DURECT Corp (DRRX) 2020 Q4 法說會逐字稿

Greetings, and welcome to the DURECT Corporation Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mike Arenberg, Chief Financial Officer. Thank you. You may begin.

Good afternoon, and welcome to our fourth quarter 2020 earnings conference call. This is Mike Arenberg, Chief Financial Officer of DURECT Corporation. I will provide a brief review of our financial results, and then Jim Brown, our President and CEO, will provide an update on our programs. We will then open up the call for a question-and-answer session.

Before beginning, I would like to remind you of our safe harbor statement. During the course of this call, we may make forward-looking statements regarding DURECT's products and development, expected product benefits, our development plans, future clinical trials or projected financial results. These forward-looking statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Further information regarding these and other risks can be found in the SEC filings, including our 10-K and 10-Qs, under the heading Risk Factors.

Before I get into the financial results, it will be helpful if I explain how the sale of the LACTEL product line is reflected in our financials. We sold the product line to Evonik for what we feel was an attractive price of $15 million in cash, resulting in a gain on the sale of approximately $12.8 million. This gain is reflected in net income for the fourth quarter and net loss for the full year. As of December 31, the $15 million was shown on the balance sheet as cash held in escrow, and it was released after a few days. Operating results related to the LACTEL product line have been excluded from the continuing operations and presented as discontinued operations in the relevant financial statements for all periods presented.

So total revenue in Q4 2020 was $2.2 million compared to $9 million in Q4 2019. Q4 2019 included the recognition of $6.1 million in deferred revenue from an upfront fee and milestone payments. So excluding that, the comparison was $2.2 million versus $2.9 million.

Product revenue, now largely from the ALZET pumps, was $1.9 million in Q4 2020 as compared to $1.7 million in Q4 2019. Our gross margin from product revenue was 78% in Q4 2020. Product revenue continues to be strongly cash flow positive.

R&D expense was $6.7 million in Q4 2020 compared to $9.3 million in Q4 2019, primarily due to lower expenses for DUR-928 and POSIMIR-related expenses. SG&A expenses were $3.4 million in Q4 2020 as compared to $3.7 million in Q4 2019.

Our underlying burn rate during the quarter was $7.9 million. At December 31, 2020, we had cash, cash in escrow and investments of $56.9 million as compared to $64.8 million in December 31, 2019. In Q1 2021, we strengthened our balance sheet by raising net proceeds of $47.8 million from an underwritten public offering and sales under our ATM program.

With that, thanks again for joining our call, and I will now turn the call over to Jim for an update on certain of our programs.

Thank you, Mike. Hello, everyone, and thank you for joining us today. Since the start of the fourth quarter, we have made tremendous progress. Most importantly, we initiated patient dosing in AHFIRM, our Phase IIb study of DUR-928 in patients with severe AH. We have been steadily adding clinical sites for AHFIRM. We currently have more than a dozen sites up and running with a plan to have 40 to 50 sites in total.

The FDA granted DUR-928 Fast Track Designation for the treatment of AH. We presented biomarker data from our NASH trial at the AASLD meeting that further supports the potential of DUR-928 for this indication. The FDA approved POSIMIR for postsurgical analgesia for up to 72 hours after arthroscopic subacromial decompression.

We appointed 2 highly successful and experienced biopharmaceutical executives to our Board. We sold the LACTEL Absorbable Polymers product line to Evonik for $15 million. And in February, we further strengthened our financial position through an equity offering that raised $47.8 million.

Now let's move to our programs. I'll begin with the opportunity for DUR-928 in the treatment of alcohol associated hepatitis, or AH. DUR-928 is an endogenous sulfated oxysterol that acts as an epigenetic regulator that modulates the expression of multiple clusters of master genes that are involved in many important cell signaling pathways. DUR-928 up and down regulates more than 1,000 genes, involving functions that include stabilizing mitochondria, reducing lipotoxicity, regulation of inflammatory or stress responses and promoting cell survival.

We announced earlier this year that we are dosing patients in the AHFIRM trial. AHFIRM is our 300-patient Phase IIb efficacy and safety trial. It is a placebo-controlled double-blind multinational study. The primary endpoint is 90-day survival. There are over 122,000 hospitalizations per year in the United States for AH. There is no approved therapy for AH.

We demonstrated 100% survival at 28 days in our DUR-928 Phase IIa AH trial. The average historical 28-day mortality rate for AH is 26% and the 90-day mortality rate is 29%. Based on the results from the Phase IIa AH trial and the fact that survival is the primary endpoint for the AHFIRM trial, we are optimistic that we are able to demonstrate a robust survival benefit in this trial. It may support an NDA filing.

