DURECT Corp (DRRX) 2015 Q1 法說會逐字稿

Greetings and welcome to the DURECT first-quarter earnings call.

(Operator Instructions).

As a reminder, this conference is being recorded.

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

Thank you, Mr. Hogan.

You may begin.

Okay, good afternoon.

Welcome to our first-quarter 2015 earnings 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 our business.

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

Before beginning, I would like to remind you of our Safe Harbor statement.

During the course of this call, we may make forward-looking statements regarding DURECT's products in 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 the 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-Q, under the heading risk factors.

Let me now turn briefly to the financials.

Total revenue was $4.8 million in the first quarter of 2015, compared to $6.3 million in the first quarter of 2014.

Excluding all deferred revenue recognized for upfront fees from our agreements, revenue from our R&D collaborations was $1.6 million in the first quarter 2015 as compared to $1.4 million in the first quarter last year.

Revenue from this source always fluctuates from quarter to quarter, depending on the state of development under the various programs and what our role is in those programs.

Product revenue, largely from the sale of ALZET pumps and LACTEL polymers, was approximately $3 million in the first quarter 2015, as compared to $2.8 million in the first quarter last year.

Our gross margin on these products was around 67% in the first quarter and these product lines continue to be strongly cash flow positive for us.

R&D expense was $5.4 million in the first quarter this year, as compared to $5.5 million in the first quarter last year, so not much change.

SG&A expenses were $2.8 million in the first quarter this year, as compared to $3.4 million in the first quarter last year.

As a result of the above, plus interest expense, our net loss for the first quarter of 2015 was $4.9 million, compared to a net loss of $3.6 million for the same period in 2014.

At March 31, 2015, we had cash and investments of $29.8 million, which compared to $34.9 million at December 31, 2014.

After the quarter closed, we raised $10.1 million net by selling 5.4 million shares in the open market at an average price of $1.94 per share, using our at-the-market facility.

Hence, really our pro forma cash position would be about $40 million.

We have $19.8 million in long-term debt.

With that, thanks for joining the call and I will turn it over to Jim for a discussion of nonfinancial matters.

Thank you, Matt.

I will focus on what's new since our last call and our most significant program.

Therefore, I won't be touching base on every program that we have.

I will begin with our Epigenomic Regulator Program and DUR-928.

DUR-928 is the lead molecule from this program.

It is an endogenous small molecule.

DUR-928 is the first in a new family of endogenous steroid hormones.

DUR-928 represents a major discovery for DURECT and, although still to be proven, a potential major advancement for medicine.

DUR-928 has demonstrated significant effects in six different animal models while not demonstrating any toxic effects in the preclinical toxicology studies conducted, nor have we seen any safety signal in the initial Phase I study, despite achieving plasma concentration of DUR-928 that were at least 100 times the normal endogenous levels for this hormone.

We have been working on this program for more than 3-1/2 years before we announced it on March 2 and have six patent families in process to protect it.

DUR-928 is an epigenomic regulator of lipid homeostasis, inflammation, and cell survival.

It inhibits cholesterol synthesis more broadly than statins; that is, statins which block HMG-CoA reductase, the number one enzyme in the pathway.

928 also blocks the five other major enzymes in that pathway.

DUR-928 inhibits triglyceride synthesis.

It inhibits bile acid and fatty acid synthesis like the -- in a similar fashion to the bile acid analogue.

It inhibits lipid absorption and transportation via MTP, similar to the function of lomitapide.

DUR-928 downregulates PCSK9 and can be dosed orally.

It inhibits inflammation by downregulating TNF-alpha, the interleukins COX-2, and others.

It improves cell survival, increases bile acid secretion, and it improves insulin sensitivity and glucose tolerance.

DUR-928 does all of this and it occurs naturally within the body.

Our animal data are divided into two main categories, safety and efficacy.

With regard to safety, in pharmacokinetic and toxicology studies conducted in mice, hamsters, rats, dogs, and monkeys, DUR-928 has been found to be orally bioavailable and safe at all doses tested to date.

