Tuesday October 16th, 2018 AcelRx Pharmaceuticals (NASDAQ: ACRX) Chief Development Officer (CDO) and Chief Engineer reported selling an aggregate of 33,567 shares at $5 per share. The month before the CDO sold 6,953 shares at $4.5. If you scroll back a couple pages on ACRX’s SEC filings you’ll see that less than two months the CDO and Chief Engineer bought 6,876 and 8,022 shares respectively at $1.49.
Table 1: Insiders Sales Sept.-Oct.
|Date||Insider||Shares Sold||Price ($)||Shares still owned|
All three sales were in accordance with the SEC Rule 10b5-1 trading plan. This rule allows insiders and directors of a company to buy or sell shares at a predetermined time and at a predetermined price. A prerequisite is that the insider does not have have access to material nonpublic information. For example, whether or not a drug will be approved. It appears that the CDO and Chief Engineer were confident in ACRX’s response to the 2017 CRL and scheduled to lock in ~220% gains on a less than two month old investment sparked by a positive ADCOM review. Given the parameters of the 10b5-1 rule they likely had the same option last year. The only problem was on 10/15/2017 ACRX had recently taken a nose dive from ~$5.30 to $2.30 because of the aforementioned CRL.
Insiders Did a Lot More Buying Than Selling
From August 6th to September 5th six insiders bought a total of 88,238 shares at an average cost of $2.149. Notable purchases is 37,000 shares and 10,000 shares by the CMO and CEO respectively. The CFO and Mr. Edwards also bought respectable amounts too.
Table 2: Insider Buying Aug.-Sept.
|Date||Insider||Share Bought||Price ($)|
After this stretch of buying the above insider owned:
Table 3: Insider Share Count
Out of all of them only the Chief Engineer and CDO decided to sell a modest portion of their holdings (34% and 29% respectively). The others bought at moderately higher prices and if they elected to sell could have secured ~70%-80% returns in the same time frame. The fact that they did not likely reflects their optimism about the future price action and the future of ACRX as a company in the specialty pharmaceutical space. I think now when on the cusp on a major inflection point it’s important to take a step back and look out past a PDUFA date. Then it becomes clear why turning down 70-80% gains may have been justified and a buyout could be coming.
ACRX’s Product Portfolio Has Blockbuster Potential
The active chemical in both Zalviso and DSUVIA(EO) is Sufentanil; an extremely potent new class of opiate with distinct pharmacokinetics and molecular characteristics that provide significant clinical and patient safety advantages over morphine and fentanyl. It quickly penetrates cell membranes and reaches the central nervous system (i.e. relieves pain). Currently, Sufentanil is only approved for IV administration where the main issue is a short duration of action. The sublingual (tablet) formulations of Zalviso and DSUVIA address this issue and provide competitive advantages over other opioids.
Zalviso is approved for treating moderate to severe-acute pain in a hospital setting in Europe and Australia and is through phase 3 of development in the U.S. Unlike morphine and fentanyl, Zalviso is only to be prescribed by clinicians experienced with opioid therapy thereby reducing the risk of misapplication and use.
Zalviso was designed to address existing issues with Intravenous patient-controlled analgesia (IV PCA). It is a handheld preprogrammed device that orally delivers a .15mg tablet and is licensed to Grünenthal Group GmbH in the Switzerland, Liechtenstein, Iceland, Norway and Australia. Under an amendment in the licensing agreement ACRX is can receive an additional $194.5 million in milestone payments and sales achievements. Presently, the main source of revenue for the company has been from this agreement with GmbH and funding for from the department of defense (DOD). Between DSUVEO’s EU approval, the high potential for U.S. approval, and financing from the DOD, more revenue sources appear on the horizon. And the fact that the company appears to be undertaking this on their own suggests a buyout may be what happens next if DSUVIA is approved by the FDA.
DSUVIA is designed as a noninvasive acute pain treatment in medically supervised settings and on the battlefield. In the six-month periods ending on June 30th, 2017 and June 30th, 2018 ACRX had generated $1.1 million and $900,000 in revenue from the DOD respectively. This is only a fraction of the agreed $17 million dollar funding cap. According to the company’s estimates, DSUVIA could generate $1.1 billion in annual revenue. Seek Alpha Author Douglas Johnson provided his outlook on the ACRX today and using a conservative estimate arrived at $1.65 billion valuation ($27 per share), a 541% upside. This seems realistic calculating in the purported $800 million in revenue from EU sales and the unimaginable potential revenue if DSUVIA replaces morphine in the military.
Insiders know their company better than anyone. When positioned with a potential blockbuster chemical like Sufentanil and sophisticated devices to deliver it in a manner that is safer, more effective, and encompass penetrating the united states military, one of the largest and most well funded in the world, $5 dollars a share starts to look like highway robbery. On Monday October 15th the demand for shares was extremely high as evident by a premarket spike over 40% and more than 20 million shares traded. Shorts have been relentless in keeping us below $5. From an investors perspective there is much more potential upside for ACRX looking at November 3rd and beyond. It’s time to sit tight, accumulate, trust in management who obviously believe in their company, and let the market take care of the rest.
I am/we are long ACRX. I wrote this myself and expresses my own opinions. I was not compensated to write it and have no business relationships with ACRX.
MS Money Move and its Chief Operating Officer who is a scientist and individual investor, as well as its affiliates are not registered financial advisors. Our posts should serve as educational material to help you conduct due diligence research. Posts and articles are not directives or recommendations to invest in any security. We reserve the right to buy or sell any security for ourselves without any notification except when required by law. We are not responsible for the action of our affiliates. Investment theses may change due to the variable nature of the securities market. Because of this there is great risk when investing in stocks and options which can result is capital loss. Additionally, past performance by MS Money Moves or any security is not a predictor of future performance. Everyone should conduct their own research and due diligence before making an investment decision. We recommend you consult a financial advisor regarding any investment action.
The biotech sector is especially volatile. Stock prices may fluctuate substantially based on material or nonmaterial developments. We encourage everyone to familiarize themselves with clinical trial processes, relevant terminology, FDA/SEC rules and regulations, and the general processes of drug & therapy development/approval. Always do independent research in a security prior to investing.