BST Trade Alert: March 27, 2013
March 27, 2013
Recommendation:
Buy AcelRx Pharmaceuticals (NASDAQ: ACRX) up to $5.65 per share.
About the Company:
ACRX has the all the characteristics of a biotech stock poised to skyrocket. A late-stage product candidate with blockbuster sales potential. A solid financial position. And a significant, fast-approaching catalyst.
To say we’re excited about ACRX would be a huge understatement.
Now that we have your attention… here’s a bit more background about this fascinating biotech.
AcelRx is a specialty pharmaceutical focused on developing innovative therapies for acute and breakthrough pain. They currently have four products in phase 2 testing and one product in phase 3 trials. It’s the kind of broad, mid- to late-stage pipeline that investors find attractive.
Each of the company’s products uses Sufentanil to treat pain.
Sufentanil is a strong opioid analgesic currently marketed for intravenous epidural anesthesia. As such, the drug’s efficacy has been well established. It facilitates rapid cell membrane penetration and onset of action.
With that said, use of Sufentanil has been limited due to its short duration of action when delivered intravenously. And right now, the only FDA approved way to deliver the drug is by IV.
But that could be about to change…
AcelRx has developed a new technology called NanoTab® to deliver Sufentanil in a novel way. NanoTab® is a non-invasive, sublingual (under-the-tongue) dosage form. By using the sublingual delivery route, it resolves the short duration of action problem inherent to IV administration.
We’ll tell you all about this amazing technology in a moment.
Of course, having a broad pipeline and innovative technology doesn’t mean much if the company lacks financial resources. Fortunately, AcelRx has plenty of cash to get through the regulatory catalyst expected in the second quarter of 2013.
At the end of 2012, the company had $59 million in cash on the books. Approximately $44 million of this was just raised through a public stock offering in December. And according to management, these funds are sufficient to fund the biotech’s operations and clinical trials through the third quarter of 2014.
As you can see, AcelRx has innovative proprietary technology, multiple products in development, and a strong financial position. Let’s take a closer look now at their leading product candidate.
About the Product:
Acute pain management in the hospital, and post-operative analgesia in particular, remains a challenge for healthcare providers.
In the US and five largest European Union markets, 16 million surgical procedures are performed every year which require post-operative pain control. At the moment, this important medical need is served by intravenous patient-controlled analgesia (IV PCA) systems.
However, studies show that a whopping 75% of patients do not experience adequate pain relief after surgery.
Being in pain is horrible enough by itself. But it can also lead to decreased mobility, which increases the risks of other medical complications.
Why are so many patients not getting the pain relief they need after surgery?
AcelRx believes there’s a simple answer to this question. There are just too many problems with IV PCA. These problems include morphine side effects, risk of infections due to the invasive route of IV delivery, and medication errors (sometimes fatal) due to the complexity of infusion pumps.
The good news is…
Surgical patients may not have to put up with inadequate pain relief much longer. AcelRx is developing a revolutionary product that could replace IV PCA.
ARX-01 or the Sufentanil NanoTab® PCA system is designed to solve the problems posed by IV PCA. This amazing product is a non-invasive, handheld system that allows patients to self-dose with sublingual Sufentanil NanoTabs to manage their post-operative pain.
ARX-01 has several advantages over IV PCA…
First off, Sufentanil is a high therapeutic index opioid, so it offers good potential for pain relief. However, unlike morphine, Sufentanil has a low incidence of drug-related side effects.
Second, the sublingual route of delivery provides rapid onset of pain relief… so, an IV isn’t needed. This eliminates the risk of IV-related analgesic gaps and infections.
Third, ARX-01 is a pre-programmed PCA system. As such, it removes the risk of infusion pump programming errors.
So, how has ARX-01 performed in clinical testing?
It has already provided positive results from three phase 2 studies. These studies involved patients recovering from knee replacement surgery and major abdominal surgery. And all three showed statistically significant reductions in pain intensity over the study period.
But that’s not all…
The product’s now nearing completion of phase 3 testing… and it’s performing very well.
In November 2012, data from the first of three phase 3 trials showed ARX-01 was non-inferior to IV PCA morphine. A critical step required for FDA approval.
Then earlier this month, the company released positive top-line data from the second phase 3 trial.
This study evaluated ARX-01 in patients with acute post-operative pain following major open abdominal surgery. And the data showed a significantly greater reduction in pain versus placebo.
Now, we’re waiting on results from the final phase 3 trial.
This pivotal trial is evaluating the efficacy and safety of ARX-01 in patients with acute post-operative pain following hip and knee replacement surgeries. Results are expected in the second quarter of 2013.
About the Market for This Product:
According to the 2010 Decision Resources Acute Pain Report, the post-operative pain market in the US, Europe, and Japan is growing steadily. In fact, this market is expected to reach a staggering $6.5 billion by 2018.
But despite its size, the market remains underserved.
Studies show that up to 75% of patients experience inadequate pain relief after surgery.
The 2010 DR Report projects that in 2013, 20.7 million in-patient procedures performed in the US and the five largest European Union countries will require post-operative treatment of pain. And that figure is expected to increase by 1% a year going forward.
Clearly, ARX-01 is targeting a very large and growing market that needs a more effective way to manage post-operative pain.
And the product’s already gaining acceptance in the medical community.
Market research targeting surgeons and anesthesiologists has identified a consistent positive response to the NanoTab System. And these medical professionals have indicated an interest in using it in at least 75% of their eligible patients.
No question about it, the Sufentanil NanoTab PCA System has blockbuster potential. And the company’s target market has expressed strong interest in using the product for the vast majority of their patients.
About the Potential Catalyst:
Results from the third of three phase 3 clinical trials of ARX-01 are expected during the second quarter of 2013. This trial is evaluating the efficacy and safety of ARX-01 in patients with acute post-operative pain following hip and knee replacement surgeries. If the results are positive they would confirm the prior successful phase 3 trials, and ACRX should soar.
About the Shares:
ACRX set a new 52-week high of $5.97 in February 2013. Since then, the stock has pulled back by 14%.
We believe the recent decline is nothing more than a temporary bout of profit taking after the stock’s strong upward move off the November low of $2.27. It’s not unusual for investors to take profits in a stock that has gained 163% in just three months’ time.
As such, we view the current pullback as an opportunity to pick up shares of ACRX at a nice discount.
ARX-01 appears to offer significant benefits over IV PCA for managing patients’ pain following surgery. It has performed well in clinical trials to date, including two successful phase 3 trials. And the product has blockbuster sales potential.
Given our positive outlook for ARX-01, the $189 million market cap for ACRX appears quite low. We think the stock is could easily trend higher going into the upcoming phase 3 trial results. And we further believe the shares will soar on positive data.
Grab your shares of ACRX now while the stock’s trading at a nice discount to its recent high. Use the recent weakness to establish your position at an attractive entry point.
Key Facts:
| Company: | AcelRx Pharmaceuticals |
| Ticker: | ACRX |
| Recent Price: | $5.10 |
| Market Cap: | $189 million |
| Avg. Daily Volume: | 273,452 shares |
Chart:
Category: BST Trade Alert