Approval based on a single trial is not uncommon. In fact, 37% of the new drug approvals between 2005 and 2012 were based on a single pivotal trial. And 42% of the new drugs launched in the United States in 2018 were approved based on just a single trial.

AH is an acute form of alcoholic liver disease, or ALD. It is characterized by long-term heavy intake of alcohol, a recent period of increased alcohol consumption or binge drinking as well as jaundice, fever, fatigue, weakness, nausea, vomiting, loss of appetite and a depressed or negative mental state. While the majority of AH patients are between 40 and 60 years old and also have liver cirrhosis, approximately 20% of the age population are in their 20s and 30s and may not have cirrhosis. 89% of hospitalized AH patients have insurance.

Unfortunately, during the pandemic, alcohol consumption in the United States has increased. And in conversations with physicians who treat this disease, they have told me the incidence of AH has also increased. According to many of these doctors, they are also seeing a larger number of younger AH patients. As I said earlier, there is no approved treatment for AH. What physicians have available to them today primarily involves abstinence and supportive care, which includes nutrition and hydration.

An analysis of 77 studies published between 1971 and 2016, which included data from more than 8,000 patients, showed the average overall mortality for AH was 26% in 28 days and 29% at 90 days and 44% at 6 months. A high 1-month mortality rate from the time of diagnosis is similar to some ferocious cancers such as AML and advanced breast or pancreatic cancers.

According to the AASLD guidance, steroids may be used in certain patients with severe AH. However, steroids have shown only minimal effect and may increase infection rates with AH patients. In the STOPAH trial, a study of more than 1,000 AH patients, steroids significantly increased the infection rate. STOPAH trial also convincingly demonstrated that steroids did not improve the survival rate over placebo at 90 days or at 1 year. Many AH patients are not eligible for steroids. In fact, according to one recent study, less than half of severe AH patients are eligible for steroid use.

Hospitalization costs for AH are more than $50,000 per patient in the first year. Alcoholic liver disease is becoming a leading cause of liver transplant in the United States. And the cost of the liver transplant exceeds $875,000. The average hospital stay for an AH patient is approximately 7 days, with many staying significantly longer.

In our DUR-928 Phase IIa trial, 14 of the 19 patients were discharged in less than 4 days after receiving only one IV infusion of DUR-928. All of the 19 patients in our Phase IIa trial survived through 28-day follow-up period of that trial. 12 of these 19 patients were classified as severe based on their MELD scores. Also, 15 of the 19 were classified as severe based on a scoring system that is specific to AH called Maddrey’s Discriminant Function score. Prognostic scores, including Lille and MELD as well as bilirubin serum creatinine levels and INR, were all improved in this Phase IIa trial.

DUR-928 was well tolerated by all the patients at all doses that were evaluated in this trial, including in all of the severe AH patients. There were no serious drug-related adverse events reported in this trial.

To summarize the DUR-928 AH program, we have initiated dosing in the AHFIRM trial for patients with severe AH. The AHFIRM trial is a 300-patient double-blind, randomized, placebo-controlled multinational trial. The AHFIRM trial will evaluate 3 treatment arms, 30 milligrams and 90 milligrams of DUR-928 and a placebo arm. As with the Phase IIa trial, patients in the AHFIRM trial will receive an infusion of DUR-928 or placebo on day 1. And if they are still in the hospital on day 4, they will receive a second infusion. The primary endpoint of the AHFIRM trial will be 90-day survival.

We have more than a dozen clinical sites actively recruiting patients. We expect to have approximately 30 clinical sites in the United States and 20 sites in Europe and Australia. In December, we were granted Fast Track Designation by the FDA for our AH program. We expect that if we achieve a robust survival benefit, this study may support an NDA filing.

Next, to COVID-19. Today, we announced that we are discontinuing our clinical trial for DUR-928 in critically ill COVID-19 patients. Because of the rapidly evolving state of the pandemic, we were not able to expand beyond the original 3 clinical sites or enroll a meaningful number of patients in this trial. As a comparison, we have more than 4x the number of clinical sites up and running for our AHFIRM trial. The people and resources that we are using to support the COVID-19 trial are now being redirected to support the AHFIRM trial.

