Good day, everyone, and welcome to the AcelRx ZALVISO Phase 3 Top-Line Data and 2Q17 Financial Results Discussion. 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 Jane Wright-Mitchell. Please go ahead.

Thank you. Good morning, everyone, and welcome to today's review of the IAP312 study results and our second quarter financials. I'm joined here today by Vince Angotti, our Chief Executive Officer; Dr. Pam Palmer, our Co-founder and Chief Medical Officer; Merrill Keefer [ph], our Corporate Controller; and Dr. Harold Minkowitz, the Principal Investigator in our ZALVISO Clinical Program and a practicing anesthesiologist at Memorial Hermann Memorial City Medical Center in Houston, Texas. Before I turn the call over to Vince, let me remind you of our Safe Harbor language. During the call today, we will make forward-looking statements, including but not limited to statements related to the process and timing of anticipated future development of AcelRx's product candidates DSUVIA, sufentanil sublingual tablet 30 microgram known as ARX-04 outside of the United States, and ZALVISO, sufentanil sublingual tablet system, including U.S. Food and Drug Administration, or FDA review of the New Drug Application, or NDA for DSUVIA; the potential approval of the DSUVIA NDA by the FDA; the European Medicines Agency or EMA's scientific review of the ARX-04 Marketing Authorization Application, or MAA; the DSUVIA and ARX-04's clinical trial results; AcelRx's pathway forward towards gaining approval of ZALVISO in the United States, including the planned resubmission of the ZALVISO NDA to the FDA; and the therapeutic and commercial potential of AcelRx's product candidates, including potential market opportunities for DSUVIA, ARX-04 and ZALVISO. These current forward-looking statements are based on AcelRx Pharmaceuticals' current expectation and inherently involves significant risk 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 limitation, risks related to AcelRx Pharmaceuticals' DSUVIA and ARX-04 development programs, including the FDA review of the DSUVIA NDA; the EMA review of the ARX-04 MAA and the possibilities that the FDA or the EMA may dispute or interpret differently clinical results obtained from the DSUVIA or ARX-04 Phase 2 and 3 studies; the possibility that the FDA may dispute or interpret differently the results of the ZALVISO development programs, including the results from the IAP312 clinical trials; any delays or inability to obtain and maintain regulatory approval of its products, including DSUVIA in the United States, ARX-04 in Europe and ZALVISO in the United States; the uncertain clinical development process including adverse events, the success, cost and timing of all development activities and clinical trials, the accuracy of AcelRx's estimates regarding expenses and capital requirement and the needs of financing and other risks detailed in the Risk Factors and elsewhere in AcelRx's U.S. Securities and Exchange Commission filings and reports, including most recently, quarterly report on Form 10-Q and other SEC filings. AcelRx undertakes no duty or obligation to update any forward-looking statements contained in this presentation as a result of new information, future events or changes in its expectations. I will now turn the call over to Vince.

Thanks, Jane. And thanks to everyone for dialing in for today's call. This morning, we released results of the ZALVISO IAP312 study. Since the timing of the 312 results overlaps with our second quarter financial results, we'll focus this call on the 312 clinical update but also briefly discuss the quarter's accomplishments and financial results. As a reminder, IAP312 is a Phase 3 study in hospitalized post-operative patients, who self-administered 15 micrograms sufentanil sublingual tablets using the ZALVISO system as often as once every 20 minutes to manage their moderate to severe acute pain. We conducted this study at the request of the FDA to evaluate the overall performance of the ZALVISO system. And for those of you unfamiliar with the AcelRx story, AcelRx first filed an NDA for marketing approval of ZALVISO in 2013. With the original ZALVISO design utilized in the Phase 3 study, IAP311, 7.9% of patients experienced a device error over the treatment period of up to 72 hours. In all of the Phase 3 studies, we also observed a small number of inadvertently misplaced tablets, that being less than 0.1% of total dispensed tablets. In July 2014, we received a Complete Response Letter, or CRL. In this CRL, the FDA requested that we adequately lower the device error rate and expressed concern that inadvertently misplaced tablets had not been addressed or routinely assessed as part of the study protocols. So in response, we conducted bench testing and human factor studies to respond to the FDA's concerns, as well as worked with the FDA to design IAP312 to provide additional clinical data on the functionality and usability of the newly revised ZALVISO system. We believe that 312 results presented today address the Agency's questions, and we are looking forward to submitting this data to the FDA as part of the resubmitted NDA for ZALVISO. And with that as a backdrop, let me turn the call over to Pam for a review of the results.

