DURECT Corp (DRRX) 2014 Q1 法說會逐字稿

Greetings and welcome to the DURECT First-Quarter Earnings Call.

At this time, all participants are in a listen-only mode.

A brief question-and-answer session will follow with the formal presentation.

(OPERATOR INSTRUCTIONS.)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Matt Hogan.

Thank you.

You may begin.

Okay.

Good afternoon and welcome to our First-Quarter 2014 Earnings Conference Call.

This call will begin with a brief review of our financial results, and then Jim Brown, our President and CEO, will provide an update on the business.

We will then open up the call for a Q&A session.

Before beginning, I'd 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 in development, expected product benefits, our development plans, future clinical trials, potential product approvals, 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 are included in our SEC filings, including our 10-K and our 10-Qs under the heading Risk Factors.

Let me briefly turn to our financials.

Total revenue was $6.3 million in the first quarter 2014, as compared to $4.2 million in the first quarter of 2013.

If you exclude all deferred revenue recognized for upfront fees from our agreements -- like with Zogenix and Impex -- revenue from our R&D collaborations was $1.4 million in the first quarter of 2014, as compared to $900,000 in the first quarter last year.

And revenue from this source always fluctuates from quarter to quarter depending on the state of development under the various programs and what our role isin those programs.

Product revenue from the sale of ALZET pumps and LACTEL polymers were approximately $2.8 million in the first quarter of 2014, as compared to $3 million in the first quarter of 2013.

Our gross margin on these products was around 62% in the first quarter of 2014, and these product lines continue to be strongly cash flow-positive for us.

R&D expense was $5.5 million in the first quarter 2014, as compared to $4.8 million in the first quarter last year.

SG&A expenses were $3.4 million in Q1 2014, as compared to $2.9 million in the first quarter of 2013.

And as a result of the above, our net loss for the first quarter of 2014 was $3.6 million, compared to a net loss of $5.2 million for the same period in 2013.

Our net cash consumed during the quarter was $2.6 million.

At March 31, 2014, we had cash and investments of $21.8 million, which compares to $24.4 million at the end of 2013.

And we have essentially no debt, other than normal liabilities associated with running the business.

And a brief reminder -- we have multiple programs that may potentially be partnered over the next 12 to 18 months.

These include POSIDUR, where we have worldwide rights, TRANSDUR-Sufentanil, ORADUR-ADHD and various feasibility studies that we hope may mature into development agreements, much like Relday did.

With that, thanks for joining the call and I'll turn it over to Jim.

Thank you, Matt, and hello, everyone.

When investors think of DURECT, they inevitably think of REMOXY and POSIDUR, our two late-stage product candidates that address large market opportunities in the field of pain management.

On April 29, Margaret Hamburg, the Commissioner of the FDA, made the following statement, and I quote, "Let me say, in no uncertain terms, the prevention of prescription opioid abuse is the highest priority for the FDA.

Nothing can ease the tragedy or erase the tragedy so many people have had to face as a result of abuse, addiction, or misuse of opioids.

But we can make meaningful progress to reduce and prevent our nation's prescription drug crisis.

The FDA is committed to reducing abuse of opioids and ensuring appropriate access to pain medications for patients in need."

REMOXY and POSIDUR address this major medical need, but in very different ways.

REMOXY is designed to provide effective opioid treatment for chronic pain sufferers in an abuse-deterrent formulation.

We believe our technology makes REMOXY far more resistant to the most common methods of tampering -- that is, snorting, injecting, smoking, chewing and dissolving in drinks.

In the case of POSIDUR, we have developed an extended-release pain product covering the first [full] three days after surgery, [and they] significantly reduced additionally the need for opioids with their associated risks and side effects.

There is not a similar product on the market today that provides local analgesia beyond the first day after surgery.

We believe that by also controlling pain locally between 24 to 72 hours post-surgically, POSIDUR has the potential to fulfill a meaningful unmet medical need in this important patient setting.

Many investors considering DURECT don't look beyond these two programs, but we're not just a two-product company.

There is much more here at DURECT that can create value for us over time.

