AcelRx Pharmaceuticals Reports Fourth Quarter and Full Year 2013 Financial Results

AcelRx Pharmaceuticals Reports Fourth Quarter and Full Year 2013 Financial Results

REDWOOD CITY, Calif., March 3, 2014 AcelRx Pharmaceuticals, Inc. (Nasdaq: ACRX), a specialty pharmaceutical company focused on the development and

commercialization of innovative therapies for the treatment of acute and breakthrough pain, today reported financial results for the three and twelve months ended December 31, 2013.

AcelRx made strong progress in 2013 with the successful completion of the Zalviso (sufentanil sublingual NanoTab system) Phase 3 program, the

filing and acceptance of the NDA for Zalviso, the execution of a commercial partnership agreement with Grunenthal for Zalviso that covers Europe and Australia, and agreement with FDA on a Phase 3 program for ARX-04, an investigational single-dose

sublingual sufentanil NanoTab for moderate-to-severe acute pain, stated Richard King, president and CEO of AcelRx. As we begin 2014, we are advancing our U.S. commercial capability and preparing for a potential Zalviso approval in third

quarter of 2014. We are also readying Zalviso for MAA filing in Europe, and preparing to initiate a Phase 3 clinical program for ARX-04 in the second half of this year.

Fourth Quarter and Full Year 2013 Financial Results

income for the fourth quarter of 2013 was $17.8 million, or $0.41 per share, compared with a net loss of $10.5 million, or $0.41 per share for the fourth quarter of 2012. During the fourth quarter of 2013, AcelRx received a $30.0 million upfront

payment from Grunenthal GmbH associated with the Zalviso commercialization agreement in the EU and Australia, of which $27.4 million was recognized as revenue in the quarter. Excluding the $27.4 million of revenue recognized from the Grunenthal

collaboration, and excluding a $1.2 million one-time non-cash charge associated with the Hercules debt renegotiation and $0.7 million non-cash expense resulting from the liability accounting related to warrants issued in connection with the PIPE

financing completed in June 2012, the net loss for the fourth quarter of 2013 was $7.7 million, or $0.18 per share.

During the fourth quarters of 2013

and 2012, AcelRx recognized revenue of $27.6 million and $1.7 million, respectively. The fourth quarter of 2013 revenue includes $27.4 million of revenue recognized from the $30.0 million upfront payment from Grunenthal and $0.2 million of

reimbursement for work completed under a research grant from the U.S. Army Medical Research and Materiel Command (USAMRMC), for development of ARX-04.

Fourth quarter of 2012 revenue consisted of $1.7 million in reimbursement for work associated with the USAMRMC

Research and development (R&D) expenses for the quarter ended December 31, 2013 totaled $4.3 million, compared with $7.8 million for the

quarter ended December 31, 2012. The decrease in R&D expense reflects completion of the Phase 3 development for Zalviso by the third quarter of 2013.

Selling, general and administrative (SG&A) expenses were $3.3 million for the fourth quarter of 2013, compared with $1.9 million for the fourth quarter of

2012, due primarily to an increase in commercial activities related to Zalviso, including increased market research activities and the initial build of internal marketing capabilities. Fourth quarter 2013 SG&A expense of $3.3 million includes

$1.0 million in marketing costs.

Other income and expense includes a $0.7 million non-cash charge in the fourth quarter of 2013 resulting from the

liability accounting related to warrants issued in connection with the PIPE financing completed in June 2012. The primary determinant of this charge was an increase in share price during the fourth quarter of 2013 and its resulting impact on the

Black-Scholes valuation of these warrants. Additionally, in connection with the renegotiated debt with Hercules, AcelRx recorded in the fourth quarter a $1.2 million non-cash charge for the extinguishment of the original Hercules loan that was paid

off upon the signing of the new debt arrangement.

For the twelve months ended December 31, 2013, AcelRx reported a net loss of $23.4 million, or

$0.59 per share, compared with a net loss of $33.4 million, or $1.51 per share for the same period in 2012. Excluding the $27.4 million recognized from the Grunenthal upfront payment, the $14.1 million in non-cash expense resulting from the

liability accounting related to the warrants issued in connection with the PIPE financing completed in June 2012 and the $1.2 million one-time, non-cash charge associated with our debt renegotiation, adjusted net loss for 2013 was $35.5 million, or

R&D expenses for 2013 totaled $26.3 million, compared with $24.9 million in 2012. The increase for 2013 over 2012 was primarily due

to expenditures related to the Zalviso Phase 3 clinical trials that were at their highest levels in the first and second quarters of 2013. SG&A expenses were $9.9 million for 2013, compared with $7.2 million in 2012, due primarily to an increase

in stock based compensation and commercial activities related to Zalviso, including increased market research activities and the initial build of marketing capabilities.

As of December 31, 2013, AcelRx had cash, cash equivalents and investments of $103.7 million, compared to $59.8 million at December 31, 2012. In

July 2013, AcelRx raised approximately $47.9 million in net proceeds through the issuance of 4.37 million shares of common stock in an underwritten public offering. In December 2013, AcelRx received an upfront licensing fee of $30 million from

Grunenthal GmbH under the terms of a collaboration agreement for Zalviso in Europe and Australia and an additional $6.0 million, net of payments to Hercules, from the renegotiated debt agreement.

