DURECT Corp (DRRX) 2006 Q1 法說會逐字稿

Welcome to the first quarter 2006 earnings call for DURECT Corporation.

We are now ready to begin.

Hello, everyone, and good afternoon.

This is Schond Greenway, head of IR and strategic planning for DURECT Corporation, and on behalf of everyone at the company, we would like to welcome you to our first quarter 2006 financial results conference call.

I have with me today Jim Brown, our CEO;

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

The order of the call will be as follows -- Jian will review our first quarter financial results.

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

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

Before I turn over the call to Jian, I would like to remind you of our safe harbor statement.

During the course of this discussion we may make forward-looking statements regarding DURECT's products and development and expected product benefits, our development plans, future clinical trials or projected financial results.

These forward-looking statements involve risks and uncertainties than can cause actual results to materially-- differ materially, I'm sorry, from those in such forward-looking statements.

Further information regarding these and other risks are included in our annual report on Form 10-K and 10-Q under the heading “factors that may affect future results.”

I will now turn the call over to Jian.

Thanks, Schond.

Good afternoon, everyone, and thanks for joining our first quarter 2006 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 March 31st, 2006, was $6.3 million or $0.10 per share compared to a net loss of $5.4 million or $0.10 per share for the same period in 2005.

Our results for the three months ended March 31st, 2006, included non-cash charges for the amortization of intangible assets and stock-based compensation of $1.2 million compared to $353,000 for the same period in 2005.

Cash used in operating activities was $3.3 million for the three months ended March 31st, 2006, compared to $5.2 million for the same period in 2005.

At March 31st, 2006, we have cash and investments of $87.9 million, including $1.7 million in restricted investments, compared with cash and investments of $91 million at December 31st, 2005.

Thanks, again, for participating in this call and I would now turn the call over Jim to discuss the activities of the quarter in greater detail.

Thank you, Jian, and hello, everyone.

The first quarter was a strong one for DURECT.

We continued to drive forward our development programs and carried the momentum for 2005 into the first quarter of 2006.

During this call I'll provide updates on our postoperative pain depot product, on our collaboration with King Pharmaceuticals and Pain Therapeutics for the Remoxy gel-cap product, on our collaboration with Endo Pharmaceuticals for the seven-day sufentanil patch, as well as on our collaboration with Voyager Pharmaceuticals for Memryte, which is a novel treatment for the progression of Alzheimer's Disease.

Our SABER-Bupivacaine postoperative pain depot is a first-in-class therapy.

For this product we're applying a local anesthetic in a depot which will be administered during surgery to provide regional pain control for three days or more.

We have estimated that the U.S. market for this product exceeds $1 billion annually.

Previously, we have conducted a top-down market research analysis for this product and have indicated and identified over 100 million surgical procedures in the United States and the top five European countries for this product.

During the first quarter of this year we have just got the results from a bottoms-up market research analysis, which involved 275 physicians.

This study involved 100 general surgeons, 100 orthopedic surgeons, as well as 25 OB/Gyns, 25 cardiothoracic surgeons and 25 plastic surgeons and after looking at the-- at this product and the technology and the opportunity it afforded together across the different surgeries that they conduct in their practices, they came back with a bottoms-up analysis projected for this product of 32.5 million procedures annually for this product.

As well, during the first quarter of this year with regard to this product, we had the IND accepted and moved into clinical development into the United States.

We met with both regulatory and clinical advisory boards to outline the Phase II program for this product.

These discussions resulted in an expansion of our Phase II program to include additional soft tissue, as well as orthopedic, surgical procedures in patients throughout 2006.

For the first-- from the first Phase II study, which we conducted in Australia, which involved 81 hernia patients, we learned some specific information with regard to this product.

First off, that we could safely deliver as much as 1 gram of Bupivacaine into these patients.

We have phenomenal pharmaceutical performance-- excuse me, pharmacokinetic, PK, performance in the product, 72 hours in delivery.