Understanding the true value of DURECT requires a real work at the sum of the parts.

Our pipeline of differentiated products in development, our earlier-stage research programs which we anticipate will yield additional product candidates and partnership, and our ALZET and LACTEL product lines, which today are strongly cash flow-positive.

Our pipeline of products is protected by an extensive patent portfolio that provides patent protection in large market jurisdictions to at least 2025, and in several cases beyond 2030.

I'll now go into a brief update on our programs and then I'll open it up to questions and answers.

I'll begin with POSIDUR.

POSIDUR is a simple and easy product to use.

It's applied topically into the surgical wound where you effectively put it where it hurts.

It takes seconds to apply and works for up to 72 hours after surgery.

Our two pivotal trials demonstrated a 20%-30% reduction in pain with a concomitant 60%-80% reduction in narcotic use.

In our two trials -- our two pivotal trials, 20% more patients were narcotic-free after surgery.

One of those trials was a hernia trial, so if we just take a look just for a moment and think about hernia surgeries in the United States, there are 800,000 hernia surgeries annually in the United States.

A 20% reduction in patients taking narcotics would mean 160,000 potential fewer narcotic prescriptions being written each year.

This is for hernia alone.

With the rate of abuse in the general population being what it is today, that could potentially mean thousands of fewer families having to deal with the heartbreak of abuse.

As is to be expected, in our POSIDUR clinical program, a mixture of various surgically-related side effects were seen.

Some of these side effects were numerically lower and some were numerically higher with the POSIDUR versus the comparator.

Except for transient wound discoloration, none of these side effects occur at a rate higher than is typically seen by our surgical consultants or in the literature, and all of these side effects resolve over time.

As you know, we received a Complete Response Letter on February 12 from the FDA.

The Complete Response Letter was not with regard to our pivotal trial efficacy, nor to cardiovascular safety concerns, nor the CMC section, nor -- which is the Chemistry and Manufacturing Control -- nor the non-clinical or pharmacology.

The FDA that they have -- they aren't ready to approve the NDA and that the NDA does not contain sufficient information to demonstrate that POSIDUR is safe when used in a manner prescribed in the proposed label.

The FDA has indicated that additional clinical studies need to be conducted.

We have been working extensively with clinical and regulatory consultants to gain their perspective and guidance in addressing the Complete Response Letter.

Since receiving this letter, we've had some interactions with the FDA, and the next step is a formal face-to-face meeting.

We plan to put in our request for that meeting next week with an expectation that the meeting will be held this summer.

We will disclose the outcome of this face-to-face meeting after we have received the FDA's response to our minutes from the meeting.

While we're preparing for this FDA interaction, we are stepping up our medical communications activity around POSIDUR.

For example, we have had four posters that were presented at the 39th Annual American Society of Regional Anesthetic and Pain Medicine Meeting in April.

In addition, we have a number of POSIDUR abstracts that we expect to present at the following annual fall congresses -- the American Society of Anesthesiology Meeting in October in New Orleans that typically draws about 13,000 attendees and the American College of Surgeons Meeting in October in San Francisco that is expected to draw around 9,000 attendees.

We've generated a lot of compelling data in our POSIDUR development program, and we intend to continue our educational efforts to the medical community.

As a reminder, we own the worldwide rights to POSIDUR, which puts us in an enviable position for this late-stage asset.

Investors often ask us about our strategic plans for commercializing POSIDUR.

The short answer is that we're pursuing a dual-track process, and we're committed to doing what is right for our shareholders.

We're taking and talking to multiple parties about potential licensing -- potentially licensing the commercialization rights to POSIDUR.

We're also preparing to be in a position to commercialize the product ourselves.

Both of these options are viable and could create tremendous value for us over time.

Once we have clarify on the path forward with the FDA, we will weigh our partnership opportunities against the alternative of marketing it ourselves.

There is also the possibility that we will do some type of hybrid -- a co-marketing arrangement of some sort.

Now I'd like to turn to REMOXY.

REMOXY is an abuse-deterrent formulation of oxycodone, which is a widely-used chronic pain product.