Next, I will update on the DUR-928 NASH program. In May of 2020, we reported positive top line results from our Phase Ib trial of DUR-928 in NASH patients with Stage 1 to 3 fibrosis. This was a randomized open-label and multicenter study of DUR-928 in NASH patients conducted in the United States. DUR-928 was dosed orally for 28 consecutive days at 50 milligrams or 150 milligrams once a day or 300 milligrams twice a day and followed up for an additional 28 days. A total of 65 patients completed the study, and there were at least 20 patients per dose group.

Key endpoints included safety and pharmacokinetics, clinical chemistry and biomarkers as well as liver fat content and liver stiffness by imaging. This includes both MRI-PDFF and FibroScan. DUR-928 treatment in this trial resulted in reductions from baseline of liver enzymes, liver fat, liver stiffness, as measured by imaging, and serum lipids. Many of these reductions were statistically significant. A statistically significant 24% reduction of plasma triglyceride was seen in 16 patients who had baseline triglyceride levels above 200 milligrams per deciliter. 43% of the patients in this trial had at least a 10% reduction in liver fat, as measured by MRI-PDFF. In this group of patients, liver fat, liver stiffness, liver enzymes and serum lipids were statistically significantly reduced from baseline.

DUR-928 was well tolerated at all 3 doses evaluated. There were no serious adverse events reported during this study. Pharmacokinetic parameters after repeat dosing were comparable to those after a single dose from a prior NASH study, indicating no simulation after repeat dosing. Also, drug exposure was dose dependent.

A poster reviewing additional data from this trial was presented at last November's AASLD conference. This poster showed reduction in biomarkers from baseline, including full and cleaved cytokeratin, C-reactive protein, plasminogen activator inhibitor 1, interleukin-1 beta, interleukin-6, interleukin-17, interleukin-18, tumor necrosis factor and adiponectin. These biomarkers moved in concert with reduction of liver enzymes, liver stiffness and serum lipids. This is particularly impressive when you consider the patients were only dosed for 4 weeks. These results, together with the continued safety profile of DUR-928, supports further evaluation of DUR-928's potential in NASH. We are currently planning our next steps for NASH.

Next, to the POSIMIR program. This quarter also marked the FDA approval of POSIMIR. POSIMIR is a novel non-opioid sustained release local analgesic that is approved to produce postsurgical analgesia for up to 72 hours following arthroscopic subacromial decompression. This approval provides an important new option to orthopedic surgeons in their effort to minimize opioid use while managing acute pain for up to 72 hours after this painful surgery. We are in discussions with potential commercial partners for POSIMIR. Our plan is to use the proceeds from the partnership to help fund our epigenetic program and our flagship product, DUR-928, for the treatment of alcohol-associated hepatitis.

POSIMIR is the only approved sustained release bupivacaine product indicated for up to 72 hours of postsurgical analgesia from a single administration. Infusion pumps were the first systems to enable sustained delivery of bupivacaine within a surgical wound to treat postoperative pain. The infusion pump literature indicates that the minimal bupivacaine exposure needed to maintain sustained postoperative analgesia is approximately 10 milligrams per hour.

Based on this, the product will need to contain approximately 720 milligrams of bupivacaine hydrochloride in order to provide up to 72 hours of postsurgical pain relief. POSIMIR contained 660 milligrams of bupivacaine base, which is equivalent to 743 milligrams of bupivacaine hydrochloride. We believe this is enough bupivicaine to provide sustained analgesia for up to 3 days without the need for a pump and catheter system. And POSIMIR was indeed approved for postsurgical pain reduction for up to 72 hours following surgery.

POSIMIR contains more bupivacaine than any other approved single dose sustained release bupivacaine product. We believe this may be an important differentiator in the market.

Another potential differentiator for POSIMIR is the ease of application. At the end of surgery, POSIMIR is administered into the subacromial space under direct arthroscopic visualization, where it continuously releases bupivacaine for 72 hours or more. POSIMIR is applied directly into the surgical wound, the primary source of postsurgical pain.

The FDA approval is based on positive data from randomized placebo-controlled critical trial in patients undergoing arthroscopic subacromial decompression surgery with an intact rotator cuff. The primary outcome measures were mean pain intensity and total opioid rescue analgesia administered, both evaluated over the first 72 hours after surgery versus placebo. POSIMIR demonstrated a statistically significant improvement in both primary outcome measures, a 1.3 point reduction in mean pain intensity on a 0 to 10 point pain scale. This represents a 20% reduction in pain and is statistically significant at 0.01. This trial also demonstrated a 67% reduction in IV morphine-equivalent rescue opioid use from the median of 12 milligrams in the placebo group to 4 milligrams in the POSIMIR group. This is also statistically significant to 0.01.

