AcelRx Pharmaceuticals, Inc.

ACRX Details

AcelRx Pharmaceuticals, Inc. (NASDAQ: ACRX) is a specialty pharmaceutical company focused on developing and commercializing therapies for the treatment of acute pain. Its main pipeline products are DSUVIA (also known as DZUVEO in Europe) and Zalviso. In addition, ACRX is developing ARX-02 and ARX-03. The US accounts for the majority of DSUVIA's revenue. As of December 08, 2021, the company's market capitalization stood at USD 84.01 million.

Latest News:

• Common Stock and Warrant Offering: On November 15, 2021, ACRX agreed with two life sciences-focused investment funds (one current and one new stakeholder in the company) for the sale of 17.5 million shares plus warrants that are exercisable into 17.5 million shares at an offer price of USD 0.80 per share plus warrant. The warrants will not be exercisable until six months following the completion of the transaction, i.e., November 17, 2021, and will have an exercise price of USD 1.00 per share. ACRX expects to receive net proceeds of USD 14 million from this offering.
• Lowell Therapeutics Acquisition: On November 15, 2021, ACRX agreed to acquire Lowell Therapeutics, a privately-held developer of Niyad, a regional anticoagulant. The transaction is valued at ~USD 32.5 million-plus net cash acquired, and certain other adjustments include USD 26.0 million in contingent consideration payable in cash or stock at ACRX's discretion if regulatory and sales-based milestones are met. The transaction is expected to close in Q4FY21.

Q3FY21 Results:

• Expansion of Topline: The company reported YoY growth of 36.11% in total revenue to USD 1.86 million in Q3FY21 (ended September 30, 2021) from USD 1.37 million in Q3FY20 attributable to 1.70 million upfront payments from Laboratoire Aguettant to commercialize DZUVEO in Europe.
• Reduction of Net Losses: Net loss for the company decreased to USD 8.38 million in Q3FY21 vs. USD 8.93 million in Q3FY20.
• Exceeded Annual Guidance: As of October 31, 2021, ACRX had obtained 646 formulary approvals, exceeding its year-end guidance of 615 approvals.
• Strong Balance Sheet: As of September 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 48.70 million and total debt of USD 15.73 million.

Key Risks:

• Product Concentration Risk: ACRX's prospects are significantly dependent on the success of DSUVIA. It has invested a significant amount of resources in its development. If it fails to get marketing permissions or set up an efficient manufacturing and distribution system, it could harm its operations.
• Distributor Concentration Risk: DSUVIA and Zalviso are distributed by ACRX through a limited number of distributors and pharmaceutical wholesalers. As a result, any breach of contract by distributors and wholesalers could adversely impact the company's operations.

Outlook:

• NDA in FY22: ACRX plans to file New Drug Application (NDA) for its two innovative pre-filled syringe candidates provided by Laboratoire Aguettant in FY22.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ACRX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ACRX's share price fell 67.59% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 0.54 to USD 2.94. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 35.38. We have valued the stock using the EV/Sales multiple-based relative valuation methodology and arrived at a target price of USD 0.79.

Considering the correction in the stock price, increasing demand for pharmaceutical products, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 0.6255, up 1.87% as of December 08, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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