Oxycodone does about $3 billion in sales in the form of Oxycontin and provides effective pain relief for chronic pain patients, but unfortunately, it has been misused at a rate the FDA has described in "a major public health care concern." Our ORADUR technology is what confers to REMOXY its multiple layers of abuse resistance.

It's effectively impossible to snort because when you cut open one of our gelcaps, it's got the viscosity of Vaseline.

Injection makes it -- it's a controlled-released injectible.

It can't be inhaled or -- without creating irritation.

Chewing doesn't work, nor does mixing it with alcohol.

It basically comes out at the same rate and the same range of rates as the product was intended to deliver.

We think the multiple layers of abuse resistant built into REMOXY make it a compelling pain product and that Pfizer will do an impressive marketing job when it's approved.

They have a major presence in the pain space with Celebrex and Lyrica.

With REMOXY, Pfizer has a product designed to be effective for legitimate pain patients, but with features designed to reduce abuse of illegitimate users.

Prescribing prescriptions get the comfort of knowing it will be an effective pain product without having to worry about writing prescriptions for a product that is more easily diverted and misused.

Patients won't have the stigma of telling anyone they're on Oxycontin, yet they get an effective pain relief -- they'll be able to achieve effective pain relief with a true twice-a-day gelcap.

With Pfizer's large sales force, they should do very well once this product is launched.

I'd also like to note we have multiple issued patents that go out at least until 2031, so there should be a long period for our shareholders to (inaudible) a meaningful return from REMOXY.

It's a late-stage asset in that the safety and efficacy of REMOXY have been shown conclusively, and the remaining task is to address the manufacturing-related issues that led to the FDA giving REMOXY its latest Complete Response Letter.

In March of 2013, Pfizer met with the FDA to share the extensive work that they had been doing on REMOXY and to propose a path forward.

The FDA agreed to Pfizer's proposal, namely that there is no need to replicate earlier Phase III if a bridge back to the data is provided with a bioequivalent study.

In October of last year, after a thorough review, Pfizer announced their decision to move ahead with the steps required to resubmit REMOXY and they are driving the program forward.

Specifically, there are two primary clinical studies that are required for resubmission.

The first is an abuse potential study and the second is a pharmacokinetic bioequivalent study.

The abuse potential study with the new formulation was started, per clinicaltrials.gov, in November of 2013.

This is listed as being a 60-subject study with a target completion date of June of this year.

In February of this year, Pfizer posted a study on clinicaltrials.gov that involved 60 subjects to evaluate the bioequivalence of the modified formulation of REMOXY versus the original formulation under immediate (inaudible) Fed conditions and to estimate relative bioavailability under fasting conditions in healthy volunteers.

This study has a target complete date of April of 2014.

We think the probability of success in these studies is high for multiple reasons.

First, a smaller bioavailability study has already been done by Pfizer, and those results supported moving forward with the bioequivalent study.

In other words, the bioequivalent study is basically a larger and more formal version of the bioavailability study that's already been completed by Pfizer to their satisfaction.

Second, the changes to the formulation were extremely minor.

Hence we don't expect the abuse liability study to turn out any differently from the study previously done by King Pharmaceuticals, and that study met all of its endpoints.

We are now about a year away from Pfizer's resubmission of REMOXY.

We believe that as the months tick by and the resubmission gets closer, more and more investors will begin to factor this program into their thinking.

The review period is 6 months, so our expectation is for an approval in late 2015 and launch shortly thereafter.

Pfizer gave an update on their R&D programs in February 25th of this year at the Citibank Conference, and REMOXY is listed as one of their key Phase III programs.

As a reminder of how transformative this product could be for DURECT, we receive a royalty of 6% to 11.5% of REMOXY sales.

Therefore, if Pfizer captures just 30% of the roughly $3-billion Oxycontin market, which is about $900 million, we would have an annual royalty stream of about $72 million, and that's a strong free cash flow that would go straight to our bottom line.

I'd also like to note that we have over $250 million NOLs built up, so when the royalty stream starts to kick in, we won't be paying taxes for some time.

I'll now move on to ELADUR.