When we started the postoperative pain control program that led to POSIMIR, we did so because of the opioid epidemic. Stories of the families impacted by this epidemic are heartbreaking. Unfortunately, the opioid epidemic in our country has not improved over the years. It has gotten much worse. Today, in the United States, approximately 200 people die every day due to opioid abuse. The objective of the POSIMIR program is to give health care providers and in turn their patients a non-opioid alternative for postoperative pain control or, at a minimum, a way to reduce the amount of opioids required to reduce postsurgical pain.

POSIMIR is a product that can provide up to 72 hours of pain relief and, in the pivotal trial, demonstrated a statistically significant reduction of both pain and the use of opioids. Subacromial decompression is a shoulder surgery used to treat impingement syndrome, a common repetitive use injury that causes pain when the arm is raised over the head. The procedure is typically performed arthroscopically, meaning that several small incisions are made in the skin and muscle of the shoulder through which a camera lens called an arthroscope and surgical instruments are inserted during surgery.

Arthroscopic subacromial decompression is generally considered outpatient surgery, and most patients go home within a few hours of surgery. The recovery period may extend from weeks to month, but the most intense pain typically occurs during the first 3 days after surgery and is often managed with oral opioids. There are over 600,000 surgeries involving arthroscopic subacromial decompression performed each year in the United States. We view subacromial decompression as a beachhead to get POSIMIR on the market, and we believe the opportunity to expand the label to cover a broader group of surgical procedures represents significant upside.

To summarize, we believe there are a number of product features that have the potential to differentiate POSIMIR in the market. POSIMIR is the only sustained release bupivicaine product indicated for up to 72 hours of postsurgical analgesia from a single application. POSIMIR contains more bupivacaine than any other approved single dose sustained release bupivacaine product. And according to investigators in our clinical studies, POSIMIR's ease of application will be a welcome benefit. In addition to these attractive features, we believe there are a number of potential avenues available to extend the label to include more surgical indications going forward.

Regarding the business development process, we have multiple interested parties, and the process is underway. We are working to put a deal in place in time for our partner to launch in the second half of this year and expect that the deal would include an upfront license fee and royalty.

Moving on to other accomplishments. This quarter, we also appointed 2 new members to our Board of Directors: Gail Maderis, MBA; and Mohammad Azab, MD, Master of Science and MBA. These 2 senior industry veterans bring extensive drug development, clinical research and medical affairs experience. Their addition to our Board is part of the evolution of DURECT.

In summary, since our last quarter's call, we initiated dosing in AHFIRM, our Phase IIb study of DUR-928 in patients with severe AH. The FDA granted Fast Track Designation for the use of DUR-928 in the treatment of AH. Based on the results from the Phase IIa AH trial, with survival as the primary endpoint for AHFIRM, we are optimistic that if we are able to demonstrate a robust survival benefit in this trial, it may support an NDA filing. We presented biomarker data from our NASH trial at the AASLD meeting that further supports the potential of DUR-928 for this indication.

Since coming on board in November, our new CMO, Dr. Norman Sussman, and his team have greatly expanded the number of clinical sites for the AHFIRM trial in the United States and are on track to initiate sites in Europe this year. The FDA-approved POSIMIR for postsurgical analgesia for up to 72 hours after arthroscopic subacromial decompression. We appointed 2 highly experienced biopharmaceutical Board members.

We sold the LACTEL Absorbable Polymers product line to Evonik for $15 million, which we believe was a very attractive price. And in February, we further strengthened our financial position by raising $47.8 million in equity. So we now have a strong balance sheet as we focus on the AHFIRM trial.

With that, we'd now like to take any questions that you may have.

(Operator Instructions) Our first question comes from the line of François Brisebois with Oppenheimer.

My first question here was just you guys have mentioned in the past submitting a manuscript for publication maybe to help us understand a little bit the mechanism of action of DUR-928. And I'm just wondering, any updates on that? And -- or are we just obviously still waiting? And can you share any color, I guess, on what to be expected on the mechanism? Or is this -- there is so many signaling pathways that might be expected here? So just any color there would be helpful.

Sure. And -- yes, absolutely. So first off, yes, we're getting close, very close. But as you know, with these things, they just -- they have their own time. So we're still waiting. I do believe that there'll be quite -- there'll be quite a bit of clarity by virtue of knowing what we do know and what's in the manuscript. But as with any epigenetic interactions, there's a lot of information. There are a lot of master switches involved and genes involved. So -- but it will be, I think, a very interesting conversation with you and with a number of other knowledgeable people in the area.

