Hello, welcome to Talphera Q1 2023 financial result Conference Call. This call is being webcast live via the Events page on the Investors section of Talphera's website, www.acelrx.com. This call is property of Talphera, any recording, reproduction, or transmission of this call without the express written consent of Talphera is strictly prohibited. As a reminder, today's webcast presentation is being recorded. You may listen to the replay of this webcast by going to the Investor section of Talphera website. I would now like to turn the call over to Raffi Asadorian, Talphera Chief Financial Officer. Thank you for joining us on the call today. This afternoon, we announced our Q1 2023 financial results and associated business updates in a press release. This press release can be found within the Investor section of our website. With me today are Vince Angotti, our Chief Executive Officer, and Dr. Pam Palmer, AcelRx's Co-founder and Chief Medical Officer. Before we begin, I want to remind listeners that during this call, we will likely 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. I will now hand the call over to Vince. Thank you, Raffi. Good afternoon, everyone. We're excited to provide an update to you today during this transformative time for AcelRx, marked not only by the divestment of DSUVIA, but also by submitting a request for an emergency use authorization to the FDA in April for Niyad, our lead nafamostat program. This amends a prior EUA submission to the FDA by Lowell Therapeutics, which received an encouraging response from the agency but requested certain CMC information that was manufacturing- related. These requests were addressed by the primary amendments to our recent EUA submission. Niyad is being developed for use in the US. as a novel anticoagulant for dialysis circuits. We cannot stress enough how important the availability of an alternative anticoagulant is for dialysis patients, including those undergoing continuous renal replacement therapy, or CRRT. This is because clotting of the circuit filter during CRRT can occur, resulting in major complications to the patient. Our interactions with leaders in the field of nephrology during our recent advisory board meeting reinforced the urgent medical need for an alternative anticoagulant for use during CRRT. This, combined with our recently conducted US. quantitative research, reaffirms the market potential for Niyad. At this point, I'd like to turn it over to Dr. Palmer to help explain the risks of not using an anticoagulant with inpatient dialysis. Thank you, Vince. As a result of not using anticoagulants in the dialysis circuit, patients can experience a low-quality dialysis due to a clotted filter. In addition, when the clotted filter is changed, loss of red blood cells and platelets removed with the filter can often result in the patient requiring a transfusion. For these reasons, the international CRRT guidelines recommend the use of an anticoagulant infused into the dialysis circuit. Despite this, US physicians do not always use anticoagulants in patients undergoing CRRT. Our recent quantitative market research indicates 29% of patients undergoing CRRT get no anticoagulation in the dialysis circuit. Why would physicians not use an anticoagulant in some patients, even though it's the internationally recommended standard of care? As we were told by many physicians at the recent annual Acute Kidney Injury and CRRT meeting held at the end of March in San Diego, they are stuck with, in their words, two bad options for CRRT anticoagulation, heparin and citrate, the latter of which was made available under an EUA at the start of COVID. Heparin has a relatively long half-life and recirculates back into the patient and can cause systemic bleeding as well as other issues. Regarding citrate, it is difficult to use, requires calcium levels to be drawn every four hours, requires intensive nursing time, and our recent market research indicates physicians are concerned about its use due to its side effects, which include hypocalcemia, citrate toxicity, alkalosis, and other complications, including ventricular arrhythmias. Not surprisingly, when talking to 1 ICU physician from a major academic center who was at the recent AKI and CRRT meeting, he told us his hospital does not use any anticoagulant during CRRT at all due to the risks of both heparin and citrate, even though it is against the international standard of care. Our recent study of 150 physicians specializing in CRRT showed that across the board, heparin was used in 43% of patients and citrate was used in 28% of patients. Leaving 29% of patients with no anticoagulant due to the risks of the other two agents. Given the issues and fears physicians have with the two available anticoagulant options, this is not surprising and demonstrates a large unmet need for an easy-to-use, short half-life anticoagulant such as Niyad. We plan to submit this quantitative market research for peer-reviewed publication this quarter. Thanks for that, Pam. We believe the majority of the target population for Niyad consists of patients who are receiving no anticoagulant, as well as the 28% who are receiving citrate, totaling 57% of CRRT patients, and to a minor degree, patients at risk on heparin. In terms of market opportunity, we estimate Niyad to have a peak annual sales potential of $200 million in the US., attributed to just the inpatient and outpatient dialysis markets, excluding use in any other extracorporeal circuits. Our estimate in peak