DURECT Corp (DRRX) 2020 Q3 法說會逐字稿

Greetings, and welcome to DURECT Corporation's Third Quarter 2020 Earnings Conference Call.

(Operator Instructions) A question-and-answer session will follow the formal presentation.

(Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn this conference over to your host, Mr. Mike Arenberg, Chief Financial Officer.

Please go ahead, sir.

Good afternoon, and welcome to our third 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 of our program.

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 our SEC filings, including our 10-K and 10-Q under the heading Risk Factors.

Let me now turn to our financials.

Total revenue in Q3 2020 was $2.7 million compared to $10.8 million in Q3 2019.

Q3 2019 included the recognition of $6.2 million in deferred revenue from an upfront fee and milestone payment.

So excluding that, the comparison is $2.7 million versus $4.6 million.

Product revenue, largely from the sale of ALZET pumps and LACTEL polymers, was $2.4 million in Q3 2020 compared to $3.0 million in Q3 2019.

The gross margin for these combined product lines was 55% in Q3 2020.

These product lines continued to be strong and cash flow positive.

R&D expense was $7.0 million in Q3 2020 compared to $7.9 million in Q3 2019 primarily due to lower expenses in partner-funded R&D programs and lower POSIMIR-related expenses.

SG&A expenses were $3.5 million in Q3 2020 as compared to $3.8 million in Q3 2019.

Our underlying burn rate during the quarter was $7.6 million.

In Q3, we raised $6.1 million net of expenses by selling about 2.7 million shares through our ATM facility at an average price of $2.32.

At September 30, 2020, we had cash and investments of $49.8 million as compared to $51.3 million at June 30, 2020, and $64.8 million at December 31, 2019.

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, and hello, everyone.

Thank you for joining us today.

I hope you're all doing well.

During the quarter, we made exciting progress on a number of fronts.

We announced the design of AHFIRM, the DUR-928 Phase IIb alcoholic hepatitis trial, and we are now initiating clinical sites and expect to begin dosing patients very soon.

We started dosing in the Phase II trial for DUR-928 in hospitalized COVID-19 patients with acute liver or kidney injury.

After reporting positive top line data from the Phase Ib NASH study with DUR-928, we announced that additional data from this trial will be presented at the upcoming AASLD Liver Meeting.

We continue to work with the FDA on the POSIMIR NDA.

And today, I'm pleased to announce our hiring of Dr. Norman Sussman as our Chief Medical Officer.

DUR-928 is 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 the mitochondria, reducing lipotoxicity, regulation of inflammatory or stress responses and promoting cell survival.

I'll begin with an overview of the opportunity for DUR-928 in alcoholic hepatitis or AH.

There are 122,000 hospitalizations per year in the United States for AH.

There are no approved therapies for AH.

We demonstrated 100% survival at day 28 in our Phase IIa AH trial.

The historic 28-day mortality rate for AH is 26%.

Currently, we are initiating sites and are on the cusp of starting patient dosing in AHFIRM, the 928 Phase IIb AH safety and efficacy trial.

AHFIRM is a 300-patient, placebo-controlled, double-blind, multinational study.

The primary endpoint will be 90-day survival.

Based on the results from the Phase IIa AH trial and the fact that survival is 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.

Approval based on a single trial is not uncommon.

In fact, 37% of new drug approvals between 2005 and 2012 were based on a single pivotal trial, and 42% of new drugs launched in the United States in 2018 were approved based on a single trial.

AH is an acute form of alcoholic liver disease or ALD.

It is characterized by long-term heavy alcohol intake, a recent period of increased alcohol consumption or binge drinking as well as jaundice, fever, fatigue, weakness, nausea or vomiting, loss of appetite and a depressed or negative mental stake.

The AASLD guidelines provide the following criteria for the diagnosis of the AH: an onset of jaundice within the past 8 weeks; ongoing consumption for at least 6 months of more than 40 grams of alcohol a day for a woman or 60 grams of alcohol a day for a man.

To put this type of alcohol consumption into perspective, this means approximately 3 standard drinks per day per woman and 4 for man for the last 6 months.

A 12-ounce beer, a glass of wine or 1.5 ounces of spirits is considered one standard drink.

Also, less than 60 days of abstinence before the onset of jaundice, serum bilirubin levels greater than 3.0 milligrams per deciliter, and these patients also typically have elevated liver enzymes.

If you think this disease did not affect people you know, you're wrong.

While the majority of AH patients are between 40 and 60 years old and have liver cirrhosis, approximately 20% of the AH population are in the 20s and 30s and may not have cirrhosis at all.

89% of hospitalized AH patients have insurance.

Unfortunately, during this pandemic, alcohol consumption in the United States has increased.

