Talphera, Inc. (TLPH) Q3 2015 Earnings Report, Transcript and Summary

Good afternoon. And welcome to the AcelRx Third Quarter 2015 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 Timothy Morris, Chief Financial Officer. Please go ahead, sir.

Thank you, Gary. Good afternoon, everyone, and welcome to today’s call. On this call I’m joined by Howie Rosen, Interim Chief Executive Officer and Pam Palmer, our Co-Founder and Chief Medical Officer. During the call today, we will make forward-looking statements, including but not limited to statements related to future financial results, including process and timing of anticipated future development of AcelRx’s product candidates including Zalviso and ARX-04, the timing and quality of data for ARX-04 and the therapeutic a commercial potential of AcelRx Pharmaceuticals product candidate including Zalviso and ARX-04 anticipated results and timing of the completion of the SAP302 study or ARX-04. AcelRx’s plans to seek a pathway forward towards gaining approval of Zalviso in the U.S. anticipated resubmission of the Zalviso NDA to the FDA including the scope for the resubmission and the timing of the resubmission, statements related to the timing of the commercial launch of Zalviso in Europe, financial guidance and cash forecast and potential milestones and royalty payments under the Grunenthal agreement. These forward-looking statements are based on AcelRx Pharmaceuticals current expectations and inherently involve significant risks and uncertainties. AcelRx Pharmaceuticals actual results and timing of events could differ materially from those anticipated in such forward-looking statements and as a result of these risks and uncertainties, which include, without limitations, risks related to any delays or inability to obtain and maintain regulatory approval of its product candidates, including Zalviso and ARX-04, its ability to successfully complete the additional clinical study requested by the FDA to support the resubmission of the Zalviso NDA, its ability to timely resubmit the Zalviso NDA to the FDA and to receive regulatory approval for Zalviso. The fact that the FDA may dispute or interpret differently positive clinical results obtained to date from the pivotal Phase 3 SAP301 ambulatory surgery study there so forth, its ability to complete Phase 3 clinical development of ARX-04, inability to successfully manufacture Zalviso to meet the requirements of Grunenthal and potential delays in the timing of the European launch. The success, cost and timing of all product development activities and clinical trials, including the SAP302 ARX-04 trial, any delays or inability to obtain and maintain regulatory approval of its product candidates including Zalviso in the United States and Europe its ability to receive any milestones or royalty payments under the Grunenthal agreement and the timing related thereto. Its ability to obtain sufficient financing, the accuracy of AcelRx’s estimates regarding expenses, capital requirements and the needs for financing and other risks detailed in the Risk Factors and elsewhere in AcelRx Pharmaceuticals U.S. Securities and Exchange filings and reports, including its quarterly report filed on Form 10-Q filed with the SEC on August 4, 2015. AcelRx Pharmaceuticals undertakes no duty or obligation to update any forward-looking statement contained in this presentation and as a result of new information, future events or changes in its expectations. I will now turn the call over to Howie Rosen, Interim Chief Executive Officer.

