Good afternoon and welcome to the AcelRx Q1 2014 Financial Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Mr. Tim Morris. Please go ahead, sir.

Thank you, Shan. Good afternoon and welcome to today's call. I'm Tim Morris, Chief Financial Officer for AcelRx. During the call today, we will make forward-looking statements including but not limited to statements relating to future financial results including 2014 financial guidance and cash forecast, potential milestone and royalty payments under the Grunenthal agreement; the process and timing of anticipated future development of AcelRx's product candidates including the timing of potential approval for Zalviso; therapeutic and commercial potential of Zalviso and the anticipated timing of therapeutic and commercial potential of AcelRx's product candidates including the timing of the Phase 3 trial for ARX-04. These forward-looking statements are based on AcelRx's current expectations inherently involves significant risk and uncertainties. AcelRx's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risk and uncertainties. We encourage all investors to review the various risk detailed in the risk factors and elsewhere in AcelRx's U.S. Securities and Exchange Commission filings and reports. AcelRx undertakes no duty or obligation to update any forward-looking statements contained in this release and as a result of the new information, future events or changes in its expectations. I will now turn the call over to Richard King, our President and CEO.

Thanks Tim. I'm joined in the call today by Tim obviously, but also by Pam Palmer, Founder and Chief Medical Officer for AcelRx. On today's call, I will give you an update on our activities and progress so far this year including the NDA efforts to Zalviso, precommercial activities and infrastructure preparedness ahead of the potential approval and the Grunenthal collaboration. Pam in turn will give you an update on the medical education and publication efforts for Zalviso and also on ARX-04 program. Finally, then Tim will provide a brief review of the financial results for the quarter and future Investor Relations activities. And then lastly, we will take your questions. As you are aware, we submitted the NDA for Zalviso sublingual sufentanil tablet system for the treatment of moderate, severe acute pain in the hospital setting last year. The NDA was accepted for filing in December and as a PDUFA date of July 27, 2014. Since that time, we have been in active dialog with the agency. It appears the FDA is fully engaged in the review process and their questions have been inline with our expectations. We continue to anticipate a decision in regard to approvability of the NDA by the PDUFA date. As the Zalviso PDUFA date falls on a Sunday, the decision may come on Friday, July 25, 2014; however, there can be no assurance that we will see a response ahead of the PDUFA date. While there are no guarantees of course we are planning for a successful outcome of the Zalviso NDA review and have begun numerous precommercial activities to ensure preparation for approval and launch. Our principle precommercial activities year-to-date consist of completion of sales force sizing; our efforts are confirmed our preliminary thoughts and the initial sales force will include 65 sales…

Thank you, Richard. Our medical affairs team led by myself and recent new hires Dr. Brenda Lemus, who heads up our MSL Group and Karen DiDonato, who runs our internal medical affairs and pharmacovigilance functions have been extremely active. We have had a major presence including sponsoring symposia, posters and films at the following important medical meeting since the beginning of the year. American Academy of Pain Medicine, American Academy of Orthopedics Surgeons, American Society of periOperative RNs, American Society of Regional Anesthesia, American Academy of Anesthesiologists Assistance, American Society of PeriAnesthesia Nurses and the American Pain Society. These meetings target the three main decision markers for Zalviso in the hospital setting namely anesthesiologists, surgeons and nurses focused on treating pain in the hospital. Feedback from these meetings is that there is a high level of enthusiasm for Zalviso from all engaged audiences, of particular interest was the overwhelming response on PeriAnesthesia nurses' at the most recent ASPN meeting in Las Vegas. These are nurses are responsible for transition of the patient from the operating room to the floor. They are key individuals in the implementation of floor-based anesthesia for patients and represent a key target audience for AcelRx. There are excitement at the possibility to use Zalviso pending approvals was very apparent. On the publication side, four Zalviso manuscripts have been submitted and two of these have been accepted for publication this quarter. The main focus is obviously the Phase 3 clinical data for Zalviso. We have also submitted for publication of pharmacoeconomics of study of the cost of the current IV the patient-controlled anesthesia standard of care to lay the ground work for the potential cost reduction provided by Zalviso. In addition, the initial results of the study will be presented in June at the International Society for…