According to a September publication in the Journal of American Medical Association Network, on average, alcohol was consumed 1 more day per month by 3 or 4 adults in the United States.

For women, there was a more significant increase of 0.18 days of heavy drinking with a 95% confidence interval from a baseline in 2019 at 0.44 days.

This represents an increase of 41% over baseline and equates to an increase of 1 day for 1 in 5 women.

In my 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.

There is no approved treatment for AH.

What physicians have available to us today primarily involves abstinence and support of care, which includes nutrition and hydration.

An analysis of 77 study published between 1971 and 2016, which include data from more than 8,000 patients, showed the overall mortality from AH was 26% in 28 days, 29% at 90 days and 44% at 180 days.

The high 1-month mortality rate from the time of diagnosis is similar to some ferocious cancers such as AML and advanced breast or pancreatic cancer.

According to the AASLD guidelines, steroids may be used in certain patients with severe AH.

However, steroids have shown only minimal benefit and may increase the infection rate in AH patients.

In the STOPAH trial, a study of more than 1,000 AH patients, steroids significantly increased the infection rate.

The STOPAH trial also convincingly demonstrated that steroids did not improve survival rate over placebo at 90 days or at 1 year.

And many AH patients are not eligible for steroids.

In fact, according to one recent study, less than half of severe AH patients were eligible for steroid use.

The 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.

The cost of the liver transplant exceeds $800,000.

Regarding hospital stays in AH, the average hospital stay for an AH patient is approximately 7 days, with many staying significantly longer.

In our DUR-928 Phase IIa AH trial, 14 of the 19 patients were discharged in less than 4 days after receiving only one infusion of DUR-928.

All of the 19 patients in this study survived through the 28-day follow-up period of the trial.

12 of these 19 patients were classified as severe based on their MELD score.

Also, 15 of the 19 were classified as severe based on the scoring system that is specific to AH called Maddrey's discriminate function score.

DUR-928 was well tolerated by all of the patients and at all doses evaluated in the study, including in all of the severe AH patients.

There were no serious drug-related adverse events reported in this trial.

AH patients have greatly elevated bilirubin level.

The minimum bilirubin level to be diagnosed with AH is 3, which is about 2.5x the upper limit of normal.

Patients in our Phase IIa trial had an average bilirubin of over 14.

Significant early, that is day 7, reduction of bilirubin levels from baseline are a critical factor in determining a patient's prognosis.

AH patients treated with DUR-928 in our study had significant day-7 reduction in bilirubin.

Prognostic scores, including real and MELD as well as serum creatinine levels and INR, were also improved in this trial.

To summarize the DUR-928 AH program.

During the quarter, we announced the design of the AHFIRM trial for patients with severe AH.

AHFIRM is a 300-patient, double-blind, randomized, placebo-controlled, multinational trial.

AHFIRM 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 with DUR-928 or placebo on day 1. And if they're in a hospital on day 4, they will receive a second infusion.

The primary endpoint for AHFIRM will be 90-day survival.

We are currently initiating clinical sites and expect to dose the first patients soon.

We expect that if we achieve a robust survival benefit, the study may support the NDA filing.

Next, I will update on the DUR-928 Phase II trial in hospitalized COVID-19 patients with acute liver or kidney injury.

DUR-928 is not an antiviral agent.

It's a naturally occurring epigenetic regulator that has tremendous potential to treat acute organ injury including the systemic inflammation such as in the case of sepsis.

Phase IIa clinical evidence in patients with acute alcoholic hepatitis and preclinical evidence in a number of multi-organ injury model, which demonstrate protection of the lungs, liver and kidneys as well as demonstrated safety in AH patients in our Phase IIa study, suggests that DUR-928 may be able to help COVID-19 patients.

In addition to lung injury, patients with severe COVID-19 can develop multi-organ injury, including acute kidney, liver and/or cardiac injury resulting from direct viral infections or complications from the viral infection.

These may contribute to poor outcomes of patients with COVID-19.

From a safety perspective, DUR-928 has been well tolerated in nearly 300 subjects, both healthy volunteers and patients, in multiple Phase I and II studies.

Most relevant to COVID-19 are the results from our Phase IIa study of DUR-928 in AH patients.

As I described earlier, all 19 patients treated with DUR-928 survived the 28-day study, while 1-month mortality in AH clinical trials is, on average, 26%.

Besides multi-organ injury, one of the main complications associated with the death of AH patients, similar to those patients with COVID-19, is sepsis.

Therefore, if acute organ injury could be effectively treated or prevented in hospitalized patients with COVID-19, lives could be potentially saved.

This Phase II trial is a double-blind, placebo-controlled, multicenter study to evaluate the safety and efficacy of DUR-928 in hospitalized, severe or critically ill COVID-19 patients with acute liver or kidney injury.

