Talphera Inc (TLPH) 2020 Q4 法說會逐字稿

Welcome to the AcelRx's Fourth Quarter and Full Year 2020 Conference Call. This call is being webcast live on the Events page of the Investor Relations section of AcelRx's website at acelrx.com. This call is the property of AcelRx and any recording, reproduction or transmission of this call without the express written consent of AcelRx is strictly prohibited. As a reminder, today's call is being recorded.

You may listen to a webcast replay of this call by going to the Investors Section of AcelRx's website.

I would now like to turn the call over to Raffi Asadorian, AcelRx's Chief Financial Officer. Please go ahead.

Thank you for joining us this afternoon. Earlier today, we announced our previously released fourth quarter and full year 2020 financial results in a press release. This press release and the slide presentation accompanying this call are available in the Investors section of our website.

With me today is Dr. Pam Palmer, our Chief Medical Officer. Unfortunately, Vince Angotti, our Chief Executive Officer, is unable to join us today due to a family emergency.

Before we begin, I'll remind listeners that during this call, we will 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. Let's get started as we have a long call today.

Like most companies, during this pandemic, we have adapted and found ways to continue advancing the long-term value of AcelRx and commercial launch of DSUVIA despite the obvious challenges with access to hospitals, physicians and decision makers. As a result, we successfully achieved many of the objectives set out at the beginning of 2020 and believe that in the post-COVID environment, DSUVIA is well positioned for success due to the need for efficiencies at ASCs and hospitals, the progress of our partnerships and the readout of additional clinical data through the course of 2021. We've learned from the real-world use of DSUVIA that in addition to DSUVIA being an effective and well-tolerated analgesic to manage acute pain, DSUVIA also supports opioid stewardship and that it reduced overall perioperative opioid requirements in patients from 2 separate peer-reviewed published studies.

Importantly, these studies showed data that supported for the first time, economic benefits to hospitals and surgery centers, which is resonating with physicians as well as hospital administrators. Later, I will discuss the importance of this data and our continued focus on supporting investigator-initiated studies where we see significant potential for DSUVIA to help new patient populations. I will also update you on the progress in each of our 4 pillars, providing a foundation for revenue growth.

In addition, we have a special guest with us today, who is one of our physician experts in oral and dental anesthesiology, Dr. Steve Yun. Zimmer Biomet is gearing up for its formal launch of DSUVIA into the oral and dental surgery space, and we thought it would be helpful for our investors to hear about Dr. Yun's experiences with DSUVIA. Pam will provide a further introduction to Dr. Yun later in the call.

The pandemic has many -- has had many unanticipated effects on the world and impacted each of us in different ways. With regards to AcelRx, the 3 main impacts we have experienced are: one, cancellation or delays of formulary committee meetings; two, restrictions on pharmaceutical representatives or any outside visitors entering the institutions to educate health care providers; and three, delays of elective surgeries.

With regards to the last point, the elective surgery backlog has grown significantly over the last year. The May 2020 study of orthopedic surgery volumes by the Journal of Bone and Joint Surgery suggested that even under the most optimistic scenario, the United States may face a cumulative backlog of more than 1 million total joint and spine surgery cases.

With the rollout of vaccines, many industry insiders believe these elective surgeries will start ramping in the second half of 2021. We believe this expected return of surgeries provides an opportunity, as the surgical environment has been the initial primary use for DSUVIA.

I'll provide an update on some 2021 guidance that includes this growth expectation and the number of expected formulary approvals by the end of the year. Before looking forward, let's review the progress made and objectives achieved in 2020 in each of our 4 pillars.

The first pillar is centered on the Department of Defense. We made significant progress in 2020 with Milestone C approval received in April, joint deployment formulary approval received in September and finally, a 4-year $3.6 million contract received from the U.S. Army to develop clinical practice guidelines. In addition, we continue to penetrate the military treatment facilities or hospitals based here in the U.S. as the benefits of DSUVIA across the military are being better understood. As a reminder, the Milestone C approval means DSUVIA will be packed out in the U.S. Army SKOs or sets, kits and outfits for all deploying troops. We continue working with the Army on all the complex logistics and administrative matters to improve this process, which has taken time. Regardless, once the logistics are finalized, we still believe that the initial stocking for all SKOs will approximate $30 million in revenue over 3 years. We do not yet have any guidance on what this will translate into for revenues in 2021, but we expect these final logistics to be worked out in the near term.

Our focus will remain on educating and training the U.S. Army teams, so they are prepared as DSUVIA ships to deploying troops. Separately, military treatment facilities continue to be a focus as many of these physicians rotate into deployment, which provides an opportunity for more health care providers within the military to learn about the benefits of DSUVIA.

