this will provide long-term value for our shareholders.
After the expected closing of the DSUVIA transaction in the coming days, we'll have transformed the company and are confident that we can leverage our successful development expertise in obtaining approval for our late-stage high-value assets. In particular, we're focusing on our lead nafamostat program, Niyad, which has FDA breakthrough designation and is being developed for use in the US as an anticoagulant for extracorporeal circuits, in particular, such as dialysis. As such, we wanted to provide visibility into Niyad's potential, which we believe is a key component of the company's value. Nafamostat is approved and widely used as an anticoagulant for dialysis in Japan and South Korea. We, AcelRx, are the first to develop it for such use in the United States. If approved, Niyad would be the only regional anticoagulant labeled for use in this indication in the US.
Clotting of the dialysis filter during continuous renal replacement therapy, or CRRT, is a major limitation to the patient receiving effective dialysis. In addition, filter clotting results in loss of red blood cells, platelets, and clotting factors, often requiring transfusions for the patient. For these reasons, the international CRRT guidelines recommend the use of an anticoagulant infused into the dialysis circuit. Today, two anticoagulant options exist for CRRT. First heparin, and then there's citrate, which is only available under an EUA. Our recent U.S. quantitative market research confirms the urgent medical need for an alternative anticoagulant for use in CRRT.
The study results show that the inherent risks of the currently used products, heparin, which is used 43% of the time in patients, and citrate, which is used in 28% of patients, lead physicians to not use anticoagulants, which again, is below the international standard of care, and the remaining 29% of patients are undergoing CRRT. Consistent with the published literature and our recent quantitative market research, 84% of physicians reported that frequent filter changes occurred when not using an anticoagulant. This not only leads to increased blood loss and an increase in the number of transfusions, but also results in delayed or prolonged treatment time and imposes a burden on healthcare resources. Now, in addition to our market research detailing the specific adverse events physicians were concerned about regarding citrate, it included hypocalcemia, citrate safety, alkalosis, and others.
In conclusion, we believe that the market opportunity for Niyad is 29% of the patients that are receiving no anticoagulant, as well as the 28% of patients that are receiving citrate. This totals almost 60% of the CRRT patients. This market research is significant. We plan to submit it for peer-reviewed publication in the second quarter. We've already completed the production of the initial development batch in Niyad and are now completing stability product testing in preparation for a planned EUA submission. We remain on target to submit this EUA in the second quarter, and in addition, having already received an ICD-10 CMS procedural code for reimbursement, we're proceeding with early commercial planning.
Niyad is estimated to have a peak sales potential of $200 million, and this is attributed to just the inpatient and outpatient dialysis markets, excluding use in any other extracorporeal circuits. We anticipate that we'll need only a very modest sales force for launching Niyad. Our market research has reinforced that it is clearly an important unmet patient need, and we look forward to initiating a single registrational trial in the second half of 2023, of which the primary endpoints have already been agreed upon by FDA for a 160-patient study. Consistent with our priority to advance our pipeline of late-stage assets, we continue to make progress towards filing NDAs for our ephedrine and phenylephrine prefilled syringes.
As such, our other near-term corporate milestone expected by the end of Q2 2023 is the filing of a new drug application for our prefilled syringe of ephedrine branded as Fedsyra. Again, branded as Fedsyra. The benefits of prefilled syringes include less waste, improved safety, and the convenience of not having to dilute and prepare the syringe in advance of procedures resulting in a shift towards their use. Based on our partner Aguettant's experience in Europe, the expected shelf life of Fedsyra is three years. Nearly all of the currently used ephedrine prefilled syringes are made by compounding pharmacies, which have an inherent short shelf life and well-known risks for contamination. The ability of physicians to have available a convenient, prefilled, terminally sterilized ephedrine syringe that has a three-year shelf life would be a significant improvement and advantage for the overall healthcare system.