This is our 3-day bupivicaine patch.

We are pleased to start the year by announcing our collaboration with Impex and the resumption of the development of ELADUR.

As a reminder, ELADUR is a pain patch that we are developing for post-herpetic neuralgia.

It's a 3-day patch that's designed to compete with the 12-hour lidocaine patches.

This is more than a convenience matter as it has been reported that 2 out of 3 patients on lidocaine have breakthrough pain during the 12 hours when their patch is off.

So this could be a meaningful patient benefit and efficacy advantage for us.

In addition, ELADUR has a very patient-friendly design.

It contours to the skin and won't fall off easily.

So a patient can exercise with it or take a shower with it.

The terms of our collaboration with Impex are as follows -- we received $2.5 million up front; we have $31 million in development milestones, the next of which is at the beginning of Phase III; they have $30 million in sales-based milestones; Impex funds all of the development and commercialization for the product; DURECT gets a share of sub-license fees that are received if Impex decides to sub-license the product; the royalties start at mid-single digit and go to low double-digit.

In the terms of next steps for the program, Impex is conducting a short proof-of-concept study followed by a meeting with the FDA to discuss the structure and design of the proposed Phase III program.

And their plan is to start the Phase III program late this year.

As a reminder, we have orphan drug designation for ELADUR for post-herpetic neuralgia, and we have an issued patent in the US going to 2031 and an issued European patent going out at least until 2027.

We're pleased that ELADUR is back in development with Impex and that we may have another attractive program in Phase III this year -- later this year.

Now I'd like to move to Relday.

Relday is a large commercial opportunity.

It features the first once-a-month risperidone product.

It's a patient and physician-friendly treatment for schizophrenia.

It's a subcutaneous injection, versus the market leader today, which is IM.

We've had positive single-dose Phase I data with a full dose range expected for clinical practice.

This product has been partnered with Zogenix and they plan to initiate a multi-dose clinical trial in the fourth quarter of 2014.

Just as a reminder of our collaboration with Zogenix, we received $2.25 million up front; we have $103 million in potential milestones from the program -- $28 million are development-based and $75 million are sales-based milestones; DURECT gets a share of any sub-licensing fees that are received by Zogenix; and Zogenix is responsible for funding the full development and commercialization for the product.

The royalties that DURECT has received start at the mid-single digit and go to low double-digit.

I'd like to move now to our other ORADUR opioid products.

Pain Therapeutics has the right to develop three other opioids with our ORADUR technology.

These products are hydrocodone, hydromorphone and oxymorphone.

All three of these products have active INDs in place at the FDA, and Phase I work has been done in the past with hydrocodone and hydromorphone.

Future development of these will definitely benefit from our REMOXY experience.

Pain Therapeutics has made the following comments during their February earnings call.

First, they seem to prefer hydrocodone and hydromorphone over oxymorphone.

And second, they mentioned that they may be able to have one or two of these products in Phase III at about the time when REMOXY is submitted in the middle of 2015.

And they then went on to mention that they are considering an approach for the hydromorphone project that might not require a Phase III trial, but they of course will have to vet that strategy with the FDA.

We are now working with Pain Therapeutics on those programs under approved work plans.

If Pain Therapeutics commits the resources, we think these programs have the potential to move quickly and represent a nice value stream as they advance in development.

As a reminder, we get the same economics on these programs as we do for REMOXY -- that is, a 6% to 11.5% royalty; PTI pays for all of the development and commercialization costs.

There are also about $6.1 million in pre-sales milestones spread across the three programs that we could earn.

Now I will be moving on to our ORADUR-ADHD program.

The methylphenidate formulation demonstrated the following in a Phase I study -- rapid onset of action, long duration for once-a-day dosing, a smaller capsule size when compared to leading products on the market and, of course, the tamper-resistance due to our ORADUR technology.

Orient Pharma, our partner in Southeast Asia, met with the Taiwanese FDA to outline their Phase III program, and they are developing plans for their other Asian and South Pacific territories.

In the US and Europe and Japan, the rights are retained by DURECT.

Now that we have the formulation in hand with supporting PK data, we are initiating licensing discussions.