We also demonstrated dose linearity.

So we understood for this product how to much to give these-- how much we could give these patients safely.

For the remainder of the Phase II program, what we're going to be focusing on is dose selection, procedure selection and optimal injection site in order to further define what we're going to do in the Phase III.

What we're going to be doing here is studies involving somewhere between 250 and 300 patients.

The surgical models we are looking at right now are hernia, rotator cuff, hysterectomy and appendectomy.

In other words, we're going to be focusing on where to give the product in and around these surgical sites.

We are currently dosing patients in the United States in a Phase II, placebo-controlled trial which will enroll up to 90 patients following hernia surgery, with efficacy being the key focal point of this trial.

We also have ongoing another Phase II trial in hernia patients in the UK.

Pending successful completion of these Phase II studies and pulling together the information from the remainder of the Phase II program, we will then begin to design the Phase III trials and, following regulatory authority approval, initiate the Phase III program.

With regard to Remoxy, this is a product using our ORADUR gel-cap technology.

It's a proprietary, abuse-resistant version of a sustained release oxycodone product.

This is one we have partnered with Pain Therapeutics and they have, in turn, sold the right to those to King Pharmaceuticals for commercialization.

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

Oxycodone is the active ingredient in OxyContin, Purdue Frederick's product, which had sales that exceeded $1.9 billion in 2004.

The first Phase III study for this product involved 200 patients with chronic pain.

They were dosed at 20 milligrams given twice a day for four weeks.

The results demonstrated a statistically significant decrease in pain scores, an improvement in the quality of life and no drug-related safety issues beyond the typical opioid-related side effects.

In February of 2006, the Special Protocol Assessment was completed for this program, which allowed for completion of trial design with the FDA for the pivotal Phase III study.

I'm pleased to say this will only involve about 400-- in fact, 400 patients.

It will be a randomized, double-blind, placebo-controlled multi-center study in patients with moderate to severe osteoarthritic pain.

It will be conducted at multiple sites in the United States.

Following a titration period, the patients will be randomized either to Remoxy from 10-- anywhere up to 10-- from-- to 80 milligrams per day or placebo.

They'll be dosed for 12 weeks.

The primary end point will be reduction of pain score over three months as compared to baseline.

King and PTI have stated their plans to initiate dosing in this final Phase III study for Remoxy in the near future.

We plan to support the Phase III clinical studies throughout the year.

King have also indicated they plan to move a second ORADUR product from this collaboration into the clinic later this year.

Remember, this entire collaboration involves actually four separate narcotic products.

DURECT is currently developing the product formulation that will be used in the clinic later this year for this second ORADUR product.

Now I want to move on to our TRANSDUR sufentanil pain patch program.

Here we're leveraging the sufentanil work that we had been doing here at DURECT for many years, as well as DURECT's management experience in developing transdermal products.

This product is a seven-day delivery system as compared to the three-day for the fentanyl patches that are out there.

It's also much smaller, in the range of about one-fifth the size of the fentanyl patches.

It affords a much greater increase in available skin sites for application, as well as the potential to reduce dermatological problems as skin irritation.

We expect to be able to enhance patient compliance and convenience by virtue of the smaller size and the longer duration and have a potential for reduced tolerance and/or improved safety based on the inherent qualities of sufentanil itself.

In March of 2005 we signed a deal with Endo Pharmaceuticals for the rights to this product for the United States and Canada.

We received $10 million up front and will receive another $35 million in milestones.

As well, we will receive royalties on sales and development support from Endo Pharmaceuticals for the entire cost of the development of this product in the United States and Canada, as well as all launch costs.

We maintain all the outside-- ex-U.S. rights outside of Canada and if you look at the outside the U.S. sales of Duragesic in 2005, you'll see that their sales were greater than $900 million, growing at 25%.

We're currently talking to people about potential partnerships, both in Europe and Japan, with regard to this product.