Thank you, Tim. And I’d like to thank everyone for joining us this afternoon for our third quarter call. During today’s call we’ll cover the following. Business highlights and accomplishments for the third quarter, and update on ARX-04, our plans for Zalviso in the U.S. and a brief review of the third quarter financial results. Let me start with our recent accomplishments. The third quarter of 2015 was mark by considerable progress for AcelRx. On September 9th, we announced positive results from SAP301. In the study, ARX-04 single 30 micrograms sufentanil sublingual tablet in a pre-filled, single-dose applicator met primary and secondary endpoints in a multi-center, double-blind, placebo controlled Phase 3 trial in patients with moderate-to-severe acute pain following ambulatory abdominal surgery. These results demonstrates that patients receiving short-term treatment with ARX-04, experienced significantly greater pain reduction compared to placebo, as measured by the time-weighted summed pain intensity difference over the first 12 hours of treatment or SPID-12. Pam will provide some additional information from SAP301 in a moment. On September 22nd, we in our commercial Grunenthal announced that the European Commission approved Zalviso sufentanil sublingual tablet system for the management of acute moderate-to-severe post-operative pain in adult patients in a hospital setting. The marketing authorization was granted for the 28 EU member states as well as for the European Economic Area countries. Grunenthal expects the product to be available to Western European patients in the first half of 2016. The approval triggered a $15 million milestone to AcelRx from Grunenthal which we expect to receive in fourth quarter of 2015. On September 21st we announced the monetization of the expected royalty stream from Grunenthal sales of Zalviso in Europe. AcelRx receive $65 million from the sale to PDL BioPharma Inc. Tim will speak later about this transaction. Finally based on the teleconference we held with the FDA in early September, regarding the regulatory pass for Zalviso, we have submitted a protocol for an additional clinical study to address concerns raised by the FDA and to assess the overall performance of the device. In the comments on the protocol from the FDA we’re preparing to initiate the study early next year. The protocol committed includes a single-arm study with Zalviso in patients with moderate to severe acute pain following surgery. Unlike the pivotal Phase III study with Zalviso, we will include patients from multiple surgery types, we will allow multi-model pain treatment only require a one night stay versus the two night that were require in pivotal studies. And we’ll measure pain improvement using SPID-12. We’ll measure the performance through device including ARX on a patient basis and will require study personnel to proactively look for dropped tablets. We expect to provide an update once we prepare to perceive with the study. Zalviso remains a valuable asset in our portfolio and the ultimate approval in the United States continues to be important company objective. I personally like to thank the employees of AcelRx, our contractors, consultants and investigators involved in the successful SAP301 Phase III clinical study of ARX-04. I also wish thank and congratulate Grunenthal for their rigorous precision to an ultimate approval of the MAA for Zalviso in the EU. And lastly our advisor, legal counsel and PDL for the accretion of the royalty monetization that provided significant non-dilutive capital to AcelRx. I’d now like to turn the call over to Pam, who will provide you with an update on ARX-04 concluding the recently announced results from SAP301.

Thanks Howie. As previously announced in the SAP301 trial ARX-04 met primary and secondary end points in the multi-center double-blind placebo controlled Phase III trial designed to study the short term treatment of patients with moderate-to-severe acute pain following ambulatory abdominal surgery. Results demonstrate that patients receiving ARX-04, a 30 microgram dose of sublingual sufentanil experienced significantly greater theme reduction compared to placebo as measured by the time weighted sum to pain intensity difference over the first 12 hours of treatment or SPID-12, the trial enrolled adult patients undergoing outpatient abdominal surgery procedures at four clinical sites in the United States. Following surgery 163 patients were randomized to repeat either ARX-04 or placebo in a 2 to 1 active to placebo ratio. ARX-04 or placebo was administered by the site staff as requested by the patients, but no more than once per hour, the intent to treat for ITT population in the study averaged 40.9 years of age with an average body mass index of 27.5 and had a higher percent of females to male, 68% to 32%. 89% of patients entering the study completed the 24 hours study period. Baseline demographics were evenly distributed between treatment arms with approximately 50%, 30%, and 20% of the patients undergoing abdominoplasty laparoscopic surgery, herniorrhaphy respectively. The primary end point of the study was a different in the SPID-12 course patient receiving ARX-04 compared to those receiving placebo. SPID-12 scores were 25.8 for the ARX-04 treated patients and 13.1 for placebo acute patients, the difference between the two groups being highly statistically significant. The baseline pain scores for ARX-04 and placebo patients were 5.6 and 5.5 respectively. Statistical significance for ARX-04 over placebo was achieved as early as 15 minutes, the first interval in which pain liquid stepped, patients were allowed either ARX-04 placebo as requested for pain relied but as mentioned no more often than once per hour. The medium number of doses of ARX-04 was four tablets over the first 12 hours and seven tablets over the total of the first 24 hours. Patients were allowed 1 milligram of body morphine as rescue medication. 65% of placebo patients received rescue medication as compared to 27% of ARX-04 patients. Yet five times as many patients in the placebo cohort terminated early in the study due to lot of efficacy compared to the ARX-04 cohort, 18.5% versus 3.7%. Importantly both patients and healthcare providers alike were impressed the pain control afforded by ARX-04 rating the global satisfaction with pain control over the 24 hour study, as either good or excellent in 8% of cases. There were two serious adverse events or FAE reported during the study period both of which were in the placebo group and resulted in early termination of the affected patients. No patient in the ARX-04 group dropped out of the study prior to 24 hours due to an adverse event and there were no statistical differences for any adverse events between the active and placebo group. These results brings AcelRx one step closer to commercializing a sublingual sufentanil product that we believe will have a meaningful impact by providing a non-invasive treatment of moderate-to-severe acute pain in a medically supervised setting. Also as previously announced, we’ve initiated a single arm study with ARX-04 in the emergency room. This study known as SAP301 is an open-label study in patients with marked severe pain. The study is intended to add in the safety database required for filling the NDA for ARX-04 and is expected to enroll at least 40 patients across the three clinical trial sites in the U.S. We intend to collect pain intensity and pain relief scores to access pain relief over the first hour following the treatment with ARX-04. We anticipate that the emergency room maybe an initial market for ARX-04 and will serve as our gateway to utilization of the ARX-04 across the hospital and other managements who provide study. We have pre-NDA meeting scheduled with the FDA in December to review our plans to submitting the NDA for ARX-04, which we anticipate to occur in 2016. We’ve begun preparing the NDA and we’ll provide an update on the timing following the pre-NDA meeting. In Europe, we held scientific advice meetings with the health authorities in Austria and the UK to discuss the clinical data package for ARX-04. Based on those meetings, we believe we have sufficient information to proceed with the filing of an MAA under the centralized procedure. In summary, our meetings with the EU health authorities were very positive and we are planning on filing an MAA for ARX-04 in 2015. I will now turn the call back to Tim to discuss the financial results.

