Welcome to the AcelRx third quarter 2023 financial results conference call. This call is being webcasted live via the events page of the Investors section of AcelRx's website at www.acelrx.com. This call is 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, this webcast is being recorded. You may listen to a replay of this webcast by going to the Investors section of AcelRx's website. And now I would like to turn the call over to Raffi Asadorian, AcelRx's -- AcelRx Pharmaceuticals' Chief Financial Officer.

Thank you for joining us on the call today. This afternoon, we announced our third quarter 2023 financial results and associated business updates in a press release. This press release can be found within the Investors section of our website. With me today are Vince Angotti, our Chief Executive Officer, and Dr. Pam Palmer, AcelRx's Founder and Chief Medical Officer. Before we begin, I want to remind listeners that during this call, we will make forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of AcelRx. Please refer to our press release in addition to the company's periodic current and annual reports filed with the Securities and Exchange Commission for a discussion of the risks associated with such forward-looking statements. These documents can be found on our website within the Investors section. I will now hand the call over to Vince.

Thank you, Raffi, and good afternoon, everyone. Today, we look forward to updating you on Niyad, AcelRx's lead nafamostat program as well as other highlights of our business. For those of you who have followed AcelRx over time know that our focus on product candidates for use in the medically supervised setting has greatly evolved from acute pain. We're now at a stage where we're focusing our expertise in drug development on a very different area of unmet medical need, specifically dialysis. Our lead product candidate, Niyad is a novel anticoagulant for use during dialysis and has received Breakthrough Device Designation from the FDA. At the close of the third quarter, we were pleased to receive approval for our Niyad IDE, allowing us to proceed with the registrational study for what could potentially become the first FDA-approved regional anticoagulant for the dialysis circuit. We recently completed our Investigators' Meeting, where the participants expressed excitement at the prospect of the near-term availability of an ultra-short acting anticoagulant for use in CRRT. We will now proceed with our registrational study known as the NEFRO CRRT study, the Nafamostat Efficacy in Phase 3 Registrational Continuous Renal Replacement Therapy study. This 166 patient study will evaluate Niyad versus placebo, measuring clinical endpoints that have been agreed upon with the FDA. Based on the results from this study, we plan to submit a premarket approval or PMA application in the second half of 2024. In terms of market opportunity, we estimate Niyad to have a peak annual sales potential of over $200 million in the US. And this is attributed to just the inpatient and outpatient dialysis markets excluding use in any other extracorporeal circuit. Note that our estimate and peak sales potential assumes modest penetration into these markets, specifically attaining only about a 20% share of the current in-hospital CRRT market and 6% of the dialysis market outside of the hospital. Our interactions with leaders in the field of nephrology have reinforced the urgent medical need for an alternative anticoagulant for use during CRRT. And this, combined with our recently conducted US quantitative research reaffirms the market potential for Niyad. In fact, as announced yesterday, we're hosting a key opinion leader panel discussion on December 6, with thought leaders in nephrology and critical care to discuss the use of anticoagulation in dialysis circuits and the NEPHRO study protocol. At this point, I'd like to turn it over to Dr. Palmer to briefly expand on this.