Our ORADUR technology could be -- could have utility for a number of potential ADHD products, which may be the basis for future licensing opportunities for DURECT.

Let's review potential fee drivers for DURECT over the next 12 to 24 months.

For POSIDUR, we'll be meeting with the FDA to determine the next steps to addressing the Complete Response Letter, and then pursuing development and commercialization of POSIDUR and the program, including a potential licensing deal.

For REMOXY, it's Pfizer conducting the required studies, including the BE and abuse potential studies, and then with the resubmission target in the middle of 2015, then followed by a 6-month review at the FDA, and once approved, the product launch.

For ELADUR, it's initiation of the Phase III (inaudible) impact in late 2014, which also triggers a milestone payment for us.

And for Relday, it's initiation of the multi-dose trial by Zogenix in the fourth quarter of 2014, potential for a PTI ORADUR program advancing into late-stage development in this timeframe.

Also, the potential for new collaborations around POSIDUR, our Sufentanil patch, the other ADHD programs, or from our feasibility programs.

We as well have the potential to move a new program into development this year.

With that, I'd like to thank you again for joining our call and we'll now take any questions you might have.

Thank you.

We will now be conducting a question-and-answer session.

(OPERATOR INSTRUCTIONS.) Our first question is from Annabel Samimy.

Hi.

Thanks for taking my question.

Just wanted to get a little bit more color on -- you said you've had some further communications with the FDA regarding the safety issues on POSIDUR and, honestly, other than the imbalance between the bupivicaine arm and the POSIDUR arm that you cited before -- which can be pretty minor discoloration -- I think it was pruritis -- it seems unusual that, given that the FDA is under to deal with this whole narcotics issue and reduce the use of narcotics that they would make such an issue out of these small points.

Is there any more color on some of the safety issues that we're talking about through your discussions, and if you have any better idea about the timelines (inaudible), that would be great.

Yes.

I don't really have any more color on the safety questions.

We're still obviously preparing ourselves for the face-to-face meeting.

We just wanted to get some further clarification with regard to the way the letter was constructed and the like, and we did get back very positive feedback actually from them.

So we're going forward into this with our eyes open, and I totally agree with what you said.

Given what Dr. Hamburg had said and given the whole focus of the agency, it seems that a product by which in two clinical trials -- the hernia trial showed 21% of patients being opiate-free and the shoulder trial, which is a more painful trial, showed 24% more patients.

So if we can look at those and say the potential is here for -- at least in those two studies -- 1 in 5 patients not taking any narcotics, that's a huge difference.

I have some friends who work for drug enforcement and the like and I don't know what -- you can look at different trial -- or different studies and get the percentage of people who have that predisposition for abuse, but it's in the range of kind of mid-single digits, let's say -- 4% to 6% kind of thing of the population.

And if we can talk about maybe hundreds of thousands of patients not having to get a script written, the potential there is, I think, really strong and really requires (inaudible) consideration.

As far as the timing goes, we're going to submit the request next week for a meeting this summer, and I don't know, Matt, will we confirm --

After that, we'll be able to communicate more about the longer-term timing.

Yes.

Because you sort of sense there's a little bit of frustration here because these issues don't seem to us to be life-threatening.

But nonetheless, the arbiter is the FDA.

Yes.

So until we have that meeting, it's hard for us to say much more.

Yes.

And we feel like we have a substantial leg up over what (inaudible) has with their product.

They have really nothing beyond 24 hours in true reduction of pain and substantial narcotic reduction, and we think we can fit that unmet need with that 24 to 72 hours.

And so that's going to be part of what we focus on.

Thank you.

The next question comes from Jason Napodano.

Hi, guys.

Thanks for taking the question.

If you go to clinicaltrials.gov, again you see the two studies that you mentioned, but there's two other smaller studies on there -- I think a dose proportionality study and then a small food effect study.

All of these say that they're going to have data soon.

I think the three of them say June and one of them says April or May.

Just curious as to if Pfizer has given any clue to you guys on how they will present that data.

Will we see it?

Will you see it?