These nonclinical results supported the initiation of DUR-928 into human safety trials with our oral formulation.

Regarding efficacy, the biological activity of DUR-928 has been demonstrated in six different animal disease models involving three animal species.

Three of these models represent acute toxic or ischemic organ injury, as demonstrated in kidney and liver, and three represent chronic disorders of liver lipid accumulation fibrosis and dysfunction, such as NAFLD and NASH.

For the pharmacology studies supporting the chronic indication, DUR-928 has demonstrated improved liver morphology and reduced liver triglycerides and cholesterol in mice and hamsters fed a high-fat diet.

It has reduced fibrosis and NASH scores in a mouse NASH model.

In pharmacology studies supporting the acute indications for DUR-928, the molecule has demonstrated improved survival after injury from lethal doses of acetaminophen and ethanol in mice.

It has improved survival after exposure to lethal doses of endotoxin in mice and it has reduced ischemic injury in a rat kidney model that mimics restricted blood flow, similar to what you would see in cardiac surgery.

In March, we reported results from our initial Phase I safety study.

This trial was conducted in healthy subjects.

It was a single-site, randomized, double-blind, placebo-controlled, single ascending dose trial in 30 subjects, of which 20 received 928 and 10 received placebo.

There were five doses tested, the highest of which resulted in plasma levels that were greater than 100-fold those of the subjects' endogenous levels of DUR-928.

No treatment-related side effects were noted at any dose.

The half-life appears to be suitable for once-daily or less frequent dosing and it is a precursor to the Phase I multiple ascending dose trial.

This past month, we also started this multiple ascending dose Phase I trial.

This is a single-site, randomized, double-blind, placebo-controlled, multiple ascending dose trial in 20 subjects.

There are two doses that will be given once daily for five consecutive days in healthy volunteers and we expect to have the results from this trial in the second quarter of this year.

I am now going to move on to the therapeutic opportunities for DUR-928.

The first group of potential clinical indications for DUR-928 is acute organ injury, for which we use our injectable formulation.

The initial indications of interest are acute kidney injury, which has orphan indications.

Examples of this would be something protecting the kidneys during some type of major open-heart surgery or bypass surgery.

As well, acute liver failure, which also has orphan indications.

An example here would be acute acetaminophen toxicity.

And finally, ischemia and reperfusion injury, which also contains orphan indication.

Postoperative acute kidney injury, or AKI, has been associated with cardiac surgery.

There is an increased incidence of postoperative AKI.

It is currently seen in somewhere between 5% to 25% of patients undergoing major surgery.

AKI portends a poor outcome for even small elevations of serum creatinine are significant and have been associated with dialysis and reduced survival.

Other potential clinical indications for DUR-928 are in the chronic liver diseases, which we will pursue with our oral formulation.

The initial indications for chronic use are nonalcoholic fatty liver disease and nonalcoholic steatohepatitis.

Additionally, there are multiple orphan indications we plan to investigate.

Both NAFLD and NASH is a growing global epidemic.

NAFLD and NASH are hepatic manifestations of the metabolic syndrome, and unfortunately NAFLD now, prevalence has doubled in the last 20 years to the point that it -- basically, one-third of the US population has nonalcoholic fatty liver disease and 3% to 5% of Americans, or about a little bit more than 10% of those NAFLD patients, go on to have NASH or nonalcoholic steatohepatitis, with about 20% of those patients developing cirrhosis.

By comparison, between 1999 and 2002 the prevalence of hepatitis C viral infections in the United States was 1.6%.

It is projected that soon NASH will be the number one cause of liver transplant in the United States.

This past March, there was a keystone meeting up in Canada on NASH.

It was the first of these actually held and we had one of our key scientists up there, and there was a lot of discussion as what causes this transition from nonalcoholic fatty liver disease to NASH patients.

And there is a new theory that is being proposed and supported by some data that the progression from NAFLD to NASH is in some way potentially associated with endotoxin, a bacterial leaking coming in from the gut and being expressed into the liver.