Thank you, Vin. Good afternoon, everyone. As Vince mentioned, we are hosting a KOL panel discussion on Wednesday, December 6, with experts from two prestigious institutions. Joining us for this event are Dr. Laurence Busse of Emory University School of Medicine, and Dr. David Boldt of UCLA School of Medicine. They are experts in continuous renal replacement therapy and our principal investigators in the NEPHRO CRRT study. The panel discussion will focus on the current approach to anticoagulation in the dialysis surface informed by our market research studies for which both physicians are co-authors on this study's manuscript recently submitted for publication. We will also discuss the NEPHRO study protocol with doctors Busse and Boldt at this event. A live question and answer session for analysts will follow the panel discussion. With Niyad's Breakthrough Device Designation open discussion with the FDA allowed an efficient IDE submission, an agreement with respect to the protocols' patient population, key endpoints, and inclusion-exclusion criteria. The primary endpoint of the study is assessing the activated clotting time or ACT, resulting from the administration of Niyad to the dialysis circuit compared to the ACT in the placebo saline group over the first day of CRRT. We believe that this should be a straightforward primary endpoint to achieve since those patients on placebo will not be receiving any anticoagulants and therefore, their ACT would not be expected to increase. Secondary endpoints include duration of filter life before clotting occurs and a number of transfusions required due to red blood cells or platelets loss. As a reminder, Niyad is being regulated by the FDA as a device, since the mechanism of action of Niyad is within the dialysis circuit and not the patient. This serves as an advantage for us to efficiently move Niyad towards approval, since device studies typically require much lower patient exposures than drug study. The feedback that we have heard from the clinical sites is that enrolment should be robust, allowing top line data mid-2024 and a PMA submission soon thereafter. I will now turn the call back over to Vince.

Thank you, Dr. Palmer. Knowing that the nafamostat has been a standard of care for CRRT in South Korea and Japan with decades of use and a favourable safety profile, we're confident in the success of this study as it is evaluating the nafamostat versus saline as the placebo for activated clotting time. As Dr. Palmer stated, based on study timing, we plan to prepare a PMA submission to the FDA in the second half of next year. This would enable us to potentially launch Niyad in the first half of 2025. We're proceeding with early-stage commercial planning after already receiving an ICD-10 CMS procedural code to facilitate reimbursement. Now just a few words on our prefilled syringe candidates. The need for pre-filled syringes is as clear, since their availability offers a significant improvement and advantage for the overall health care system, including less waste, improved safety, and the convenience of not having to dilute and prepare the syringe and advance our procedures. Our Fedsyra pre-filled syringe containing the anti-hypertensive ephedrine is the first of two pre-filled syringe product candidates in our pipeline that is closest to an NDA filing. Following our capital raise in the second quarter, we have continued to prioritize resources on the development of Niyad, and are evaluating the timing of the NDA submission for Fedsyra. AcelRx has evolved quite a bit over the past 18 months, and we're now a very different company than we were just a few years ago. To round out our transformation, the transition of DSUVIA to Alora Pharmaceuticals is still ongoing, and AcelRx continues to support Alora to facilitate their success. We expect their focus to turn to commercial activities early next year as the supply chain transition is completed. As a reminder, AcelRx is being reimbursed by Alora for…

Thank you, Vince. We ended the quarter with $13.4 million in cash and short-term investments. This includes the capital raised through the financing closed in July with new and existing healthcare investors. This financing provides capital of up to $26 million upon the exercise of the milestone-based warrants, including $10 million of gross proceeds that were made immediately available. These new investors appreciate the value of Niyad, and have been extremely supportive of management as Niyad development progresses and with the clinical study about to begin. Revenues for the third quarter of $0.1 million were generated primarily from royalties on the sales of the DSUVIA, principally from sales to the Department of Defense on which we earn a 75% royalty from ALORA. As Vince mentioned, the quarter was negatively impacted by timing of shipments in the quarter, which are expected to be realized in the fourth quarter of this year. Our combined R&D and SG&A expenses in the third quarter totaled $3.4 million compared to $4.5 million last year, and excluding non-cash related expenses, it was $3 million in Q3 2023. We remain on track to stay within the range of our full year 2023 combined R&D and SG&A expense guidance excluding non-cash expenses of $16 million to $20 million. We expect fourth quarter R&D and SG&A expenses, excluding noncash expenses, to increase from the third quarter as we begin our clinical study. We anticipate top-line data of this clinical study by the middle of next year, so we expect expense levels over the next several quarters to be higher than levels we've seen over the last two quarters. We will provide further financial guidance for 2024 at a later date. I'll now turn the call back to Vince.

Thanks, Rafi. Now like to open the line for any questions you might have. Operator?

[Operator Instructions]. Our first question comes from Ed Arce with H.C. Wainwright.