Thank you, Pam. Net loss for the first quarter of 2014 was $9.6 million or $0.22 per share, this compared to a net loss of $12.8 million or $0.34 per share for the first quarter last year. The decrease in net loss and net loss per share is due to lower R&D expenses in Q1 2014 as compared to the same period last year as the bulk of the clinical work for Zalviso was completed last year, R&D expenses are lower in 2014. During the first quarter of 2014, AcelRx recognized $95,000 of deferred revenue, one of the commercial agreements with Grunenthal. As the agreement was signed late last year, there were no corresponding revenues in 2013. In the first quarter of last year we recognized $940,000 in revenue under the U.S. Army grant for reimbursement of development expenses for ARX-04, all work related to this grant was completed last year and accordingly no revenues were recognized in 2014. Operating expenses for the quarter were lower mainly due to the decrease in R&D expense mentioned above partially offset by a higher G&A expenses from the precommercial authorization activities in the first quarter of 2014. As of March 31, 2014, we got cash, cash equivalents and investments of $92.9 million as compared to $103.7 million at the end of 2013, a decrease of $10.8 million. AcelRx reiterates its financial guidance for 2014 with total operating expenses anticipated to be in the range of $48 million to $52 million. I would refer you to our press release for more details on the first quarter financial results. As we entered the second quarter, we will increase our Investor Relations activities in presence. We have a number of conference presentation and a variety of non-deal road shows planned in the 2 months. This will include participation in presentation at the following healthcare conferences. The UBS Global Healthcare Conference May 20th, in New York City, the Jefferies 2014 Global Healthcare Conference June 30th, again in New York City, ROTH Capital one-on-one Conference June 24, in London and the JMP Securities Healthcare Conference June 25th, in New York City. Our non-deal road show activities will take us to meet with investors in San Francisco, San Diego, Boston, Mid-Atlantic, Denver, the Midwest and Florida. One housekeeping item, as I would like to remind investors and analysts that we will enter a quite period ahead of the Zalviso PDUFA. The quite period is scheduled to begin on July 1, 2014. I would now turn the call back to Richard for a quick summary.

Thanks Tim. And before we answer your questions, I would like to briefly summarize on major goals, potential milestones, looking at over the coming months. Zalviso was under review at the FDA for the management of moderate severe acute pain in adult patients in the hospital setting. But the PDUFA date of July 27, 2014 dialog with AC is active and it is ongoing. MAA filing by the centralized procedure in the EU for Zalviso is being prepared by AcelRx and Grunenthal, and we expect to make our submission in mid-2014. We are engaged with the notified body BSI to pursue ISO 13485 specification for AcelRx and a CE Mark for the Zalviso device in Europe. We anticipate realization of both of these key milestones in the second half of 2014. The build out of our commercial capability is ongoing with sound leadership to be added in the second quarter of 2014 ahead of the Zalviso PDUFA and we continue with a host of precommercial activities at risk ahead of the approval itself. With that I would like to open the call for questions. Operator, if I can turn it back to you, see you can coordinate, I would appreciate it.

Certainly. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes today from Louise Chen of Guggenheim Securities. Please go ahead.

Hi. This is Swati for Louise. I have a couple of quick questions. First question that I have is on, do you expect an outcome for Zalviso, also you said that you feel that you have enough cash to fund operations through 2015 excluding Grunenthal, do you know how much cash, how far the cash would go if you did include the Grunenthal milestones and lastly what type of level do you expect to get for Zalviso? Thank you.

Okay. Swati, good to hear from you. So on the outcome front, no, I think that we have always communicated, but we don't anticipate an outcome for product phase in hospital settings and there is no indication that the FDA is going to refresh one of this at the late stage. On the cash from Grunenthal stand point, Tim, if you want to comment on that?

Sure. We clearly have enough cash to get through 2015 and there are fair amount of milestones from the Grunenthal transaction. But, I think cash and cash equity on, 2015 will be depending on revenues and expenses, obviously we had some of the milestones for Grunenthal, we could get well into 2016. We haven't commented much beyond that. So it's really hard to say at this point.

And then your last question was related to –

Kind of label do we expect?

What kind of label can it be?

Yes. Any specific labels that you are expect I think that would be more incrementally more competitive for your product?

Yes. From a label standpoint, we have obviously got an indication the first instance which is a broad indication that we are trying to pursue with the agency. That's a point of differentiation to some competitors. The indication itself is for basically the creation of pain relief some of our competitors maybe had an indication for the maintenance of pain relief. We hope to be able to see some commentary in the label about the device and the nature of features of the device that supports effective nurse set-up and patient use of the device. So that goal is obviously to come with the discussion -- label discussions typically happen late in the game. And at this stage, we won't comment at in terms of whether label discussions will take this to in the course of the next two, three months as we finalize our discussion with the agency. But, in broad terms those are the areas that we have looked at as we provided the label to the agency for that discussion to begin.

Thank you.