And if that case does hold up, it would actually even be more relevant for DUR-928, given our strength in being able to protect against endotoxin toxicity and the inflammation associated with it.

In summary, DUR-928 is a novel, endogenous, small molecule that is an epigenomic regulator of lipid homeostasis, inflammation, and cell survival.

We have compelling data from multiple animal models.

In acute organ injury models, we have shown improved survival in the presence of chemical damage caused by acetaminophen and alcohol or biologic damage caused by endotoxin.

We also have improved post-ischemic organ function in the chronic metabolic disease model.

We have seen improved liver morphology and reduced liver triglycerides in cholesterol.

We have seen reduced inflammation, reduced fibrosis, as well as a reduction of a NASH score.

And we have seen improved glucose tolerance and insulin sensitivity.

We have an injectable formulation for our acute dosing and we have an oral formulation for our chronic dosing.

This product is suitable for once-daily or less frequent dosing.

In some of the models, we have seen just phenomenal data by only dosing every three days.

We have seen no toxicity in any of our preclinical studies to date.

As well, we have seen no adverse events from our first Phase I trial.

The next steps for DUR-928 are completion of the multiple ascending dose -- the oral Phase I trial.

We expect those data this quarter, the second quarter of 2015.

Next, we will be starting the single-dose injectable Phase I trial in the second half of this year and the multiple ascending dose injectable trial at the beginning of the fourth quarter of this year.

The Phase II for this program will begin in 2016 in the multiple patient population.

We are looking at acute organ injury, looking at orphan indications with our injectable formulation.

We are also looking at orphan indications for the chronic indication with our oral formulation.

As well, we are looking at a chronic indication with the oral formulation that is not orphan, such as NAFLD/NASH.

Now that the program is public, we have ramped up our engagement with our key opinion leaders to assist us in defining the right studies to prioritize in 2016 and we look forward to updating you as this year unfolds.

While we have been working on DUR-928, we continue to focus on and maintain progress with our other programs, which include two late-stage product candidates.

The first I will discuss is POSIDUR.

Since our face-to-face meeting with the FDA in late September, we have had additional interactions with the FDA to clarify what we need to do to address the complete response letter.

These interactions have done a lot to clarify key points with the FDA, and in late February, we sent the FDA a synopsis of the protocol we proposed for a clinical study that is designed to gather the data the FDA would like to see in the NDA resubmission.

When we get feedback from the FDA, we will be in a position to finalize the protocol and get going on the trial.

Regarding timing of the response, there is no formal PDUFA date when they need to -- when they will have -- would have to get back to us.

However, the FDA has told us that they are working on it, so we expect to hear back from them soon.

In the interim, we are engaging with clinical research organizations and key investigators regarding conduct of the trial.

And rather than talk about the trial right now, we would rather get feedback from the FDA on our protocol synopsis and then we will be in a far better position to describe the trial.

With this clarity from the FDA as the missing piece with regard to our partnering discussions, we are able to now move those forward.

There is a strong interest in the program from multiple parties.

To that end, we are looking forward to getting this feedback from the FDA.

The interest in POSIDUR is driven by the substantial market opportunity for a true three-day postsurgical pain product that has the potential to meaningfully reduce opioid use after surgery.

I'll now move on to REMOXY.

Pain Therapeutics has stated that they are focused on an orderly transfer of the program back from Pfizer.

At that point, Pain Therapeutics can finalize their strategy for resubmitting the NDA and their partnering efforts.

The Pain Therapeutics press release on April 21 stated that they had resumed responsibility for REMOXY under a letter of agreement from Pfizer.

They said that Pfizer has started to transfer documents, data, and regulatory responsibilities related to REMOXY to Pain Therapeutics.

They further stated that they expect the transition to be successfully completed -- or substantially completed in the second quarter of this year.

We have been in contact with Pain Therapeutics, shared with them our knowledge of the work we conducted with Pfizer, and we're standing by, ready to assist Pain Therapeutics in any way that we can.