Thanks, Vince. First, I'd like to thank all the patients, physicians and nurses for their participation in the study. The IAP312 study enrolled a total of 320 hospitalized post-operative patients, who use ZALVISO for up to 72 hours to manage their moderate to severe acute pain. Patients were considered a completer if they successfully completed at least 24 hours in this study following the first dose of study medication. There was no primary efficacy endpoint but rather a list of study objectives, including those requested by the FDA. At least 315 patients were required to be enrolled in order for the study to have a 90% power to demonstrate that the upper limit of a 90% confidence interval of the device error rate during patient use was not greater than 5%. We enrolled a wide range of patients of different ages, surgeries and comorbidities. Specifically, patients who participated in the study were 60% female and the average age of all study participants was 57 years, with 38% aged 65 or older. 41% of patients had a BMI of greater than 30. The majority of patients underwent either knee replacement surgery, 25%; hip replacement surgery, 24% or major open abdominal surgery, 21%. Approximately 91% of patients completed this study with the reasons for dropping out prior to 24 hours being inadequate analgesia, 2.5%; adverse event, 1.9%; early discharge, 1.6% and various other reasons which totaled 3.5%. Regarding device functionality, the occurrence of a device error during patient use occurred in 2.2% of the patients enrolled in IAP312 over the course of up to 72 hours of treatment and the upper limit of a 90% confidence interval was 4.1%, which was lower than the protocol's target of 5%. Moreover, this rate was statistically lower, p-value less than 0.001 than the 7.9% rate…

Absolutely. Hello, everyone. I am Dr. Harold Minkowitz. And as Dr. Palmer mentioned, I have been involved in evaluating sublingual sufentanil for the treatment of moderate to severe acute pain since the initial Phase 2 study of ZALVISO in 2008. From both my personal observations, as well as reports from our staff and from our patients, we found ZALVISO system easy-to-use and was pleased by the level of analgesia observed and reported by our study patients. In addition to being enlisted under this IAP312 study, I was also initiating a new Phase 3 ZALVISO clinical trial, IAP309, which was a head-to-head study of ZALVISO versus IV patient-controlled analgesia with morphine. In that study, [Technical Difficulty] compared to IV-PCA morphine. Since that time, I'm pleased to see further improvements in ZALVISO have been treated as evidenced by the results of this IAP312 study. It is important to remember [Technical Difficulty] analgesics often associated with programmable infusion pumps. Overdosing patients with opioids can lead to significant morbidity and mortality. Having excess resist with ZALVISO, which is preprogrammed may eliminate the potential for these type of errors and [indiscernible] currently available for us to use in a hospital setting. Not to mention the fact that ZALVISO eliminates the need for an additional IV, decreasing the risk of IV line infection.

Thanks Dr. Minkowitz. We intend to submit the IAP312 results together with those from our earlier IAP309, 310 and 311 studies, as part of a resubmitted new drug application for ZALVISO to the FDA by the end of 2017. Our expectations that results from this IAP312 study will provide the FDA with a complete picture of ZALVISO's usability and functionality. Moving onto additional accomplishments for the second quarter. Recently, we announced that the commercial ZALVISO system was recognized by the prestigious Red Dot Organization and received a Red Dot Award in the category of product design, life sciences and medicine. Red Dot, for those not familiar with it, is an internationally recognized quality label for design excellence. You can go to the website red-dot.de to see the winners of this award. I also wanted to update you on DSUVIA activities. As you know, we filed the NDA for DSUVIA and are expecting response from the FDA in October of this year. The FDA informed us that they would not be convening an advisory committee meeting to review DSUVIA. In Europe, we filed an MAA and have received EMA's Day-120 letter as expected. We remain on track with both of these applications. Now let me turn the call back to Vince, who will run through the second quarter financials with you.