Thank you, Pam. Earlier today, we reported financial results for the third quarter and the first nine months ended September 30, 2015. I’ll refer to you that press release for specific details on the actual results. Net income for the third quarter of 2015 was 5.1 million or $0.11 basic and diluted net income per share. This compares to net income of 700,000 or $0.02 basic net income per share and $0.13 diluted net loss per share for the third quarter of 2014. That increase in net income and income per share is primarily due to revenue under AcelRx’s Zalviso collaboration license agreement with Grunenthal and AcelRx AcelRx’s contract with the Department of Defense for ARX-04 development. In general G&A expenses decreased as a result of the cost reduction plan implemented at the end of March 2015, while other incomes decreased in the third quarter of 2015 as compared to the third quarter of 2014. For the third quarter of 2015 AcelRx recognized revenue from the Grunenthal CLA of 13.9 million. As previously mentioned, we are entitled to receive a milestone payment of 15 million related to the approval of the MAA in Europe, which we expect to receive in the fourth quarter of which 13.2 million was recognized as revenue during the third quarter of 2015. In the third quarter of 2014, we received a milestone payment of 5 million related to the MAA submission of which 4.6 was recognized as revenue. Revenue attributed to the research and development work performed under the DoD contract was 1.6 million for the third quarter of 2015. There was no such revenue recognized for the third quarter of 2014. For the nine months ended September 30, 2015, AcelRx reported net loss of 13.9 million, or $0.31 basic net loss per share and $0.37 diluted net loss per share. This compares to a net loss of 19.5 million, or $0.45 basic net loss per share and $0.63 diluted net loss per share for the same period in 2014. AcelRx recognized revenue of 14.5 million under the Grunenthal agreement in the nine months ended September 30, 2015, primarily related to the milestone for approval to Zalviso MAA. During the nine months ended September 30, 2014 AcelRx recognized revenue of 5 million under Grunenthal Collaboration primarily related to milestone payment for the Zalviso MAA submission. Revenue attributed to the R&D work performed under the DoD contract was 3 million for the nine months ended September 30, 2015. With no such revenue recognized for the nine months ended September 30, 2014. As of September 30, 2015, AcelRx had cash, cash equivalents and investments of 104.3 million, compared to 75.4 million at December 31, 2014. The net change in cash, cash equivalents and investments was 28.9 million. As mentioned above, the royalty monetization gross proceeds of $65 million occurred in the third quarter of 2015. With the gross proceeds from the royalty monetization of 65 million, the $15 million milestone from Grunenthal and support for ARX-04 under the DoD contract we anticipate we will end 2015 with over $100 million of cash. We anticipate this cash balance is sufficient to permit us to meet our capital and operational requirements at least through the first half of 2017. On the Investor Relations front planned presentations and participation in upcoming conferences and meetings include BIO-Europe 2015 November 2nd to the 4th Munich Germany, the Credit Suisse Healthcare Conference November 9th to 11th in Phoenix Arizona, the Jefferies AUTUMN 2015 GLOBAL Conference, November 18th to 19th in London and the 27th Annual Piper Jaffray's Healthcare Conference, December 1st and 2nd in New York City. Lastly as we've previously announced we have hired Gina Ford as our Vice President, Commercial Strategy. Gina has been a consultant to the company for the last two years, helping lead the launch planning for Zalviso. As VP, Commercial Strategy, Gina will be responsible for developing the commercial plan for ARX-04 in U.S., Europe and other geographies. As we advance ARX-04 into the final study SAP301 in the emergency room and prepare our regulatory filings in the U.S. and the EU we will be relying on Gina's expertise in market access, pricing, pay relations and branding to plan a successful launch. Gina represents our first hire primarily focused on ARX-04. Her initial review of potential market for ARX-04 was presented at our recent analyst and investor event in New York City on October 2, 2015, while we have much more work to do to better define the commercial opportunity for ARX-04, based on the preliminary estimates, we believe peak sales for ARX-04 in the United States have the potential to be 2.5 times higher than that of Zalviso. We look forward to providing an update on the commercial potential for ARX-04 as we gain additional insights. I will now turn the call back over to Howie for some closing comments.