We look forward to updates from Pain Therapeutics in the coming weeks.

Now moving to Relday.

Zogenix stated that the multiple dose trial started in the first quarter of this year and they expect to have data in the third quarter of this year from this trial.

They have also stated that they are targeting for an end of Phase II meeting by early 2016.

This is a milestone for which we would receive a payment.

Zogenix has stated they intend to seek a partner for outside the United States.

If they do partner, DURECT will receive a portion of what Zogenix receives.

With a product like this, once the PK is established there is no need for a Phase II study, so the next step in development would be Phase III, which could occur in 2016 and which -- for which we would also receive a milestone payment at the start of Phase III.

We feel Relday will be a nice product opportunity for treating schizophrenic patients.

In the earlier Phase I trial, therapeutic plasma levels were achieved on the first day of dosing, followed by control released profile over the whole four-week period.

Relday offers a simpler dosing regimen as compared to the current therapy because the patient would most likely not have to be weaned off the oral medication as they transition to the long-acting injectable.

Relday offers a subcutaneous injection, rather than an IM injection.

And unlike the leading injectables in this category, with Relday there is no need for reconstitution prior to use.

Market research on this product is quite positive, and we look forward to more data later this year and potentially to having another program in Phase III in 2016.

The last program we will review today is our ORADUR-ADHD program.

Orient Pharma is our partner for ORADUR-Methylphenidate and they have certain Far East territories for which we get a royalty, while we have retained rights for Europe and the United States.

Orient Pharma has been interacting with the Taiwan FDA and they expect to start a Phase III trial in Taiwan in the middle of this year and complete it in 2016.

Although the commercial opportunity for us is not that large in Taiwan, we are looking forward to having the data generated, as it may be very useful for us.

As you may know, methylphenidate is one of the two main ADHD drugs and the ADHD market is a large one.

As a reminder, the ADHD market in the United States was about $9 billion and grew 6% in 2014.

The features of our product candidate are a rapid onset of action, the long duration, a small capsule, and with regard to abuse deterrence, we have minimal alcohol dose dumping and resistance to physical tampering.

About 20% of youth abuse ADHD drugs and 40% of the users snort them, a strategy by which our ORADUR technology would be prevented.

Our market research suggests this could be a very attractive product.

With that, we would be happy to take any questions you might have.

(Operator Instructions).

Annabel Samimy.

Thanks for taking my question.

So I wanted to ask you about 928.

Obviously, you are very excited about the program, but from our perspective it is still a little bit hard to wrap our heads around the compound, given its early stage.

So maybe you can help us lay out the timelines.

I know you just mentioned that you are doing a lot of single and multi-escalating doses -- or multi-ascending doses in 2H.

But once we get into Phase III trials, how do you see this progressing for acute studies or acute indications?

Are they going to be rapid type studies, the chronic ones?

Are those going to be year-long studies?

Like how do we think about this so we can even try to formulate an idea of this value in our head?

Okay, it's a great question.

First off, you are absolutely right.

This year, we're going to spend the majority of our time focusing on getting the Phase I done, and I think we are a little bit ahead of schedule to where we thought we would be.

We had expected to start the multiple ascending dose for the oral program the middle of this year.

We actually started -- we were able to start it last month and we will actually have data before the second half of the year and be doing the injectable Phase I following that in the second half of this year.

Once one has -- once we have accomplished or completed the Phase I dosing, the next step would be Phase II data to look for various models of efficacy and where we want to pursue, and there are quite a few.

As you can imagine, there are more than half a dozen potential orphan indications for the chronic use, as well as NAFLD/NASH and alcoholic fatty liver disease and potential for treating hepatitis patients once they have been cured of their virus, because they still have this damaged liver that needs to be treated.

And then on the acute side, there is, of course, acute kidney injury around surgeries and, as well, acute liver damage that can occur from toxicity and a host of other things.

So there are a lot of opportunities in front of us, and what we are doing actually right now, why we are doing the Phase I work is we're working with our key opinion leaders and we have got a number of KOLs we're working with, both nephrologists and liver specialists and others, to really ferret out which are the best opportunities for us to pursue.