Thank you, Pam, and thank you, Dr. Minkowitz. Our new CFO, Raffi Asadorian, starts in a few weeks, so you'll get a chance to meet him on our third quarter conference call. We're certainly happy to have him on board. In the meantime, I'll highlight the financials for you so we can get to your questions. We ended the quarter with cash, cash equivalents and investments of $62.1 million, which was in line with our plan, compared to $80.3 million at December 31, 2016, and $72.3 million at the end of the first quarter. The decrease in cash is primarily attributable to cash used in operating activities. Net loss for the second quarter of 2017 was $13.1 million, or $0.29, basic and diluted net loss per share, compared to $11.1 million, or $0.24, basic and diluted net loss per share for the second quarter of 2016. The net loss from operations in the second quarter of 2017 was $9.9 million, compared to $8.3 million during the second quarter last year. For the six months ended June 30, 2017, AcelRx reported a net loss of $28.6 million, or $0.63, basic and diluted net loss per share compared to $22.1 million, or $0.49, basic and diluted net loss per share for the same period in '16. The increased net loss in the first half of 2017 was primarily due to decreased DoD contract revenue combined with increased cost of goods sold related to larger shipments of ZALVISO and higher expenses related to the IAP312 study and pre-commercialization activities. In addition, total other expense increased in the six months ended June 30, 2017, primarily due to increased interest expense in the Hercules loan and other non-cash items, including interest expense and liability related to the sale of future royalties. Now turning the focus back to our commercial preparations. We continue to make progress on our launch readiness for DSUVIA in the U.S. As we have discussed, we've made limited but key commercial hires in the past few months to address initial commercial planning activities. We'll keep you updated as we approach our commercial launch. Finally we're continuing to look at licensing opportunities that would support marketing of our product candidates in other ex-U.S. geographies, including Europe and Canada. With that, I believe we can open the call for questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions]. At this time, we will pause momentarily to assemble our roster. The first question comes from Matthew Andrews of Jefferies. Please go ahead.

Hi. Good morning, Vince and Pam. Thanks for the chance to ask a couple of questions. So first one is, since this is in response to the CRO for ZALVISO, what is the next step? Do you actually have to meet with FDA to review the data and/or can you can file without their inputs relative to the 312 dataset?

Yes. We are going to be combining this data together with our previous data and submitting an NDA - resubmitting submitting our NDA for ZALVISO and there is no need to have more discussions with the FDA around that.

Okay. Thank you. The lower rate versus prior studies, what do you believe actually drove the improvement and performance of the system?

Well, there was a number of small software and hardware changes that were made to the device to reduce some of the optical errors that we were seeing earlier that - so the engineers as any - everyone knows, gen-two is always better than gen-one. So with time and the ability to evaluate what was going on with the ZALVISO device in the first series of Phase 3 studies, they were able to go in and make some minor adjustments and tested them out on bench-top testing and then again in the clinical trial.

And then on the device performance, did FDA specifically ask that you include inadvertent dispensing in your calculations for the combined error rate? And if so, and we include the six or 13 issues noted in the release, what would the mean rate then be if those were included?

Well, the - so the FDA asked for a number of different objectives to be measured and we evaluated all of those objectives in the study. We were just reporting top-line data now that I've told you, so. I can't really start doing some additional math to give you some different populations. But the study was powered around device errors only and we were very clear on the protocol, and the FDA was aware that that's how the study was being powered. But we collected a number of different data points and we'll be releasing those in the future.

Matt, I think it's important also to understanding the two - in the 2.2% error rate, they all don't lead to analgesic gaps. It's inclusive of all device error rates. So we've had this subset both out as well as it relates to analgesic gaps, which has been a priority for the FDA. Does that all make sense?

Yes, it does. Thank you. And just one last one. FDA held a workshop a few weeks ago, two-day workshop on chronic opioids. So wondering if you had any comments relative to that two-day session and if there was anything relevant that was discussed that you really feel are relevant to ZALVISO and/or DSUVIA? Thanks.

Sure. I think it's really important that the work continue with the FDA, the DEA and many other agencies looking at the chronic opioid use and outpatient abuse issues. But really our products are not meant for that population. A lot of the issues just don't pertain to us and we're just trying to make sure that when healthcare professionals reach for the best products to treat their patients in a hospital, and if they consider an opioid necessary to treat their patients that they look towards our sublingual sufentanil product. But we're not trying to encourage more opioid use and we're certainly not looking to treat chronic outpatient pain for sure. And that will - by the way, that is mandated by our REMS. Our REMS will be controlling the distribution of our opioid products.

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

Good morning guys. Thanks for taking my questions. Couple on DSUVIA to get start off. So you get the 120-day later back from MAA. Any unexpected questions in there and the timing that you expect before you submit your responses?

Sure. Yes, we've got the Day-120 questions back from EMA and there was absolutely no surprises for us and we're diligently working through answering those questions so that we can get back on file. But I don't know the exact date that that will be.