sales potential comes from 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. Recently, we've agreed to terms with a manufacturer for the supply of the active pharmaceutical ingredient in Niyad, being nafamostat mesylate, that'll allow us to scale up the production of this product candidate. We look forward to initiating a single registrational trial in the second half of this year, of which the primary endpoints have already been agreed upon by the FDA for a 160- patient study. In addition, after already receiving an ICD-10 CMS procedural code to facilitate reimbursement, we're proceeding with early commercial planning. We anticipate that we'll need only a small sales force for Niyad. As such, we're evaluating the use of an in-house sales team versus external commercialization partners with nephrology and/or ICU experience. We remind you that if approved, Niyad would be the only regional anticoagulant approved for this indication in the United States. Let's turn to our pre-fill syringe portfolio. We plan to file new drug applications or NDAs for our ephedrine and phenylephrine pre-filled syringes. The first filing will be Fedsyra, our pre-fill syringe of ephedrine anticipated by the end of the Q2. The need for pre-filled syringes is clear since their availability offers a significant improvement and advantage for the overall healthcare system, including less waste, improved safety, and the convenience of not having to dilute and prepare the syringe in advance of procedures. There are currently two FDA-approved ephedrine pre-filled syringes. Other than these recent approvals, nearly all the current used ephedrine pre-filled syringes are made by compounding pharmacies, which have an inherent short shelf life and well-known risks for contamination. However, the ability of physicians to have available a convenient pre-filled terminally sterilized ephedrine syringe that has an extended shelf life would certainly offer an additional advantage. For all these reasons, we believe that there's a significant amount of room for Fedsyra in what we estimate is a $100-plus million-dollar market. This is especially true based on our partner, Aguettant's European product, which has a 3-year shelf life. We believe that the market opportunity is also attractive for our pre-filled syringes since we're expecting to allocate minimal resources towards this program. This is because much of the commercialization efforts are expected to be through contracting with group purchasing organizations and hospital networks. With potential approval of the NDA for Fedsyra, commercialization could occur as soon as the first half of next year. With regard to our transition of DSUVIA to Alora Pharmaceuticals, we closed the divestment transaction on April 3rd, and as restated in our press release today, we anticipate the transition to be ongoing for about 6 months from the closing date. During this time, AcelRx will be reimbursed for transition services. We'll lead the relationship with the Department of Defense or DoD to ensure continued engagement and expected sale to that important customer. We completed training to an infantry division just last week with additional training scheduled for this year. We remind you that in addition to the 15% royalty on commercial sales by Alora, we'll retain 75% royalties on all net sales to the DoD, DSUVIA's single largest customer, which is a significant upside of our agreement. We're entitled up to a hundred and sixteen and a half million dollars in sales-based milestones from Alora. In 2023, we have already accomplished the following previously communicated goals. Number one, the divestment of DSUVIA to a strong commercial partner while retaining upside from royalties on both the commercial and DoD sales. 2, significantly reduced our operating expenses. 3, advanced the manufacturing and supply chain for Niyad. 4, submitted the EUA for Niyad. Moving forward, we're preparing to initiate the Niyad registrational trial later this year. We're also on track to file our NDA for Fedsyra, our first pre-filled syringe product candidate, setting up the potential to have two commercial products by mid-2024. With that, I'll now hand the call over to Rafi to take you through the details of our Q1 financial results. Thanks, Vince. Sales of DSUVIA in the Q1 were $0.5 million, which was a 7% increase over the Q1 of last year and a 111% increase over the Q4 of 2022, despite only having 3 sales representatives promoting DSUVIA during the quarter. With the experience and resources that Alora Pharmaceuticals has in sales and marketing, we expect continued momentum in sales with their ownership of DSUVIA. Revenues in the Q1 are not reflected in our statement of operations due to the specific accounting treatment and presentation of the now divested DSUVIA business. All sales and expenses related to DSUVIA are reflected in a single line item entitled Net Loss from Discontinued Operations in our Statement of Operations, and the individual line items will be disclosed only in the notes to the financial statements. Cash and cash equivalents totaled $13.4 million at the end of the quarter. Our combined R&D and SG&A expenses in the Q1, excluding DSUVIA-related expenses, since these are now reported within the Net Loss from Discontinued Operations line item, totaled $5.3 million compared to $4.9 million in the Q1 2022. Including the DSUVIA-related expenses within the Loss from Discontinued Operations, these expenses have declined $2.3 million in Q1 2023 compared to Q1 