Our next question comes from David Amsellem with Piper Jaffray.

Hi, guys. This is Traver Davis on for David. Thanks for taking the question. So just a couple. So its looking a little more like the potential entry of The Medicines Company's product Ionsys don't happen until as early 2015 at the earliest given the timing of their filing. And I guess this could be several months after your launch, so with the persistent delays on their filing, are you thinking about potential introduction of your product any differently from a commercial perspective? Then I have a follow-up.

Two questions. So yes, that's ability to push forward on getting early and ahead of the time point when Ionsys might be into the marketplace, is the one that's not last minute. So that certainly a topic of conversation and thought, at the moment our plan remain the same as we communicated previously which is assuming approval July 27. We would add about a third of sales force in the Q3 timeframe basically to push forward on P&T work and approval and the remainder of the sales force in Q1 of 2015. Those are obviously moveable numbers for the state that remains our focus and our plan. But, certainly that delayed timing is something that doesn't comes often.

Got you. Thanks. And then just as a follow-up on the timeline you said about hiring a sales force or ramping up the sales force. So how shall we think about the ramp in operating expenses once Zalviso is approved again bearing in mind that you had just mentioned that you guys would be hiring about a third of the sales force in 3Q and filling up the rest over the – I guess the sales combination. So just any idea of how should we think about operating expense say from 3Q on to be useful. Thanks.

If you want to take –

Sure. Yes. I think as Richard mentioned, we would expect to bring on third of those folks in – to be available really starting most likely in the fourth quarter. So I don't think you are going to see a whole lot of change between the second quarter and the third quarter, you will see a little bit of increase in G&A. I think starting in the fourth quarter you will see the impact of those reps and I think the guys were given previously – each of those reps is about $250,000 per year fully burdened expense. So you would expect to see the impact of those guys into the fourth quarter.

Okay. That's helpful. Thank you.

Our next question is from Ed Arce with ROTH Capital Partners.

Hi. Good afternoon.

Good afternoon, Ed.

Hi, Ed.

Hello. So just a few questions on your prepared remarks, and I find it interesting if things continue to go well in terms of your pre-launch activities and I think that bodes well for obviously for the launch. I was interested in how you are continuing to tighten up your own internal estimates of the price demand curve and the pharmacoeconomic work which – some of which will be published soon. I don't want to steal some of the thunder from this quarter, but I was just wondering you could give us sort of your general thinking around how that work impacts your thoughts of the flexibility of your ultimate pricing?

So I'm not going to kind of steal that thunder ahead of the time either. But, I will take you back now to what we talked about previously which is IV SCA cost in $100 to $200 per two days of therapy. P&T committee support two, three years ago now against that with $150 to $300 that based on the cartridge of the dispensing kit, the disposals of the Zalviso product. Giving us good margins on that part of the business, continue to think that $150 to $300 is the relevant range broadly speaking. But hoping to pin down where in that range is going to be the optimization price point for products. So that's the goal of the research. It's coming in the in-field and obviously I have played against the pharmacoeconomics part of what we have seen now is either P&T cost in 2013 as opposed to back in 2010-2011.

The only other question I had was just to further understand some of the activity around the infrastructure in particular with the AMCP Dossier, if you could just -- I don't know if that was covered in detail, I joined late, but if you could just review some of the thing that you are working on there?

Sure. Pam, do you want to take that AMCP Dossier question?

Sure. So I'm working with Dr. Brenda Lemus who we hired on recently to get the Dossier in a good shape for the P&T committee. I mean in that is the combination of the placebo controlled studies, but obviously hospitals are interested in seeing all of the data which is very separate from when someone is just trying to discuss on label studies only. The hospitals want to see all the data. So they will be seeing the Active Comparator study, or IAP 309 study as well as the pharmacoeconomic story that we have laid out with the research that we have done – original research is in the premier data base as well as cold data from the literature on the instance of programming errors issued with infection with [needle Endo 6] (ph) et cetera. So all of that would be put together in the Dossier to make it very compelling argument to P&T committee, the adoption of Zalviso.

Okay. Great. Thank you.

Thanks Ed.

Our next question comes from Graig Suvannavejh with MLV & Company. Graig Suvannavejh - MLV & Company: Great. Thank you. Good afternoon. Can you hear me fine?

We can, thanks Graig. Graig Suvannavejh - MLV & Company: Okay. Thanks. I apologize for this background noise. But, I have got a couple of questions, one, just since your last quarterly call, has there been anything substantial or maybe not substantial that is – have you thinking any differently around big picture things like pricing market opportunity positioning, how doctors might be thinking about the product. I know you spent some time in the call saying that you have done additional market research. But things basically the same as they were three months ago in terms of how you are thinking about the product opportunity?