This study is an 80-patient trial with a 3:1 ratio of active to placebo.

The dose of DUR-928 is 150 milligrams by intravenous infusion on day 1 and day 4. The primary efficacy endpoint is a composite of survival and being free of acute organ failure at day 28.

It is our hope that DUR-928, in combination with the standard of care, will be able to help COVID-19 patients with acute liver or kidney injury, which, if successful, ultimately could save the lives of some of these patients.

We dosed our first patient in this trial in September.

We now have drug at multiple sites, and we are in the process of adding more sites.

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 that includes both MRI-PDFF and fiber scan.

DUR-928 treatment in this trial resulted in a global reduction from baseline of liver enzymes, liver fat, stiffness, as measured by imaging, and serum lipid.

Many of these reductions were statistically significant.

A statistically significant 24% reduction in plasma triglyceride was seen in the 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, live fat, liver stiffness, liver enzymes and serum lipids were statistically significantly reduced from baselines.

DUR-928 was well tolerated at all 3 doses evaluated.

There were no serious adverse events recorded during the study.

Pharmacokinetic parameters after repeated dosing were comparable to those after a single dose from a prior study, indicating neural simulation after repeat dosing.

Also, drug exposure was dose dependent.

We believe having multiple important parameters all moving in the desirable direction are particularly impressive when you consider the patients were only dosed for 1 month.

Additional results will be presented in the poster of the upcoming AASLD meeting, which is going to be between November 13 and 16.

These results achieved over a 1-month course of treatment, together with the continued safety profile of DUR-928, are promising indicators of DUR-928's potential in NASH.

Next, to the POSIMIR program.

POSIMIR is our investigational post-operative pain relief depot that uses our patented SABER technology and is designed to deliver bupivacaine to provide up to 3 days of pain relief after surgery.

Since our last earnings call, we have continued to communicate with the FDA regarding their review of the POSIMIR NDA and believe they are making progress with their review.

If approved, we plan to license POSIMIR to a partner for commercialization in the United States.

We expect that this deal would include an upfront license fee and royalties based on product sales.

Today, it's my pleasure to welcome Dr. Norman Sussman as our new Chief Medical Officer.

Dr. Sussman is a renowned hepatologist with a proven track record in clinical research of liver disease.

He will provide critical support in advancing our clinical programs, and we look forward to his contribution.

Dr. Sussman has extensive clinical experience and expertise in the liver disease field and brings over 30 years of clinical research and development experience in academia and industry.

He joined DURECT from Baylor College of Medicine where he was an Associate Professor of Medicine and Surgery.

Dr. Sussman has been a faculty member of Baylor College of Medicine intermittently since 1985.

During this time, he has served as a principal investigator for research focused on assessment and management of acute liver failure and artificial liver support.

Dr. Sussman has also had leadership experience in industry as the Founder and Vice President of both Hepatix, Inc from 1993 to 1995 and Amphioxus Cell Technologies from 1995 to 2003.

Most recently, he has served in senior leadership role as a member of the Baylor Faculty Senate and as Director of Project ECHO, the telehealth program at Baylor St.

Luke's Medical Center.

Dr. Sussman received his MBBCh from the University of the Witwatersrand in Johannesburg, South Africa.

He then completed his residency at St.

Louis University Hospital and his post-doctoral fellowship at Washington University.

He is Board Certified in Internal Medicine, Gastroenterology and Transplant Hepatology.

Dr. Sussman is also a Fellow of the American Association of the Study of Liver Disease, which is a designation that recognizes his superior level of professional achievement in the field of hepatology.

He is a thought leader in the field of hepatology, an excellent commission and communicator, and we're excited to have him with us as a member of our senior team.

We are planning a virtual event later this month to introduce Dr. Sussman to our investors.

We will announce the details of this event in the near future.

In summary, we're excited about the progress on DUR-928, the flagship of our epigenetic regulator program.

We have begun clinical site initiation visits and are nearing first patient dosing in AHFIRM, our Phase IIb DUR-928 trial in severe AH patients.

Based on the results in the Phase IIa AH trial and the fact that survival is 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 initiated patient dosing and are adding clinical sites into the DUR-928 Phase II trial in COVID-19 patients with acute liver or kidney injury.

In addition to the positive top line results we've already announced from our Phase Ib trial of DUR-928 in NASH patients with liver enzymes, liver fat and liver stiffness as well as plasma lipids all moving in the right direction, we will be presenting biomarker data from this NASH trial at the AASLD meeting this month.

When you combine these results with the safety profile of DUR 928, we believe it has a chance to play an important role in the treatment of NASH.

Today, we welcome Dr. Norman Sussman, DURECT's new Chief Medical Officer.