2022. The Q1 2023 combined R&D and SG&A expenses included $0.6 million non-cash stock-based compensation expense. Our estimated combined R&D and SG&A expense in 2023, excluding non-cash related expenses, is in the $16 million-$20 million range, depending upon the timing of the receipt of a potential emergency use authorization for Niyad and other discretionary costs. We expect to continue to closely monitor our discretionary expenses during the year to extend the cash runway as we await potential upcoming significant milestones. I'll now turn the call back over to Vince. Thank you, Raffi. I'd like to open the line for any questions you might have. Operator? We will now begin the question and answer session. To ask a question, you may press Star then One on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press Star then Two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead. Hi. Thanks. Take my question and congratulations on all the progress. Maybe just one from me. How should we think about a potential Niyad launch trajectory given it'll be an EUA and there is this need? Do we think about this as a normal hospital product launch trajectory, or do you think there's possibility of maybe bending that curve a little bit just given the need for this product? Thank you. I think the key to your question, Brandon, and thank you for it, is what is a normal hospital trajectory? They've been all over the map. Historically, what I think you're alluding to is probably slower uptake due to P&T committees, and the time involved with the evaluation of the product from an efficacy and cost standpoint. I would venture to say with those sites that we've already interacted with, you would see within that target population, that target set of institutions, a faster uptake because of their knowledge in nafamostat, their historical, not experience, but education on the product in anticipation for it coming to the US. I think the other key to this, and I'll ask Dr. Palmer to comment on it, is this isn't, as we have learned, a typical P&T routine calendaring, mechanism for approval within the hospitals. Dr. Palmer, could you please comment on those that are critically involved with this and how that would typically operate? What we found out from talking to these large institutions and the smaller ones as well is that there's only 1 or 2 docs who are really calling all the shots for CRRT anticoagulation in any of these institutions. This isn't something that goes in front of, you know, a 25-panel P&T committee and has to get on the calendar and has to be debated. The decision really is made by the folks who are running the CRRT program as to what exactly they want. If they ask for it, they get it. It's going to be quite different, I think, than something like DSUVIA, for example, which is just a, you know, opioid for pain management and would be broadly used. This is a very, specific use drug that will be, you know, basically dictated by just a few folks. I think, Brandon, I'll follow up your question, as you're talking about bending the curve of potentially adoption, and again, ask Dr. Palmer to comment on this. As we've been designing the study and working with those that are gonna be investigators on the trial, we were expecting maybe 9-12 months in life for enrollment. The communication back to us is they feel like they can accelerate that. Dr. Palmer, maybe you can comment on how they're talking about velocity of enrollment. Yeah. I think that, you know, even with our quantitative market research and sort of hearing from 150 US. physicians, when you really talk to them one-on-one, they really don't like heparin, and they really don't like citrate either, although it's a sort of a necessary evil when a patient can't tolerate heparin. They have told us that their use of CRRT has escalated since COVID and has remained escalated, and that's certainly what our quantitative market research shows as well. It's they're seeing enrollment of this study, which again, remember is only 80 active and 80 placebo patients, so it's only a total of 160 for the study. They're basically saying this can happen in a few months. We're really sort of having to rethink about how quickly we're gonna be able to get this clinical trial done. Brian, does that help answer your question? Very helpful. Thanks so much. Okay. Thank you. Our next question comes from Ed Arce with H.C. Wainwright. Please go ahead. Hi, everybody. This is Thomas Yip asking a couple of questions for Ed. So first, good to hear that the EUA was filed. Can you give us some details, when was the filing, formally accepted? Just trying to figure out the timing of the next steps, if you can go over them. Sure. The filing occurred in the second half of April, towards the end of April, and we got confirmation of receipt of that filing within 24 hours. The difference between an EU filing and typically NDA filing is the NDA filing has to go through an electronic portal that requires some significant work. This is a less formal submission we directed to an email with a pretty significant file that goes directly to the project manager. It occurred in late April. We got confirmation of receipt very shortly thereafter. Okay. Can you remind us, let's see. 30 days. When should you expect a response from the agency regarding? Yeah. when the submission should be expected? I'll have Dr. Palmer weigh on this as well, but there is no set timeline with EUAs as there would be with a classic NDA submission where you have a PDUFA fee