Acelrx Pharmaceuticals Inc.'s decision to go ahead with another phase III study to satisfy FDA jitters about dispensing errors with the patient-operated drug-device product Zalviso (sublingual sufentanil) pleased investors, even as attention – and some concern, albeit less – turned to ARX-04, another product for pain that could be the subject of a new drug application (NDA) after yielding data in the first quarter of next year.

Shares of Redwood City, Calif.-based Acelrx (NASDAQ:ACRX) closed Friday at $3.94, up 59 cents, or 17.6 percent.

"This is a standard, nurse-administered drug," chief medical officer (CMO) Pamela Palmer assured analysts about single-dose ARX-04 (sublingual sufentanil) during a conference call on earnings, with a corporate update. "There are very simple instructions on how to use the single-dose applicator, which is just a two-step procedure. It's almost like giving a syringe to a patient, but obviously it's non-invasive."

Regarding multidose Zalviso, the FDA smacked Acelrx with complete response letter (CRL) in the summer of 2014, which also delivers the opioid agonist sufentanil in a sublingual tablet, but by way of a pre-programmed, hand-held device, to relieve moderate to severe acute pain in adult hospital patients. (See BioWorld Today, July 29, 2014.)

To run another trial with Zalviso "to us, just doesn't make sense," Timothy Morris, chief financial officer (CFO) of Acelrx, told BioWorld Today in August, but a next-month teleconference with the FDA prompted the firm to go ahead with it anyway, and U.S. regulators have from Acelrx a proposed design that could allow for the start of the study early next year. The new experiment, per the FDA, has dispensing errors as its endpoint. Palmer said during the call that "our bench testing clearly met that endpoint, and we believe we'll be able to show that in clinical testing as well," if the FDA gives the go-ahead to try. "We're not expecting a huge pushback [on the trial design] but we don't definitively know yet," she said. (See BioWorld Today, Aug. 5, 2015.)

The company expects to end 2015 with more than $100 million in cash, including money from the U.S. Department of Defense contract for ARX-04, described as fast-onset, single-dose oral sufentanil for patients with moderate to severe acute pain, in military and civilian settings of trauma or injury. In September, Acelrx said the 30 mcg tablet met primary and secondary endpoints in a multicenter, double-blind, placebo-controlled phase II trial called SAP301 in patients with moderate-to-severe acute pain following ambulatory abdominal surgery. Results demonstrated that patients on short-term treatment with ARX-04 turned up significantly greater pain reduction compared to placebo. In the fourth quarter, Acelrx started a study known as SAP302 of ARX-04 in the emergency room (ER), designed to see how the approach works in this setting and add to the safety database requirements for NDA filing.

"You have to remember the ER is a little different animal than your standard hospital procedure, where [drugs are] included" as part of the treatment indicated by the diagnosis-related group system, CFO Morris said on the call when asked about pricing and formularies. "The preliminary feedback to date has been very positive" on ARX-04, he said, with $20 per application seen as reasonable, at least by the federal government. "Obviously there's more work to be done with pricing and with payers."

TEST MATCH WITH PATCH: IONSYS REMISS . . . MAYBE

Jefferies analyst Hugo Ong upgraded Acelrx shares from "hold" to "buy," saying that, "while shares have underperformed over the last 12-18 months due to regulatory issues with Zalviso, we believe there is upside opportunity from ARX-04," which could be useful across settings: in the ER, in surgeries (outpatient and in-patient) and nonsurgical acute pain. "We believe the risk/reward profile on ARX-04 is favorable to the upside," he wrote in a research report, noting that the phase III SAP302 data could drive shares and lead to an NDA filing next year, with potential approval in 2017. He estimated risk-adjusted sales of $291 million by 2031 "on conservative assumptions," and set a price target of $7.

Somewhat less sanguine was Cowen and Co. analyst Boris Peaker. "While we see low clinical risk, we see regulatory risk, as the FDA may request additional studies or hesitate about approving an oral non-abuse deterrent sufentanil," he wrote in a report. "Additionally, the company guided to about $1.5 billion per year U.S. potential for ARX-04 in the ER and ambulatory surgical center market, while our 2025 U.S. sales estimates are only about $600 million." Regarding Zalviso's new trial, the company has not disclosed detailed study design or timeline, he pointed out, and plans to OK these details with the FDA prior to start. "Given the uniqueness of this trial, there is a significant risk of not meeting the agency's expectations," in his view.

Morris said the peak-sales guidance is $1.3 billion, "but clearly you would need more than [the currently planned] 65-person sales force to get there." For the first markets, though, ER and ambulatory surgery, the force should be big enough. "A lot of this work is very similar to some of the profiling work we had done with Zalviso," he said. "You could look at it geographically and size it the right way." Acelrx will be considering the matter more, "but for right now that's where we're comfortable," he said.

The CRL hamstrung Zalviso in its race to approval against the likes of Ionsys, the fentanyl iontophoretic transdermal system from The Medicines Co., of Parsippany, N.J., cleared by the FDA in April. Ionsys, also patient-controlled, is also indicated for acute postoperative pain in adult, hospitalized patients requiring opioid analgesia.

Acelrx was "thrilled" when Ionsys was approved, CMO Palmer said. "I'm still thrilled. Two companies beating up on I.V.-PCA [intravenous, patient-controlled analgesia] is a good thing. We think that, from an efficacy standpoint, an onset standpoint, [and] a pricing standpoint, we probably will look more competitive than Ionsys does, but we'll see when we get to the market. The issue with Ionsys is it's a one-day patch. It has some dermatological issues with it, and it has really no onset of action. You have to titrate a patient to comfort. You have to maintain them with comfort for three hours before you can really let them loose on their own."

The next phase III study with Zalviso, assuming the FDA gives its blessing, should enroll at a fairly brisk pace. "We're going to be using the same clinical sites we've used for phase II and phase III" trials already completed, Palmer said. "These folks loved the device, loved the drug and are very eager to work with us and start enrolling."