Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: Shares in AcelRx Pharmaceuticals (NASDAQ:ACRX) continued their decline today, falling by as much as 10% after the company reported disappointing fourth quarter results. The drop follows yesterday's 37% collapse on news that the FDA will require an additional trial for AcelRx's pain drug device, Zalviso.
Why it's happening: There weren't a lot of bright spots in AcelRx Pharmaceuticals' fourth quarter results. The company has been dealing with a series of disappointments for Zalviso, including an FDA complete response letter that was issued last July, that has caused expenses to climb.
Investors had hoped that AcelRx could address the FDA's concerns with Zalviso and resubmit it for approval early this year; however, the company's admission yesterday that it will need to conduct another trial before resubmitting Zalviso could mean that the company won't be able to refile until next year or later.
That's a big blow to AcelRx, particularly given that the company had previously told investors that the FDA was only asking for additional information on how patients and caregivers use the handheld, sublingual pain drug dispensing device.
Last year, expenses tied to gathering the information necessary to resubmit Zalviso resulted in the company's net loss growing from $23.4 million in 2013 to $33.4 million. Additionally, hiring to support a potential commercial launch of Zalviso this year led to general and administrative costs jumping from $9.9 million in 2013 to $18.3 million in 2014. Overall, the spending increase reduced AcelRx's cash position by $28.3 million, leaving the company with $75.4 million exiting December.
Now what: Since the FDA wants more insight into the risk of inadvertent dosing and dosing failures, addressing the agency's concerns is bound to increase the company's expenses, and that may mean that AcelRx's loss gets even bigger this year.
It shouldn't be too shocking to learn that the FDA is very cautious when it comes to pain medications like this. The tablets that are dispensed by AcelRx's device are sufentanil, a synthetic formulation of the opioid drug fentanyl that is five to ten times more potent. Since opioids carry significant risks of misuse, making sure that the dispensing system is bulletproof is necessary. Regardless, with another costly study on tap for Zalviso, there seems to be little reason to jump in and buy shares until the company can offer up a new timeline for trial data and eventual resubmission.