DURECT Corp (DRRX) 2005 Q3 法說會逐字稿

Welcome to DURECT's Q3 earnings conference call.

Please go ahead, Schond.

(technical difficulty) for DURECT Corporation, and on behalf of everyone at the Company, we would like to welcome you to our third quarter 2005 financial results conference call.

I have with me today Jim Brown, our CEO;

Jean Liu, Vice President of Finance and our Controller; and Felix Theeuwes, our Chairman and Chief Scientific Officer.

The order of the call will be as follows.

Jean will review our third quarter financial results.

Next, the call will be turned over to Jim Brown to discuss the highlights for the quarter.

Afterwards, we will open at the call for a question-and-answer session.

Before I turn the call over to Jean, 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 could cause actual results to differ materially from those in such forward-looking statements.

For other information regarding these and other risks are included in our annual report on Form 10-K, as well as our 10-Q under the heading Factors That May Affect Future Results.

I will now turn the call over to Jean.

Thanks, Schond.

Good afternoon, everyone, and thanks for joining our third quarter 2005 earnings call.

I'm going to briefly review the financials before asking Jim to review the highlights of the quarter in greater detail.

Our net loss for the three months ended September 30th, 2005 was $3 million or $0.06 per share compared to a net loss of $7.3 million or $0.14 per share for the same period in 2004.

Our cash used in operating activities was $1.1 million for the three months ended September 30th, 2005, compared to $4.4 million for the same period in 2004.

During the third quarter of 2005, we exchanged and canceled approximately $2.7 million in principal amounts (ph) of our 6.25% convertible notes through conversions into our common stock.

As of September 30th, 2005, the remaining principal balance of our 6.25% convertible notes due 2008 was $57.3 million.

DURECT had cash and investments of $59.2 million at September 30th, 2005 compared to $61.8 million at December 31st, 2004.

We anticipate that our December 31st, 2005 cash and investment balance should be in the range of $48 to $50 million.

Thanks again for joining us on this call.

I will now turn the call over to Jim to discuss the activities of the quarter in greater detail.

Thank you, Jean, and welcome everyone.

The third quarter 2005 was an outstanding quarter for DURECT.

During the quarter, we achieved all of our predicted product development milestones.

We had positive Phase III clinical results from Remoxy, our first ORADUR product development program.

Together with our partner, Voyager Pharmaceuticals, a successful end of Phase II meeting was held with the FDA for Memryte, the DURIN-Leuprolide product.

We announced the completion of dosing and cohort 3 of our Phase II trials for our SABER-Bupivacaine development program.

And we also announced today that we have filed a shelf registration for up to $75 million.

During this call, I will provide updates on our Post-Operative Pain Depot product, our Remoxy gel-cap product, on our collaboration with Endo Pharmaceuticals, as well as on our collaboration with Voyager Pharmaceuticals.

With regard to SABER-Bupivacaine, this is our post-operative pain depot product.

In this case, we are taking a local anesthetic, bupivacaine, and administering it in the depot during surgery the time of closure to provide regional pain control for three days or more.

The estimated market for a product such as this is in the range of $1 billion or more.

And we anticipate that there are more than 70 million surgical procedures conducted within United States on an annual basis for which this technology could be applicable.

The current clinical status of the program is one where we are in Phase II clinical study.

In fact, we have a Phase II trial ongoing in Australia where we're looking at pain control of patients who have undergone an inguinal hernia repair.

This is the most common hernia seen in men.

This trial has a total enrollment of up to about 80 patients.

These are being conducted -- or these have been conducted in three different cohorts.

The safety -- excuse me -- the study endpoints for this trial include, first off, safety.

Next is pharmacokinetic evaluation of plasma bupivacaine levels.

And then as well, we're looking at the analysis and the summary of total pain intensity and pain relief, and a total analysis of the concomitant analgesic medications taken by the patients.

We have completed dosing of the third cohort of the study, which involves about 60 patients.

Earlier in the year, we talked about the fact that we completed the first and second cohorts.

And data from the second cohort of this trial demonstrated that we had no local or systemic toxicity, no adverse (ph) on injection.

And we were able to reproduce our delivery profile as seen in the first cohort and in our Phase I work of three days or more of delivery.

As well, we saw substantial reduction in concomitant medication, as well as reduced pain scores in the treatment group.

With regard to cohort 3, we look forward to announcing preliminary results from this third cohort of this Phase II trial during the American College of Surgeons meeting to be held next week -- the week of October 17th in San Francisco, California.

The next product I want to talk about is our lead product in our ORADUR technology field.

Here, the product name is Remoxy.

It's being developed with Pain Therapeutics, our partner in this area.

Remoxy is a proprietary abuse-resistant version of a sustained release oxycodone which is based on our ORADUR technology.

It incorporates several of abuse deterrent properties with the convenience of twice-a-day dosing and a patient-friendly, easier to swallow gel-cap technology.

Oxycodone, as most of you recall, is the active ingredient in OxyContin which last year led to sales for (indiscernible) (technical difficulty) by $1.9 billion.