His experience and patient focus will be critically important for the development of DUR-928 in AH and for other indications.

And during the quarter, we continued correspondence with the FDA regarding the POSIMIR NDA and believe they are making progress on their review.

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

(Operator Instructions) Our first question comes from the line of Kristen Kluska with Cantor Fitzgerald.

My first question is in regards to the Phase IIb AHFIRM study for alcoholic hepatitis.

So based off the 3-month mortality probability correlated with MELD scores and the literature around the hospitalizations and mortality, I wanted to ask what you might assume the mortality rate could be for the placebo group with these understandings.

Well, we did make a number of assumptions with regard to that as we laid out our patient numbers, and we are very conservative on our estimates.

That's how we arrived at 300.

But we haven't given the actual breakdown.

I don't know, WeiQi, what are your thoughts on that?

Yes.

I think that when we calculate the placebo mortality in 3 months, we actually looked at multiple publications out there.

And then based on this group of patients as a 3-month mortality, so in general, these patients at 3-month mortality are at 20% to 30%.

So we actually make -- run like a computer modeling run and then maybe from a whole scale of the mortality and then as compared with the 928.

Of course, DUR-928, we haven't had 3-month mortality data to base on.

However, we do have 28-day mortality to base on.

So assume we have a similar increase from the second month to third month in terms of the rising of mortality as the published data, so then we run like a modeling or calculate our power for the 3-month mortality.

Yes.

That was kind of the basis, and then we took a very conservative view on all that as we did the computer modeling.

Yes.

We assumed a lot more placebo patients would live and a lot more 928 patients would die with our basic assumption.

Okay.

The next question is on the COVID-19 study for acute liver, kidney injury.

So it appears on ClinicalTrials.gov that you have sites open in Chicago, Detroit and New York where, unfortunately, we have seen an increase in terms of the number of COVID-19 cases there.

So I know in your prepared remarks, you did mention that you are looking to open more sites.

So I wanted to ask what are the key metrics you're looking at, at this time.

And then also, in a situation where perhaps Chicago, where more cases really are, unfortunately, skyrocketing, would you look to kind of try to balance it out in the sites?

So for example, if there's one where there's a lot of patients, you might look to balance it more across the site?

We always try to have balance in any clinical trial, for sure.

And unfortunately, it does come in split, as you said.

And it's horrible, when it does hit, you hit a center, and then it will go away, and it will come up someplace else.

So yes, we always try to be mindful of balance whenever we are conducting any clinical trial.

And as far as the new centers that we look to add in, those are generally in the South and in the West.

And we've been working on these for a while and expect that they'll be up soon.

So I hope that gives you some sense of it.

Yes.

And then the last question, also related to this program, is just that since some of these organ injuries may appear during the hospitalization.

And now that there has been more cases, thus, more literature to kind of support the different organs that are being damaged as a result of the virus, how often are these patients getting their liver enzymes and the other key measurements checked to kind of look for this now that it's more known?

Well, it's all part of their screening.

So they get those as all part of a normal panel.

And it's been unfortunate because we have seen of late that these monoclonal antibodies aren't seeming to help the more seriously ill, the most seriously ill patients, and they're looking to try and give those earlier on.

We've seen a couple of major programs stopped their critical patient dosing and looked to try to dose patients who are less damaged.

But they -- what we did -- they did the blood chemistries on a regular basis, so we would -- and the physicians would know what was going on.

WeiQi, would you add anything to that?

Yes.

So I think they do test at least all these patients.

Given the fact that all these patients are -- so for the hospital physicians and then the caregivers, they usually -- they do care for them daily.

But then the sample, they do only check for them typically is once daily.

So every day, they do get safety panels tracked.

So if there is an enzyme level -- liver enzyme levels elevated, they do follow them carefully.

Once they meet the criteria, so our physicians and our study coordinators, they are following up and monitoring these patients very closely.

And then some patients maybe did not quite meet our criteria, but they actually monitor them daily.

Our next question comes from the line from François Brisebois with Oppenheimer.

First one here, I just wanted to talk about the evolution of the primary endpoint here.

Obviously, it's easier at a shorter time period.

It seems like 90 days is still pretty short, which is nice.

And then can you just talk about how that's evolved in terms of the length of survival rates with time?

Sure.

Yes, it was historically longer.

And in fact, when Gilead did their trial that didn't work with their ASK1 inhibitor, that was a 6-month trial.

But the FDA and the liver associations both in the U.S. and Europe have been meeting fairly frequently going over this.

And the last meeting, where we attended there, where this was discussed, was in October of last year in Chicago.

And at that meeting, it was decided that 90 days would be an appropriate amount of time to be able to look at follow-up and survival.

Yes, this is an acute episode, and that seems to be the best duration.

