Acura Pharmaceuticals Inc (NASDAQ:ACUR): Is An Exposure Worth The Risk?

Acura Pharmaceuticals, Inc.(NASDAQ:ACUR) started out this week at circa $0.5 a share. By mid week, it had risen to more than $1.3, and currently trades for just shy of $1. The correction might be an opportunity to get in ahead of a return to the overarching upside momentum. Right now, however, and for reasons we'll get in to shortly, it's a risky allocation.The question is, is the potential reward worth the risk?Let's take a look.So, the latest gains don’t seem to be driven by anything in particular. The company's most recent news (which it didn’t press release, but it's accessible through the SEC filing system) is that it is looking to raise $5 million in a follow-on stock and warrant offering. The offering will go towards the continued development of a range of products called LIMITX, which is a category of products that accounts for Acura's lead development program.For those new to this one, Acura is a biotech company with three primary points of note. The first is called Oxaydo, an opioid abuse disparagemt product, which is currently under out-license to Egalet Corp (NASDAQ:EGLT), and is the key revenue driver for the company right now. The second is called IMPEDE, and this is the technology that underpins a product called Nexafed, which Acura currently sells as an abuse deterrent pseudoephedrine (PSE) tablet product, designed to limit or disrupt the extraction of PSE from tablets for conversion into the illicit drug methamphetamine. The third is the above mentioned LIMITX, with the lead asset from this program called LTX-04, currently under investigation as an abuse deterrent hydromorphone HCl tablet.So before we get into answering our question, a bit of a macro perspective is necessary. Acura has had a rough eighteen months, and investor sentiment surrounding prospects is very weak right now. Back in early Summer 2015, the company went for more than $5 a share. In the time since, it's gradually declined to current levels. In response to the decline, and against a backdrop of falling royalty revenues from the licensing agreement, management has stated that it is looking for strategic alternatives to induce value-add. At this end of the biotech space, that almost always means the company is looking to sell itself.A sale would likely come at a premium to current PPS, and bring about a decent upside on any current allocations.The latest raise, however, goes against this suggestion. If the company is looking to fund the development of its lead asset, this suggests it is looking to sell just yet – at least not in its entirety.So what do we think is going on?We believe that Acura is lining up to sell its two commercial assets, and find a partner to continue the development of its LIMITX product portfolio. This would serve to inject some capital into its balance sheet near term (both from the asset sale and any upfront capital from a partnership deal), easing pressure on sentiment and paving the way for a smoother development pathway on the LIMITX technology. Exactly what company could be either a buyer for the commercial assets or a partner on the development product remains to be seen. Someone like KemPharm Inc (NASDAQ:KMPH) or the above mentioned Egalet might be a good call, with the interest of these two already established. For the development asset, Bayer AG (ADR) (OTCMKTS:BAYRY) is a name that has been thrown around, but its all speculation right now.So what's likely to happen going forward?Well, that this one is raising cash means management feels there's real potential in the development assets, and that – in turn – there's more value in driving the development than just unloading at current price. For us, this suggests there's some upside momentum on the cards going forward, and given current market cap, we think this upside potential outweighs the risk as things stand.We will be updating our subscribers as soon as we know more. For the latest updates on ACUR, sign up below!Disclosure: We have no position in ACUR and have not been compensated for this article.