I don't know, WeiQi, would you add something to the time line or to the subsequent...

Yes, sure, sure. We are -- actually, we ourselves are checking every day to see it [as well and are] impressed. So it's effective. And then we are just waiting for any moment to be impressed, so it will show up online. But then certainly, there are a couple of review articles out there. You might get a hint of the mechanism of action. Of course, there's a particular manuscript that had been accepted. It will present a lot of data to show genes and what pathways might be affected with the treatment of 928.

Just like every study, there are limitations for each study. So we opened up the doors to let the world see what the 928 affects, which pathway and which target, but then there will be more questions I'm sure you would have for the exact mechanism of action. So ultimately, we look at the function of 928, what does it do in patients or in the disease state.

Thanks, WeiQi. I do think -- just one other thing, François. I think the other piece of it all is there is a nice connection between the literature out there of what is dysregulated in AH patients and in NASH patients. And it makes the data that we see, I think, much more logical. It's kind of a logical sequence to that. Sorry.

Okay. Okay. No. Great. That's helpful. And then in terms of AHFIRM, obviously, started dosing here. But can you just remind us? Sometimes you've compared -- to help us with the time line a little bit, you've compared it to the Gilead trial that ran a few years ago. And can you just help us kind of compare and contrast the differences in the trial with Gilead and the time it took them to help us understand the potential timing?

Sure, yes. I think we're in a different environment now that we're just coming -- as we get through this last wave, hopefully, of the pandemic, we think things will open up. And we do have a number of sites -- a good number of sites actually up and running now and writing more all the time.

But if one looks at that [FD1] inhibitor trial that Gilead did, they dosed 100 patients, and they enrolled that number of patients in about 18 months to finish the entire trial. But that was a 6-month follow-up from dosing to the end of the patient's involvement, and ours would be 3 months. So one could then take 3 months off of that. So instead of 18 months, it would be 15 months.

And the other aspect of that is they require biopsy of all their patients, and biopsy typically effectively will restrict the number of patients available and enrollment rates just because it's a dangerous thing and a lot of patients don't want to do that. And on top of that, they also required all of their patients to use corticosteroids. And we know from the literature that only about 43% of AH patients are eligible for corticosteroids. And so you basically cut your patient population in half again. So you can look at being able to add these multiple together and get a sense that we have an opportunity to do, hopefully, a more rapid enrollment than they have.

And the other side of it is we're now in the hospitals just coming out of being overwhelmed with COVID. But the reality of it is COVID also unfortunately dramatically increased the alcohol consumption and the incidence of AH as well probably will follow the [the pattern] we've gotten from the physicians. So I think all of that points to probably a more rapid enrollment. And we'll -- but we'll be in a better position to project once we have some months under our belt here in a more normal society.

Okay. And just lastly, in order to try to figure out a little bit. Difficult, but it's our job to try to project things sometimes and think about what's going to happen here. But on the POSIMIR side, can you help us understand the label -- the subacromial decompression in terms of its percentage versus the surgeries in the U.S.? And obviously, some of the other drugs in the market weren't always approved for specific surgeries like this. But I guess can you help us understand the size of the market of the subacromial decompression space? And why -- any news from the FDA or anything on why not include hernia in there?

Well, I'll take the first one first and then I'll -- anyway. So with regard to patient numbers, there are over 600,000 subacromial decompression surgeries a year that we think for which POSIMIR could be used. And so you've got that as a starting case, which is a very good number of patients and surgeries. And we saw 67% pure narcotics taken, 20% less pain, both statistically significant. So we think -- and quite easy to use. You just simply squirt it in, so take seconds of the surgeon's time at the end of surgery.

And so all of those things, we think, are going to be advantages. And it lasts the full 72 hours, which is what the surgeons are looking for. When we first started the POSIMIR program way back when, we had meeting with -- it was more than a dozen surgeons in a room. I remember we sat down talking to them about how -- what kind of duration are they looking for because we can go kind of 24 hours to 5 days. And they felt like 72 hours, 3 days, was really what they were looking for. Beyond 3 days, they want to know whether or not a patient is normal or has more pain than they expected and they could be coming into some other challenges. And so that's why we designed it as we did for the 3 days, and we're thankfully able to get that approval.

As far as why not hernia, that certainly is a regulatory question that will be answered as we go forward, and we -- and/or potential partner as well, we'll be investigating that because we certainly got some really nice data from the hernia trial that we reported on. So we'll have to see what happens in the future on that.