As far as the current status of this product, we have established the appropriate patch size to plasma concentration from our Phase I work, so we know what size patch to make to be able to yield a given plasma concentration of sufentanil and we have established with our work with CHRONOGESIC the plasma concentration as it relates to efficacy and also the potential to reduce side effects.

This is work based on months of delivery of-- of the CHRONOGESIC patch delivering sufentanil to chronic pain patients.

Right at the end of December of last year we announced some positive preliminary Phase II results for this program.

In this case, we dosed a small number of patients, 12 patients, for an entire month.

It was an open label study designed to assess the pharmacokinetics and safety over four weeks.

We were able to confirm and evaluate the conversion strategy going from Duragesic over to our TRANSDUR-sufentanil system.

All the primary end points for this study were achieved.

We demonstrated very nice PK and safety over both the seven days of delivery, as well as over the four weeks of delivery.

The targeted plasma levels were achieved and maintained over the four-week period.

With regard to any preliminary efficacy observations, on average the pain levels remained stable after the transition to our TRANSDUR-sufentanil and even though the patient wasn't-- the trial wasn't designed for any efficacy points at the end of it all, the patients did not drop out, even though they had the opportunity to and stayed on the therapy and seemed to like it.

We are pleased with the progress that both Endo and DURECT are making with regard to this program and, as a general update, I can tell you also today that Endo and DURECT now have in place manufacturing capabilities to be able to move this program forward to commercial manufacturing levels.

With regard to the Alzheimer's Disease product, our DURIN-based product, Memryte, this is one that we're developing with Voyager Pharmaceuticals looking for a therapy for Alzheimer's Disease using our DURIN drug delivery platform.

As well, significant progress has been made in this program this quarter.

Voyager recently has talked about completing dosing in a nearly one-year, Phase II study that involved approximately 100 men who had mild to moderate Alzheimer's Disease.

They are currently analyzing these data and plan to present those-- these data at the AC-- excuse me, at the ICAD meeting which will be head in Madrid-- held in Madrid on July the 10th.

As well, there's an ongoing Phase III program for this drug-- for this product.

Here the Phase III program will involve two studies, each totaling about 550 patients for a total of about 1100 patients.

The first of these studies -- these are both, by the way, double-blind randomized, placebo-controlled, 56-week trials and these are going to be in patients with moderate to mild Alzheimer's Disease.

Voyager has currently announced that they are over 50% enrolled in the first of these Phase III trials.

In all of these trials, Memryte will be tested in conjunction with acetylcholinesterase inhibitors.

With regard to the company financials, as Jian just outlined, we completed the quarter with $87.9 million in cash and investments.

We also expect our total cash burn for the year to be somewhere in the range between $31 to $34 million.

This includes interest payments of $3.6 million for our convertible notes.

Additionally, with the completion of our move to a new 40,000 square foot leased facility in Cupertino, we believe that we are well positioned for growth of our operations to meet the demands of these maturing development programs, as well as our expanding pipeline.

We continue to add to our management team here at DURECT.

We built out, more recently, the manufacturing operations group within the company and you probably just saw the announcement today where we've hired a Chief Medical Officer, Peter Langecker.

He's an MD/PhD with great experience on getting products-- drugs developed.

We're very pleased to have him on board.

You should also know that our clinical staff is being rounded out more fully as we've hired a second physician onto the staff as well as a PhD pharmacokineticist as we are looking forward to bringing these products through the development pipeline.

During the first quarter we completed a number of our anticipated development milestones and we look forward to making progress on the others throughout 2006.

So far this year, we have had the IND accepted for our post-op pain depot.

We've had a Special Protocol Assessment approved for the remaining Phase III program for Remoxy.

We have initiated additional Phase II studies in the United States for soft tissue and orthopedic surgical procedures and continue our clinical studies outside the U.S. for our post-op pain product.