As stated previously, we believe that the market opportunities for these assets exceeds $100 million. We believe that we'll be able to obtain a significant share of this market with minimal investment, since much of the commercialization efforts are expected to be through contracting with group purchasing organizations and hospital networks. Just to put the market potential for a prefilled syringe into better context, a ready-to-use vial of ephedrine, not a prefilled syringe, but a ready-to-use vial of ephedrine launched in 2020 and reported $30 million in sales in only its second year of launch. With potential approval of the NDA for Fedsyra, commercialization could occur as soon as the first half of next year.
As we stated in today's press release, both the Niyad and Fedsyra regulatory submissions will bring us closer to delivering important advancements for the healthcare system and increasing value for our shareholders. In conclusion, I'm pleased to report that we believe we're well-positioned to execute on a new successful chapter for AcelRx. We've divested our opioid product to focus on our proprietary anticoagulant program, which we believe has the potential to reach $200 million in peak sales. We've made significant progress in our clinical development program of Niyad, and we're preparing to move to a registrational trial with endpoints agreed upon by FDA later this year. We're also on track to file our NDA for our first prefilled syringe product candidate, Fedsyra, which also has significant upside potential for the company if approved.
Importantly, we'll continue with our efficient approach to managing cash as we accomplish these key milestones. I'll now hand the call over to Raffi to take you through the fourth quarter financial results.
Thank you, Vince. The planned closing of the DSUVIA transaction with Alora Pharmaceuticals in the coming days is expected to add value through reduced cash burn and leveraging the Alora commercial infrastructure to collect royalties and milestones on DSUVIA sales. We're excited to work with Alora on the transition and supporting the potential long-term value creation from the transaction. Our full year 2022 DSUVIA sales totaled $1.8 million, which was a 76% increase over 2021 despite the significant reduction in our commercial investment to conserve cash. We believe Alora's ownership of DSUVIA will deliver a significant increase in DSUVIA sales after the initial transition period. As Vince mentioned, our focus now turns to our lead program nafamostat, for which significant potential near-term milestones exist, as well as our first pre-filled syringe NDA submission, Fedsyra.
We continue to focus on our cash and end of the year with $20.8 million in cash and investments. Our debt continued to amortize, and the balance at the end of the year was $5.4 million. Combined R&D and SG&A expenses for the fourth quarter of 2022 totaled $7.3 million compared to $6.9 million for the fourth quarter of 2021. Excluding non-cash depreciation and stock-based compensation expense, these amounts were $6.6 million for the fourth quarter of 2022 compared to $5.6 million for the fourth quarter of 2021.
The increase in combined R&D and SG&A expense in the fourth quarter of 2022 was primarily due to costs associated with the December financing and other legal costs, partially offset by net decreases in R&D and SG&A expenses compared to the fourth quarter of 2021. We expect our cash operating expenses in 2023 to range from $16 million-$20 million, which include costs related to a planned launch of Niyad under an EUA, initiating the single registrational study for Niyad, and the PDUFA fee for Fedsyra, for which an NDA submission is expected in the second quarter of this year. 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. Andrew?
We will now begin the question and answer session. To ask a question, you may press star than one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star than two. At this time, we will pause momentarily to assemble our roster. The first question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.
Hi. Thanks for taking my questions, congratulations on all the progress. Maybe I'll just start on DSUVIA. Can you just talk about who drives the military procurement with this deal? Are there any current DoD orders? Just to sort of, you know, will you have a continued involvement on the DoD side or just staying ahead of the DoD? I'll ask my DSUVIA question I'll hop across to Niyad, if that's all right.
Sure. The DoD purchasing is decentralized when you consider it from the different branches of the military, that being that the Navy, the Air Force, the Coast Guard, and the Army all purchase through different avenues. Even within the Army in particular, you have different avenues that drive it. For instance, we have relationships that we work with with the Defense Health Agency, the Defense Logistics Agency, USAMMA. We're working on contingency contracts with the Army outside of those particular channels and of course, the TCCC. It's a myriad of different channels within the military. The largest driver, though, will be through these FKOs, which are often driven centrally by a single purchaser for troop deployment and readiness. These relationships have been fostered over time.