When would investors kind of get a good sense of how these four trials turned out?

We -- unfortunately, I don't have any insight into it.

In Pfizer's communication of this stuff, they are their own masters, for sure.

We do have the right to understand the clinical data as it comes out, but to that end, I think that they'll be giving that to us when they see fit.

And so the timing of it will be, I think, later rather than sooner.

So I think we'll be waiting along with the rest of the world to kind of see when they decide to present this data.

They may hold off on a lot of this until just -- if it were me and I were Pfizer, I would wait until right I was ready to launch a product and then I'd be out at the congresses talking about the abuse potential reduction and all those kind of things.

But until then, why start to talk?

I think in chatting with our colleagues at Pain Therapeutics, their kind of phrase is that no news is good news.

They really don't expect Pfizer to say much, but as long as they're moving forward with things, the absence of news is actually probably a positive.

Yes.

The next question comes from Nick Farwell.

Matt, I unfortunately missed what you said the deferred revenue recognized in the quarter was so that we can determine exactly what the research and development revenues were.

Well, I don't think I gave the deferred revenue number, but if you strip it out, to kind of call it the real revenue --

Yes.

Was -- from collaborations was $1.4 million.

Okay -- sorry.

Compared to -- it was up about $500,000 from the first quarter in 2013.

Were you able to hear that, Nick?

Were you able to hear that, Nick?

I'm sorry, sir.

The next question is now from Jeffrey DeSiebert.

Good afternoon.

Coming back to POSIDUR, can you share with us a little bit what the reaction of the consultants we gather you've been working with since the CRL and then -- and what kind of feedback you've gotten from them in terms of the somewhat surprising areas the FDA chose to focus on in the CRL.

For those of us who are not intensively involved with this kind of activity, it would be very helpful to get a little bit of feedback as to what the experts have told you.

Yes.

I think in general -- not even in general -- to a person, they've been very supportive, and along the lines of what you have suggested, somewhat surprised and somewhat feeling like the rates -- I think I said this in my talk -- the rates at which you see these side effects is really in their hands as it was in these trials or as one can see in the literature.

And so this is the information that we're pulling together.

Alright.

And following on the POSIDUR topic, we've certainly had the feeling that over the last month and leading in -- certainly leading into the PDUFA date that you were involved in a number of discussions with prospective partners for POSIDUR.

Can you give us any sense of the level and intensity of interest in a possible deal?

We're sensing from your comments that at the moment, you're looking at two possible road, to borrow from Mr. Frost, but which one you travel -- we don't know yet.

But the fact is one of them is the partner path.

And I guess the crux of my question is are you getting very much a sense of, well, we'll talk to you once the FDA is (inaudible) and this is something maybe later this year, early next year we can talk about?

Or are you finding a more active level of engagement?

I think you see the full gamut.

There are a number that -- we're actually engaged in talking to a number of people, even post the letter, because the letter does provide in itself some clarity.

The market opportunity, I think, is substantial for this.

We see that with (inaudible).

I think they announced this year that their first-quarter sales were $34 million, up 13% after being up 50% the two previous quarters.

So a nice continued momentum there.

So if they, with a product that is a 12 to 20-hour product, can achieve in excess of $100 million -- maybe in excess of $150 million if this keeps growing on an annual basis -- we with ours should be able to do better than that.

It would be easier to apply and simpler, no risk of injection intravenously and all that kind of stuff.

So we feel like we've got a superior product.

And so the decision will be one that we'll be making over time, and we certainly have the partners there and we're doing all of our work as if we were going to launch it ourselves -- hence the work with the posters and all of the abstracts that we're working on to continue to pave that runway and prepare for this product.

So we hope at the end of the day, whatever decision we make, it will make all the difference, Jeffrey.

Thank you.

The next question comes from Rajesh Patel.

Hi, guys.

Thanks for taking the question.

Pfizer just announced the news today about the ALO-02, which is their other abuse-resistant oxycodone.

And so what I'm wondering is have you guys, either from Pain or from Pfizer, have any color about how REMOXY versus ALO-02 fits into their thinking.

