One of our biggest winners of the year this year has been AcelRx Pharmaceuticals Inc (NASDAQ:ACRX). We first highlighted the company back in July as part of our Biotech Catalyst Series here.Our thesis on the stock was based on two individual but both high-value potential catalysts. The first related to a drug called Zalviso and, specifically, a then ongoing phase 3 study set up to demonstrate that the drug can be safe and effective in its target indication of pain management. We noted that the data should hit press within a couple of weeks of our coverage and that – if it came out as positive – we could see the stock start to run. ACRX Daily ChartAs it turned out, the stock did run but it did so in anticipation of the release and then AcelRx actually took a hit on the news. It was positive data and will support a New Drug Application (NDA) submission later this year, but markets sold off on the company regardless. Our interpretation of this selloff was that it was rooted in a misinterpretation of the numbers (AcelRx put out earnings at the same time, which we think confused markets) and that the further the company fell, the cheaper it became ahead of an inevitable recovery.So, when we first highlighted it, on July 6, AcelRx went for $2 a share. By July 31, this had risen to $3.90 piece. Subsequent to the above-mentioned misinterpretation, the company gave back a fair amount of the strength to eventually bottom out at $2.78. At this point, we said buy the dip and justified this suggestion not just with what we saw as being an inevitable rebalancing of the misinterpretation, but by the nearing of a second major catalyst – one that could in no way be misinterpreted as and when it hit press.Since then, AcelRx has risen to current prices of $4.43 a share. That's 121% on its early July pricing.And it's done this, of late, on no real news.So why is the company rising?Well, as we have just said, there is a major catalyst upcoming that has the potential to send this one soaring into the end of 2017. The above discussed Zalviso is something of a secondary asset, with the lead being a drug called DSUVIA. This one is also a pain drug, this time designed for the treatment of moderate-to-severe pain in a medically supervised setting. This latter point is important.Why?Because markets see a major risk factor for DSUVIA as being the ongoing opioid crisis in the US (it's an opioid-based asset). However, the opioid crisis is rooted in drugs that are available over-the-counter or with prescriptions. DSUVIA is limited to medically supervised settings, meaning the opioid crisis doesn't really apply to it. That in itself is a nice bit of misinformation to trade off of. Outside of this, however, and as the primary catalyst in focus right now, the FDA is set to rule on the drug by way of a PDUFA date of October 12, 2017.That means we've got about two weeks (a little over) before the agency in the US could potentially approve a drug with a peak sales potential of $1.1 billion for marketing by a company with a current market capitalization of just $193 million.When looked at against a backdrop of this near-term catalyst, the recent run makes perfect sense – markets are loading up heavily on AcelRx stock in anticipation of a regulatory green light for DSUVIA.Keep in mind that there is a binary risk here and the company will dip if it doesn't get approval. There's plenty of data to support a green light, however, so while the binary risk exists, it's far outweighed by the potential for upside on a positive decision.Check out our previous coverage of ACRX here. We will be updating our subscribers as soon as we know more. For the latest updates on ACRX, sign up below!Image courtesy of The Comedian via FlickrDisclosure: We have no position in ACRX and have not been compensated for this article.
Discover Hidden Gems
Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.