Thanks Tim. So, far in the fourth quarter we are continuing to make good progress. To recap based on the teleconference we held with the FDA in early September regarding the regulatory pass for Zalviso, we have submitted a protocol for an additional clinical study to address concerns raised by the FDA and to assess the overall performance of the device. We are undertaking efforts to be ready to initiate the study early next year. We also initiated a study of ARX-04 in the emergency room. The study is designed to provide experience in the setting and to add to the safety database. We are looking forward to the pre-NDA meeting with the FDA in December in discussing timing for submitting the ARX-04 NDA. Approval of Zalviso in the EU was a great accomplishment, and we look forward to working with our supply chain partners to manufacture commercial products for Grunenthal’s launch of Zalviso in Europe next year. After many years of dedicated work by our employees it is exciting to anticipate seeing patients benefit from our first product. We'll now open the call up to questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Randall Stanicky with RBC Capital Markets. Please go ahead.

Hi, this is James Chen on for Randall. For Zalviso rest of the world post the EU approval has there been any interest that has stirred since then and how do you feel potentially balancing collecting royalties on additional ex-U.S. region or potentially monetizing it, helping the launch of Zalviso or ARX-04 in the U.S.?

Sure James yes, there is definitely interest outside of the U.S. and Europe for Zalviso, we'll continue to carry on those discussions that have actually added new parties to the mix that's part of the focus for our meeting next week at the BIO conference in Munich, it's difficult to say exactly what the potential for those territories are and we -- I would say that South America and Latin America is of interest, Asia is of interest. China is a little bit challenges because of the timeline. And then potential parts of Eastern Europe and then the Middle East and with Africa region is another one. So, we'll continue those discussions clearly with the approval in Europe, it's a little bit easier in those territories to get partners and to seek approval so we will continue those out. Now historically those haven't been as lucrative as Europe or the U.S. but they should provide some proceeds. We haven't gone far enough long in those discussions to really determine whether to weigh the monetization of royalty there is, collecting royalties ourselves to not see that probably more of a financial question then not, so we'll continue to look at that because having some cash flows as you suggest to help launch ARX-04 in the timeline would be nice, but we'll continue to weigh out those options and move all those discussions forward.

And perhaps just one more for ARX-04, at least before you guys have mentioned peak sales potentially 1.3 billion, potentially around the 65% salesforce, just wanted to confirm everything's on schedule starting in September I believe and anticipated on results first quarter and can you talk about the biggest differences between targeting the ER and the ambulatory surgery care market and what might be some of the challenges there? Thanks.