It takes time, but we feel like we're really advancing them here just in the course of the past year to a new level. You know, part of it, honestly, is the tension that builds around the world and the challenges with the conflict and the creation for potential more deployments, unfortunately, for our U.S. Armed Services. We're gonna continue to maintain those relationships, drive them, and hopefully be able to supply them at the right quantity and timing as those things escalate.
Yeah, it's our responsibility-
Okay.
Brandon. That remains with us.
Okay, great. That's, that's good to hear. Thank you for that. Maybe just shifting gears to Niyad, maybe just a two-part 'cause they probably go together. I guess any color on the steps outstanding from here on in terms of submitting the EUA? You know, You sound quite confident. You know, we've almost had 2 Qs. Is it fair to just think of it as procedural from here on in? Along those lines, in terms of manufacturing of Niyad, can you just remind us, on this EUA, will you need an inspection? Secondly, staying on manufacturing, can you just talk about your ability to supply the market just given, you know, the 60% figure you put out today? Thank you very much.
Sure. I can address the first part of that question, and I'll continue to turn it over to Raffi and Pam as it relates to some of the supply. We've been working on the EUA for a year, you know, at least in preparation. Part of, just to give you an example of a quantitative markets research we just completed that started, I think, in the fourth quarter last year with results in the first quarter this year, was to continue to show the FDA the elevated use of CRRT in the hospitals from a post-COVID standpoint, pre and post, if you really wanna consider it post right now. We've put all of our work together related to the package, and the one remaining aspect, most importantly, has remained CMC. We've got the balance of the package basically ready to go.
If you recall, in the early discussions around the EUA with the FDA, and I apologize for all these three-letter acronyms. The FDA's concentration was on the proper manufacturing of the product. Over the course of the past year, that has been our focus. As we mentioned, we've got product up on stability. It's important that we've done accelerated stability. Some people might not know what that means. What that really means is stability testing beyond the normal ranges of temperature and humidity. The concept is, if degradation is gonna be happening over time, you can simulate that degradation in extreme environments, and that'll show you a longer period of time based off of that simulation of stability of the product. For us, humidity is a non-event. It's obviously a sealed vial. We've got three months of good, solid data at room and accelerated temperatures.
That being 25 degrees Celsius, 40 degrees Celsius in the accelerated portion. Our GMP initial release test data looks very good with only 1 test still remaining, and that's in sterility. We feel very good about the progress we've made on CMC. We have partnerships related to supply, relative to ex-US suppliers for both the API and finished product. We're well on our way as it relates to this.
I think you had, you had one more question. The question about inspection a need for inspection for the EUA. There's no need for an inspection for an EUA. Obviously, for a full approval, which would come after our clinical study, which we expect to start in the second half of next year.
Did that answer all your questions, Brandon?
It did. Thank you very much. I appreciate it, and best of luck for the filing.
Thank you.
The next question comes from Ed Arce with H.C. Wainwright & Co., LLC. Please go ahead.
Hi, everyone. This is Thomas asking a couple of questions for Ed. Thank you so much for taking our questions. While we're on the topic for Niyad, can you discuss what are your expectations under the EUA this year? If it's approved, what commercial traction will you expect? Perhaps initial thoughts about pricing and annual filing use for patients. Some details on commercial launch.
For Niyad, again, under the EUA, we're confident in our ability to submit. I'm sure there'll be dialogue with the FDA as it goes through the process, hopefully for that approval this year. Beyond that, we have to prep either way for a potential commercialization with the EUA. As we mentioned in the most recent study, we believe our target market is clear. That's the market where people are receiving no anticoagulant in CRRT, which is considered below standard of care, which honestly would be a real shame for the United States and our ability to provide healthcare. The second is the citrate market in particular because of the complications and side effects associated with it. When you combine those two markets as an opportunity for Niyad's penetration, it's 60% of the CRRT market. We're working on our commercial planning now.