Okay. And then looking ahead here in the U.S. with DSUVIA regarding the DoD, any timing you can provide for us on their potential acquisition timing of the asset? And how their stocking patterns may compare to wholesalers and hospitals?

Yes. This is Vince, Michael. Thank you for the questions. As it relates to the DoD, we've arranged with them via contract that they can order up to 112,000 units at a specified price. That would certainly be in part timing related to our availability to make it accessible to them as it relates to packaging, labeling, etcetera. With our PDUFA date in October, you wouldn't anticipate that their ordering could begin until late after that, and we don't anticipate having supply chain ready to fulfill those orders until the start of 2018.

Okay, very helpful. And you mentioned some key hires recently here in the U.S. Can you give us an update on the rollout of your employees? I understand you're taking a pilot launch strategy. You'll intend to saturate specific hospitals, ambulance services and then roll that out across the country. How does the timing look in terms of number of employees of, let's say, the first part of the year versus the back part of 2018?

Yes. Good question, Mike. Thanks. So around the readiness as it relates to the rollout of promotional execution, again we reiterate that we plan on launching DSUVIA in the U.S. utilizing internal commercial infrastructure with the emphasis on accounts with significant emergency room flow and a number of procedures with short-term post-op stays, typically less than 24 hours. We're currently planning an adaptive launch effort that allows us to use feedback from our initial marketing targets to adjust accordingly as we broaden the rollout of DSUVIA. So the hires we've made initially are that of the head of sales, the head of market access, a marketer and a head of MS sales. And that's the limit over the hiring we've done in the commercial realm in order to be smart with our cash and be sure we get a positive outcome with DSUVIA in October. And post that, PDUFA assuming its approval, is the answer. Then we'll start the rollout of the additional headcount and bodies. In the United States, the average size of an institutional sales team is about 60 headcount. We would not go that large that quickly. We would likely be much smaller starting in January, maybe 10 to 15, which is a key core of talent that we are evaluating based off the criteria mentioned previously, but on the high procedure flow and ER visits. And we would likely look after four to six months to reassess that uptake and look to expand at that point on towards the middle of 2018.

Okay. And just a follow-up on that. If I had a marketing cost in Q2, is it fair to roughly double that by Q4 in '18?

I'm sorry. Did you ask if marketing cost in Q2 would double up in Q4 of '18?

Essentially, yes.

Not from an A&P standpoint as much, because those are really relatively steady throughout the year other than the production of materials that might be utilized with the actual physicians themselves. As it relates to headcount, yes, it would probably double up from the beginning of the year towards the middle to late end of the year.

Okay, fair enough.

Looking from strictly a function of numbers of sales personnel.

If I can poke in on ZALVISO a bit, in your interactions with the FDA, have they discussed the number of misplaced inadvertent dropped tablets, I suppose, in the bed sheets? What's an acceptable level? You talked about device errors and interactions with the nurse and the patient, but it's those additional tablets that the nurse finds later. Has there been any discussions with the FDA on what is an acceptable versus unacceptable level?

No, there has not been any discussion around what an acceptable level is. The issue the first time as we've said in the script, it was very, very low. It's just that it hadn't been prospectively assessed. There was not an objective of a study to evaluate it. So the issue really was how many were dropped. They didn't feel that they've had a good handle on that. And that was the whole point of the 312 protocol. We worked with the FDA. We're in back and forth on exactly how the nurses were going to check, where they were going to check, the fact that there would be a checklist for them to mark off to prove that they checked those areas. So it was really about fully assessing what happened with these tablets. And I think there is - the important thing is that the training screen - this is a unique device in that we actually have patient training screens on the handheld ZALVISO device that electronically teach patients and help the nurses training patients about what to do with assisting various situations. And so you can see where half the patients who had a misplaced tablet, in fact alerted the nurse right away so that could be dealt with. And that's something that we feel really improved the system. But there has never been a discussion of an exact number.

Okay. That's helpful. I'll jump back in the queue. I've got a couple of follow-up on. So I'll leave it here. Appreciate it. Thank you.

Thanks Mike.

Sure.

The next question comes from Ed Arce of H.C. Wainwright. Please go ahead.