Sure and I will ask Howie to chime in as well the information that Gina presented at our Analyst Day could have potential peak sales of about $1.3 billion, but clearly you would need more than a 65% salesforce to get there, so I think the 65% was something in from a launch standpoint in terms of targeting the initial market of both the emergency room and the ambulatory surgery centers, each are slightly unique characteristics, but it felt that if you could launch with a relatively sufficient salesforce of probably 65 into both of those areas. So I think for us when we think about the ER -- obviously there is about 5,000 ERs there. A lot of this work is very similar to some of the profiling work we had done with Zalviso. You can look at it geographically and size it the right way. In this case the ER there is reimbursement component too which actually might help the uptake from that standpoint. So obviously a lot more work to be done, but for right now that’s kind of where we’re comfortable. The ambulatory surgery centers while there is a fair amount of those at least from a corporate standpoint there is some concentration of ownership. To the extent you could take advantage of a corporate formulary or corporate purchasing or procurement process. We could do that with a relatively smaller efficient team. Clearly the pull through would have to happen at the local level and geographies where we already have reps, so we believe there is efficiency there. So at least initially we think that’s kind of the targeted how we would plan to launch and obviously there a lot more work to be done there.

The next question comes from Boris Peaker with Cowen. Please go ahead.

So the first one is on ARX-04, I am just curious is there any patient or physician training required with this drug specifically and how and when would this training occur?

Hi, it's Pam. No there isn’t -- this is a standard nurse administered drug. So they are very simple instructions on how to use the single dose applicator which is just a two step procedure. So it's almost like giving a syringe to a patient, but obviously it's not invasive and sublingual.

And in terms of getting other such drug approved in a hospital formulary have you had discussion with K. Walters for doing that I am just curious what are they specifically looking at and how sensitive would that be to pricing in that setting?

Yes, we have had some discussions around that at least the early response is, they like profile of the drug, they like some things about the onset, they like the PK level and also a more predictable offset. From our pricing standpoint you got to remember the emergency room is a little different animal than your standard hospital procedure where it’s included as part of the ERG. So at least the clearer feedback to-date has been very positive. I think the pricing at least that we have with the U.S. government is at $20 per application. Most of the folks that we talked to and Pam has been out at some for her medical meetings, I think the response has been not bad it's clearly not a barrier. Obviously there is more work to be done on the pricing and with payors and we are doing that. But today I think the KOLs have been very responsive at least to that as a core growth.

One other thing that is important that we learned in the emergency room as well as that there is -- if you're getting someone for example an IV, have to put an IV in order to give them their pain medicine and there is cost associated with that in terms of the nursing time and the items that you need to the IV as well as it takes longer to actually get all that in place and provide pain relief to the patient. So there is more than just -- there is more of a finical economic story than -- and also a benefit to the patient than just substituting one pain medication for another.

And my last question was on Zalviso. If you end up starting the pivotal study I guess in that timeline that you estimate which is in the first quarter of 2016. Give a sense of how long it would take to actually complete it?

Well the short answer is not yet, because we did propose a sufentanil trial to the FDA and one of the things we are looking for feedback from them is on the size of the trial. So obviously that no one is going to tell how long it will take. But Pam can comment when she wants to we have designed it to be quickly enrolling as I mentioned will be multiple types of surgeries and allow multi modal pain relief as well so.

Yes, so we’re going to use the same clinical size we have used for the Phase II and Phase III studies for Zalviso. These folks love the device, love the drug and are very eager to work with us and start enrolling.

The next question comes from Michael Higgins with ROTH Capital Partners. Please go ahead.

A couple of questions around Zalviso and then two on 04 personal and Zalviso regarding inadvertent dosing, in your discussions with the FDA have they given you any sense for whether it's more important to have aero rates and on patient basis or more important to have aero rates as we go through all dosing basis?

Yes, so they focused on a per patient basis.

And then also on Zalviso regarding the device failures, I believe the FDA is asking to allow the air rate with the device. Do you know if they are looking for something as they are looking for results on a point estimate on upper bound is that something that you're waiting till the end of the year to find out?

Yes we proposed a statistical plan along with our protocol and that is one of the things we’re expecting to comment on as well.

Okay. And then on 04 should we look in Q4 to see contract revenue pick up versus what we saw in Q3, can you give us any near-term guidance on that would be appreciated?