Throughout the course of this year, we look forward to, as well, starting the dosing in the pivotal Phase III trial for Remoxy, presenting additional data with regard to the post-op pain program, proceeding toward the Phase III program for this post-op pain product, completing a Phase I clinical study for a new development product, a DURECT product, as well as moving a second ORADUR product into Phase I and completing Voyager's-- supporting Voyager's goal to complete the enrollment in the first Phase III trial for Memryte.

In summary, we continue to advance our pipeline in 2006.

We started the year with two products in Phase III with a potential for a third product entering before year end.

We have the potential to receive additional Phase II trial data from at least one development product.

We look forward to advancing an undisclosed development product into the clinic, one for which we retain full commercial rights.

We have the potential to have two new products enter Phase I this year.

We have the potential to complete a deal outside the United States for the SABER-Bupivacaine or the TTS transdermal product, sufentanil, which would be mechanisms for non-dilutive financing for our company.

We are, as a company, transitioning into a fully integrated specialty pharmaceutical company.

We retain commercialization rights to significant development programs and we build out our commercial-- as we build out our commercial and clinical teams for these programs.

Thanks, again, for the time today and now I-- we'd now like to answer any questions that you may have.

[OPERATOR INSTRUCTIONS] Our first question comes from James Molloy.

Go ahead, James.

Hi, guys.

Thanks for taking my call.

Hey, Jim.

My question is regards to the Phase II trials for SABER-Bupivacaine.

Can you walk through the trial timelines?

In the past you've guided towards the second half of '06 for these Phase IIs to wrap up.

With the new trials and the four trials you've initiated, could you just give us an idea when you think you might be presenting data on those trials?

It's a great question, Jim.

Certainly the program has grown this quarter.

We sat down with both our clinical advisory board and our regulatory advisory board and now with-- and having Peter came on board and he's building out his team, there's a lot of work that's going on now.

We're dosing some patients now and we're looking to move these things forward.

We will be reporting these studies out as they complete and I'm hesitating a little because I can't tell you exactly when this stuff will be done.

But I'm expecting that we will have significant data between now and the end of the year as we move forward.

Excellent.

Is there perhaps any thought of the four models that you've laid out -- hernia, hysterectomy, rotator cuff surgery and appendectomy -- can you briefly touch on what the advantages might be of each of those-- each of these models, compared to each other?

Yes, Jim, we can.

Also I have to tell you we're also talking to potential partners on this product, especially outside the U.S. and getting some guidance in from them as we go through this process.

Different pain models afford different looks at different opportunities.

For example, the hernia is often said to be one that is more -- if you look at the I-Flow data -- more of an acute, kind of in the first 24 hours to 36 hours.

Rotator cuff and bunion tend to be longer, a little more painful.

Hysterectomy is a little more painful.

So they both-- they all offer different looks at different surgeries and the FDA is more or less comfortable with different ones of these models.

So what we're doing is during this more expanded Phase II program looking to how we're going to apply the drug into these various surgical procedures and-- and how we move through there.

So I can't speak that directly to these, I really would have to let the experts do that.

I don't know, Felix, do you have anything to add to that?

Well, I think that the Phase II program is, obviously, designed to sort out all the different aspects that we can face in a Phase III program because that's going to be involving a lot of patients.

And that will be focused, mainly, on the efficacy.

And since we already have a lot of safety developed, I think that it's a very exciting time to be here and, especially, as Jim said, there's a lot of enthusiasm by potential marketing partners in the U.S. as well as overseas and we're in the process of fine-tuning that Phase II-- III program to figure out how to best position this product for the marketplace.

So as time goes on, I think we'll be able to give you more detail about the findings.

But, as you know, the first one to come out will be the study that we started in the U.S., which will be giving us the first glimpse of the-- of efficacy since it's a placebo-controlled trial.

I know this a long-winded answer, but one of the other things that we're also building on are a lot of applications out there with I-Flow and some of that information, as well, [inaudible]

Yes, of course, from a-- from a-- the quantity of medication to be delivered, we have nailed that one down in the first Phase II study.