Hi, Vince and Pam. Congratulations on the successful year [ph]. I remember going back a year or more now in various conversations around the study. Internal study results of the newer device showing error rates around the 3% or 3.5%. So this 2.5% mean, in this study, it's certainly better than I think you would have even expected. Perhaps you could comment on how well these results measure up to your previous expectations? And in particular, along with - separate from the measurements of drop tablets, I'm wondering if there was a specific error rate number or objective that the FDA was looking for? Thanks.

Sure. Well, the error rate that the FDA specifically requested was the 90% confidence interval being less than 5%. And that in fact was our own internal statistic around our bench-top testing of the device. And so, I think it's not a coincidence that that was in fact repeated back to us when it came time to run the clinical trial. We in fact had great bench-top testing data, which made us confident to go into this trial and we feel that clinically we had similar numbers to what we saw in the bench-top testing error rate. And it's important to say that when we talk about a 2.2%, that doesn't mean 2.2% of the time that a patient tries to use the device there is an error. It means that 2.2% of patients over the course of up to 72 hours with the treatment at one point in time experience a device error. So as far as the patients are concerned, it's a very rare event and we're very pleased with the results today.

Okay, great. And perhaps, Vince, you could speak a bit about any discussions you've had with the FDA around analgesic gaps and any data that you've collected with this study around that?

As it relates to analgesic gaps for the ZALVISO 312 study?

Yes.

I think we're - I'm repeating a lot of what Pam said as it relates to the core focus of the study was in the device error rates and them potentially leading to analgesic gaps for the patient. So while most people might be concerned that you have an overdosing issue with these opioids and the device, actually it's quite the contrary as it relates to this device. The concern by the FDA was that, well, the patients won't be getting the analgesic effect that they need and require in this particular post-op setting. So as it relates to those discussions with the FDA, that was the primary concern, number one. And then beyond that, number two, obviously as Pam mentioned, was the drop tablets, just the tip of the iceberg, because we had proactively looked for them as it related to study protocol in the previous studies. And by inherently including that within the study protocol, I think this gives us great comfort on the accountability of the tablets moving forward. And the fact that, well, on the original studies, it was very low, less than 0.1% total tablets dispensed, it has remained very well at less than 0.1% of tablets dispensed as it relates to those patients unknowingly inadvertently dispensing the tablet. Does that help, Ed?

Yes, it does. Thank you, Vince. And congrats again on the data.

Thank you.

The next question comes from Randall Stanicky of RBC Capital Markets. Please go ahead.

Great. Thanks for the questions. Assuming a late year filing of the NDA for ZALVISO, that would put you on track for a mid-2018 potential approval, can you just talk to the commercial strategy and specifically how much leverage are you going to have with the DSUVIA commercial efforts, sales force and ER and hospital connectivity? Thanks.

Yes, good question, Randall. Thank you. And you're correct. If we complete the resubmission and that shall go by close of this year, it's considered time to review our six-month review based off of the resubmission, which would put it right on track assuming approval mid-year next year. That also puts it on track on not being too far into the DSUVIA launch. So we think that there is great commonalities, obviously between the two products, that being that there is an underlying denominator of sublingual sufentanil tablets expecting the accounts. So as we're looking at targeting accounts moving forward based off of not only ER but short-term stay surgeries, they often bleed into the same institutions that have longer stay post-op surgeries. So we feel that the overlapping institutions between the two products is very favorable to allow us to leverage our infrastructure moving forward. One thing we're going to carefully look at is the time it requires to sell ZALVISO and educate on ZALVISO versus DSUVIA. One is a little bit more of a device sell, even though there is the commonality of sublingual sufentanil tablets, versus the other being more focused on the drug itself in the single-dose applicator. The number of sales representatives likely wouldn't change, although we would consider putting up a small specialty team, I'd say very small, that would focus simply on ZALVISO as a consideration moving forward in complement to the reps that are in the midst of the launch of DSUVIA. Two launches at once, while blessed as a company, certainly creates challenges for being sure we can concentrate on the efficiencies moving forward of the messaging. So we continue to evaluate that. The accounts will certainly overlap. We can leverage the infrastructure with the sales reps and will consider a small select team of those purely devoted to servicing the device components moving forward. Does that help, Randall?

Yes, it does. And we're still waiting for you guys to announce a partner in Europe, and obviously that approval process is moving forward. Given the commonalities that you just talked about, should we be thinking that Grunenthal could be a potential partner here along - with DSUVIA along with ZALVISO, which is obviously already marketing?