The second pillar is concentrated on large specialty markets accessed through partnerships. A significant accomplishment in 2020 was the exclusive Zimmer Biomet oral and dental surgery partnership announced in July. Zimmer Biomet has just started to begin promotion with the trained 31 sales representatives that is expected to expand to the broader 200-plus sales representatives later this year, particularly after Zimmer Biomet Dental received their wholesaler drug licenses.

As a reminder, this opportunity approximates 7.5 million applicable DSUVIA procedures. We believe the potential is significant to reach a large proportion of these customers given Zimmer Biomet Dental's customer base and established relationships in this space. Once a full promotional effort is made with their sales force, we believe growth will ramp quickly.

Dr. Yun will discuss his experience with DSUVIA in this setting to provide a better idea of the types of procedures that can benefit from DSUVIA. Also within this pillar are other potential specialties such as plastic surgery, emergency medical services and many others. Plastic surgery has been one of our fastest-growing specialties in the first quarter of this year, given the unique pharmacokinetic characteristics of DSUVIA and how these procedures are being performed. And this has been accomplished with only 2 sales representatives making virtual sales calls initiated in the fourth quarter.

Our third pillar, which is the primary focus of our internal commercial organization is hospitals and surgery centers. While COVID has certainly had an impact on our progress in this pillar, the publications of the new real-world clinical data have provided a rationale of how DSUVIA can help address the backlog in elective procedures moving forward.

Importantly, in 2021, we believe the ongoing investigator-initiated trials at some of the most prestigious hospitals in the U.S. and new studies being evaluated will provide further evidence of DSUVIA's potential to change the paradigm of pain management for surgeries. Selling into hospitals and surgery centers has a long lead time, and this was only exacerbated during the pandemic. With the data showing real-world use of DSUVIA supporting opioid stewardship and efficiencies in the perioperative setting, now there is more information that health care providers are able to evaluate for upcoming formulary and purchasing decisions. One example of the benefits of this data was our recent partnership with the National Rural Health Association, which identifies opioid stewardship as 1 of their 4 critical priority areas. After reviewing the available publications with this clinical data, they decided to enter into a partnership with us to help support this effort.

As we've previously announced, there are ongoing investigator-initiated studies being performed at Harvard Brigham and Women's Hospital, the Cleveland Clinic, University Hospitals of Cleveland as well as at the Newport Plastic and Reconstructive Surgery Center. These are well-regarded institutions, all focused on different studies in patient populations. We believe the data from these ongoing studies will demonstrate the effectiveness and benefits DSUVIA provides over current standards of care. We expect data from these studies to read out later this year. And coupled with the opening up of elective surgeries expected in the second half of the year, we believe it will provide further momentum for the use of DSUVIA.

Knowing how important new data is for driving adoption by health care providers, we are reviewing many other study requests with several focused on orthopedic surgeries, which has been one of the fastest increasing specialties along with plastic surgeries. The benefits being seen from orthopedic surgeons, while using DSUVIA include faster discharge time for patients and overall reduction in opioid utilization in the PACU. These physicians also report patients are more clearheaded, which is consistent with DSUVIA's lack of cognitive impairment as assessed in our registration trials. The orthopedic surgery market will be a key specialty for DSUVIA in 2021.

In addition to orthopedic studies, we continue to receive strong interest for investigator-initiated trials in other areas, including proposed studies in sickle cell patients presenting to the emergency department and retinal surgery in the elderly.

With COVID delaying formulary reviews, as mentioned on our last quarter call, we shifted our commercial team's focus to the accounts that had already reviewed and approved DSUVIA for use. As a result, in the fourth quarter, 90% of all orders shipped were for reordering customers.

Before providing a further operational and financial update, I would like to hand the call over to Pam to introduce Dr. Yun.

Thank you, Raffi. We are fortunate to have with us today the anesthesiologist to first recognize the important benefits that DSUVIA could bring to oral surgeons and their patients, and we're also excited about the collaboration with Zimmer Biomet. Dr. Steve Yun is a board-certified anesthesiologist, who specializes in providing dental office anesthesia for complex oral surgery cases. He is an examiner and expert consultant for the Dental Board of California, Clinical Professor of Western University of Health Sciences and a lecturer at the Loma Linda School of Dentistry. He is also a safety inspector for The American Association for Accreditation of Ambulatory Surgical Facilities. Dr. Yun knows firsthand how important, consistent and effective levels of opioid analgesia are for the oral surgeon performing a lengthy surgery in his or her procedural suite. Usually, patients are not under general anesthesia during these lengthy procedures. And throughout the case, the oral surgeon will have to repeatedly stop to administer low-dose IV opioids. This is because the peaks and troughs of IV-administered drugs are inherently ineffective at providing stable level of analgesia for cases lasting hours.