Our next question comes from the line of Kristen Kluska with Cantor Fitzgerald.

So the first one I have here is -- thanks for your comments related to the increased alcohol liver disease hospitalizations we've seen during the pandemic. But I wanted to ask based on your conversations with these centers and physicians, whether they might expect this trend to continue once the world starts to return to be a little bit more normal. While patients may not be as isolated anymore, their daily structures and job status still might be unchanged. So anything you've heard about the long-term outlook there?

And then secondly, this is a large orphan market. But do you think from an awareness standpoint that that's grown as well, especially considering a lot of these hospitals are citing 30% to 50% increases in hospitalizations over the last year?

I think that we're very fortunate to have Dr. Sussman on who recently left the clinic and can speak to that because he was working at a transplant center for almost 20 years. So Norman, maybe you can address that question.

Yes. And thanks. Can you hear me okay?

Perfectly, yes.

Yes.

Great. Okay. So that is a very interesting question. Of course, we don't know what will happen. We had seen a significant surge in alcohol, especially among young people, even before the pandemic. So there's been a lot of press on increasing the number of the -- late press has had multiple articles on this. So yes, there has been -- it's been more obvious, but this really preceded the pandemic, and I -- it may fall off a little. It's impossible for us to say, but there was such a need even before the pandemic.

And Kristen, I'm sorry, I forgot your second question.

The second question was just that given it is a large orphan market, whether generally speaking from the increased hospitalization since the pandemic from an awareness standpoint, if you're feeling that maybe physicians who in the past hadn't seen as many of these patients were less familiar with the indication, whether that knowledge base has grown in light of what we've seen this past year?.

Yes. I think -- well, the -- I can't point to any specific literature on that, but all of the -- so most of these people -- I shouldn't say most. A lot of these people end up as a transplant center because if you are very ill and you have liver failure for whatever reason, even if the -- understand, if the outside hospital doesn't recognize the cause, they would prefer to have that patient managed by an expert and most smaller hospitals don't have a liver expert on staff. So they end up coming -- if possible, they end up coming to transplant centers.

The -- I do think that there is also a growing awareness. And a lot of societies are reaching out to their membership and encouraging conversations with community providers because of this unrecognized disease. Many times, they just say, oh, the patient has hepatitis, and it turns out to the alcohol.

So I think there's generally a strong push by the professional societies to increase awareness. We are also participating, and when I say we, the company, but also through several charitable organizations of trying to increase awareness through community outreach.

Okay. And then my last question is you noted that the demographics are starting to change a little bit. Particularly more young people are developing AH. So with that basis, based off of different metabolisms and other factors, and particularly, we've seen the difference between men and women and, hence, the number of drinks per person. But do you anticipate any changes with the drug? Or do you think there's like a patient population who might benefit more based off of kind of these understandings?

That's an excellent question. I think -- I don't really know. We know that there are certain population. There's genetic aspects to why some people are more sensitive. There are obviously people who drink a lot and may have mild or even moderate or severe fatty liver but don't get AH. And the actual transition to -- from just fatty liver to AH is not really very well understood. Some recent work suggests some epigenetic regulators. And as Jim mentioned, some of those are possibly going to be reversed by the mechanism of action of DUR-928.

So it's a lot of conjecture, but we're getting -- people are getting closer to finding the answer. There's more interest in epigenetic regulation, and we are certainly interested on the back end as a therapeutic.

Our next question comes from the line of Mayank Mamtani with B. Riley FBR.

This is Sahil Kazmi on from Mayank. Just a couple of brief ones from us. Noting that the focus seems to be on AH, and look forward to incremental updates there, we did see that you made the decision to discontinue the COVID-19 program. And just wondering if there's any opportunities you're thinking about leveraging some of the data generated on acute organ injury, if there are other indications that might be pursued. And maybe on the same train of thought, if you could discuss kind of where else might POSIMIR be applied. And is that something that you aim to do with a partner in the future in terms of indications beyond the subacromial depression?

Sure. With regard to DUR-928, we have done a huge number of studies in modeling, in vivo modeling. And we've shown potential in everything from stroke to sepsis to pancreatitis, acute pancreatitis, a number of acute kidney injury, a lot of interesting opportunities. And that still -- certainly, those opportunities are there. We want to, as a company, focus on AH right now because it's such an important thing that our -- to be able to help these people.