I would consider them an option, but we're continuing to discuss the potential of the product with multiple parties moving forward. And they would, I think, communicate to that they are still in the midst of the ZALVISO launch, even though it has been a year. They are continuing to go country by country and expand their footprint as it relates to education of ZALVISO moving forward.

I have one last question. So a source of financing could be obviously a partnership either in Europe or in the U.S. And so as you look at the U.S. commercial efforts, the plan to rollout a limited numbers of reps to target the ER, is a potential partnership to target some of the other channels something that we could be looking at?

It could be. We wouldn't commit to that. We want to be sure that the control of the distribution is tight as it relates to DSUVIA and ZALVISO moving forward. So the other channels would clearly have to fall within our medical supervised settings and out of the target accounts that we would be calling on moving forward. So while it's a potential option, it certainly have to fall within those parameters.

Okay. That's helpful. I'll stop there. Thanks very much.

Thanks Randall.

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

Great. Thanks for taking my questions. My first question is, can you just comment on the cost of the new version of the device?

Well, as it relates specifically to the development of those costs, I can't give you the exact dollars on it but I could tell you - as Pam mentioned early, because they are software updates, it's relatively efficient as it relates to the updates on that particular device. The hardware itself has limited enhancements to it. But the software is easy to conduct changes to as it relates to enhancing the performance of the device errors.

So what do you anticipate the cost of the device to be overall, just ballpark? It doesn't need to be exact into each dollar.

I'm sorry?

Just the cost - what's your estimated cost of the device?

Well, that will depend on - are you talking about pricing moving forward as it relates to the market of the device?

Well, there is the cost to you and the pricing that you'd like to sell it at, I guess, I'd just like to understand both.

Yes. So we're still evaluating the pricing moving forward and we haven't revealed the cost of goods as it relates to the device itself. We would consider the device as an opportunity for significant margins moving forward. When we consider this product in the hands of the health system, the device would be minimal as it relates to margin, where we're really looking to understand the economics of this moving forward, the cartridges of the 40 tabs that will be ordered throughout the healthcare system.

Got you. So my next question is on the 312 study. So in the study, there was a nurse inspection occurred every two hours. I just want to know, how does it compare to prior studies in terms of frequency of nurse inspection, and how much nursing oversight do you anticipate to be required for the final marketed product?

Sure. Well, there actually wasn't any nurse inspection prior to this study, and that's why again the FDA wanted this particular study to have that kind of intense oversight. But I'll tell you the reason why we picked every two hours is because many hospitals have standard operating procedure to check vital signs every two hours when a patient is on an opioid PCA. So we felt that was very consistent with clinical care and that the nurse going in and looking for misplaced tablets while she is collecting vital signs would not onerous at all on the system. And it may in fact be that ultimately our REMs involved this sort of nurse oversight to help - make everyone some more comfortable about drug accountability.

Got you. Okay, thank you very much for taking my questions.

Sure.

Thanks Boris.

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

Thanks. Just a couple on ZALVISO. So first, just aside from the data and the rate of device errors and meeting your hurdles, I just wanted to get your general thoughts on the overall regulatory landscape vis-à-vis opioids and how you think that might affect the potential for approval, particularly considering that the FDA seemingly has got more aggressive around opioids in general. The Opana ER removal is a case in point. So how do you think that plays into level of caution and ultimately approvability? And then the second question I had is regarding supervision here. And I think one of the things you cited in the past regarding the device is that there potentially would be less need for supervision, less need for oversight compared to IV-PCA, although that doesn't quite appear to be the case here. So I wanted to get your thoughts on level of supervision and oversight for the device relative to IV-PCA and how you think that could be a challenge commercially? Thanks.

Hi David, this is Vince. So there is couple of different components as it relates to that question. I'll start off with the initial portion about the level of caution as it relates potentially to environment and the regulatory environment. And then turn over to Pam as it relates to level of supervision and the component of the regulatory comparison or consideration of how it compares to standard of care on IV morphine, in particular. So we're fully aware and share the public concerns over opioid abuse. And I think Pam mentioned earlier that AcelRx has no interest in expanding opioid use. Our goal is to really positively disrupt the current standard of care in each of our respective markets being that for DSUVIA, for short-term opioid use, as well as for ZALVISO for the longer patient post-op stay. And I'll again reiterate that it's important for people to continue to understand that our products are not available in an outpatient-based setting. In a retail setting, you'll never find these products at your local CVS, Rite Aid, etcetera, and the patients aren't walking out with a prescription for these products. They are only under medical supervision. And opioids have a place in mild-to-severe acute pain, particularly in a hospital setting. They are still considered the standard of care moving forward for many different patient issues. And when you look at ZALVISO in particular - and Pam can add a little more color on this - the standard of care today is the IV morphine PCA system that has this inherent challenges and it's been around for quite sometime and we feel that we can, through a preprogrammed device and limitation of the ability for patients to receive the pill, address some of those concerns as it relates to safety in opioid dosing moving forward in that particular segment, which we would hope the FDA would consider a benefit and an alternative to not only the patients but to healthcare providers. Pam, maybe you want to comment quickly again - versus the standard of care and then, as it relates to oversight, how we feel that it's not burdensome because it's part of the routine checks from the nurses for these patients anyhow.

