A number of pharmaceutical companies are working toward a better solution to manage pain. AcelRx Pharmaceuticals Inc. (NASDAQ: ACRX) is one of them, but what separates it from the pack is that now it is partnered with the U.S. military, which will fund its research and clinical trials.

AcelRx announced that it entered into a contract with the U.S. Army Medical Research and Material Command within the U.S. Department of Defense (DoD). The contract is worth up to $17 million, and it provides partial funding for the ongoing development of ARX-04.

Now $17 million might not seem like a lot of money, compared to the pharmaceutical companies that 24/7 Wall St. usually addresses, but AcelRx only has a market cap of $145 million. This contract makes up about 12% of the market cap, and that makes it a big deal.

ARX-04 consists of a 30 mcg sufentanil sublingual tablet in a pre-filled single-dose applicator. ARX-04 is non-invasive, single-use and disposable, allowing health care professionals to administer a sufentanil tablet under a patient’s tongue to manage their moderate-to-severe acute pain.

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Under the terms of the contract, commencing in the second quarter of 2015, the Defense Department will reimburse AcelRx for costs incurred for development and manufacturing, as well as clinical costs outlined in the contract. This would include reimbursement for some personnel and overhead expenses, not to mention the completion of the Phase 3 clinical program and manufacturing development activities over the next 18 months.

Howie Rosen, interim CEO of AcelRx, commented on the contract:

We recently announced the initiation of the pivotal Phase 3 study of ARX-04 and are now very pleased to announce the DoD’s continued support of ARX-04. The funding, together with our existing resources, will allow us to complete the Phase 3 development program, continue with manufacturing activities, and ready the product for the potential submission of a New Drug Application (NDA). We are excited to continue our relationship with the DoD, which began in 2011 through a $5.6 million grant to fund Phase 2 development. We believe ARX-04 can potentially provide great benefit to our servicemen and women in the armed forces and presents promising commercial opportunities in a wide range of medically-supervised settings such as emergency rooms, and following short-stay surgeries.

Shares of AcelRx were up about 8.6% Thursday, at $3.27 in a 52-week trading range of $2.96 to $11.65. The stock has a consensus analyst price target of $4.70.

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