There are only a certain number of Phase II trials that we within our current capability at DURECT financially can pursue, and so we will most likely do three or so.

We haven't quite nailed it down next year, but that's the range that we are looking at.

So we want to make sure that the ones we have, we can get a decision sooner rather than later and that the data will be meaningful.

To that end, that's one of the reasons why Matt -- I am very pleased that he was able to execute on the at-the-market financing and able to bring in another $10 million to move forward, but we certainly will look forward to other means to fund ourselves as we accelerate.

One of the things that is interesting on the chronic side, I think the Street is used to seeing people who are looking at NASH results typically taking a year to see results.

They typically have to dose those patients for a year, and I think it's because the primary function of these molecules that they're looking at, the activity of these molecules, is to get the fat out of the liver.

They reduce the triglycerides and the cholesterol and, by secondary means, then, reduce the inflammation because the inciting cause, that high -- the high lipids in the liver are no longer there and, secondarily, the liver starts to clean itself up over time.

It may well be with our molecule that we see this response faster, maybe in months rather than a year, and we are getting to glean -- in just gleaning of this from some of the work that we have done with that NASH model in Japan where we saw just almost basically a reversal of cirrhosis at four weeks of dosing because we have this direct anti-inflammatory effect, along with getting rid of the fat and the cell survival.

And so, it's quite possible that, and we are hoping, that we can see a signal maybe sooner.

We even saw in the one mouse study that we did in the United States just within a certain number of hours, within 14 hours or so, there were some very significant biochemical changes in those mice.

It still remains to be seen.

I know it's a long-winded answer, but we are building the ship before flying it, but we are moving through this year and we will have better clarity as each quarter unfolds.

Okay, so I guess on the issue of cash, you obviously have your $10 million from the ATM that you just had, I guess, last quarter.

Then, you have got some milestones coming up.

Can you give us a sense of the size of these milestones that are coming up, whether it's from Zogenix or [PKIE]?

Can you just help us size that a little bit in our heads?

Yes, well, I am not allowed to give you the exact details.

Most of these milestones that we are talking about would cover most of a quarter's worth of burn or a substantial portion of it.

Right now, our burn rate is about $5 million a quarter.

That would go up once we start the POSIDUR study.

We're estimating that would have costs associated with it of $8 million to $10 million in outside expenses to run the trial and get the resubmission ready.

That would be spread out over the course of maybe 18 months or something through the resubmission.

So there is possible milestone payments from these existing programs.

There is a little milestone on approval for REMOXY, and I think the other source of cash here is if in fact we did partner POSIDUR, for example.

There, we wouldn't do it unless we were getting a meaningful upfront, and the most likely scenario would be someone would share in the cost of that Phase III program as well and then a large milestone on approval.

So if that happens, then we are on a very different place financially.

Okay, so just on that point of partnership, I think you had a line in your press release where you said you are preparing to be in a position to commercialize POSIDUR yourselves in the US, and I haven't gone back to the old press releases, but it seems like you are leaning a little bit more towards commercial, keeping it as a proprietary program.

Are partnership talks not going as you expected or is it just completely on hold until you hear something from the FDA?

And have they decided a timeline, because this is several quarters now we're waiting to hear what their response is here?

Right, so let me address that.

No, that's not meant to convey in any way, shape, or form that now we have increased our desire to do it ourselves or not.

It is safe to say we have considerable interest from people who might like to partner this program and we have had meaningful discussions with several of them.

The one remaining gating item, of course, is figuring out what is the remaining study that we are going to do.

Once we have that, many of these parties have already done a lot of due diligence, but that's the one piece that is missing.

And then, our plan is to drive those discussions forward and figure out, are they offering a sufficiently good deal that we should do it at this time, or not?

And if it's not attractive, we will keep it ourselves and potentially go forward ourselves, just like a Pacira did.

So we want to keep all options open, but there is considerable interest in the program, quite frankly, which is driven by the market opportunity.