Yes I mean obviously the reimbursement will happen for the SAP302 study. So at what rate, I mean that’s a relatively small study. So as compared to Q3 my guess it is probably going to be roughly the same. We would expect it -- there will be a blip in ’16 with the filing fee which is a couple of million dollars that is included in DoD. So from a contract standpoint, if you assume about the same level that you saw in the third quarter I think that is a safe assumption.

Regarding the entire 17 million should we look for all of to SAP now at some point or is it up to 17 million?

The contract is up to -- it's subject to calculation of overhead rates and fringe rates which can vary and so we’re still comfortable that we should be able to realize a majority if not nearly all of the $17 million. As we go through our year-end and true up those amounts for the two rates I mentioned before and we think there is an adjustment we’d be happy to kind of let you guys know at that time.

Pam, you did some work on Zalvis’s firm economics, would you do the same for 04 and if so when might we see the results of that work?

Great question I am working on that now. What we did for Zalviso was we presented a poster at the Spring ES4 meeting and then we used that data for the publications and I believe that’s going to be our plan for ARX-04 as well. We’re very excited to work on that type of economic story, I think it almost writes itself on that to having talked to many ER docs about the cost of the nursing time and effort to place an IV in an ER is quite expensive and then you have to the drug cost of the IV opioids and then of course the time for morphine to kick-in which of course takes a while. Having a non-invasive drug administrator too for ARX-04 it is just really helpful. And not only for paramedics and medics in the army but for ER docs and I think that’s going to be a relatively easy paper to write.

I have got 20 bucks for a dose I am thinking an IV a little lite. Can you give us some feedback that you have heard from docs regarding the cost of the drug nursing time the bag the lines that kind of thing in aggregate has he given any kind of feedback?

We really just to this point, we really just have anecdotes and so conventions will at some point do more typical quantitative pricing study and as Pam wants to do the pharmacoeconomic story we will have some solid data on that.

The next question comes from Ed Arce with HC Wainwright & Company. Please go ahead.

First on your upcoming study which is submitted or working on those protocol, can you give us a little more detail around some of the specific things that you're looking for specific details around the aero rates whether it's patient based or are procedure based on the device?

Sure, well endpoints that we’re looking at is where the FDA suggested to us a primary endpoint around dispensing aero and so we have written that up as a primary endpoint to the study that we submitted at a protocol to the FDA. And where advanced testing clearly met that endpoint and we believe that we’ll be able to show that in clinical testing as well. But again until we have the feedback from the FDA. We submit the protocol in line with what they have recommended. So we’re not expecting a huge push back, but we don’t definitively know yet.

Perhaps you could give us some update as well on Grunenthal’s progress with your launch in Europe?

Sure, and actually they are moving ahead at full speed, we have taken a look at their launch plan their commercial strategy they have actually have put a fair amount of working into this Pam actually was at a meeting earlier in September big pain meeting in Europe where Zalviso was unveiled literally to the medical community there. And so Grunenthal will continue those efforts both kind of at the trade level they also have and are beginning an awareness campaign or we might refer to that as a unveiling campaign which they call change paying. They were very effective with this type of campaign in the chronic setting so they are adapting those principals in the flask to the acute setting, they will begin to roll that out and they kind of have a full strategy to look at those digital both traditional PR and press release to roll that out. So they are ramping up, they have a lot of folks involved, it's very significant to them. We don’t know exactly when they are going to launch. But it looks like they clearly in the first half of 2016 and they are going full speed ahead.

And then just one last housekeeping question, this noncash liability expense for the PDLI royalties that you now have on your income statement, is that something we can expect on an ongoing basis?

Yes, unfortunately, who U.S. account for the sale is more debt like under GAAP and so what you see there is an amount that we will take as royalty they are actually collected from Grunenthal and dispersed about to AcelRx and to PDL we will essentially take an interest charge and at some point that we will come off the books, but unfortunately it's around for 15 years until they have reached the capped amount so, we'll have to talk a little bit more about the accounting for that, but it does represent noncash charge and unfortunately it is in accordance with GAAP.

The next question comes from David Amsellem with Piper Jaffray. Please go ahead.