It's an opioid painkiller used by patients treating chronic pain.

The first Remoxy Phase III trial design was one where it was randomized, double blinded, placebo controlled, multi-center study.

The study was used to confirm the efficacy and safety of patients with chronic pain.

The study enrolled about 200 patients in over 20 U.S. centers.

All of these patients suffered from moderate to severe osteoarthritic pain.

After a one week saturation period, the patients received Remoxy or a matching placebo for at least four weeks.

The dose used in this study was 20 mg given twice today for a 40 mg a day dose per patient, and the primary endpoint was analgesic efficacy.

The Remoxy Phase III results as reported in September were as follows.

A statistically significant of pain scores for patients using Remoxy versus placebo, a statistically significant reduction -- excuse me difference in quality of life using Remoxy versus placebo.

As well, no drug-related safety issues were noted in this study, as expected.

But as expected, there were some opioid related adverse events.

These are typically seen with narcotics, and they were nausea, vomiting, dizziness, itching, and sedation.

Pain Therapeutics plans to initiate a second Phase III study for Remoxy later this year.

From DURECT's standpoint, we plan to support and we are supporting the Phase III clinical program as well as -- the clinical trials as well as the chemistry manufacturing control program throughout this year for the Remoxy project.

With regard to our TRANSDUR technology, the lead product here is our TRANSDUR-Sufentanil pain patch, which is a differentiated transdermal opioid patch for the treatment of chronic pain.

Here, we're leveraging our years of experience with Sufentanil, a very potent narcotic that we've used to treat chronic pain patients, as well as DURECT's management experience in developing transdermal systems.

This system is a seven-day drug delivery patch that is approximately one-fifth the size of the current DURAGESIC fentanyl patch that is on the market today.

The offers, then, a fivefold increase in available skin sites for application of the patches, as well as the potential because of Sufentanil itself and the design, the potential for reduced dermatological complications such as skin irritation.

We expect to see enhanced patient compliance and convenience from this dosage form given its duration and smaller size.

As well, we have the potential for reduced tolerance and improved safety due to the (indiscernible) Sufentanil itself.

The current status of this program is one where we are currently in Phase II clinical development.

We have a collaboration in place with Endo Pharmaceuticals for the development of this project in United States and Canada.

And we continue to make progress with this program.

We plan to announce topline Phase II results by the end of this year.

Memryte is a DURIN-based Alzheimer’s disease product.

We're working -- developing this product together with our partner, Voyager Pharmaceuticals, in developing an Alzheimer’s disease treatment using our DURIN drug delivery platform.

We made significant progress with this program during this past quarter.

The current development status is as follows.

During this quarter, we held a successful end of Phase II meeting with the FDA.

During this meeting, clinical data were presented on the Phase I PK data as well as two Phase II proof of concept trials in mild to moderate Alzheimer’s disease patients.

Voyager announced in a summary of their clinical trial data to the public as part of their S-1 filing, which has -- was filed in September as the Company is preparing to go public.

With regard to the Phase III program status, Voyager plans to initiate the Phase III clinical study during the fourth quarter of 2005.

They have approximately 50 sites which have been identified, and are currently recruiting patients in 12 of those sites according to ClinicalTrials.gov, which is a website that offers up-to-date information on locating clinical studies sponsored by the National Institute of Health, other federal agencies, and private industry.

This phase through program will involve approximately 1,100 patients, and will be conducted in two randomized double blind, placebo-controlled 56-week trial (sic) in which Memryte will be used to treat patients with mild to moderate Alzheimer’s disease.

In this trial, Memryte will be tested in conjunction with acetylcholinesterase inhibitors.

With regard to the Company's financials, we completed the quarter with $59 million in cash investments.

And we anticipate that our December 31st, 2005 cash and investments balance to be in the range of $48 to $50 million.

Today, we also announced that we filed a shelf registration for $75 million that is intended to give the Company flexibility to take advantage of financing opportunities when market conditions are favorable to the Company.

Additionally, we have this quarter signed a lease for a 40,000 square foot building in Cupertino, just down the road from our manufacturing and research and development offices.

We believe that with this new space, we are well positioned for growth and expansion of our operations to meet the demands of these maturing development programs.

A summary of the goals met thus far in 2005 are as follows.

With regard to the SABER-Bupivacaine project, we announced positive results from our cohorts one and two in the Phase II program and have completed dosing in our cohort 3 of the study, and look forward to announcing the data and talking about it next week.

With regard to our transdermal Sufentanil patch program, we completed the Phase I study, initiated the Phase II study, and announced a collaboration with Endo Pharmaceuticals for the United States and Canada.

With regard to our Alzheimer’s disease therapy, we held a successful end of Phase II meeting with the FDA, with our partner Voyager Pharmaceuticals, and are currently recruiting patients for the Phase III trial.

With regard to Remoxy, the ORADUR product, we have announced positive results from the first Phase III clinical trial.

The remaining goals for this year are to announce preliminary Phase II results from the SABER-Bupivacaine cohort 3 which we look forward to doing next week in San Francisco at the American College of Surgeons meeting.