We know what-- that Bupivacaine is effective if you keep it around.

We know the delivery profile from this dosage form and we know that we are exactly in the plasma concentration that is commensurate or that is dependent or consistent with the delivery profiles which have been effective for I-Flow.

So we feel very good where we are with regard to the dosage form itself and now I think it's fine-tuning.

It has to do with the positioning of the dosage form and with the-- with the administration in the various indications.

Thank you very much.

Our next question comes from Andrew Forman.

Go ahead, Andrew.

Hi, Jim and Felix.

Could you talk through a big picture just so-- for adjusting models.

How do you see the sequence of products being approved and launched with Remoxy, SABER and CHRONOGESIC and I guess is this a good time to maybe confirm that CHRONOGESIC-- I mean, [SUROGESIC] the sufentanil patch.

Is CHRONOGESIC effectively dead at this point?

And then lastly, you had talked about having sort of a five-year plan and some discussion about that in the next couple quarters.

Do you still plan to do that?

So to kind of go through those in reverse, we do plan to roll out our five-year plan.

It's going to be a little bit later given scheduling conflicts -- graduations and things -- so we're scheduling that out.

I'll let Felix speak to CHRONOGESIC, because it's not dead.

So I'll let him address that as we go.

To look at the order of potential filings, I think to look first you'd have to look at, especially with the SPA now on Remoxy, that would most likely be the first and if that starts, let's say, in the next month or so, then I would hope that they would complete the 400 patients in a year and we would hope that that NDA would be filed in '07.

So that would be the first one and beyond that, the other products-- it kind of depends how things go clinically.

It's possible SABER-caine could be next, but if the Voyager project works well, that could be coming up quick.

I mean-- and so I think beyond that I don't want to get into too much detail, Andy, because it'll really depend on-- on what's happening and we'll know more, probably, between now and when we have that meeting.

So I think we'll have to save some of that for that meeting.

I don't know, Felix, if you want to address CHRONOGESIC?

Yes.

Certainly CHRONOGESIC-- the good news about CHRONOGESIC is that it was an investment in sufentanil franchise which led to the transdermal patch.

Now that the transdermal patch is moving very nicely all of the pharmacology will also spill over into CHRONOGESIC.

On the other hand, we are working on that technical problem and at the strategic optimum time we will bring that out and plan this product-- to bring the product forward because the market assessment is that three month pain control is still very much a desirable product and I feel very good about where we are currently with CHRONOGESIC but we don't need to make any projections about the timing of it.

And if we do have a fix, that would be another patent, as well.

So that would be another 20 years or protection, should be.

So on the patch, you indicated you've got some manufacturing capability.

Is that something that's on your cost or is that on Endo's or are you sharing that?

How does that work?

No, Endo's paying for all of that, but that is a significant milestone and we appreciate Endo allowing us to talk about that.

That's-- we've been making progress on this program and they're very quiet and we respect that tremendously with regard to talking about development programs, but we can tell you today with their agreement that that piece has been put in place.

And that's a significant piece because once you've got, as you know, the capacity to produce these things on a grand scale, then we'll be moving.

Right now we make the Phase II supplies here at DURECT but we're moving that on to another site now.

You basically signalled that the SABER-Bupivacaine Phase III is really going to start in '07, but you don't have any visibility on the hot fentanyl patch Phase III for Endo?

Yes, we haven't given the Endo.

But first to correct, we haven't signalled entirely that the Phase III for Bupivacaine is going to start in '07.

I think it'll start when we have had the end of Phase II meeting and when we complete the work in front of us.

We have a lot of trials that we're going to be undertaking and that'll come out as it comes out.

But as far as the sufentanil patch, we haven't-- we haven't said when that is, nor has Endo.

And in terms of the Phase III designs, big picture in terms of timing, what's the difference in the patch Phase III-- just drawing from the Duragesic experience that we both had and the SABER-Bupivacaine?