Dr. Yun's direct observations during surgical cases of the unique pharmacodynamic profile of sublingually administered DSUVIA and his knowledge of the high therapeutic index of sufentanil make him uniquely qualified to discuss with you today the use of DSUVIA's oral surgery procedures. Before Dr. Yun discuss his experience with utilizing DSUVIA in his dental anesthesia practice, I will cover some safety information about DSUVIA.

The following information is intended for investors, not health care professionals or patients. DSUVIA is a Schedule II controlled substance that may only be dispensed to adult patients in a certified medically supervised health care setting for the management of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate. Risks include life-threatening respiratory depression, addiction, abuse, misuse, cytochrome P450 3A4 interaction and risk from associated use with benzodiazepines or other central nervous system depressants. The most commonly reported adverse reactions are (inaudible) vomiting, dizziness and hypotension. Insufficient data are available on the use of DSUVIA in patients with severe liver or kidney impairment.

DSUVIA should be used with caution in such patients due to the importance of these organs in the metabolism and excretion of sufentanil. AcelRx ensures proper use of DSUVIA via physician education and the DSUVIA Risk Evaluation and Mitigation Strategy or REMS program. DSUVIA is only available to facilities that are part of the DSUVIA REMS program. Facilities that administer DSUVIA must be able to manage acute opioid overdose, train relevant staff on DSUVIA, and implement policies and procedures to ensure the appropriate administration of DSUVIA. Full safety information in the black box warning for DSUVIA can be found at dsuvia.com.

Now I would like to hand the call over to Dr. Yun to share his insights into the use of DSUVIA in oral surgery practices.

Great. Thank you, Dr. Palmer. Hello, I'm Dr. Steve Yun. I'm pleased to be able to share my observations on the use of DSUVIA in patients undergoing oral surgery. Of note, I am a consultant and speaker for AcelRx. I am being compensated for my time to speak with you today.

Almost 2 years ago, I was attending a talk by Dr. Palmer on DSUVIA that was unrelated to oral surgery. But given my focus in this field of anesthesia, I immediately realized the potential impact DSUVIA could have on the oral surgeons' practice. Oral surgeons train not only in oral surgery, but also anesthesia. So the vast majority of these cases do not have an anesthesiologist like me present. I am only brought in for the more complex or difficult cases, such as patients with many comorbidities or difficult IV access. Therefore, oral surgeons have to provide both the sedation and the analgesia as well as perform the surgery, which is no easy task. While dental local anesthetic blocks provide a substantial amount of pain control, these alone are often inadequate for larger surgeries, especially those that involve the upper arch. Nitrous oxide or laughing gas can slightly blunt the sense of pain, but it really isn't that effective for moderate-to-severe pain, and it is cumbersome to administer and can often get in the way of the surgeons' operative field.

Now oral surgeons often rely on intravenous opioids such as low-dose intravenous fentanyl to supplement the local anesthetic blocks. I say low dose since these patients are not intubated, but rather, they are under a moderate level of sedation and breathing on their own. The pharmacokinetic profile of intravenous fentanyl is a rapid high peak followed by a fairly (inaudible). We can only give low doses in these awake cases, because the rapid peak plasma concentration can cause respiratory depression if it rises too high.

Following the peak drug levels, the distribution half-life of IV fentanyl is only 1.7 minutes, which essentially means a quick release of plasma and doesn't maintain a consistent plasma concentration that is delivered to the brain. The duration of action of these typical low doses of fentanyl such as 25 micrograms is about 30 minutes at most. So you can imagine the roller-coaster of fentanyl plasma concentrations throughout a 2- to 3-hour case.

The interruptions to the surgeon and the breakthrough pain profile are not optimal to (inaudible). In patients, who are especially risky from an airway standpoint, such as patients with sleep apnea, who have excessive soft tissue in their airway, these high peak opioid levels can really be problematic as these sedated patients can have an obstructive airway and drop their oxygen levels more rapidly than the patient without sleep apnea.