It's a huge problem from a societal standpoint. It's a huge problem from a medical system standpoint. These patients cost at a minimum kind of 50,000. And if they need a transplant, they go up close to $900,000 or more. So it's a huge cost and burn to our health care system, and of course, the families and the patient's lives with the 3-month mortality of almost 30%. So if we can make a difference there, we want to make sure that we have a chance to be able to help those patients.

That being said though, we are investigating other opportunities for the use of DUR-928. I've always said if this molecule we're in the hands of a large company, we probably have 7 Phase IIs ongoing right now because there's just so much potential outside of where we are. And once you see the mechanism of action, you can start to investigate how that would interplay with various genes and various syndromes, and you'll see that there are multiple potential opportunities. So that is definitely, certainly an opportunity going forward.

As far as POSIMIR is concerned, as was mentioned earlier, we do have some nice data from hernia. And so we would certainly hope at some point in time, POSIMIR would eventually be able to be approved for use in a general surgical way. Certainly, bupivacaine is applied that way. This has been shown to have the potential as well. So that is something we will be investigating with our commercial partner.

Great. And then maybe just one more brief one. Could you give us a bit more color on how you're thinking about the enrollment mix for AHFIRM in terms of the U.S. versus ex U.S. split?

Yes. It's a great idea -- great question, sorry. Right now, we're expecting about 30 sites in the United States and then another 20 plus between Europe. And Europe would be then U.K. and the EU. And also, we're investigating Australia as well. So we'll end up with probably around 50 sites in total. Not quite a 50-50 split, U.S., ex U.S., but pretty close to it.

Great. And congrats on all the progress.

Sure. Yes. Thank you.

Our next question comes from the line of Michael Morabito with Chardan Capital Markets.

You mentioned that the current survival rate at 90 days is 29%, I believe you said. With the size of the AHFIRM study, how large of an improvement in that 90-day survival rate is the study powered to see? And then I was hoping you could just give us a little bit of thought on how you expect R&D expense to grow throughout the year as AHFIRM opens more sites and how that might be countered by any OpEx savings that you are getting from discontinuing the COVID trial.

Sure. So I don't want to lose any of these things. So first of all, the COVID trial wasn't a particularly expensive trial. But maybe, Mike, you want to speak to the -- as you look at the calendar year, budget-wise with AHFIRM adding more sites every month.

Sure, yes. I'll take that one first. As you saw, the Q4 number for DUR-928 was down a little bit. And now it will start ramping up as the enrollment ramps up. But overall, as you said, there's an offset there from stopping the COVID trial. And overall, it's not going to be a huge change from where we've been in terms of the overall burn rate when you mix everything together.

Yes. We project that the trial is about a $30 million total external expense. So that will just be enrolling as it goes.

And then as far as the power calculation, we certainly have worked that in spades for sure. I guess, Norman or WeiQi, whoever wants to -- who spoke with this statisticians most recently?

Yes. Just about every day. Yes. So we -- without giving the exact calculation, we're finalizing some of the numbers. But we've given a somewhat pessimistic view to the DUR and a somewhat optimistic view to the control. So that is we've underestimated death in the control, overestimated, we think, overestimated in the DUR to give ourselves 82% power -- sorry, 82% probability.

Yes. And that's with 100 patients.

And I just wanted to see -- and forgive me if we mentioned this in the call. Do you have any expectations for timing of when you may take the next step in NASH or when you might expect to make an announcement on POSIMIR licensing?

Yes. The POSIMIR licensing is something we're working on right now, and our hope is that we would have a partnership in place to launch this year. So that would mean the deal would come prior to that. So certainly, that's something to be looking for as the months unfold.

As far as next steps for NASH, we're looking at it. It's an interesting place where we are right now because we've got Phase II -- Phase Ib data that are pretty impressive. I mean we've got everything moving in the same direction, in a positive direction. We've got liver fat and liver stiffness and liver enzymes, circulating enzymes and biomarkers of cell death and biomarkers and inflammation and other categories all moving as you would expect and then with clean profile that we've been fortunate to be able to have with 928 from a safety standpoint. So it certainly speaks well to something that can help in this patient population.

But then we see the NASH environment changing, right? And so it will be interesting to see kind of -- we're trying to select the place to enter where we can have the most impact and learn from those who are in front of us, who are kind of out there in the water trying to swim across that channel. So I didn't give you an answer yet because we're still doing the work, but we will be announcing it as we get closer.

Our next question comes from the line of Ed Arce with H.C. Wainwright.

Congrats on all the progress recently, especially with the approval of POSIMIR.