You obviously are running the show yourself on Bupivacaine.

Is that roughly the same timing or is that going-- is SABER going to take a lot longer because you've got four different arms?

That's interesting.

So the question is, if you were to lay up each-- right along side each other, the sufentanil patch Phase III and the SABER Phase III.

I think the only thing I would say is that the SABER, each patient will only be exposed to the product for a few days and so-- there'll be a follow-on, but that will be a shorter duration.

The patch, based on the experience that others have had with the fentanyl patch, is one where you'd be dosing for at least three months and my expectation is that most chronic pain patients require-- most complex pain products require one year exposure for a certain number of patients.

So that would probably dictate a longer program, I would think, for the patch.

I don't know, Felix, would you--?

No, I think I would totally support that.

Yes.

And lastly, on partnerships internationally which is more likely, a patch deal or a SABER deal?

I think we're both ducking that.

I think that these things can be made at various times, obviously, and we have-- fortunately we are in a very strong position to be able to do these-- both of those deals from our terms when we have the data in hand, so I think that our hands on both of those projects are getting stronger.

With the investment and the movement on the sufentanil patch, I think, we have a winner in our hands and I think the longer we can keep it, the better we are off.

But it's a card that we can play whenever we, I think, are ready to do so.

And with the SABER-Bupivacaine program, now we have clinical people in a position to strategically put a solid plan in place.

We have this-- we have discussions ongoing with partners.

So there will be a fantastic opportunity for us to-- to design that program and to play the card on that opportunity.

So while-- the rest of the world is, obviously, not just Europe, it's also Japan and the Far East, so I think there's some of those points of view, as well.

Yes, I think we have-- it's safe to say we have multiple people interested in each of these areas of the world, each of these territories of the world there are multiple people interested and talking to us about each of these products.

So there's a-- the group here is very, very busy talking to all these people and we're also learning a lot, which is great, because there are good potential partners that we're talking to about how to approach these various products in various markets.

And so hopefully be able to streamline those programs, if possible.

Since Janssen still has a good brand and not as much generic penetration in Europe, is that a plausible partner to switch--?

We won't say anybody is not a plausible partner.

We're talking to a lot of different people.

I won't go beyond that.

Okay.

Thank you, gentlemen.

Sure, thank you.

Our next question comes from Angela Larson.

Go ahead, please.

Thank you for taking the question and, unfortunately, I'm going to keep you on the SABER program for just a little bit longer.

No problem.

You mentioned a new-- when you were kind of rattling off some of the potential indications or potential models that you're looking at, you got hernia, rotator cuff, hysterectomy, appendectomy and then you said-- you were starting to say bunionectomy.

Are all of these individual studies or are you looking to do 300 to 350 studies in one study with these various arms?

Actually, bunionectomy is just-- I used that as an example.

It's not one of the four that we're looking at.

Okay.

I just wanted to clarify.

Yes.

And the 250 to 300 patients would be all of the entire remaining Phase II program that we expect right now and it'll be spread across a cross section of studies involving those type of surgical pain models.

Okay.

And do you plan on rolling out the data as you complete one model?

I believe we will.

Yes, as we have things finalized, then we'll-- we'll let the information out.

Yes.

Okay.

And then as you look across this program, which seems to be very impressive and robust with the number of different models you're using and then we go to Remoxy and we're really only talking about osteoarthritis, can you give us an idea if you would look at other models with Remoxy or if there were other models studied in Phase II.

Yes.

That's the difference with these two products.

The-- post-op pain product, as I said at the beginning of that, is a first-in-class therapy.

So there's been nothing else out there that you could inject around a wound that would control pain locally for days.

And so that's what we're looking at there.

So that's a very different product.

The best way you can get guidance, I think, would be to look at the acute use products like Mepivacaine or Bupivacaine or one of those and just look at some of the number of patient studies they've done there.