Now before recommending DSUVIA to my oral surgeon colleagues, I wanted to dose it in my own challenging oral surgery anesthesia cases to really get a feel for the safety and efficacy of the drug. My first case was a morbidly obese patient weighing 350 pounds for full mouth extraction and full arch implants. These cases typically last 5 to 6 hours, and this patient not only had difficult airway to protect, but many comorbidities such as coronary artery disease and diabetes. In fact, I felt the patient was at too high a risk to put under general anesthesia in the oral surgery suite. And instead, I opted to use only intravenous Versed, which is a sedating drug and light drug and DSUVIA for analgesia throughout the case in order to keep the patient only lightly sedated and breathing on his own. So with a total of 3 doses of DSUVIA, each one spaced 2 to 3 hours apart and a total of 6 milligrams of intravenous Versed dosed throughout the case, I was able to provide the patient with a quality level of sedation/analgesia with no vital sign or hemodynamic concerns.

After a number of cases where I dosed DSUVIA in similar patients with difficult airways and underlying comorbidities, I believe there are 2 attributes of DSUVIA, which provides a stable pain control with minimal side effects that -- excuse me, that I'm observing in these patients. The first is the blunted and extended duration of sufentanil plasma concentrations following dosing of DSUVIA, which is quite differentiated from the intravenous bolus profile. And the second is the high therapeutic index of sufentanil, which is a measuring (inaudible) for the safety of the drug. These attributes of DSUVIA are above and beyond the additional benefit of not requiring an IV for administration of the drug. There are many times where patients either could opt down procedures or completely avoid the oral surgeon's office for fear of needles. Having a noninvasive method to effectively administer analgesia to allow the surgeon to proceed without an IV or as analgesic bridge to allow an IV to be inserted in a patient, who requires multiple attempts due to difficult-to-access veins is really a leap forward in the dental field.

In addition, the analgesic onset of 15 minutes and the duration of approximately 3 hours allows only 1 to 3 doses that cover up even the longest of oral surgery cases, which is well below DSUVIA's label limit of 12 doses in a day.

The lack of cognitive impairment, as shown in Dr. Miner's published Phase III study of DSUVIA's use in emergency trauma or injury is also a key attribute for dental analgesia. The oral surgeon's office is busy and rapid recovery following the case is critical to keep the daily flow of patient, moving efficiently through to discharge. Consistent with the recently published real-world evidence on DSUVIA use, we are finding that patients are recovering quite quickly when DSUVIA is utilized as the opioid analgesic.

I am excited about the collaboration between AcelRx and Zimmer Biomet. Zimmer has a trusted relationship and broad office of oral surgeons throughout the U.S. as well as top-rated educational courses that provide ongoing training in dental and oral surgery procedures. Adding DSUVIA to their offerings to the oral surgeon and IV sedation certified dentists will truly be beneficial for both the surgeons as well as the patient, whether it's impacted third molar extractions, multiple dental implants or the large full mouth dental implant cases, DSUVIA is a uniquely effective analgesic option that minimizes the frequency of dosing, minimizes CNS impairment, doesn't require IV access and is a much needed event in this field. Thank you.

Thank you, Dr. Yun, for those great insights. And apologies if you were unable to hear Dr. Yun on some of that given the difficulties with the line. But we're very excited about the launch into the oral surgery space. And Dr. Yun will be available for Q&A at the end of our call.

I would like to provide a few other important updates before going into the financial review. First, our high-volume automated packaging line that has been held up in Europe because of COVID has finally shipped. We expect to receive the packaging line at our contract manufacturing facility by the end of the month. After the equipment has been received, the next steps are to assemble at our contract manufacturer, complete final acceptance testing and then begin producing validation batches, which, importantly, will be able to be sold after all approvals are received. Subsequent commercial production batches are expected beginning in the third quarter of '22. This will have a significant reduction on our unit cost of production and increase our capacity to meet expected demand from the DoD, Zimmer and growth in hospitals and surgery centers.

Importantly, this also clear the path to finalizing discussions on out-licensing DSUVIA -- or DZUVEO in Europe. We plan to have an agreement later this year with a potential partner for Europe.

As part of our fourth pillar, we continue to explore additional product licensing or acquisition opportunities, which we believe will complement DSUVIA and improve efficiency, and leverage our commercial team. We remain committed to adding at least one complementary product to DSUVIA in our portfolio. This does not replace our priority with DSUVIA, but simply provides our commercial team with additional sales opportunities on the same call.

We've completed a lot this year, but much more is expected in 2021. We've had some questions about the recent FDA warning letter. We take their communications very seriously. As such, we responded to their letter promptly and have already received confirmation of the response received and that they will schedule our requested meeting. Our intention has always been to partner with the FDA and be the model citizen of proper promotion and education. And importantly, considering DSUVIA is an opioid, I'd like to mention that the data that has been collected with respect to DSUVIA being kept in the hands of qualified personnel and not adding to the outpatient opioid abuse issues we have all heard about over the past 10 years. We work with Denver Health's RADARS Program, which is the top surveillance program for prescription drug abuse, misuse and diversion, and this data, which is reported annually to the FDA, shows a clean track record for DSUVIA.

