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Acelrx Pharmaceuticals: Patient-controlled pain snags $250M Grunenthal deal

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By Randy Osborne
Staff Writer

Shopping among European collaborators for its drug-device pain combo known as Zalviso, Acelrx Pharmaceuticals Inc. “had a number of different suitors approach us,” with “a lot of very large-scale players interested,” said CEO Richard King.

The firm settled on Aachen, Germany-based Grunenthal GmbH, which is paying $30 million up front and potentially $220 million more in development and regulatory milestones for rights in Europe and Australia to Zalviso, made up of the opioid agonist sufentanil in a sublingual tablet delivered by a hand-held device.

“Essentially designed by patients for patients,” the Zalviso device came about through work by the Palo Alto, Calif.-based design firm Ideo Inc., which also helped make Apple’s user-friendly computer products, King said during a conference call with investors. He noted that the pain gizmo’s “size, shape, weight, color, lights and simplicity stem from patient input.”

For use in a hospital, hospice, nursing home or other medically supervised setting, Zalviso could prove just the ticket in pain management over intravenous patient-controlled analgesia (I.V. PCA), which brings much more risk. I.V. catheters can become infiltrated, kinked or dislodged, leading to infections. Pump programming errors by caretakers can happen.

Acelrx, of Redwood City, Calif., decided on Grunenthal because of its footprint in Europe’s postoperative pain setting with tapentadol (Nucynta, partnered with Johnson & Johnson), first approved in 2008. An extended-release version reached the market in 2011. Grunenthal also developed the twice-daily opioid tramadol (Tramal) therapy for pain.

“Between the launch of tapentadol and when their pipeline delivers [next], which is likely to be in the 2018 time frame, there’s a gap, where something like Zalviso can receive the attention of the organization in ensuring commercial uptake and success,” King said. “It was also important to us that the company we aligned with couldn’t lose our product in a sea of other products.”

Under terms of the arrangement, Grunenthal will make tiered royalty, supply and trademark fee payments in the mid-teens up to the mid-20 percent range, on net sales of Zalviso in the Grunenthal territory. The German firm takes over all commercial activities for Zalviso, including regulatory approval for the drug, while Acelrx will handle getting the device approved in Europe. Meetings with regulators on both matters are slated for the first half of next year.

In the U.S., Acelrx also disclosed, the FDA has established a PDUFA date of July 27, 2014, for the Zalviso new drug application (NDA) that was accepted for filing earlier this month.

Some investors apparently viewed the NDA filing as questionable after Zalviso submitted in late September and the company went quiet. Shares fell about 40 percent, a sell-off that Jefferies analyst Oren Livnat called “overdone” in a November research report.

“We still forecast launch in the first quarter of 2015, and our estimates are largely unchanged, including more than $500 million peak potential,” he wrote.

Acelrx had just reported third-quarter earnings, finishing the period with cash, cash equivalents and investment of $76 million, thanks to a financing of $47.9 million in July.

Cowen and Co. analyst Edward Nash also weighed in, citing solid clinical data supporting the recent NDA and a strong balance sheet.

In the U.S., Nash found the marketing strategy for Zalviso “well-devised and believe it will be efficiently executed,” he wrote. “We are confident that Acelrx will be able to drive early adoption in top hospitals with its 65-rep sales team.”

With the European partner secure, questions arose about pricing. “The preceding product to Zalviso was Ionsys [fentanyl iotophoretic transdermal system],” King said, referring to the patch that The Medicines Co., of Parsippany, N.J., gained in its 2012 buyout of Incline Therapeutics Inc., of Redwood City, Calif. (See BioWorld Today, Dec. 13, 2012.)

Ionsys was developed by Alza Corp. of Mountain View, Calif. (part of Johnson & Johnson), and goes for $125 to $130 per day. “We would see an ability, an expectation, frankly, of pricing below that level with Zalviso, probably more in that sort of range for a two-day treatment,” King said.

The market in postoperative pain is more than $5 billion worldwide, King said, and hospitals are hungry for new alternatives to I.V. PCA. Zalviso, he said, is “highly differentiated, not only in design but in results” from other products and would-be products for patients to manage their pain.

Money from Grunenthal, combined with cash on hand, should “allow Acelrx to reach a break-even point” financially, King said, and may also provide leverage with regard to the rest of the pipeline.

Next is ARX-04, a noninvasive, fast-onset sufentanil product for moderate-to-severe acute pain, in such settings as the battlefield and civilian trauma or injury.

“We have coming up very shortly, in the next few days, an end-of-Phase-II meeting with the FDA,” King said. “We remain interested in the Department of Defense providing some support to move that program forward into Phase III, and we’re in dialogue around that idea.”