Hey, this is Michael on for David. Just a couple of quick ones, for the Zalviso study, you mentioned that you'd be including other surgery types, I was wondering if you could may be give just give a little bit of color on what types of surgeries specifically and then just a housekeeping one, just wondering if you guys add any color on maybe how we should think about R&D spend moving through the end of this year and through 2016 given that you will have these additional programs running?

Sure David so I'll take the first question. This is not an efficacy study we've clearly beaten placebo many-many times in our trial. So, we can be a little less careful as far as selecting very specific type surgeries, before we've allowed major abdominal hip and knee replacement surgeries which is fairly broad for Zalviso, we're now opening up to other type of surgeries, they could have spine surgery, they've got different types of surgeries just along as they will be requiring systemic opioids for at least 24 hours after surgery and obviously that they have a qualifying pain score that's going to be a moderate to severe pain scoring or its entering the study, so we're just trying to increase the enrollment but we're also trying to be more real world, I think the data from the study, even though it's open label and single armed, will still be very valuable to show the use of Zalviso in other patient populations than we've done before and to look at the efficacy of Zalviso and the use of Zalviso any multi-modal of environment which we also couldn't really do in a placebo controlled study. So, I'm actually excited about this study for many reasons.

And then on the R&D spend that we moved the current trend is somewhat around between 5 million to 5.5 million. I really don't expect that trend to be any different at least in the fourth quarter and then obviously depending on where we come out with the study with the FDA most likely it won't be dramatically different next year.

The next question comes from Hugo Ong with Jefferies. Please go ahead.

This is Hugo Ong speaking in for Biren Amin. Just wanted to get your latest thoughts on the developing competitive landscape in post doc pain, how do you look at say medicines companies IONSIV which recently got approved, Cara is going into Phase III for their kappa opioid receptor agonist and I know Trivina has presented some good Phase II data, I mean if you could share your thoughts? Thanks.

Sure, well there's a lot to cover. I'll be glad to take them on individually. So, IONSIV we were thrilled when they were approved I'm still thrilled -- two companies bidding up on IDPCA is a good thing. We think that from an efficacy standpoint an onset standpoint, a pricing standpoint, we would probably will look more competitive than IONSIV does, but we'll see, we'll see when we get to the market, I think that again the issue with IONSIV is that the one day patch it has some dermatological issues with it and it has really no onset of action so they -- you have to tie for your patient to come for -- you've to maintain them with comfort for three hours, before you can really let them loose on their own with the patch. And so, and that's how we ran our clinical trials and there're advantages to the product and there're disadvantages as well. Regarding the kappa agonist story, kappa agonists have been around for a while as they're not the most profound analgesia the play there really is that you will have some level of analgesia that hopefully has a better safer side effect profile and I'm sure mucilaginous it is always a claim with kappa agonists but they're just not usually that strong of a powerful opioid event when you're talking about few sentinel or sentinels and those sorts of drugs so, I do look at it sort of a different patient population then what we're talking about for our product. Regarding the TRB 130 drug that you're referring to I think it's interesting to buy a smart end story is an interesting one, there data is a little confusing to me in stage 2 they have a side effect profile for their drug which looks very much like our drug, but it's their morphine side effect profile that's exquisitely high, extremely high for any opioid after surgery. So I think that’s interesting. But I am looking forward to their data they are an injectable they are IV, so I don’t really see them as competing with us at all, we’re non-invasive and our whole point is to avoid IV PCA or hopefully to avoid the IV drug administration it is invasive, it's not at all the trend where people are going to oral multi modal therapies, they are going to enhanced recovery after surgery program. The whole push is to be non-invasive. So as far as IV opioid goes I think it's an interesting story, but we’re non-invasive, we in fact have a side effect profile that’s equal to placebo. Beating morphine to me is a very low bar, I am -- that’s the way we look at it, we beat morphine it is a really soft instauration occurring in our Zalviso program and we have an ARX-04 side effect profile that is equal to placebo. So as far as side effects we love our sufentanil product and it is a non-invasive product we really think will win the day.

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

I just wanted to thank everyone again for participating in our third quarter call. We will be presenting at several investment conferences as we mentioned next month. So we look forward to providing you updates as they come along.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.