I'll now take you through the financials.

We believe we will see improved access to health care institutions as well as a stronger return to elective surgeries in the second half of this year after a year filled with COVID restrictions. I'll first provide an overview of our historical results and provide some guidance for 2021. Q4 revenues were $0.7 million, a 55% increase over the $0.5 million in the same quarter in 2019. Total 2020 product sales were $2.5 million, a 38% increase over the $1.8 million in 2019. This growth, despite the challenges we've encountered with COVID, was encouraging, but is expected to accelerate once elective surgeries return in the second half of 2021 and the backlog begins to be reduced.

At the same time, we expect many of the restrictions still in place at hospitals and surgery centers to be lifted. This, combined with the expected acceleration of the rollout of DSUVIA to deploying troops SKOs, should be a catalyst for much stronger revenue growth beginning in the second half of 2021. Gross profit was negative during the quarter and the year, as revenues did not cover the fixed overhead costs within cost of sales. The loss narrowed compared to 2019 and is expected to continue to do so as sales growth accelerates. We're excited that the -- our automated packaging line has finally shipped and will be installed later this year. Once our automated packaging line is approved for commercial production in 2022, the direct unit production costs with our contract manufacturers are expected to significantly reduce. This, combined with the expected revenue growth to cover our fixed costs will have a favorable impact on overall gross margins.

Cash operating expenses or combined R&D and SG&A, excluding stock compensation and depreciation, in the fourth quarter was $7.5 million compared to $12.5 million in the same quarter in 2019. The decline is across all functional areas, but primarily driven by our sales and marketing spend as we continue to be mindful of our expenses and closely manage them during the extended DSUVIA launch period and while in COVID.

Looking forward to 2021, as mentioned, we are expecting elective surgeries to start returning in the second half of this year as the vaccines continue to get rolled out across the U.S. We believe, this also will have a favorable impact on new hospital and surgery centers adopting DSUVIA on formulary. We expect to have 615 hospitals and surgery centers that have approved DSUVIA for use by the end of 2021. Quarterly combined R&D and SG&A expense, excluding stock compensation and depreciation in 2021, is expected to range from $8 million to $8.5 million. Annual debt service is expected to approximate $10 million as we continue to pay down amounts outstanding under our senior debt facility that matures in June 2023.

Capital expenditures in 2021 are expected to range from $4 million to $5 million attributed mainly to the final installation of our new high-volume automated packaging line at our contract manufacturer. We expect initial packaging batches to be produced at the end of this year with commercial batches beginning after regulatory approvals are received in Q3 2022.

With the path now cleared to finalize installation of the automated packaging line, we also plan to close on an agreement to out-license DZUVEO for Europe later this year.

In summary, 2020 was challenging for many people, but we've been able to make solid progress despite these challenges and are set up nicely once many restrictions are lifted in the hospitals and surgery centers. There are many different opportunities for sales creation, and this is unique for companies in our sector. We expect to capitalize on this beginning in the second half of the year as COVID restrictions begin to be lifted, and 1, we benefit from the 90% reorder rates we're seeing from our hospital and ASC customers; 2, the DoD logistics and administrative issues get cleared; and 3, the clinical data from the approved investigator-initiated studies is received.

I would now like to open the questions. The line up for any questions you might have. Operator?

(Operator Instructions) The first question comes from Brandon Folkes with Cantor Fitzgerald.

Maybe just the first one. Raffi, you talked about sort of 3 headwinds that COVID had created. But any color where the sort of hospital protocol is a limiting factor for DSUVIA in the current environment? And in that, I mean, maybe sort of getting close to a patient to actually administer it under the tongue versus sort of putting an IV in. Is there any sort of headwind there that may reverse as we come out of COVID?

And then secondly, you talked about the new formulary wins in 2021 and the goal -- the cumulative goal for the end of the year. Any color on the types of institutions we should expect coming out of that?

Yes Brandon, I'll take the second part first. You broke up a little bit on the protocol question, but let me answer your first one. I mean what we've been seeing is about 1/4 of the formulary approvals to date have been hospitals and the rest are surgery centers. We're seeing a lot more hospitals up for approval -- for formulary approvals, but those have been the ones that have been really delayed because of COVID. So we're expecting that to come back once things open up. So the hospitals we'll see that mix shift a bit more to the hospital side of things. But the surgery centers with the big backlog that -- of elective surgeries will continue to be a primary place that we'll see approvals and orders coming in with an increasing share coming in from hospitals.