As a matter of fact, Dr. Palmer and I are spending time at the CRRT meeting in San Diego tonight and tomorrow. We've got an advisory board with some of the key experts for CRRT in the United States, as well as internationally known next week, a week from this Saturday. We're beginning to start on pricing evaluations. It's something I won't comment on this call just from a competitive standpoint. Again, we feel very good about the preparation we have for this moving forward and the size of the target market. The other important aspect of this is even though the market is large, when we talk about a $200 million peak sales opportunity and 60% of the existing practice that's occurring in the United States based off the citrate no anticoagulation segments.
This is not one that we anticipate to require a large commercial infrastructure. We expect it to be very modest. It's a top-down approach based off the key opinion leaders in the nation that drive CRRT guidelines. I think the other important aspect of this is nafamostat is not a new concept to them. Niyad/nafamostat has been used, as we've mentioned, for 30 years in separate countries, including Japan and South Korea. The thought leads in the United States cross-mingle and share expertise with those outside of the U.S., so nafamostat is a known entity to them, and they're often asking us when we think we'll be able to have this available for the U.S. so they can provide this anticoagulant to their at-risk patients. I hope that helps give a bit of a color to it, Thomas.
Pam, would you have anything to add relative to the market research that we've conducted most recently, relative to CRRT?
No. We're writing up the data right now. It'll be submitted, you know, in Q2 and likely published in Q3. We're really excited about, possibly being able to, in very near term, address this, sort of deficit in the medical, treatment of patients during CRRT. I mean, it's amazing to me that 29% do not get any anticoagulation during CRRT, just because of the, you know, issues with heparin and citrate.
Thomas, I would just add, we don't know. Should we receive an EUA, we don't know when that would come. There's no specific timeframe on the FDA review of that. We don't know if that's going to come in one month or it's going to come in six months.
To give any expectations on sales would not be a reasonable way to estimate this at this point. I think we can give more detail if we, when we receive an EUA later this year.
Got it. I guess just to clarify, so the, a decision if, after the EUA is filed, a decision is expected by, this DM of this year?
Well, you'd hope. They have no firm guidelines on review timelines like they do for classic PDUFA.
Right.
You know, as we research EUAs that have been reviewed in the past, one month or two months, could be longer. We just can't give you a defined timeline on that. I think what's important even beyond that, Thomas, and maybe some people are asking about, is we are intending even beyond the EUA to move forward with a registrational trial in the second half of this year. This is a very clear design trial with endpoints already agreed upon by the FDA. There's not a lot of what I'll call debate left on how to execute this trial. Pam, maybe you can comment on the preparation we've made, the endpoints, et cetera, on the trial so people are clear on how we feel it's very simple to execute.
The N of 160 patients, which is actually quite a small trial, it's 80 active, 80 placebo, has already been agreed upon the FDA, as is the primary and key secondary endpoints for the trial. CRO selection, moving forward with the finalization of the statistics for the protocol and picking clinical sites is what we're actively doing right now. That's a key part of our advisory board coming up.
Pam, can you also comment on the active versus the control in that trial? It'll be obviously nafamostat versus?
Versus, saline.
Saline. The primary endpoint over the first 24 hours is?
activated clotting time. It's basically a powerful anticoagulant versus saline, and then looking at, you know, clotting time as your primary endpoint over the first 24 hours of the study. Pretty straightforward.
Got it.
Got it.
Thank you.
You're welcome.
Yes. Really appreciate all the details for the new study. Looking forward to it. Then perhaps one more question from us regarding the prefilled syringe products. Can you discuss any ongoing commercial path for potential launch with the NDA closing in? Also, just to clarify, if Fedsyra, so that's the first NDA to be submitted, should we expect commercial launch of both prefilled syringe products or, you know, they'll be marketed as soon as approved?
