NEW YORK (TheStreet) -- Shares of AcelRx Pharmaceuticals(ACRX) - Get Report are extending losses in afternoon trading, down 10.16% to $4.95 today, as Jefferies downgraded the company to "hold" from "buy" after the company announced yesterday that the FDA is demanding another clinical trial for its pain pill Zalviso.
The stock closed down more than 37% at $5.51 yesterday.
As a result of the FDA request, the Redwood City, CA-based company announced that it will not resubmit the drug's regulatory application this quarter. Zalviso was initially rejected by the FDA last July.
The company said that it received correspondence from the FDA last week stating that in addition to the bench testing and two Human Factors studies it had already performed, the regulatory agency was requesting that it also conduct clinical trials to assess the overall risk of dispensation failures.
"Given the regulatory uncertainty, we push out Zalviso launch to 2018, versus 2016 previously," Jefferies said, cutting its price target in half, to $6 from $12.
The FDA's request comes as a surprise to Jefferies' analysts, and they are unclear as to why the FDA would not request this information sooner when it submitted to ACRX the complete response letter last July, or why a clinical trial is needed to assess risk of inadvertent dispensing when it previously communicated that the Human Factors studies would be appropriate.
TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio says, "This is a true HOUSE of Pain stock. For pain products, I like Halyard Health (HYH) which the charitable trust owns."
"Pain's a real hard category, as this drug company's actions show," Cramer added.
AcelRx Pharmaceuticals is a development-stage specialty pharmaceutical company focused on the development and commercialization of therapies for the treatment of acute and breakthrough pain.
Separately, TheStreet Ratings team rates ACELRX PHARMACEUTICALS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate ACELRX PHARMACEUTICALS INC (ACRX) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ACRX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.86%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, ACELRX PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- ACELRX PHARMACEUTICALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ACELRX PHARMACEUTICALS INC continued to lose money by earning -$0.68 versus -$1.50 in the prior year. For the next year, the market is expecting a contraction of 41.9% in earnings (-$0.97 versus -$0.68).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 106.1% when compared to the same quarter one year prior, rising from -$10.99 million to $0.67 million.
- Net operating cash flow has increased to -$5.59 million or 18.23% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.57%.
- You can view the full analysis from the report here: ACRX Ratings Report