And as you know, the volumes from those hospitals are usually much, much larger than those surgery centers. Does that answer the second part of your question?

It does, yes. And hopefully, you can hear me now. But -- so my first part of the question was more just, have you heard any feedback that perhaps given that DSUVIA is administered sublingually in the COVID environment, has that maybe been a bit of a challenge to update in institutions where you have formulary approvals rather than just sticking in an IV in the arm and if so, do you think that's something that may reverse as we come out of COVID and everyone's vaccinated?

Got it. I've not heard that, Pam. I don't know if you've heard that at all, but I've never heard that.

No. No. In fact, it's very multimodal analgesia right now in the perioperative setting, involves giving oral medications, it's very common for oral COX-2 inhibitors, oral acetaminophen, oral gabapentin is given. So giving DSUVIA as another type of oral medication is no more invasive or close contact for the nurse than injecting an IV. So I don't really -- I've never heard of that as being a differentiating aspect of the dosage form.

The next question is from Evan Seigerman with Crédit Suisse.

So I know in your guidance, you kind of have this goal for, what is it, 615 formulary approvals this year. Can you just remind us where you are with formulary approvals? And I guess, what the pace is -- I know a lot of it is weighted to the back half of the year, but just more color on that.

And then as a follow-up, so there's a lot of discussion about reopening and how that impacts your business. It seems that things, at least in parts of the country, are getting better, and folks are actually getting back into medical facilities for surgeries. Can you provide some numbers as to where we are compared to post -- pre COVID? And where you hope to be by the end of the year to achieve some of the results you outlined?

Sure. Yes. So where we are at the end of February, Evan, was 307 -- sorry, 387 approvals. So that pace to get to the 615, I mean, obviously, in that second half of the year, when elective surgeries are opened up, that's going to be the biggest. But the pace continues in terms of -- that we're starting to see in some areas open up, but it's still largely restricted. So we would expect the second half of the year to be the biggest in terms of that pace. But we're still getting -- it's taking a lot of work and effort, but we're still getting a lot of good formulary wins from large hospitals, but the pace will certainly be in that second half of the year. I don't know if that answers your question or not, Evan, that first part.

Yes, that's helpful. And then the second part, just on kind of this reopening and how you think about it?

Yes. The reopening, I mean it's a couple of things that have -- as we said, that have really had an impact. It's the formularies -- just the formulary meetings have really just been delayed. And it's not just accelerates. It's -- we talked to others in the same space. Cancellations, delays. So it's really that impact and then the elective surgeries coming back in the second half of the year. It's really -- I think, those 2 issues that we have encountered as they start improving and start opening up the -- and lifting those restrictions. And even just our reps getting into the hospitals is going to make a big difference in the pace of those approvals.

The next question is from Michael Higgins with Ladenburg Thalmann.

This is Edward on for Michael. Just piggybacking on the last couple of questions. Are you planning any additional marketing efforts to boost those formularies from 387 to 615 by the year-end? And then are there any formulary decisions that are currently pending?

We have all the time formulary meetings being scheduled. We've had a lot also delayed. But yes, there's always constantly -- we're working on hospitals and surgery centers. But we don't -- we're not going to -- we don't comment on what that backlog is in terms of the numbers, but there's always some in the pipeline for approvals.

In terms of marketing efforts, I mean our -- we mentioned on the call, the investigator-initiated studies, the real-world data that's coming from these has been the strongest voice for us, showing how is DSUVIA being used and the benefits that we're seeing, and that has really provided us a boost. I mean the August and December publications that came out from those 2 studies gave us a great boost in that third pillar that we talked about in the hospitals and surgery centers.

So that's been the primary benefit of that data is really -- this is what doctors want to see, physicians want to hear from other physicians and how they're using the product, and that's been the biggest benefit for us. So there's no new marketing efforts or promotional efforts or things like that, that we're planning. It's really having this data come out, and we're confident in DSUVIA and the benefits it provides that the data will be just as good as we've seen in the previous 2 clinical studies. And it's important information for us to see and to get out there. So we're eagerly awaiting that data.

And then as things are starting to open up a little bit here, are you noticing any trends in the communities, for example, like for, are outpatient procedures picking up more than inpatients, certain types of surgeries picking up a little bit more than other types? And are you -- how are you expecting this to change as we move into the back half?