And so based on that, that I think the FDA made their decision that that's what they wanted to see from this trial.

Okay.

Great.

And in terms of the dosage, can you just talk about the difference between 1 dose and 2 doses here and how that was decided for the Phase IIb and your confidence in that the second dose at day 4 could help?

Sure.

Yes, I'll let WeiQi speak to that first.

Go ahead, WeiQi.

Sure.

Thank you, Jim.

So we -- actually, in our Phase IIa study, of course, that study was designed as the safety, PK study.

So we gave our first dose.

Every patient would receive the first dose.

However, we -- at the time we made a decision, we thought that if the patient is qualified to be discharged, why should we keep these patients.

Because as -- earlier, as Jim mentioned, these patients are relatively younger, and then they tend to recover by themselves if you can help them to recover from the acute episode.

So if they are -- after first dose, recover from their acute episode, and then why should we keep them in the hospital?

So that's why in the first Phase IIa study, we made the decision only those patients, if they are still hospitalized, then they would receive the second dose.

And also, that's also based -- of course, based on the mechanism of action of our drug.

So with that experience in mind, and then we decided when we move to the Phase IIb trial, we will keep the same dosing regimen, so only if those people are still -- patients are still hospitalized, then they would receive the second dose.

If they -- after the first dose, if they do recover and then not poorly recover, means they are on the trend of recovery, so the chances are most of these patients, they will eventually come down -- calm down their liver inflammation.

Okay.

Understood.

And then is Dr. Sussman on the line or no?

No, he's not on the line right now.

He's actually -- it's his actual first day, so he's still going through orientation and just kind of getting all the paperwork done and everything else.

So he's -- although I'd say he was on the call earlier this morning, so he -- but he was -- yes, he's got some first day stuff to do today.

Okay.

Great.

And then…

He's actually been working with us, helping us for a while.

Sorry, go ahead.

Figured.

Yes, on the AH side, obviously with COVID, there seems to be more and more of the drinking and the consumption, as you mentioned.

Do you think that's something -- are you guys giving any color on the recruitment timing?

Is that something that you actually -- a lot of companies are struggling to enroll during COVID.

And do you think this is something that can actually accelerate your enrollment?

I don't know if accelerate is the right term, but I do think, unfortunately, I know that alcohol consumption is up in the United States.

We know that from the literature.

We know that from the physicians we talk to as we've been out talking to -- WeiQi and I have been talking to physicians at centers, whether it's for the COVID trial or centers -- or for AH.

As they're signing up these sites, they're all talking about the AH patients that they have in there.

So there are a lot more alcohol consumption, a lot more people in the hospital for AH.

And unfortunately, it seems as if a lot of them are younger.

And so I don't want to make any projections right now.

We want to kind of see how the trial is going as far as enrollment, so we're going to give it some months to get a sense of it all.

But it certainly is a different time.

And if you've got alcoholic hepatitis, you don't have an option to stay home.

If you stay home, you're probably going to die.

And so they do end up having to go to the hospital, and they do end up at the hospital.

And so I think it's different from that perspective versus other trials where it's at the election of the patients.

And I've heard this for so many different diseases, from my colleagues out there who are running other companies that it can be a challenge during this time to conduct clinical trials.

But that may not be the case, probably won't be the case for that.

Okay.

Okay.

And then just lastly, yes, this is probably more for Mike.

Any color you can give on revenues kind of going forward?

Is this something that we would expect here?

I'm thinking more on the collaboration R&D and other line, $306,000.

It was negative $30,000 in the first quarter.

Just trying to get a gauge for going forward what you can share there.

Yes.

Thanks, François.

We don't really project our revenues like that, but we do have a number of early-stage collaborations that generate revenue.

And then on the product revenue side, we -- I would say that Q3 was a little bit depressed from the -- due to the virus, but I think Q4 will look better.

Okay.

Excellent.

I'm just trying to -- is there something that's changed in the business on that side versus the first quarter and second quarter '19, where it was more about $1.5 million on that line?

The biggest change on the collaborative R&D was Gilead.

They were driving a fair amount of debt in 2019.

And so that, you take that away, and -- but we still have a number of early-stage, small programs, so they kind of -- they're going to kind of fluctuate from quarter-to-quarter.

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

This is Sahil on for Mayank.

Congrats on all the progress with DUR-928.

Thank you.

Great that Dr. Sussman joined the team.

We look forward to working with him.

First question from us is on POSIMIR.

Would be great if you could provide a bit more granularity on some of the information requests, if any, that are more recent than others.

And any incremental color you have on sort of the agency's thought process on how POSIMIR might fit in the post-operative pain management paradigm?

