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Perfect Time to Ride the AcelRx Wave (NASDAQ: $ACRX)


It has been two years since AcelRx Pharmaceuticals (NASDAQ: $ACRX) launched its flagship drug Dsuvia in the United States.

As with most new pharmaceutical products, adoption has been slow; however, the company is starting to record sales as they begin to cash in on their lucrative deal with the United States Department of Defense.

Founded in 2005, AcelRx Pharmaceuticals is an innovative pharmaceutical company focused on developing therapies for acute pain. They currently have one FDA and CE-approved product, known as Dsuvia in the United States and Dsuveo outside the United States. Dsuvia is a sublingually administered opioid analgesic intended for the management of moderate to severe pain in a range of medically supervised settings. They also have a product candidate, Zalviso, which is currently awaiting FDA approval.

In recent years, opioids and synthetic opioids have made headlines pointing to the increase in usage to treat acute and chronic pain, large spikes in the use of highly potent opioids in the black market, and waves of lethal overdoses plaguing North America and Europe. In the United States, opioid-related deaths increased 120% between 2010 and 2018.

AcelRx is focused on developing safer treatments for acute pain that address unmet needs in the market. Dsuvia is a device that safely administers a 30mcg sufentanil tablet sublingually. Sufentanil is a synthetic opioid that is ten times stronger than its parent drug, fentanyl, and approximately 1,000 times more powerful than morphine. While there are obvious risks that come with such a potent opioid, it is important to note that Dsuvia is administered in a safe dosage and format and is only intended to be administered by medical professionals in medically supervised settings. Even in the highly unlikely case of a dosage error, any medical setting where opioids are administered will have immediate access to Narcan (naloxone), which can help reverse opioid overdoses by stimulating the patient’s respiratory system and counteracting the opioid’s respiratory-depressing effect.

Dsuvia uses a small applicator to administer a bioadhesive tablet that sticks to the tissue under the patient’s tongue. The tablet is designed to limit the patient’s salivary response, limiting the amount of the drug that is swallowed. The drug is absorbed quickly and provides faster and more complete pain relief than other alternatives.

According to the company, Dsuvia is able to meet unmet needs in the opioid analgesic market because of its ease of use, its efficiency in hospitals and other surgical settings, its cost-saving potential, and the fact that it completely avoids the risk of IV infection and minimizes the risk of dosage errors.

Opioids are the second most frequent drug class of medication errors within acute hospital settings.


AcelRx is focusing on four pillars to drive revenue growth.

  1. Partnership with United States Department of DefenseIn April 2020, Dsuvia received a positive Milestone C review from the Department of Defense, clearing the drug for use in all military sets, kits, and outfits (SKOs). The army has begun stocking orders for SKOs and is planning on purchasing a total of approximately $30 million over the next three years.
    In September of 2020, AcelRx announced that the United States Armed Forces decided to add Dsuvia to the Department of Defense’s Joint Deployment Formulary, which is a list of pharmaceutical products that are provided for units across all service branches of the military.
  2. Commercial partnerships in specialty marketsIn July 2020, AcelRx entered into an agreement with Zimmer Biomet–a designer and manufacturer of orthopedic reconstructive implants, as well as supplies and surgical equipment for orthopedic surgery–whereby Dsuvia would be marketed within the dental and oral surgery market exclusively through Zimmer Biomet’s dental division.
    This agreement expands AcelRx’s ability to support dental practitioners in providing quality care to their patients in the millions of oral surgeries performed in the United States every year.
    Dsuvia can be used in any clinical setting, such as plastic surgery clinics, dermatology clinics, ENT clinics, or any setting where injectable opioids are currently being used for surgical analgesia. The company aims to build additional partnerships in these areas in order to unlock long-term value.
  3. Hospital and ambulatory surgery center penetration – AcelRx is looking to 300 hospitals and 600 ambulatory surgery centers (ASCs) as their current priority for customer penetration. In October 2020, they entered into a co-promotion agreement with La Jolla Pharmaceuticals to develop a sales and marketing infrastructure to support the new adoption of Dsuvia in targeted hospitals and ASCs based on surgery and emergency department volume and early adoption behaviors, among other criteria.
  4. Product acquisition and in-licensing – AcelRx is also focused on product acquisitions and licensing agreements as part of its business development strategy. In their latest corporate presentation, they explain that they are actively seeking transactions that will allow them to add additional existing products to their existing commercial infrastructure.

The company finished Q3 2020 with a strong cash balance of $43 million, and management has made it clear that they are committed to staying prudent with cash.

Q3 was their best quarter in terms of product sales since Dsuvia’s launch in 2018. Q3 saw $1.4 million in product sales compared to only $0.3 million in Q2. More than 90% of commercial doses shipped during the quarter were re-orders, indicating that customers are seeing the value in the product.

Gross profit was negative during Q3 as revenues have yet to catch up to COGS. However, they are currently testing equipment for a high-volume packaging line that will reduce unit costs by 60%.

Operating costs held steady at $7.3 million from Q2 to Q3 and are expected to remain in the $7.5-8 million range for Q4. Operating costs consist mainly of R&D and SG&A.

“Our second pillar … is similar to the first pillar in that it requires minimal AcelRx commercial investment”, CEO Vincent Angotti explained in the latest quarterly earnings call.

This means that the company can scale revenues without the need to drastically increase operating costs. In conjunction with improved gross margins from the new high-volume packaging line, this indicates that AcelRx is strongly positioned to move towards profitability over the next twelve to twenty-four months.

It is worth mentioning that the Biden administration has expressed its intention to battle the rising opioid crisis, which could result in the FDA taking a harsher stance in regulating opioids. However, since Dsuvia is a non-prescription opioid intended only for use in medically supervised settings, it is unlikely that this will negatively impact AcelRx in any material way.


Although we are starting to see signs of growing demand in multiple market segments, there is always a risk that new pharmaceutical products may not catch on as quickly as management teams might hope. However, we believe that with AcelRx’s growing network of partners and repeat customers, the potential rewards of this investment far outweigh the risks.

Although the company may still be a long way from profitability, investors can enjoy the benefit of partial revenue visibility from the DoD contract providing $30 million over the next three years, beginning in Q4 2020. We are two weeks away from Q4 results releasing on March 15th, 2021. Now is the perfect time to get into this investment and ride the wave up while the stock is still cheap at only $1.88 as of the market close on February 26th.


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