Well, it hasn't opened up yet. So I mean we've seen pretty much the same. We keep hearing about things starting to open up, but it has not opened up yet. The restrictions are still in place. I think soon, as we said, second half, we're expecting elective surgery. That's what we've heard from others as well. They're -- it's pretty consistent information. Right now, it hasn't really been opening up. A couple of different regions, maybe you hear more in a certain state or others. But we still haven't seen that pick up.

In terms of the types of surgeries, we mentioned plastics and orthopedics have been the strongest performers and the strongest increasing specialties. Pam, I don't know if you can -- if you want to comment on anything in terms of certain specialties that you've heard from our physician customers, but those are the ones we're hearing in terms of the strength and the ones that have been returning, because feel like those are a lot of elective surgeries, those orthopedic-type surgeries.

Yes, absolutely. And I think that's the few sites that are starting to open up are starting to work through their incredible backlog that they have. And we're starting to hear surgeries are being now scheduled on Saturdays. And that's why the efficiency. They're really eager to have something that can get these patients out, keep them awake and alert in the PACU and be able to discharge quickly, so they can get through these surgeries. So they're looking for anything that will enhance their efficiency. And specifically also, there's a huge move for total joints to be performed in the outpatient sector and get them out of the hospitals and especially with COVID around, no one really wants to be hanging out in hospitals right now. So we've had orthopedic surgeons reach out to us saying, hey, if you've got data that DSUVIA can possibly help me discharge more patients same day from total joints, that will be just a really terrific asset for them in their practice. So like Raffi said, not everything is loosened up, but the few places that have, you can see they're eager to learn about this new analgesic and how it can help their practice.

Yes. And I'll just add to that. I think one of the other things I failed to mention, but we talked about it in the prepared remarks is the oral and dental surgery, I mean that specialty with the efforts that will be behind that from Zimmer Biomet's Dental division, as they roll out and they get their licenses in place and really roll it out to their full sales force, I would say that's going to be a very strong pickup, and they put their educational efforts behind that. It's a great partner that we have. And they've got an established relationship with those dental customers. But I think that is also going to be a specialty that we see in the second half of the year is really going to pick up.

Yes. This is Dr. Steve Yun again. If I could add, in the dental and oral surgery market, we've seen a huge explosion in demand even with the fears of COVID. And I can tell you personally, in April when all our dental and oral surgery offices basically shut down for routine care, I essentially was not working in April and half of May. And yet the demand for our services and for dental implants and oral surgery was so high that in 2020, my case volume was still 30% higher than it was in 2019, even though I took essentially 6 weeks of the year off.

And so far in 2021, we continue to see tremendous demand. When people can't eat, when they're in pain, it doesn't matter, they want to have their oral surgery done. They want to have their implants and the fears of COVID notwithstanding, they're willing to come into the dental and oral surgery office to get those procedures done.

Right. So we're eager to get Zimmer Biomet out there to begin really promoting this. And I think it's going to be a great opportunity as they get out there.

That's really interesting. I appreciate all that detail. If I could squeeze in a couple more here. Just in terms of the out-licensing that you're talking about for DZUVEO in Europe, what type of structures are you expecting, especially as it compares to Zalviso, for example?

And 1 question about the presentation on the investigator-initiated studies. Do you expect all of them to be started this year? For example, do you have an annual target for these? What qualifications are you looking for before agreeing to some of these studies?

I'll let Pam take that second one. In terms of out-licensing, I mean, we're not going to comment on potential structures, but I would expect it's a -- as you know, the European market, very low-priced market, and we said that. That's why the automated packaging line, having that installed is so important to get the unit cost down. So we think it's a good opportunity for us, but we can't comment on the structure. Pam, do you want to take the question on the IITs?

Sure. Yes. So the ones that we've listed, we are expecting them to all start this year. Some have already started. The rest we are expecting to start this year. And what we look at is the subject matter, is it some of the areas that we're interested in evaluating? We look at the quality of the investigator. We look at the cost of the overall study. So those are some of the things. And of course, there's usually a lengthy contracting process that always has to occur. So everything takes longer than you think. But we're really excited that we've had such interest from these investigators regarding many different ways of utilizing DSUVIA.

So as Raffi said, are -- the data that's come out of these real-world investigator-initiated trials, real-world studies that are investigator initiated, the data that's come out has really been our best marketing tool yet for the use of DSUVIA.

The next question is from Ed Arce with H.C. Wainwright.

Thanks for giving all this guidance for the next year and also congrats on the continued real-world data supporting DSUVIA. 3 questions for me. First is on the DoD Milestone C approval, obviously, that's been something we've talked about in the past, sort of given the department's own cadence with things. I realize it's sort of difficult to know when this is expected. But I guess the question is, would you expect any procurements at some point this year? That's one.