And I'm thinking of some of the recent FDA reviews in the States, one being kind of the CRL issued to Avenue Therapeutics due to a theoretical concern of opioid stacking and then also observing some non-opioid analgesics like IV meloxicam and Heron's program.

If you could give us any color you have, that would be great.

Yes.

I mean we're trying to stay as neutral as we can on this.

So we just -- we want -- but we want our investors to know what's going on as far as communications.

And we have been in active communications with the FDA during this past quarter, which is what we shared.

We haven't given details of the types of conversations, communications that we've had.

And I couldn't really speak to their thoughts on the post-op space.

Certainly, there have been a number of decisions in different -- with different products, but POSIMIR has its own path, and we're working towards it.

We don't want to appear overly optimistic.

We don't want to appear overly pessimist.

I'm really trying to just communicate a neutral kind of position at this point in time.

But just to let people know, if they're asking questions, we're giving answers very quickly.

At this point, I don't want to give the types of questions they're asking, but it's still going on.

Okay.

No, that's fair.

I appreciate the response.

Maybe switching gears to the alcoholic hepatitis program, a similar line of questioning on how you sort of see 928 fitting in the context of the treatment paradigm particularly in the context of the watch-and-wait approach.

Looking at the recent Gilead observational study that they'll present at AASLD, where sort of clearly earlier intervention, albeit with transplant, may have resulted in better outcomes.

And in that same line of thinking, would help how you think about kind of accommodating a placebo response if patients are aggressively managed in a more well-controlled clinical trial setting.

Well, I think the nice thing about this disease is the patients do have an opportunity to have a liver transplant if they're at the end of the line and there's no other help and no other hope for them.

So -- and they turned to be everybody's good stewards as the hep C patients have been.

So it's nice to have that backstop.

The unfortunate circumstances is that backstop is very expensive, yes, at a minimum, kind of $800,000, oftentimes goes well in excess of $1 million.

And so what we have with 928 is something that we hope can be out there to help these patients, put them on the right track physically and then allow them to move forward with their lives in the right direction and save a tremendous amount of cost along with potentially saving their lives.

And so we think there's a great opportunity for this drug because, as you know, there is no therapy approved out there.

And steroids have been shown not to improve survival and can double the infection rate nearly so.

And so it's -- we think it's a great opportunity for 928 to be able to help patients in an ICU setting and may well be the first of many indications.

But it's certainly a very, very important one, probably one of the most important ones out there in the liver space today.

It's one of the reasons why Dr. Sussman is joining us.

And I look forward to when you guys get a chance to hear his experience because he just literally on Friday left the clinic, and he was treating these patients for many, many years.

So he can give you his perspective as to why he's here and what he thinks he's going to mean.

Absolutely.

I'm very much looking forward to that sort of virtual investor day.

And just lastly, one question on the NASH indication.

Kind of given the benign safety profile that you guys have served in the Phase Ib study with oral candidate, is there any plans to explore a pediatric NASH indication?

And if so, what sort of incremental tox work may be pending?

That -- it would require additional tox, and that is something we want to always look at, but I think we would cut the path through first in adults and then look for pediatric after.

But you're right in noting that DUR-928 has a very nice safety profile to date, and we're quite happy that that's the case.

And we're also very fortunate to have all of those parameters moving in the right direction.

For a 28-day study, that's pretty impressive.

And look forward to sharing more data, the biomarker data at the AASLD meeting coming up in another few weeks or so.

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

I just want to ask about a couple of updates.

On AHFIRM, you mentioned that you have already opened a couple of sites so far, but you haven't started dosing yet.

So do you have any indication of how many patients you think that you might dose as early as this quarter and how that will increase moving forward as you open more sites?

And could you also give us a sense of how many of those sites will be in the U.S. versus ex U.S.?

Sure.

I'll let WeiQi maybe speak to the site split between U.S. and Europe projected at this point.

Yes.

Probably approximately 1/3 of the sites will be in Europe, and then 2/3 of the sites will be in U.S. So that -- this is different from the Gilead trial, as Jim earlier mentioned.

That's one of the benchmarks for the enrollment.

So Gilead, mostly their sites were focused in Europe, but we decided to focus most of our sites in U.S. so that where we are currently, we are focusing on mainly opening up for the U.S. sites.

Yes.

Thank you, WeiQi.

And I think that's good.

Yes, I think if we look at using the Gilead trial as a benchmark, they took -- it was about 18 months for them to enroll 100 patients, but that was requiring 6-month follow-up.

And we will be doing only 3 months, so it will be less time there.

They also required liver biopsy of all of their patients, and that unfortunately tends to slow trials down.

And they required all of their patients to take steroids, and that's only -- somewhere around 40% of serious patients are eligible to take steroids, so that has a substantial cut on the population as well.