What was the other part of your question?

Oh, the timing.

It has been also frustrating for us that we are not ready to get started with this study, but it was late February that we sent this protocol synopsis to the FDA, so they have had about two months with it, and for all we know, tomorrow we are going to hear from them.

But there is no formal PDUFA requirement for them to get back to us.

As Jim mentioned in his remarks, they have told us they are looking at it and they expect to get back to us, but we just -- I am sorry we can't put a date on it.

We don't control that.

All right, thank you.

Irina Koffler.

I think you have answered a lot of the ones I had.

I just wanted to delve a little bit more into the expense side, which is on -- on collaborative R&D, can you remind us what programs are in that line item?

And if you were to partner POSIDUR and maybe split development costs, would you generate more revenue out of that line?

So first, who is it coming from -- Zogenix with Relday?

Santen, where you may recall we licensed a depot injectable program in the ophthalmic area?

And then, we have got some feasibility projects underway.

Those are the current ones in the first quarter that show up in the line of collaborative revenue.

If we did some work to support Pain Therapeutics on REMOXY, they would reimburse those expenses.

That could show up as well in future quarters.

There wasn't anything in the first quarter from that source.

So that's the current -- if we were to license POSIDUR and they were paying half of the, let's say, the Phase III program, we probably would show that as -- we would probably show the full expense on our books and then the revenue that we got for it, the half, the expense of the revenue.

Half of the expense of the revenue, okay.

Okay.

And then, are you going to get a milestone from Orient when you start the Phase III, like you would with Relday?

No.

Just as a reminder, we don't get one for that.

As a reminder, the Orient Pharma relationship, because we haven't talked about it in a while, what was attractive to us about doing that partnership with them is that we made a series of different formulations to try to pick the right one and they undertook at their expense to run multiple Phase I studies in Taiwan to generate the data and help us pick the right formulation.

And so, that part didn't cost us anything.

It was almost like an off-balance sheet way of getting the program through these studies.

They get the rights to Taiwan and a few other Asian countries.

We get a small royalty back, but they don't have any rights to Europe or the US.

We retained all of that.

And if you think about it, in our mind those are the bigger market opportunities, so it was an interesting way to get somebody else to fund that clinical work.

And then, we will have access to the Phase III data that they generate in Taiwan.

Not that we're implying you could use that immediately in the US, but it would certainly derisk the program if that Phase III goes well, and they would expect to have that data next year.

So that would facilitate partnering discussions in the US?

Absolutely.

And Europe.

Okay.

And then, SG&A was a bit lower this quarter.

Is there something driving that or is it expected to rebound later?

It was a little bit high in the first quarter last year, so we are benefiting from that comparison.

I think that the current rate is normal.

Okay.

All right, that's all I have.

Thank you.

Jason Napodano.

So I had a lot of the same questions on 928.

I guess the one thing I am wondering is in terms of posters or papers or presentations, when do you think we will start to see the first things coming out with respect to all the animal models that you talked about?

It will be a little while.

We do have some papers that Professor [Wren] has published and we can share those with people if they are interested and they can contact us and we are happy to.

With regard to the -- to others, they will be coming out over time.

We are working on potential strategies for publications and the like.

And we look forward to actually sharing those at various meetings as things unfold because some of the data are quite compelling.

Those NASH data, for example, we saw a greater than a 3 reduction, which, to my knowledge, I don't think anyone else has really ever seen something in that range from a therapeutically relevant molecule.

I think we're just mapping out the strategy right now, because on the one hand, it would be tempting to just put out a press release on each one.

But on the other hand, then that ruins the ability to maybe put together and submit for a nice publication somewhere in a noted journal, so we're trying to puzzle all that through.

Understood.

And the second question, just on POSIDUR, I don't know if you are willing to answer this or not, but if the protocol comes back and it is relatively similar to what you -- or the feedback comes back from the FDA and it is relatively similar to what you submitted, how quickly do you think you can get a program up and running?