Review of Recent Accomplishments and Corporate Update

AcelRx records as revenue the reimbursement received pursuant to the 2011 $5.6 million USAMRMC grant. Recognition of revenue from this grant has resulted in

recorded revenues of $5.6 million through December 31, 2013 with no funding remaining on the USAMRMC grant.

AcelRx expects the first of the

Grunenthal regulatory milestones to be triggered with the planned submission of the MAA in mid-2014, resulting in a $5.0 million milestone payment anticipated in the third quarter of 2014.

AcelRx forecasts that quarterly R&D expenses through the end of 2014 will be relatively consistent across all quarters with total R&D expenses

expected to be in the range of $27 to $29 million for the year.

Additionally, AcelRx anticipates general and administrative expenses, excluding sales and marketing costs, will

increase gradually quarter over quarter in 2014 as the company builds infrastructure to support Zalviso s commercial activities. Consistent with planned commercial preparation, sales and marketing costs are expected to accelerate over the

remaining quarters of 2014 as the company prepares for the possible approval and the planned commercial launch of Zalviso. In 2014, total SG&A costs in the $21 to $23 million range are anticipated, assuming FDA approval for Zalviso in the third

Total operating expenses for 2014 are anticipated to be in the range of $48 to $52 million.

AcelRx believes its current cash, cash equivalents, investments and cash available under credit facilities are sufficient to fund operations at least through

2015, excluding any potential proceeds from Grunenthal milestones.

AcelRx will conduct a conference call and webcast today, March 3, 2014 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss its financial results

and program updates. To listen to the conference call, dial in approximately ten minutes before the scheduled call to (877) 870-4263 for domestic callers, (855) 669-9657 for Canadian callers, or (412) 317-0790 for international

callers. Those interested in listening to the conference call live via the Internet may do so by visiting the Investors section of the company s website at www.acelrx.com and selecting the webcast link for the Q4 2013 earnings conference

call. A webcast replay will be available on the AcelRx website for 90 days following the call by visiting the Investors section of the company s website at www.acelrx.com.

About AcelRx Pharmaceuticals, Inc.

Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of acute and breakthrough pain. AcelRx s lead product candidate, Zalviso , is designed

to solve the problems associated with post-operative intravenous patient-controlled analgesia which has been shown to cause harm to patients following surgery because of the side effects of morphine, the invasive IV route of delivery and the

complexity of infusion pumps. AcelRx has announced positive results from each of the three completed Phase 3 clinical trials for Zalviso, and has submitted an NDA to the FDA seeking approval for Zalviso in the treatment of moderate-to-severe acute

pain in adult patients in the hospital setting. AcelRx plans to initiate a Phase 3 clinical trial for ARX-04, a product candidate for the treatment of moderate-to-severe acute pain in a medically supervised setting, during the second half of

2014. The company has two additional pain treatment product candidates, ARX-02 and ARX-03, which have completed Phase 2 clinical development. For additional information about AcelRx s clinical programs, please visit

Forward Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to future financial results, including 2014 financial

guidance and cash forecast, potential milestones and royalty payments under the Gr enthal agreement, the

process and timing of anticipated future development of AcelRx s product candidates, including the timing of potential approval for Zalviso, therapeutic and commercial potential of Zalviso

and the anticipated timing, therapeutic and commercial potential of other AcelRx product candidates, including the timing of the Phase 3 trial for ARX-04. These forward-looking statements are based on AcelRx s current expectations and

inherently involve significant risks and uncertainties. AcelRx s actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which

include, without limitation, risks related to: AcelRx s ability to receive regulatory approval for Zalviso, that fact that FDA may dispute or interpret differently clinical results obtained to date; any delays or inability to obtain and

maintain regulatory approval of its product candidates, including Zalviso, in the United States and Europe; its ability to attract funding partners or collaborators with development, regulatory and commercialization expertise; its ability to receive

any milestones or royalty payments under the Gr enthal agreement; its ability to obtain sufficient financing to commercialize Zalviso and proceed with clinical development of ARX-04; the success, cost and timing of all product development

activities and clinical trials, including the planned Phase 3 ARX-04 trial; the uncertain clinical development process, including the risk that clinical trials, have an effective design, enroll a sufficient number of patients, or be completed on

schedule, if at all; the market potential for its product candidates; the accuracy of AcelRx s estimates regarding expenses, capital requirements and needs for financing; and other risks detailed in the Risk Factors and elsewhere in

AcelRx s U.S. Securities and Exchange Commission filings and reports, including its Quarterly Report on Form 10-Q filed with the SEC on November 5, 2013. AcelRx undertakes no duty or obligation to update any forward-looking statements

contained in this release as a result of new information, future events or changes in its expectations.

Chief Financial Officer

SELECTED FINANCIAL DATA

(in thousands, except per share data)