And when you add those together with the Phase IIa data we have with such a nice response and then the unfortunate fact that during the pandemic, this condition seems to be higher, all of those things will have an influence on the enrollment rate.

Okay.

Great.

And as a follow-up, as you move forward this AHFIRM and you begin enrolling and begin dosing patients, what impact do you expect that to have on the R&D costs moving forward over the next 12 to 18 months?

The trial, fortunately, is not a particularly expensive trial.

And by pharma standards, it's probably about $25 million total external costs, and so that will be divided up across the duration of the trial.

So it's something that we can afford to do and have in our budget.

Okay.

And finally, just you mentioned in your press release the launch of Methydur by Orient Pharma.

Do you expect this to have any kind of meaningful impact on the product revenues moving forward?

I'll let Mike speak to it.

Mike?

Yes.

So it's the first country to see the launch, so Taiwan, which is a relatively small ADHD market, so probably not right away.

Hopefully, Orient will be partnering it in additional countries.

They have 14 countries in Asia.

So certainly, we'd hope that they would be partnering in additional countries and that there would be a growth there.

But initially, it will be pretty small, we would expect.

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

This is Thomas Yip asking a couple of questions for Ed.

Congratulations to Dr. Sussman's appointment to the DURECT team.

My first question is about the Phase IIb AHFIRM trial.

Going along with the last couple of questions about enrollment, roughly -- can you tell us the rough number of sites that are active so far?

And given AHFIRM is targeted only for severe patients, what is the expected pace of enrollment versus the Phase IIa proof-of-concept trial?

Well, the interesting thing in the Phase IIa trial, we enrolled the severe patients much more rapidly.

We enrolled all 12 severe patients before we had completed -- we had only enrolled 7 in the moderate patients because the moderate patients don't typically -- they sometimes go to the hospital.

But if they do, they don't stay very long and because they aren't as severely ill.

So the fact we're enrolling severe, I think, will actually -- unfortunately, because they're very sick, well, those patients will present at a much higher rate.

The number of centers, I don't know that we -- have we broken that out, WeiQi?

No, I don't think so.

I don't we have broken that out, yes.

Yes, it's going to be a good number.

It will be north of 40 centers total between North America and Europe.

And more, yes.

And more, yes.

And we have a number that we've already had site initiation visits.

And we have more planned.

Almost on -- whenever they come on a weekly basis, we add in more and more.

And then they can ship drug, and then it gets set up and get ready to go.

So we just started to get up but very, very excited about being able to help these patients.

Yes.

Definitely.

It sounds like good progress so far.

And then regarding the AHFIRM's endpoints, is there a 90-day survival benefit threshold of 928 over placebo that you believe could enable 928's NDA?

Yes, if we're able to show our best survival at 90 days, it's hard to argue against that, right, because survival is kind of the ultimate endpoint.

And now a surrogate endpoint is the endpoint, it's a very important clinical evidence, the most important one.

So if we can show an improvement in survival over placebo when there's no therapy out there today that is approved and patients are dying at a rate like some of the worst cancers out there, 1- month and 2-month and 3-month survival, we certainly believe that would merit -- should merit an accelerated review and potentially getting approval on a single trial.

Right.

Okay.

Yes, we certainly look forward to that.

And then one question regarding the NASH program.

Given 3 doses that were tested in Phase Ib, 50, 100 and 150, are there any work ongoing to either narrow down the dose or perhaps even testing, putting in a new dosage of 928 for Phase II?

Well, certainly, the next trial that we would do would be some type of Phase IIa trial, would be my guess.

And the dose will be further refined there.

But I don't know, WeiQi, do you want to speak to the dose, what we've learned so far?

Yes.

I think that for this current study, completed study, we have a very wide dose range, from 50 to 600 milligrams per day.

So that's a quite wide range of doses for the DUR-928.

And as Jim earlier mentioned that we just have received our biomarker data because of the delay, due to the pandemic, of the reagent.

So right now, we have all the data together.

We get submitted a poster for the AASLD.

But at the same time, we are in the process of sharing our data and then talking to multiple of our KOLs and then to get the feedback what could be our next study in the field.

Our next question comes from the line of Elemer Piros with ROTH Capital Partners.

Jim, if I may just turn for a quick moment to Mike.

Mike, I was too slow to write down how many shares you issued during the quarter.

Maybe if you could give me, please, the ending share count as of September 30, if you have it.

Yes, 203.2 million shares.

203.2 million.

And Jim, in the COVID study, how many sites do you plan to add to the current 3?

What is the plan?

It's not going to be a huge number at this point.

Right now, we're looking to maybe double that.

And it will depend on how enrollment goes and how this virus goes and where it goes because it's not a simple process.

So you find it, let's say, in the city.