A little over a quarter is the realistic lead time you need to get the investigators set up, electronic diaries programmed, all that kind of stuff.

We obviously have in mind who we would use as key investigators and we have been interviewing the CROs and all that, but it realistically takes a little over a quarter.

We're doing everything we can to prime the pump, but that's -- when you shoot the gun off, that's what it takes.

And then, our guess is probably a year to enroll and then about six months to analyze the data and write it up.

Got you.

That's if they come back and approve what we submitted, which we thought was responsive to their requests.

Appreciate you answering the questions.

Thanks.

Nick Farwell.

I have a follow-on, and you may have already answered this question in some way, but I don't recall hearing Matt or Jim comment in a conference call or perhaps other forum about the potential partnering and monetizing of POSIDUR.

Does this suggest that the Company has decided not to commercialize POSIDUR, which makes all the sense in the world?

I can understand that, given current circumstances.

And is there -- are you suggesting that it is likely we'll see some event over the next year or so with respect to -- obviously, the finance will have to meet, et cetera, but that there will be some kind of monetization of the POSIDUR relationship?

Here is what we are trying to convey.

Maybe we didn't.

Given the questions, maybe we weren't effective.

We believe this is a valuable asset and we are not going to give it away, all right?

So we are in discussions with a number of parties, and if somebody that we think will do a very effective commercialization job offers us the right terms, we are very likely to go that route.

But, to be honest with you, if the terms aren't what we think it's worth, we are prepared to wait, maybe talk to them again in a year when the Phase III is done, or put in place some of the steps so that we could commercialize it ourselves.

I think that's really what we are trying to communicate, if that is clearer.

Okay.

(multiple speakers)

We have a number of parties that we are talking to right now, and so there is a tremendous amount of interest in it, as you can imagine, because of Pacira's success, and we do believe that we afford three days versus their one day and easier to apply and many other advantages over their product.

So I think from a commercial standpoint, it's a tremendous opportunity.

It is a great opportunity for Pacira's and probably should be equal to or greater for us, quite frankly.

And so, yes, there are a lot of people that are very interested.

I actually think there is a greater potential for us to be able to partner this product now because of the presence of 928, and that has a wonderful potential beyond where POSIDUR could be, as great as POSIDUR could be.

And so -- and there is an opportunity there for us to maybe keep the acute side ourselves and potentially, at some point after Phase II, put in place something for that product on the chronic side.

Jim, I think I (multiple speakers) -- sorry.

(multiple speakers) just as a reminder, that's one of a family of molecules that we have discovered, so 928 is the lead, but there are others.

Right, so that was my follow-on.

Given the excitement about 928 and the platform, it would seem to me from a resource allocation that you are suggesting that may capture greater resources than monetizing POSIDUR with your own commercial delivery distribution network.

Yes, I think 928 is a game changer, for sure, for us.

You have seen it just -- just in announcing it.

We were able to -- basically, the Company doubled in value in a month, and there's a lot more value here than that reflects, I believe.

So, yes, it's a wonderful opportunity.

I have had certain physicians who are experienced guys older than me who say this is somewhat akin to the discovery of corticosteroids in the late 1940s, where you have got a molecule that can treat arthritis and leukemia and poison ivy.

And except the therapeutic window is amazingly large for this, the safety margin.

We have yet to see any side effects in any of our tox studies, nor in our Phase I trials.

So at some point in time, you will see something, but certainly if you gave me 100 times the amount of corticosteroid I have in my blood or 100 times the amount of testosterone or 100 times the amount of epo or insulin, I would be in a clearly bad position.

Those are all great therapeutic natural entities that -- endogenous molecules that have become therapeutics, but you can't give me that much.

And in this molecule's case, that is not the case.

So, it's a really fascinating molecule.

So, are you in a position to start talking about your partner strategy relative to 928 and the platform or is it more discovery work (multiple speakers)

It is very early.

As you can imagine when this thing -- something like this, I think, comes along once in a career, and so we certainly have a lot of interest from the big players in here.