So I think that we now completed some fairly extensive research for the qualitative and high quantitative as the hospital level as well as at the surgeon level and the specialty level. I think we have really confirmed the open scale of the opportunity, the differentiation in Zalviso derived from the clinical data set that was generated in Phase 3. And how physicians respond and react to that very positively to allocate on the perfect share of substantial share of their patient population and the management in the range of 30% to 50% depending on the specialty. We see privatization of hospitals for those that will likely provide P&T support earlier, we see also privatization amongst the physician population in terms of the historical behavior that makes us think we can figure out who is going to be an early adaptor of Zalviso versus a late adaptor, and then ultimately because of their specialty what's the scale of opportunity might exist. So I think have a much tight definition of it. I don't think is that different to where we anticipated six months ago or a year ago to be honest with you. But, it's nice on the scale of research that we completed to get feedback on your date that is going to be supporting your marketing efforts that indeed the opportunity is there. And I think that's probably the prescription to too many things

Pam, do you want to comment on your recent experience from talking with the nurses at the…

Yes. I mean it’s funny; I think PCA or IV PCA I should say is sort of a theoretical concept for physicians such as myself. We order it. We sort of look at it in the patients bedroom but we don't actually set it up. And we don't really actually let in breath the issues with it the way the nurses do to pack you which is another acronym for the recovery room. This ASPN meeting was around really packing of 2000 nurses from around the country and they are specialized in treating patients in the recovery room and getting them set up with the PCA, IV PCA didn't go to the floor. So these folks have to deal with it every single day. And I just was overwhelmed by the response with people 5 and 6 deep at our booth, I think in the first 50 minutes, I was telling these guys we ran out of every card and study that we brought there. They are dying for something new. They are absolutely sick of the 40 years of IV PCA and they really, really want to do something really transformation will occur in the space and I think we are poised to do that. Graig Suvannavejh - MLV & Company: Okay. Great. Thank you very much for that. Just another question in light of some accretion news for some other company today which had products pending FDA approval can you give us a sense as of today maybe characterize your recent communications with the FDA are you at a point where they no longer have been requesting any information from you or if they have what's the nature of the information that you are providing for them?

Well, I will say, we have a very – it's a dynamic discussion, its not quite daily but certainly it's a weekly interaction, it has been there since really the receipt of our day 74 letter. It's effective. It's focused on understanding the base set, more looking of it in different ways looking at both from a drug development device and point we are seeing kind of equal focus on each of those two areas. So I'm not seeing one group lag behind the other group in terms of that interface and interaction. And it continues to be dynamic. I think that's for me and for my pictures are very encouraging and encouraging sign of that continued work at the FDA to move towards the PDUFA date. Graig Suvannavejh - MLV & Company: Then maybe I will ask this one, last question. This one is for Tim, you have been at the company for about I don't know a month and a half or so, now, still relatively speaking early days but is there anything specific that you have been able to kind of bring to AcelRx or their initiatives that you have in place or actually undertaking now in terms of you coming from other organizations now being AcelRx?

Yes. There is probably two areas, Graig that I'm focused on here for the last six weeks. One is really commercial preparedness as we look ahead and anticipate a success on outcome of the PDUFA date coming up on T minus 90 days. Just to make sure that we are ready to go for anything from kind of the day one Web site make sure that all of our both financial systems are in place, this quality systems are in place. We have to get our agreements in place with all the distributors in the like. So I want to make sure, we are ready to go on that front and so hopefully we made some very good progress on that side also as we get into the hiring phase, we need some internal systems and processes in place which I think we made good progress in the last month and a half. I think the second area that we want to focus is to really get out there and tell the story, I think, we got good inputs from the analysts that we have – I think we have a good phase of shareholders but I think the story needs to be more broadly distributed. We got that some shareholders out there. And so that's why we are going to put concerted effort here in the next 60 months or 60 days to get out and to get in front of the right people to tell them about the company, the events that are happening the catalyst and make sure people paying attention. So that's really been the focus for the last 6 weeks, and will continue to be the focus in the near term. Graig Suvannavejh - MLV & Company: Okay, great. Well, thank you for taking my questions. And good luck with everything.

Thank you very much.

That's great.

This concludes our question-and-answer session. I would like to turn the conference back over to Richard King for any closing remarks.

Yes. So thanks everybody for time today. Thanks for your questions. And we look forward to catching up with you again Q2. Thanks very much.