The prefilled syringe products are being developed in a staggered fashion. The first one is the ephedrine or Fedsyra product. Again, trade name or trademarked right now as Fedsyra, ephedrine syringe, as you can imagine. Fedsyra, something to that effect. That will be on a 10-month review clock. During that period of time, we'll be discussing contracting with the IDNs as well as the group purchasing organizations. We're really encouraged by the uptake we've seen in the market of what I'll call similar, but potentially, less advantageous products. What do I mean by that?
We mentioned in the script that in following the most recent launch of an ephedrine ready-to-use vial, not in syringe form, but in the vial, so they still have to draw it up, have it prepared at the table, and if they don't use it, they're going to have to discard it, which is significant waste. Requires time, energy, and potential waste, or completed $30 million in sales in only its 2nd year of launch. There's clearly a need to advance the efficiency, safety, and quality of this product in particular in this market. We're gonna try to submit that here in very short order and get on that 10-month clock. The balance of the prefilled syringes you're asking would be the phenylephrine. We're continuing to do work on that with Aguettant.
It'll be a staggered submission, so it'll be delayed to after ephedrine. That'll do two things for us, allow us to get a read from the FDA on ephedrine, which we feel very confident in, and continue to work on development to fine-tune that submission as well.
Okay. Sounds good. Thank you so much for the clarification, looking forward to your progress this year.
Thank you.
The next question comes from James Molloy with Alliance Global Partners. Please go ahead.
Hi. This is actually Laura calling in for James Molloy, and thank you for taking our questions. Also congratulations on the recent, you know, divestment with DSUVIA, with Alora Pharma. With this, do you think you could possibly walk through your expectations for the ramp-up of sales? Also, I have another question. In regard to your, to Niyad, when do you expect the registrational trial to be commenced, then the expected study design that, you know, you're expecting to hold later this year? Thank you.
Sure, Laura. Thanks for the question. We can't comment on the ramp-up of sales. I think you were referring to DSUVIA on that one based off its divestment to Alora. What I can tell you is we are in deep transfer mode with them or transition mode between our commercial team, their commercial teams. Matter of fact, they're absorbing our commercial personnel, all except one, to maintain the momentum we have in the procedural suites. I know that they will be expanding and training even further their hospital sales team based off their communication to us, they've got deep distribution. We're excited about what they're gonna do. Can't comment on a forecast from them. Can only comment on their commitment and resources that they're putting against it, which is impressive.
As it relates to Niyad, again, we mentioned that the study design has been agreed upon with the FDA. The endpoints have been agreed upon with the FDA. Those endpoints as a primary are activated clotting time, and as a secondary that we didn't mention are.
Yeah, they're looking at basically, the filter lifespan. We anticipate obviously when you're perfusing saline into the circuit and you're not inhibiting clotting, that those filters will clot much more frequently. They're also looking at platelets, a number of transfusions, you know, how efficient the dialysis is, looking at urea concentrations, et cetera. There's just a whole host of key secondary endpoints that are clinically important. The primary endpoint, again, being activated clotting time over the first 24 hours of a powerful anticoagulant versus placebo, we feel pretty confident in that.
I think you asked about timing, Laura. Again, we're just guiding to the second half of this year. Dr. Palmer and team are working with the CROs as we sit here now based off of selection, sites, et cetera. Again, we're excited to get that one going as quickly as we can.
Got it. Thank you for taking the questions.
Thank you, Laura.
This concludes our question and answer session. I would like to turn the conference back over to Vince Angotti for any closing remarks.
Thanks, Andrew, and thank you for all of you for joining us today and for your continued support of AcelRx. We're really excited about our execution on the stated plan, the significant progress we continue to make with Niyad and our prefilled syringes, in particular Fedsyra. We look and remain focused on driving long-term shareholder value with advancing this high-value late stage pipeline. Look forward to answering any additional questions you might have offline and sharing our future developments with you. Again, thank you for your attendance and please be safe.
The conference has now concluded. Thank You for attending today's presentation. You may now disconnect.