Sure. Thanks.

So a few for me. First question, just wondering on AHFIRM. Looks like in the U.S., you just started a few months ago enrolling. Obviously, this is a pretty specific subgroup of severe AH patients. It seems like enrollment in the U.S. with the sites and the number of subjects is going pretty well. I know you've mentioned before how the particular dynamic of these severe patients in the hospital actually sidesteps largely a lot of the issues that other companies have with COVID. I'm wondering if that dynamic has shifted at all lately and if you're seeing the same sort of perspective in Europe as well now that you're ramping up enrollment there.

Well, we haven't started sites in Europe yet. We're still going through all the paperwork and all the -- everything you have to do to get going there. So Europe will be -- is a number of months still away. But certainly in the U.S., we are signing up a good number of sites. And Norm and the team are really cranking. I don't know, Norm, what would you say specifically to that?

Sorry, would you just -- I'm not sure I understood exactly the question.

Sure. So the enrollment of these severe AH patients into the hospital amid the pandemic, in other sorts of trials involving hospital admittance, obviously, there's been trouble in getting patients enrolled in these sorts of studies. But I think the dynamic that has been discussed previously that's expected would, in many ways, sidestep that issue. I'm wondering if you've had already a few patients enrolled, if you're seeing that or if there's anything different from what you...

Yes, yes. I get it. So the dynamic is -- you're correct in that they're competing for bed space, to some extent, with COVID patients. But then that's true of all very ill patients. The entire enrollment process is patients already admitted with a certain level of severity. We've chosen a range that is ill to be sure that the -- we can differentiate between people in control and people who get therapy. So the trial is built on a model that says you have this level of the illness, you will have this expected mortality, and we are hoping to see a difference in that outcome at 90 days.

The thing is these patients are ill. And so by and large, if someone like that goes to a doctor's office, they're most likely going to be admitted. And so then they're there. So I think you're correct in that we don't expect a big change in the frequency. We are very -- obviously, being very strict on the entry criteria to keep the study clean.

Okay. Great. That's helpful. Next question is around POSIMIR. Again, congrats on finally getting that across the finish line. It's been a long time coming. You mentioned the commercial partnership discussions that you're having. Obviously, you can't really talk about any of those details. But I was just wondering if you think that the prior Janssen commercialization collaboration stands now as a good proxy for the scale of economics that you might expect from a new partner.

Well, I think it's always -- every deal and every time is always its own place and time. So -- but the opportunity is still -- is a very valuable one, for sure. And we are talking to -- as we put the deal in place, I would expect that there'll be a very valuable deal for DURECT and also a valuable deal for our partner. And that's the -- I think we've been able to -- over the years of history of DURECT, we've been able to do good deals and have a potential for both parties to do well, and I would expect that would be the case here without getting into any granularity.

Sure. Okay. Understood. And then final question. Again, you mentioned you're pursuing potential next steps with partners in moving forward with DUR-928 in NASH. And again there, I realize that there's little that you can discuss about those until there's something actually signed and done. However, I'm wondering if, as you go through this BD process, if there's any specific criteria that you're considering or perhaps any sorts of scenarios that you would outright exclude.

I think as we look at any business development opportunity, we always -- we don't exclude it or anything unless something just is not unreasonable. But I think if we think about NASH right now, we are in early days in NASH. We just have Phase Ib data. They're remarkable data, especially considering 1 month and the safety profile. So when you look at that, you say, okay, there's something there.

But I think what the industry is figuring -- is trying to figure out is what is -- where does NASH fit and how does it fit into the health care environment and system and what is the appropriate type of therapy to develop because you've got on one side things that -- simply just weight loss exercise, diet and things like that, things that assist with that can certainly help. To the far side, you've got fibrosis, cirrhosis, people dying of liver failure. And maybe there's nothing that can help, and there's this gradation in between.

So the interesting thing about 928 is it probably can help across the board, probably greater potential to help the further along you are in the disease process. So it's exciting to me to think about, but at this point in time, it's a very early days on all of it.

I do think eventually, we will see 938 out there helping people who are damaged metabolically from a number of fronts. But right now, we're really focusing on AHFIRM and on the first acute use, which is in helping the patients, AH and then ongoing other acute use opportunities to help patients with as well.

There are no further questions in the queue. I'd like to hand the call back to CEO, Jim Brown.

Okay. Well, with that, I just want to thank you all for your time. And if you do have any further questions, please feel free to give us a call, and take care. Talk to you all later.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.