Hi, good afternoon, everyone. This is Thomas asking a couple of questions for Ed. Thank you for taking our questions. So first question for the NEPHRO CRRT study. Can you discuss what's your estimated timeline to full enrolment in order for the mid-2024 readout? And also, given the start date we have as we approach the end of the year, how -- do you anticipate slow pace around Christmas, New Year timeframe?

Hi, yeah, it's Pam here. These are ICU patients, so in fact, the holidays really don't affect their enrolment whatsoever. They have acute kidney failure, unfortunately, sort of regardless of the time of year. So we don't anticipate coming into the end of the year here, your normal clinical trial slowdown that you would see with many studies. It's a small study, so as far as last patient out till top line data, there shouldn't be a large delay. We'll be making sure we clean up the database as time goes on, and so there shouldn't be a large lag. So we're expecting the study to end sort of mid-next year and then also have top-line data soon thereafter about the same time.

Got it, understood. Perhaps some more detail around the NEPHRO CRRT study. Of the 10 ICU centers that were selected for this study, can you describe some major attributes for the selection?

For the patient selection?

For the site selection.

The site selection, sorry. Site selection are actually major academic centers. They are the top names in this deal. In fact, many of them were our advisors or are advisors when we took on Lowell and looked at this protocol, and I had to reach out to folks who are knowledgeable in this area to help us define inclusion-exclusion criteria, et cetera. Also, when we did our quantitative market research, to help us analyze that data, we relied on these folks. So they are also the co-authors in that manuscript that has been submitted. So that's really who we're leaning on for the clinical trials as well. And they're sort of -- they all know each other, they're all friends. And it's a small, tight-knit community and it's the major centers, Emory, UCLA, there are centers like that.

Got it. And then perhaps just one last question from us and then we'll jump back on the queue. Assuming NEPHRO CRRT study data positive, which we expect to be keep our PMA. Can you -- what are some other major components of the PMA for Niyad?

Maybe talk about -- components or endpoints of the study, you mean components of the PMA?

Yeah, components of the PMA in addition to the registrational study data.

Yeah. So there's going to be just a couple of the preclinical tox studies that are very short and easy to run. We'll be doing that concurrently with the trials. And of course, there's our stability data as well that we're actually generating right now.

Maybe expand on the secondary endpoints just quickly. I know we mentioned them, but just to reinforce what he asked.

Yeah, you mean what are the clinical endpoints on the trial, the primary endpoint is activated clotting time for the first 24 hours. And then the secondary endpoint is looking at that same activated clotting time over the first 72 hours, along with the number of transfusions, filter changes due to clotting, et cetera, of the first 72 hours. So all the primary and secondary endpoints are over within 72 hours. And therefore, a completer is somebody who's gone to this study for at least all those three days. They can be enrolled up to seven days per the protocol, but they will be considered a completer after just three.

Okay. Thank you so much for the detail. So looking forward to the study start and very shortly.

Thanks, Thomas.

Our next question comes from James Molloy with Alliance Global Partners.

Hey, guys, thank you for taking my questions. I had a question on -- again, I presume a good data and ultimate FDA approval. Can you -- want to -- walk through a little bit, the opportunity to potentially taking from heparin or citrate, and obviously, there's a lot of people out there know anticoagulant citrate is -- we're going to be trying to grab from as well. Is there an opportunity to try to take from the 43% of heparin as well?

Yeah. So you know that it is considered often as standard of care. One thing I'll ask Pam to do quickly is -- and then we'll address that question with further is maybe you can comment, Pam, on what is considered standard of care at many of these clinical sites that are involved in the trial, to give them some type of flavour.