Just if you think about PCSK9 just by itself, that's an enzyme that down -- it just degrades the receptors that line the -- your blood vessels that pull cholesterol out of your blood, and so if you don't knock those out, you are able to lower your cholesterol.

And so, all the big companies or half a dozen or more, major companies making monoclonal antibodies are spending billions of dollars to make monoclonal antibodies to take out PCSK9, but we have a pill that you can take it down regularly.

So, as you can imagine, there is a lot of interest in what this molecule can do and the potential of it.

And it can be, I think, potentially, if we get this far and we decide to do this, one could theoretically divide up the opportunities such that the chronic oral indication could have a partnership around it or some kind of venture investment, and then the injectable, the acute use, which is just one or two injections around the time of surgery or when a child takes too much acetaminophen or whatever the case might be, in that case that would be a hospital-based product that DURECT could actually commercialize ourself.

And we can pick orphan indications there to get through the regulatory process perhaps a little faster and can be commercialized easier than the hospital-based product.

Okay, thank you for the clarity.

Irina Koffler.

Hi, I just wanted to go back to DUR-928.

What are you looking to get out of these multiple ascending dose studies in the oral and the IV that would help you determine which of the six or half-dozen or three indications that you're going into?

Is there something that we should be aware of that you're looking for that will make -- that will inform your future decisions, if you could share that?

No, unfortunately, it's not -- it is just -- we're just seeing how much can we give and whether there is accumulation or not and that kind of thing, so it's just your basic pharmacokinetics that you have to do with a new chemical entity.

So we are doing that now.

The beautiful thing and the nice thing about this is we have it in all of us, you and I and Matt and everyone listening on this call has a few nanograms for ML in your blood right now.

And so, we are able to check within each subject in this trial what is the amount that they have, and then we can give them that much more and show that there aren't any changes to them.

And so, we will get a sense of how much we can give.

So far, we've not had any feeling, and so it will be probably limited on how much can be absorbed.

And then, we will have carte blanche to be able to go from there into our Phase II, knowing some sense of the relative plasma concentrations in these animal models to affect, which we do have a good sense of.

We are not sharing that publicly right now, but we do have, I think, a very -- a good sense in some of these models what the plasma -- I know we know what the plasma concentrations are and what the effects are.

And so, to that end, we have done some dose response, as it were, in these animal models and so we can apply some of those learnings to this.

The interesting thing, it is a highly, highly conserved molecule.

This molecule was actually discovered in liver cells that were in culture, human liver cells.

We then developed an assay for it, and we went back and we tested the plasma of hamsters and mice and rats and dogs and monkeys and found that in each one of those species, the native concentrations were almost the same as humans.

So we all are highly conserved.

All these mammals that I just mentioned all have just about the exact same amount of 928 circulating around in our blood, and the effects seem to be quite similar when we look across all these species.

And so when we made a jump like we have seen this effect, we have seen this particular gene cascade that has been altered in a disease state, and we say, okay, let's now test it.

Like, for example, we went from the acetaminophen and we tested it in endotoxin.

First time in, boom, it works.

And then, we go and we test it in the rat kidney and, voila, we see a reduction, a dramatic reduction in creatinine, 2.4 milligrams per deciliter.

So it's really -- it's been really a lot of fun, but then it fits very logically.

So the answer to your question, what we are doing with this Phase I is just to get the Phase I done so we can move on to Phase II.

It's something you have to do, and so far everything is coming out exactly as we would expect.

So with respect to dose finding for these things, if there is no ceiling on how high you can take the dose and you're just using your prior animal work to inform your decision as to what a good therapeutic dose might be, but you really don't know, so how are you going to identify the appropriate dose to use?

I think we're going to be able to get pretty close because, like I said, we have gone between various species and when we dialed in a particular plasma concentration, we see a particular kind of effect.

So I think we will be able to dial that in for humans and I think we will be okay.

I do think it will be milligram kind of doses to people.

Okay, got it.

Thank you.

At this time, there are no further questions.

I would like to turn the floor back over to management for any final remarks.

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Thank you.

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