Yes, in fact the entire point of starting the company actually back in 2005 was to come up with something better than IV-PCA morphine. It's fraught with difficulties and programming errors are an important one. The IV line coming - becoming infiltrated or pulled out is another one. The decreased ability for the patient to ambulate - we actually studied ease of mobility compared to IV-PCA in our earlier IAP309 study and showed a superiority there and that's again published results. The published analgesic gap rate for IV-PCA morphine is 12% by Panchal et al. in 2007. So it's really a kind of a - I don't want to say a low bar to meet but there is no question, I believe after looking at these IAP312 results that we are certainly not making it more burdensome for a healthcare professional. Like I said, you do not want to hand a patient a PCA opioid and walk away from the patient and check on him every eight hours. That's not what's done. Vital signs are often checked every two hours, specifically with PCA opioids. And what we're trying to have here is a device that has fewer analgesic gaps, fewer errors, fewer risks for the patient. We are preprogrammed so you do not have to worry about a tenfold decimal error, reaching the patient with our product compared to IV-PCA. And in fact, I'd like Dr. Minkowitz, who is still on the line to possibly mention his experience in using IV-PCA opioids.

Sure, Pam. This situation basically I think has been addressed in the previous trials where we looked at comparing IV-PCA morphine to the ZALVISO system. And similar to this study, both the patients, doctors and nursing staff in my experience, have preferred the ZALVISO system to the standard IV-PCA morphine, both in terms of easier administration and in terms of the analgesia. So in my experience that's what I found.

Great. Does that answer your question?

Yes, it does. Thanks.

Thanks Dave.

Our final question will be a follow-up from Michael Higgins of ROTH Capital Partners. Please go ahead.

Thanks. Good morning guys. A couple of follow-ups on ZALVISO. Any price increases taken recently by Grunenthal in Europe?

No. We haven't seen a price increase taken. We can't comment on it but continue to see success as it relates to patient exposures and hospital exposures to the tune of close to 50% increase quarter-over-quarter in patient exposures in the second quarter and hospitals continue to have greater exposure as well. So they're staying on their path of really a measured launch moving forward country-by-country and going deep within accounts as they're already moving.

Okay. Thanks for the color. In the Q1 10-Q, you've included some discussion regarding manufacturing of the device with different suppliers. Not having the Q up yet or at least not seeing it, any updates for us on the manufacturing streamlining? I think some of those have been changed. I think Grunenthal also has the new device in hand. Any updates for us on the manufacturing?

So you're commenting around ZALVISO?

Yes.

No update as it relates to those suppliers moving forward. We continue to be confident as it relates to the ability to manufacture this product in the future and don't see that being a concern as it relates to timelines for the product launch in the near future.

Okay. Appreciate the follow-up. Thanks guys.

Thank you, Michael.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Vince Angotti for any closing remarks.

Thank you, operator. And thanks to all of you for listening. I'd like to thank Dr. Minkowitz for taking time out of his busy schedule to share his firsthand experience and expertise on our call. So Dr. Minkowitz, thank you very much for your time. With IAP312 completed, we're preparing to resubmit the new drug application for ZALVISO by the end of this year, 2017, and in fewer than three months, we expect to hear from the FDA on our previously submitted NDA for DSUVIA. So clearly, it's a very exciting time for AcelRx as we move towards commercializing our two late-stage products. I want to absolutely thank our AcelRx team for their tireless efforts in ensuring we achieved our 312 study objectives. We're very pleased with the outcome of this study and successfully meet our planned goals for the quarter as it relates to continued control of our expenses and stay on our guidance and plan. So we appreciate your continued support. Thanks again for everyone as it relates to your time this morning, and have a great rest of your day. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.