involved and regulatory restrictions on time for review, whether it's 1 year, whether it's 10 months, et cetera. I think the important aspect of ours is it does have already FDA Breakthrough designation. While we can't handicap what the timing on the feedback will be, we do know that it gets that priority designation then based on the Breakthrough label that it has received. Dr. Palmer, did you have any additional color you might want to add to that? No, you're right. I mean, we don't have any specific date. There isn't any specific timelines that they're held to for EUAs, but, you know, we're moving very quickly forward with the clinical trial prep. We're working final touches on the investigator brochure. We've selected our CRO. We're going forward with the protocol and, you know, we're just moving very fast and that we think that'll be quick. Regardless of sort of what happens with the EUA and the timing of that, we're moving very fast towards the clinical trial and hope to get that wrapped up very quickly as well. Great. Got it. Thanks for the additional details. Then perhaps, beyond the EUA, the registrational study for full approval, can you tell us what else is needed to get this study launched and, I believe, in the second half of this year? What's your estimated total spend on this registrational study? I'll have Dr. Palmer answer the first part of that question. Raffi, then maybe you comment on the finances. Yeah. There's We're just working towards getting access to that final batch of drug that we're gonna use for the clinical trial. Like I said, putting finishing touches on the protocol investigator brochure. We're gonna kick off the clinical research organization, the CRO that we selected, and we're moving forward. There's really nothing that has stalled us out at all. Pam, would you comment that the enthusiasm for the participation is strong based on our personal interactions with those potential investigators? Yeah. We've met with them both in person at that meeting we mentioned down in San Diego, the AKI CRRT meeting, as well as an ad board that we held a week later. They are chomping at the bit. They're very excited to get access to this product and to be enrolled in the clinical trial and, you know, promise they can get it done very quickly. It's just a matter of contracting with the sites and getting first patient enrolled, and we're off to the races. Pam, can you remind as well the primary endpoints of the study so everyone's aware of the agreement we have with the FDA on those endpoints? Sure. As I mentioned earlier, it's 80 active versus 80 placebo. The primary endpoint is the activated clotting time over the first 24 hours. I think, you know, we feel very fortunate to have a pretty standard, you know, quantitative endpoint. It's an objective endpoint that's easily measured, comparing a very powerful anticoagulant to saline. We're very excited about the odds of hitting this clinical trial out of the ballpark. Raffi, maybe the second portion of the question on the finances. Yeah. The, the estimated cost that we have, Thomas, for the clinical study is about $7 million. That, you know, if it's accelerated, it'll be a bit less, but that's what we're, that's what we're estimating right now. Got it. Thank you so much for taking my questions. Looking forward to progress and for Niyad. Thanks, Thomas. Thank you. Our next question comes from James Molloy with Alliance Global Partners. Please go ahead. Hey, guys. Good afternoon. Thank you for taking my questions. Looking at the 29% no anticoagulant, 28% citrate markets, can you walk through where you guys see the pull coming from each of those markets, should you get approval from Niyad? How does an EUA approval versus a full approval potentially impact your ability to penetrate into those markets? Yeah. I'll comment on the first part of that question. We see the pull primarily coming from the no anticoagulant and citrate markets in bulk. To a much lesser degree, the heparin market, just because it's inexpensive, been around a while, and if a patient could tolerate it makes sense for them to actually use that. Although, as Dr. Palmer mentioned in our recent interactions with our advisory team, there was less satisfaction with heparin than we had originally anticipated. I think the quote Dr. Palmer utilizes, these physicians said, "We have two bad choices right now," and they're just trying to make the best of it between heparin and citrate. When we consider those markets, the larger pull from the no anticoagulation and the citrate market, which again, citrate's only available today under an EUA. We're estimating a market share penetration within the CRRT space only. That being the in-hospital dialysis, where they're receiving the dialysis for, call it 5 to 7 days, 24 hours a day, at just over 19% market penetration. That'll account for about half of the $200 million in sales at peak sales that we've currently estimated, and obviously it appears a bit conservative. When we think about the market outside of the hospital, the classic dialysis, where the patients are going in, call it 3 times a week for maybe 3 to 5 hours a session, very large market, of which we would get a smaller percentage, only about 5% to 6% of that market, realizing that many of them in that particular area may not need anticoagulation. It's shorter term, but there's a small portion, a small subset, according to our specialists that say we'll need it. A modest penetration in that market of only about 6%. That makes up