As far as the Remoxy product is concerned, that is a product used for treating chronic pain systemically and in that case, there are a lot of products that have been out there, in fact, oxycodone itself, which is the active agent in Remoxy, has been out there for a long time, most successfully in OxyContin.

And so the FDA is familiar with this product and doctors are-- physicians are very familiar with these products and, as such, the dose to effect range is well understood in these patients.

And so what that allowed us-- or actually, Pain Therapeutics and King, that allowed their program to move from Phase I, once we demonstrated very nice 12 hours of relief, immediately to a Phase III trial, that 200 patient trial was done.

Then they went to a Special Protocol Assessment, which we really do applaud dramatically because they, again, they have a gentlemen's agreement with the FDA that the remaining number of patients to be completed for that program is just 400, which we're very pleased to see.

You should also remember that they already completed one Phase III trial.

Right.

And that the concentration range to effect is very well established for that product.

That's great.

And going back to the survey you did of surgeons, it was-- the conversation in the survey with the surgeons that led you to these four additional pain models?

No.

Actually, the survey with the surgeons was to get a handle on the opportunity of the market and the size of the product potential, but we did apply some of that information.

That much is true.

What we did do and the way we picked the models that we picked is from probably-- we triangulated from three different sources.

First off and most importantly are what models did the FDA like to see, pain models, okay?

So we started with that.

The next thing is, what is the market look like, which was that bottoms-up analysis that showed 32 million procedures and we, obviously, have that greatly detailed out and categorized by specific type of surgeon to the surgery that they do, open, closed all that kind of stuff.

So then we got a lot of detail on those particular types of surgical procedures.

And then the third component of that is the information that we brought in from our thought leader boards, both on the clinical and the regulatory side.

So these were physicians and experienced FDA people who brought to bear what they had seen -- some of these people had had direct experience getting local products, the local acute use products approved for chronic pain, so we applied-- Not chronic pain, excuse me, for acute post-op pain.

We applied that information from the FDA, information from the market, information from the thought leaders to guide and triangulate and lead to those four pain models.

That's very helpful.

Thank you.

Sure.

We have another question now from James Molloy.

Go ahead, James.

Hi, thanks.

I just had a quick question.

Is the science day still on for this summer?

Any update on that?

Yes.

That was actually-- that was Andrew's question, as well, Jim.

And it's one that we're having a little bit of issue with scheduling due to graduations and vacations and everything, but we are going to look to schedule as soon as we can.

It may be more later summer, fall kind of at this point in time, but still with the idea to kind of roll out where we're going with DURECT.

That's the idea is to give people a global sense of where is the company going to be in the future.

Got you.

Andrew one step ahead of me, as always.

The other question would be, would you guys press release the start of the Phase IIs for the sufentanil patch?

I know that Endo is very close-lipped on the sufentanil patch.

Is there anything you guys will be able to say as that development rolls forward?

It will depend on Endo.

It's Endos' product, obviously.

Yes.

It will have to be a joint agreement on that one.

As I said, we're very pleased today that we had an opportunity to talk a little bit about the manufacturing, so that gives you guys some sense of the progress being made.

We feel very good about the progress being made, but it's hard for us to be able to communicate that to you, but that gives you some sense that there is some progress coming along.

And so you'll see some things if some data comes out, maybe, or something like that, but I can't guarantee anything.

And would you guys be able to break down the burn for '06 a little bit between G&A and-- G&A and R&D?

Yes, this is Jian.

I would like to just say the fact that the ratio between R&D and G&A will be similar to 2005, but we are going to increase burn for R&D and G&A, to give you a big picture concept.

Okay.

So we're looking at, if I understand correctly, $31 million to $32 million for '06 and a similar ratio as in '05?

Yes, $31 to $34 cash burn forecast for 2006--

With the same ratio.

--with the same ratio between R&D and G&A.

Great.

Thank you very much.

Our next question comes from Jon Hickman.

Go ahead, Jon.