Pfizer doesn't share their strategic thinking with us.

That product, ALO-02, has been around a long time.

The technology's been around a long time.

And in fact, it's been a real challenge for a long time.

If you look at Embeda, it was withdrawn voluntarily, I think, a number of times -- taken off the market because of issues of manufacturing and leakage of the antagonist.

I think the whole concept of giving what is effectively a physiological poison along with the medicine that you might give to my grandmother -- I find it actually disturbing, to say the least.

There are patients who have been put at risk from this kind of technology, all to prevent somebody from abusing it.

When an alternative is out there such as our ORADUR technology -- which simply makes it more difficult to extract and much more difficult to abuse from that perspective without having to put anyone at additional risk.

So I think that Pfizer has that deal with if they want to consider that.

I think they're just moving all the factions forward.

This was a program, as I said, was underway by Alpharma.

King kind of continued it and Pfizer has picked up the effort.

The other side of it is from a pure business standpoint.

Purdue Pharma actually control the patent space here, and King had to get a license from Purdue in order to launch the morphine product, Embeda.

They didn't.

Purdue did not give them a license for oxycodone.

And so Pfizer would still have to deal with that as well prior to launching that product.

That's helpful.

Thanks.

Sure.

The next question comes from Michael Gottlieb.

Hi, gentlemen.

I have a couple questions about the timeline for REMOXY also.

If the bioequivalence study is done in April and three more other studies are done in June, what else does Pfizer have planned in terms of -- we don't know?

Well, we do know.

They actually -- they are -- have committed to the FDA that they're going to -- they are doing it, in fact.

They're in the middle of a stability trial, which is basically -- it's under ICH guidelines, so whenever you make any changes to formulation, you have to set up a new stability trial.

And they're running those samples for a full year and those are set up kind of around the end of the year.

And so they'll reach the one-year point at the end of this year, then they'll have to write those reports up.

And I think that's how they're getting to the mid-next year.

I think the potential exists that they might be able to do it quicker, but in my experience, Pfizer doesn't do much quickly.

I think they're quite deliberate and quite precise, and so I would expect that the middle of the year is when they'll be resubmitting.

If they do a little bit better, that's awesome, but I think the most important part is you can feel that it'll be chrome-plated and bulletproof by the time they submit.

Okay.

Thank you.

And the final question comes from Nick Farwell.

Matt, I got cut off.

I was just curious.

I noted that R&D sequentially again -- fourth to first quarter -- was up $600,000, but I'm curious -- as I recall -- and I'm not sure if it was accurate -- but you include all expensed R&D under R&D which -- does that include only company R&D or does that include company plus collaborative and then it's netted out up above?

Fair point.

It's both.

So to some extent, as we would have geared up some activities with Pain Therapeutics around those other opioids --

Yes.

Or with Zogenix on Relday --

Yes.

So that they can get ready to start the multi-dose study in the fourth quarter, that R&D expense does go into R&D.

Right.

But if they repay you, it would show up above under revenues.

Correct.

Okay.

So to show a $600,000 delta first -- I'm sorry -- fourth to first quarter suggests you're ramping up on something internally.

Yes.

That hasn't been compensated yet.

Yes.

Those are two items.

And then I think with respect to POSIDUR -- even though we don't have trials underway -- we're spending a fair amount of money.

Medical affairs falls into that bucket and the various consultants we're working with to prepare to have this FDA meeting.

All that falls into R&D.

And also, we were preparing for the potential launch as well.

So there's a certain amount of effort that is associated with that.

Okay.

And secondarily, I think I misinterpreted -- I may have misinterpreted what you were saying, Jim.

There are three ORADUR programs.

Has Pain actually committed to proceed with one or two of them yet or they're still thinking about committing to proceed?

It's hard to say at the end of it all, but the have actually -- we have work plans in place, so I'd say they have committed to at least one.

Okay.

That's what I was curious about.

Okay.

Thank you very much.

Sure.

Okay.

Well, I think the operator had mentioned that was the last call.

We're always happy to take other questions if you just call us directly at the company.

And we thank you for your participation in this call.

Thank you.