the other $100 million. That gets us to your $200 million total in our preliminary forecast to date for peak sales, which again, we feel are more than reasonable and modest, based on our calculations and experience so far talking with the physicians. I think you had mentioned the second part of that, James, was EUA versus FDA approval. Yeah. I think under an EUA, you'll be more apt to work with the institutions that have the larger centers, and that they have a current specific protocol, whether it's for citrate or for heparin, and have multiple machines kinda running at the same time. When I say multiple, not 2 or 3, but 10-20. Some of these institutions have 20-30 machines or even more. Those were where we would primarily advance our efforts early on because they tend to house these specialists or the thought leaders nationally and internationally within those institutions. We would have limited resources, at least to the start of the launch, to penetrate anything beyond those large thought leader institutions. While there's a fair amount of business outside of those, they're spread a little bit more thinly and it'll take more time to educate those particular institutions. I hope that helps answer the question on a ramp for EUA versus full approval. I think at full approval, and especially if we have a partner involved, then we'll be blanketing the US in a more uniform fashion. I do wanna reiterate that we are talking with partners as we speak for both ex-US and US commercialization. Well, great. Maybe a follow-up on that if I could, please. On the 3 batches, the heparin, the citrate, and the no anticoagulant, the 3 groups of doctors out there, I presume, you know, in your estimates, you guys don't have anything coming from the heparin group to be conservative. Of the sort of 28% who are in citrate, do you guys think you'll get half of that or a third of that? Of the no anticoagulant, do you think you'll get, you know, half of that or three-quarters of that group? I was sort of wondering how that breakdown with that $100 million or $200 million comes from within those groups, again, assuming you haven't modeled anything with heparin. Yeah. Sorry about that. I should have been more specific. Raf, you can give him some more of the details. Yeah. Without getting into all those details in terms of market penetration on each, James, you know, like Vince said, the biggest is going to come from that citrate and the no anticoagulation markets. That's going to be probably close to 70%-75% of that total peak sales opportunity. The heparin, though, there is as we've been talking also to some of these physicians, they'll use heparin. They don't like it, but they'll use it, if there's nothing else available because citrate is so complex to use. They feel like they have to use something, but citrate is so complex that they can't use it. We do expect to get some share out of that heparin market. It's just not nearly as much as, the citrate and no anticoagulant market. Sure. Thank you for that. Then maybe, my final question would be, I'm sure you guys are well aware, you know, the challenges facing smaller companies with single products in the bag, even though obviously this is a much smaller sales force here, so a lot of the issues can be avoided. What are your thoughts on bringing in additional products and how does that opportunity look for potentially in-licensing something to put something else in the bag of this sales force? Right now, honestly, we got our hands full because with the Niyad potential EUA, the completion of that study, et cetera, Niyad is clearly our primary focus. We got things right on the back end of it with the two pre-filled syringes. Again, while that won't use much sales force, it'll be contracting, but we'll have other potential revenue streams from that as well. I think the other key as far as licensing in, we're always on the lookout for licensing in, but I think you have to remember that nafamostat or Niyad, LTX-608, is a pipeline and a product with multiple other potential indications that we could pursue moving forward. We wanna get these under our belt, get the revenue streams working accordingly, the income statements, you know, moving in the right direction. While we'll be opportunistic on bringing in additional products, we also don't want to eliminate the opportunity to advance nafamostat or LTX-608 for the other indications. Great. Thank you. Thank you for taking my question. Take some of the pressure off before where, you know, we had no pipeline, we were only a DSUVIA company. Now we've got multiple avenues to head with the current assets within our portfolio. Great. Thank you again. Thanks, James. This concludes our question and answer session. I would like to turn the Conference back over to Vince Angotti for any closing remarks. Thanks, Jordan, and thanks to all of you for joining us today and your continued support of AcelRx. We're clearly excited about the transformation through the progress we've made with Niyad and our pre-filled syringes. We're gonna remain focused on driving long-term shareholder value as a newly focused company with late-stage development, what we believe as high-value assets going forward. We'll look forward to answering any additional questions you might have offline, and we'll certainly continue to share with you our future developments. I'm excited about the progress we've made. Jordan, thank you, and thank you all for attending. The Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.