Hi.

Could I pin you guys down on timeline for the new DURECT program at all?

Could it be like this summer or are we looking towards the end of the year?

I mean-- Felix, why don't you answer that one?

We are making great progress on this program and it's a strategic asset for us and we need to be releasing that information not when we have made great progress, but also when we feel this is an opportunity for us to share and so I think right now we're just looking, probably, at the second half of this year and so I think that that-- within that window we'll certainly be able to do that.

And we're not-- it does sound like a very hypey kind of thing to do and that's not our intent.

Actually, our intent was just so you guys would realize that the $31 to $34 encompasses more than just the SABER-caine and our research programs and everything, that there's another development program in there.

So that was the intent of that.

Okay.

Just one more question.

Back on the SABER-caine, this 250 to 300 patients--

Right.

--spread over the four different models.

So that like 60 to 70 patients per model?

Is that what you--?

No, it's not.

There'll be some models we do very few and some we do more.

Okay, great.

Okay.

Our next question comes from Elliot Wilbur.

Go ahead, please.

Thanks.

I wanted to ask a couple of followup questions around the commentary related to the developments on the manufacturing side with respect to transder sufentanil.

I guess first, Jim, are you in a position to be able to sure with us any specifics on capacity?

Other than to say this-- we're putting in place the capacity to be able to serve whatever the market needs might be for this product.

Okay.

Are there any milestone payments related to--?

Maybe you can be more specific, I guess.

Maybe I didn't answer your question correctly.

Well, I guess to put it in simplest form, if we were thinking about the number of Duragesic patches that are prescribed annually, something that might give us kind of a-- some sense of the relative scale about what we're talking about currently.

Yes, it would be definitely more than capable to serve the U.S. market, the group that we're working with.

As well, remember this is a seven-day system versus a three-day so we only have to have kind of half the number of systems, anyway.

But they'll do well.

Okay.

And then are there any milestone payments associated with these developments?

Yes, there is for us, actually.

There's $35 million in milestone payments that come during the development phase of this program.

So we'll be receiving those as we hit certain key milestones and that might be a way of tracking things.

Okay.

I guess specifically, referring to the progress on the manufacturing side that you talked to.

Is there a specific milestone tied to that particular development?

No.

No.

Okay and then I wanted to ask a question, as well, about the-- you've recently press-released the details of the full Australian study and I guess I'm wondering is there anything that-- anything different or anything new that you learned in sort of the full analysis versus what you had talked about previously, I think, when you issued the preliminary review late last year?

This study-- what we released were the-- was the draft data, which was the data that we have obtained so far.

And what we are doing at the same time is a great deal of analysis to unearth information that will give us better design for the rest of the Phase II and the Phase III program.

So we felt that had the bottom line raw data in hand that we should share that with you and that's basically what you have and the interpretation that came with it was what we have so far.

Yes.

Okay.

Then I want to ask you a final question, as well, on Remoxy.

Can you remind us what you guys have said historically about the whole debate around whether or not it's actually possible to get sort of an abuse-resistance or abuse-deterrence actually included as a claim in the label versus just simply having data related to the actual abuse-resistant mechanism somewhere or data from the studies actually somewhere in the label versus actually having it as a claim on the label?

I don't even know if you guys have taken a position on that, but--

Actually, we haven't.

What we've said, if you look at the data, you can certainly see a product that has the potential to reduce abuse potential, right?

I mean, that's what you've got.

You've got a product that is more difficult to abuse by these mechanisms of extraction and crushing and those kind of things.

I believe that the strategy will be to let the marketplace decide once it's approved.

That's not something that DURECT is involved with directly.

This is King's call as to how the product should be approached with the FDA and the claims and so, I mean, it would be theirs, but my guess is that's the approach they'll take.

All right.

Thank you, then.

There are no further questions at this time.

Okay.

If not, I want to thank you guys for your time and we look forward to getting together.

Thank you very much. 'Bye.