To announce Phase II results from the TRANSDUR-Sufentanil patch, which we look forward to by the end of the year.

As well, we look forward to the second Phase III clinical study starting (ph) for the ORADUR oxycodone product Remoxy.

And we will be supporting initiation of dosing in the Phase III clinical studies for the Memryte product with our partner, Voyager Pharmaceuticals.

In summary, we have made significant progress and advanced our pipeline in 2005 so far.

The first product -- we have one product in Phase III and a second product currently recruiting for Phase III.

We have the potential to receive additional Phase II data from two other products.

We retain significant value from our partner development programs and additionally, we have full rights to SABER-Bupivacaine worldwide and outside the U.S. rights for our transdermal Sufentanil program.

There is tremendous enthusiasm and optimism at DURECT because the value of the products we're developing, and their increasing stage of maturity, as we transition in to a fully integrated specialty pharmaceuticals Company.

I would like to thank you again for your time and now I would like to answer some of the questions that you might have.

Jon Hickman, MDB Capital Group.

Could you guys elaborate a little bit on -- it appears that you're going to utilize quite a bit more cash in the fourth quarter than you did in the third quarter.

Granted, the third quarter was quite a bit lower than it has been running, but could you elaborate on where you might be spending those dollars?

Yes, I would be happy to.

First off, there was also in the third quarter, we received a payment of $1.6 million for a one off deal that we did as well.

So I think that's important to note.

But as we look to expenses in the fourth quarter, what we are doing at this point in time is estimating what we will be spending.

We are also expanding the work we're doing as we prepare for later stage projects, as we mature the manufacturing process for the programs -- as we start to get ready for looking at ICH batches for a number of programs.

So there are changes in structure as things mature within the clinic and as they mature in the manufacturing side.

And we are also, obviously, within the range that we have given for the year was 48 to 50 million.

It's exactly were recently would be at the beginning of the year.

In addition, we have to make about $1.8 million of interest payments in connection with our convertible notes.

That's right.

Thanks, Jean.

Corey Davis, JP Morgan.

It's actually David Shaw (ph) for Corey Davis.

I just had a couple of questions.

The first is on SABER-Bupivacaine.

I was curious when you hope to get it into Phase III trials after this upcoming data release.

That's a good question.

It's impossible to say right now.

What we are going to be doing is obviously finishing up the analysis of these data, reviewing this with our clinical advisers, and then we are also collecting some additional data.

And we expect that we will be moving into and will be having an end of Phase II meeting with the FDA next year.

And I would expect sometime next year we will start into Phase III at the earliest.

And did you say mid '06 at the latest?

Is that what you said?

I didn't project right now.

I think we will wait and see when the meeting is scheduled with the FDA and post that.

As far as projecting the Phase III duration, it's difficult to say.

This really is a first in class kind of therapy to be able to offer pain control locally without having to treat patients systemically, has not really been afforded from a product that you just inject at the time of surgery and walk away and you are done.

And so we will have to see what the agency allows for.

We certainly have a lot of experience looking at post-operative pain products more generally -- systemically given -- i.e. pills and the like, and drips and infusion systems.

But those are very different from what we're looking at here.

Okay.

And on the Sufentanil patches currently in Phase II, and you are expecting those results by the end of the year, can you remind us what kind of trials those are (multiple speakers)?

Yes, the first trial that we're doing is -- remember with the work -- we have done a lot of work Sufentanil with CHRONOGESIC.

And what we have shown with nearly 100 patients of CHRONOGESIC is very nice plasma concentration to pain control, very nice correlation there.

We also did work, a 60-patient Phase II of CHRONOGESIC where looked up the dose conversion between Sufentanil and fentanyl.

Those happen to be the same drugs in our TRANSDUR patch and obviously fentanyl is the product in the DURAGESIC patch.

So now we have a good understanding of the conversion ratios and plasma concentrations needed.

From our Phase I work done with the patch, we know the patch size that leads to a relative plasma concentration.

So what we're doing now is taking DURAGESIC patients, converting them over in the first Phase II trial to our TRANSDUR system using those same conversion factors, knowing the approximate size of the patch to give yields -- pain control based on plasma concentrations.

And then we're just tracking those patients for a month.

We are applying four systems in a month, looking at system to system transfer, also looking at what is the pain control like and the plasma concentrations like as you switch off systems one to four.

So really, it's almost -- Felix just said to me, it's almost a pilot Phase III because it is looking at efficacy.

But in reality it's a Phase II, but it is effectively that.

How many patients is it again?

We have broken that out yet.

Okay.

Do want to comment anything?

It is very similar to what we (multiple speakers) CHRONOGESIC where we can switch patients from the patch to be CHRONOGESIC pump, so we basically have equivalent strengths through Sufentanil and fentanyl.

Actually it's a very similar trial design.

(multiple speakers) Very similar, yes.

There are currently no questions.

Well with that, I would like to thank you all for your time.

And we look forward to talking to you next quarter.

Take care.

Thank you.