Two is regarding the target of 615 formulary approvals by the end of this year. I'm wondering what proportion is that of your total targeted facilities between the ASCs and the hospitals? And if you could share with us what proportion to date have you seen of formulary declinations?

And then lastly, regarding DZUVEO in Europe. Wondering as well if you would expect whatever form this ultimately takes in terms of an agreement, whether you would expect an upfront Milestone as part of that, obviously, could be another potential nondilutive source of capital in addition to the Milestone C payment?

Okay. Yes. So on the Milestone C. Yes, we've said, it's going to be hard to predict how much will be coming in under the deploying troops. We certainly do expect something this year, but we're still waiting to hear what that is. And we're -- right now, we've been working a lot on, as we said, the logistics and administrative issues to clear all that, which is, hopefully, we're close on clearing all the logistics there that are needed. As you can imagine, it's a complex process, getting products out to deploying troops. But yes, we do expect something under the Milestone C deploying troops this year.

In terms of the target of 615. I mean, right now, Ed, with the limited reps that we have, right? We have 15 of our own reps that are focused on this, and with some others from the co-promote that we have, we are targeting 300 hospitals and 600 ambulatory surgery centers, right? And you can even narrow that focus down to even kind of 50% of those surgery centers to really get those high-performing surgery centers. So if we -- if we get to that 615, we're making a big dent into that, call it, 900 institutions, but then that's what we focused. We can expand that. But that makes a big dent into that. And it's really right now focused on those higher-performing ones that -- in the surgery centers and the high volume, high procedure orthopedic types of surgery centers. So it makes a big dent getting to that, and then we'll expand from there.

In terms of the declining formularies, it's been a handful of formularies that have been declined. The biggest issue has really been delays because of COVID, right? It's not been the biggest priority to bring in new products on for a lot of these hospitals that have been under pressure. They've really been focused on their own operational and other issues. And quite frankly, when it comes back and the ability for DSUVIA to support operations, meaning throughput and getting patients discharged more quickly that we've seen in some of the recent studies, we think that will help as these surgeries come back. But it has not -- it's been a handful of declining -- declines on the formulary.

And Raffi, just to clarify on that. As you mentioned, it's either a cancellation of P&T or usually a deferral of an approval. We've received very few out and outright declines. And often what those say is this data looks interesting. Can you please come back to us with a more definitive health care patient population that you're interested in using DSUVIA? One thing about large hospitals is, obviously, when they adopt a new product, they want to test it out in a certain group of patients before having it expand to all of patients undergoing surgery, for example, all patients in the emergency room. So (inaudible) is that they really want that P&T champion to come back with a more defined patient population where they can really start trialing it in that institution. So overall, I think the absolute declines have been few and far between.

Yes. And I think just to add also to that, that the 615, a lot of the approvals we're getting are institutions that are not even on that list of targeted 900 institutions. I mean there's a lot that are coming in from the word of mouth. And that's what we expected. If you recall, during the launch, the physicians that use this product love the product and the benefits it brings to them and their patients. So a lot of word of mouth that's been on institutions that are outside those -- our initial targets. And obviously, that's great as well.

So moving on to your last question, Ed, in terms of an upfront, I -- we can't say. It's going to be -- we're working through that now. We've -- we're just happy. We now have got the automated packaging line in that we can open up that possibility here to close on the DZUVEO out-licensing agreement, I think. [Any structure], I think that the ability to have a good partner over there, that is focused on same thing, hospitals and surgery centers is the key, right? But it's difficult right now to say whether there'll be an upfront or not.

Okay. And then 1 final last one, if I may. That was very helpful. Assuming no sort of external cash inflows, like, for example, from DoD, what is your current cash runway?

So we ended the year, what, $43 million and got in another $36 million through February. So it gives us a pro forma of pretty good balance. So with our sales projections and -- that we hope to have, we've got a very good runway. I mean you can do the math, Ed, that based on the guidance that we gave to see what our burn is going to be. I mean it's effectively -- it's around -- if you just take out even all our sales, it's about $10 million or so a quarter. So it gets us a pretty good runway here to get DSUVIA launched and get things moving. So even if there was 0 sales, it gets us a good runway.

So the additional $36 million was from ATM?

No. We did a 30 million of -- around $30 million of capital raise in January.

This concludes our question-and-answer session. I would like to turn the conference back over to Raffi Asadorian for any closing remarks.

Thank you, Gary. We see -- we thank everybody for joining us as well today. We see a great opportunity coming in the second half of the year. We believe we're very well positioned for that growth, while we continue to control our expenses. So we look forward to sharing more developments in the near future. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.