Welcome to the AcelRx Third Quarter, 2021 earnings call. This call is being webcast live on the events page of the investors section of AcelRx 's website at www. acelrx.com. This call is the property of AcelRx and any recording, reproduction, or transmission of this call without the expressed written consent of AcelRx is strictly prohibited. As a reminder, today's call is being recorded. You may listen to a webcast replay of this call by going to the investors section of AcelRx 's website. I would now like to turn the call over to Raffi Asadorian, AcelRx 's Chief Financial Officer.

Thank you for joining us this morning. Earlier today, we announced our third quarter financial results and some important business updates in a press release. This press release and the slide presentation accompanying this call are available in the Investors section of our website. With me today is Vincent Angotti, our Chief Executive Officer and Dr. Pam Palmer, our Chief Medical Officer. Before we begin, I'll remind listeners that during this call, we will make forward-looking statements within the meaning of the Federal Securities Laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of AcelRx. Please refer to our press release, in addition to the Company's periodic, current and annual reports filed with the Securities and Exchange Commission for discussion of the risks associated with such forward-looking statements. I will now hand the call over to Vince.

Thank you, Raffi. And good afternoon, everyone. In alignment with our strategy to consolidate commercial and late-stage development programs and make the supervised settings, we're very excited to announce our agreement to acquire low therapeutics, which provides us with an asset that has the potential to address unmet medical needs across many different disease states in therapeutic areas. The market potential for the asset in these areas is significant and provides portfolio diversification to support profitable growth into the future. We're focused, initially, on its use as a regional anticoagulant and dialysis circuits, for which the FDA has assigned breakthrough device designation status. This pipeline expansion momentum comes at a time where DSUVIA is gaining solid traction in the plastic surgery and cosmetic procedural specialties, which has driven our strong growth and approvals leading to October being our highest commercial order month since launch. We continue to focus on all four pillars of our strategy and on the call today, I'll provide details around the acquisition and it’s fit within AcelRx, update you on the progress with DSUVIA, as well as the DoD and discuss other assets recently brought to the portfolio. So first, let's start with the Lowell acquisition. We're thrilled to bring Niyad, Lowell 's key asset into the AcelRx 's portfolio and believe it has the potential to create significant value. Niyad, an investigational product is lyophilized form of nafamostat, a broad-spectrum, synthetic, serine protease inhibitor with anticoagulant, anti-inflammatory, and potential antiviral activities. Niyad is being developed as a regional anticoagulant for the dialysis circuit during continuous renal replacement therapy for acute kidney injury patients in the hospital. NIAD has received breakthrough device designation status from the FDA, and is being regulated as a device by the FDA due to its mechanism of action. Second intended indication…

Thank you, Vince. Our financial position remains strong with $48.7 million in cash at September 30, and $15.3 million in senior debt. As announced earlier today, we entered into an agreement with two life sciences investors to issue common stock at market for gross proceeds of $14 million. The proceeds from this common stock offering will be used for general corporate purposes and fund the commercialization of DSUVIA and regulatory and development costs for our product candidates. Operating expenses or combined SG&A and R&D expenses were $10.1 million in the third quarter of 2021 compared to $8.6 million in 2020. Excluding non-cash depreciation and stock-based compensation, third quarter 2021 cash operating expenses were $8.6 million dollars. The increase in operating expenses in Q3 2021, was mainly driven by higher SG&A cost, supporting business development activities. We expect quarterly cash operating expenses in the fourth quarter, to remain around the same level, as they were in the third quarter of 2021 with efficiency gains from the re-focused commercial efforts to be realized beginning in 2022. I will now turn the call back over to Vince.

Thank you, Raffi. We're excited about the many upcoming catalysts and potential value drivers, including DSUVIA study readouts, continued penetration of DSUVIA into the single decision-maker channels, FDA submission and potential FDA approval of the two pre -filled syringe products. The other top launch of Zovio in Europe, and initiation of the single registration study and the related readout for NIAD, a device with FDA breakthrough designation. So needless to say, we're very excited about the future. I'd now like to open the line for any questions you might have. Operator.

We will now begin the question-and-answer session. . At this time, we will pause momentarily to assemble our roster. Our first question comes from Ed Arce with H.C. Wainwright. You may go ahead.

Hi. Good morning, everyone. This is Thomas, and I'll be asking a couple of questions for Ed. First, congratulations on the lower acquisition. And so that our first question is related to the acquisition. Just wondering from a commercial standpoint, can you -- it sounds like there's a good number of synergies to be realized in terms of commercial standpoint, can you outline how much the sales overlap is there with your current commercial structure?

Yes. This is Vince, Thomas. Thanks for the question. For our current commercial structure with our field-based sales representatives, there will be a 100 % overlap, or calling on the hospitals that we already have within our particular customer call list. So, it creates a very efficient structure. It also gives us the option outside of the hospital for the second indication to work the dialysis clinics. Much like, we're doing outside of the hospital when we work these procedural suites in ASCs, with our field-based team and moving forward with our virtual-based team. So, we're excited about the overlap and efficiencies this continues to supply for us.

Great. And then Vince, I believe you outlined a registration or a study for nafamostat in the U.S. that's already outlined with the FDA, can you just give us some brief details of that study?

Sure. I'll turn that over to Dr. Palmer.

Yes. So, we already had a meeting with the FDA and come to an agreement on the size of that study as well as the primary endpoint. So, it's fairly small. A study of 160 patients, half placebo, half active. And the primary endpoint is a very straightforward activated climbing time endpoint.

Right. Okay. So will this be -- since given that this is a device, do you expect, should we expect similar timeline compared to say, the severe in the past.

I'm assuming you're talking about timeline on clinical development and regulatory review. Is that correct, thomas?

Yes, that's right. Thank you.

Dr. Palmer?

Yes, absolutely. These are an inpatient study similar to DSUVIA, they're not long in duration of primary endpoints over 24 hours. So, you're not looking at a long-term chronic -type study. So, this should be relatively easy to enroll certainly within a year.

Okay. Got it. And perhaps 1 last question for Raffi. This one is finance. Can you go over -- it sounds like -- can you go over the minimum and maximum cash outlay for the Lowell acquisition. It sounds like $3.5 million is coming from Lowell. Then, also, can you talk about the rough percentages of this $26 million in contingent consideration that spans out to '23?

Yes. Sure. The acquisition is 6.5 million of AcelRx stock upfront at closing to the Lowell stockholders, plus any net cash acquired. And that's what's in the press release you mentioned up to $3.5 million dollars. But any cash we would use would be coming from Lowell. We're not using any of the existing AcelRx cash. As mentioned as well, is the large or heavy component of contingent consideration in the transaction. And there's several different milestones there. I would say part of those are regulatory base milestones on things like the approval of niad 's first indication, the approval of its second indication, as we mentioned on the call. And then there's sales-based milestones that go up to payouts of up to a $100 million of sales. We end up paying out the contingent consideration through that through 2030. So, it's a good structure that rewards performance to the product and the regulatory milestones as well as sales-based milestones. Hope that answered your question, Thomas?

Yes. Thank you, Raffi. Yes. Thank you again for taking the questions. A lot of news today and again, congratulations on the transaction.

Thank you, Thomas.

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

Thanks, Anthony. So again, thank you for joining us today and for your continued support of AcelRx. Again, we believe we are very well-positioned for future growth, continuing to build on our vision of the late-stage pipeline that we believe can bring fruit to the AcelRx investment community and patients and physicians over the course of the next few years. We're very well-positioned for future growth while continuing to control expenses and we look forward to sharing more developments in the future. So please stay safe and healthy, and thank you for joining us on our call this morning.

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