Yeah. I think that 43% that James mentioned, it comes from our quantitative market research, where we asked 150 physicians, about were nephrologists and half were critical care specialists, what is the current state of the art with anticoagulation relates to CRRT. And 43% said -- 43% of the patients are getting heparin, and the rest of it, the other 60% is split evenly between getting no anticoagulant or getting citrate. And so each of these sites that we're actually enrolling in the study, there is no United States sort of standard of care. They are sort of all over the map and they will admit that. We've got sites that don't use any anticoagulation at all, we have sites that are only using citrate, we have sites that are only using heparin or nothing. And it's -- so it's really interesting how when you don't have good options, you have a very fractured approach to clinical protocols. So we're really hoping with nafamostat to streamline that and finally give them a good option that they can use in many patients. So I think we'll be pulling mainly from the -- commercially, we'll be looking at folks who aren't using anything or using citrate and we will break into that market. But I actually believe that there's many folks that are getting -- they are using heparin in patients they otherwise don't think it's a really good option, and I think we could also erode into that as well.

So when we have communicated commentary about our potential peak sales, the bulk of that is really coming from citrate and no anticoagulation. So anything we generate from those patients that are -- where the site is utilizing heparin at risk, because they're either ill-equipped use citrate and don't want to not anticoagulated. We think that there's opportunity to get that, but that has not really been a significant or were any part of our projections to date. So that would certainly be upside.

All right, thank you for that. I think you guys talked a little bit about the potential to go into the intermittent hemodialysis market. Just talk a little bit, has your thinking evolved on that at all? Is there an opportunity there to go into that space beyond the continuous?

Yeah, it's next circuit. It's got the same problem that CRRT has, blood hits a foreign object and starts to clot. And there's not any really good options for that as well. The patients with intermittent hemodialysis tend to not be as sick as the folks who require continuous renal replacement therapy. So many more of them can tolerate heparin. So that's why it was not as big a market as far as the percentage, but the actual denominator is much larger than CRRT. So that is something that would benefit from nafamostat as well. And we've just got to make sure that we're blocking and tackling and all the --

Hey, Jim. I'm going to circle back to the previous segment of that question as well, where you asked, in particular, on CRRT, is there an opportunity potentially to take any of that market share away from heparin. I think it's important to understand that -- and Dr. Palmer, you can comment on this, when patients or I'm sorry, the sites that are going to use the nafamostat, can you clarify, is there any new training or difference relative to what they typically do with heparin when they utilize nafamostat?

No, and that's the beauty of nafamostat is that it is as simple to initiate as heparins. And that's why heparins being used for so long, it's very simple. Citrate avoids the bleeding risk that heparin has. But it's got so many other risks, and it's very difficult to run for these sites. And so to simplify the treatment, get back something as simple as heparin, which is what a nafamostat would do with potentially much less bleeding, and some of the other problems that happened like heparin, like Heparin-induced thrombocytopenia or heparin resistance. It's just -- it really is going to make it hopefully be a anticoagulant that is easy to use in all the patients, and it's great for the nurses and they will be happy to adopt it.

Okay. Maybe last question for me then I'll hop back in the queue. Looking down the road, is there other opportunities that you guys are seeing beyond obviously the pre-filled syringes to complement nafamostat and your

Yeah. So first of all, we'll be evaluating the potential development opportunities with LTX-608, where they've already been proven ex-US. Pam, some of those disease states again are --

Yeah. Acute pancreatitis, disseminated intravascular coagulation --

Are actually approved indications ex-US, and there's other potential applications as well. So again, I'll reiterate that LTX-608 really is a pipeline and a product for us. And our goal, of course, in the short term is to get it across the finish line as efficiently as we can over the course of this next year. Beyond that, we are in business development discussions. We have business development discussions, in particular, ex-US for some parties that are interested in Niyad. So we'll continue to evaluate those opportunities moving forward, but want to be sure that we absolutely maximize the value of this asset for our shareholders.

All right. Thank you for taking the questions.

Thank you, Jim.

This will conclude our question-and-answer session. I'll turn the conference back over to Vince for any closing remarks.

Thank you, operator, and thank you all for joining us today and for your continued support of AcelRx. We remain focused on driving long-term shareholder value absolutely with targeted investment and our late-stage development high-value assets. Please feel free to contact us after the call if you have any additional questions, and we look forward to sharing our future, in particular, near future developments. Thank you.

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