And then difficult -- it's very difficult to go to a city that is a hotspot and to set up at that point in time because the centers are just overwhelmed.

And so one needs to be somewhat anticipatory -- anticipate a little bit or find a center that is not yet burning so hot and work with them because it takes quite a bit of time to get a center up and running with all the legal paperwork that needs to be done.

So I think we'll just have to -- we're just kind of -- we're moving through the process that's very dynamic kind of as it goes.

So…

Do you have an advantage vis-à-vis some competing drug…

It's a great question.

Yes…

In terms of that you address a unique aspect of it.

I think so.

I don't know that there really is anyone else out there looking to treat patients that have other organs that are damaged actively.

Certainly, the steroids are out there and being used for that, and we're happy to use 928 with steroids, so that's fine, and with any antiviral that are helpful.

And I don't think -- but it is -- so that, I think, is to our advantage.

The reality of it is there are huge number of trials out there.

Most of them are trying to help patients who are less severely ill than the ones -- we're going for severe to critical, so most of our patients that we're looking at are in the ICU or just about to go into the ICU.

So it's a different group of patients and a lot of agents are looking at.

And then the other, you lay over the top of that these vaccine trials which, although we're not competing with them from the size of patients, we are competing with them, unfortunately, by virtue of just the infrastructure within a given hospital system and having study coordinators and the like.

So we do have some companies that are looking to enroll 30,000 patients or 50,000.

Those are a wave of requirements from these facilities that are challenging for them to deal with at the same time.

So all of these things kind of interplay, so it's a complex world.

Yes.

So once you had a chance to share the complete NASH data with the KOLs, what do you think we might hear about the next steps, the Phase IIa trial, as you described it?

No, I think it will probably be a next year event, would be my guess just based on that.

And we have AASLD coming up very shortly, and we're talking to people.

So maybe we'll talk to more people during AASLD and post AASLD.

With Dr. Sussman being onboard, he will also be involved in the process.

So I don't know, WeiQi, do you want to try and give any more clarity or is that reasonable?

I think that that's reasonable.

Yes.

I don't have anything else to add, yes.

Yes, because the end of the year is coming faster than we'd like, unfortunately.

Our next question comes from the line of François Brisebois with Oppenheimer.

Sorry, quick last one here.

Just wondering, any update on potential publication related to the mechanism of action of DUR-928 or just any color there?

He is working on it, I don't know, WeiQi, what would you say about the manuscript, what's going on?

Yes, the manuscript has been submitted, and we do -- from our side, we do hope it can be published very soon.

Of course, for people who are familiar with the publication procedures, sometimes maybe it depends on the editors or the reviewers, they may want the author to revise certain paragraphs as they have different questions, and then so usually going back and forth a few runs.

So -- but the manuscript has been compiled and then submitted, so we are really hoping it can be out very soon.

Yes, a number of years of hard work by that lad, let me tell you.

Yes.

A lot of good work.

Understood.

I just -- I had to ask.

For sure.

No, appreciate it.

Yes.

Our next question comes from the line of Hank Beinstein with Gagnon Securities.

Congratulations on adding Dr. Sussman to your team.

I'm sure that this will be a major addition and hopefully move the projects along more rapidly over time.

Most of my questions have been answered, but I did have one related to the AH study, if I could.

Are the hospitals that were involved in the earlier studies participating in the current anticipated study of 300 patients?

I'd say almost all of them are and a lot of their friends.

I don't know, WeiQi, what would you say?

Yes.

I think I would say the same, yes.

Yes.

Yes.

There's a lot of people who have been calling and asking when it's coming because they have so many of these patients.

Yes.

It's really sad.

And a lot of young people, in their late 20s and 30s, because, I guess, there's just more binge drinking with millennials than there was from my generation, for sure.

So…

Well, I noted that your earlier comment was that 1/3 of the hospitals would be in Europe.

Is that because we can't get enough hospitals here in the United States?

Why are we extending the program to Europe?

Well, I think it's both because the disease of circumstances occur in both places, and we're doing everything we can to try and speed enrollment.

And so we're availing ourselves of all possible -- if there's a decent site out there that can help.

And especially if you look at what's going on in the U.K. and certain places in Europe, in Northern Europe and the like, there -- and in Eastern Europe, there's a lot of problems with alcohol consumption.

Ladies and gentlemen, we have reached the end of today's question-and-answer session.

I would like to turn this call back over to Mr. Mike Arenberg for closing remarks.

Well, thanks, everyone, for participating.

We're excited about the progress we're making on a number of fronts, and look forward to keeping in touch with those of you that would like to reach out over the next few days and weeks and months.

And thanks again for participating.

Thank you all.

Take care.

Thank you for joining us today.

This concludes today's conference.

You may disconnect your lines at this time.