DURECT Corp (DRRX) 2017 Q3 法說會逐字稿

Good afternoon, greetings and welcome to the DURECT Corporation Third Quarter 2017 Conference 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. Please go ahead, sir.

Good afternoon. 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'll then open up the call for 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 or projected financial results.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Further information regarding these and other risks are included in our SEC filings, including our 10-K and 10-Qs under the heading Risk Factors.

So now let me turn briefly to our financials. Total revenue was $20.7 million in the third quarter of 2017, compared to $3.7 million in the third quarter of last year. Revenue from our R&D collaborations was $5.6 million in third quarter 2017, compared to $0.4 million in third quarter 2016. I should note that a large portion of that increase relates to the recognition of deferred revenue from upfront fees already received by the company. Having said that, even if you take out the deferred revenue, collaborative revenue increased by about $0.7 million, during the quarter compared to the first -- third quarter last year.

Product revenue, largely from the sale of ALZET pumps and LACTEL polymers, was $2.6 million in the third quarter 2017, as compared to $3.4 million in the third quarter 2016. Almost half of that difference related to some excipient sales in the third quarter 2016 and there were no similar sales in the third quarter 2017. The ALZET and LACTEL product lines continue to be strongly cash flow positive for us.

We had a new line item in revenue this quarter, which was recording the $12.5 million upfront fee received from Indivior in connection with the patent agreement signed during the third quarter of 2017, and Jim Brown will expand on that transaction later.

Cost of product sales was $3.1 million in the third quarter 2017, this was impacted by our taking a charge of around $2 million related to our excipients. We took this charge given the POSIMIR Phase III results. But we don't get rid of any of these materials, so if later, we are able to sell these excipients, then at that time, we'd have revenue, but no associated cost of goods sold.

R&D expense was $8.4 million in the third quarter 2017, which compares to $6.8 million in the third quarter 2016, driven primarily by a large increase in POSIMIR expenses as we ran the PERSIST trial. SG&A expenses were $3.1 million in the third quarter 2017, compared to $3 million third quarter 2016. And then due to that Indivior transaction, we reported net income of $6.1 million in the third quarter 2017, as compared to a net loss of $8.8 million in the third quarter of 2016.

At September 30, we had cash and investments of $41.8 million, which compares to a $33.6 million at June 30, 2017, and $25.2 million at December 31, 2016.

With that, let me turn it over to Jim.

Thank you, Matt, and hello, everyone. We recently announced top line results from the Phase III clinical trial known as PERSIST. POSIMIR did not meet its primary efficacy endpoint in this trial, which was reduction in pain on movement, after the first 48 hours after surgery, compared to bupivacaine as our active comparator. While we did see trends in favor of POSIMIR, they were not statistically significant. We're very surprised and disappointed by these results and we're working closely with our partner, Sandoz, to more thoroughly review the data from the trial and to determine next steps.

Outside of POSIMIR, DURECT has a strong pipeline of product capabilities and candidates, including 2 later-stage programs, RBP-7000 and REMOXY ER, each of which could be approved in 2018. We also have a balance sheet of over $40 million in the bank, 2 product lines, ALZET and LACTEL that generate approximately $7 million in annual gross profit and, of course, our flagship program, DUR-928, that is initiating the first of multiple Phase II studies.

DUR-928 is the lead product candidate for our Epigenetic Regulator Program. It is an endogenous small molecule new chemical entity. We consider DUR-928, a member of a new class of intracellular stress hormones. It may have broad applicability and chronic metabolic diseases and chronic liver disease such as nonalcoholic steatohepatitis and primary sclerosing cholangitis or PSC. Also in acute organ injuries involving the liver and the kidney, and in inflammatory skin disorders such as psoriasis and atopic dermatitis.

We are developing 928 for 3 different routes of administration: oral for chronic metabolic or other chronic liver disorders, injection for acute organ injury and topical for localized dermatologic conditions.

We recently disclosed some new scientific findings for DUR-928. At the most recent American Association for the Study of Liver Disease or AASLD meeting in Washington, D.C, a poster was presented by Dr. Shunlin Ren of Virginia Commonwealth University and the McGuire VA Medical Center, which disclosed -- and which included newly disclosed data from animal studies with 928 and endotoxin and drug-induced acute organ injuries.

One of these new disclosures was preliminary evidence of the effect of 928 in stabilizing mitochondrial membranes, which is an important factor in maintaining cell viability and prevention of cell death.

Previously, we have reported our DUR-928 activity in an acute animal model where a multi-organ injury was caused by endotoxin or lipid polysaccharide. In this poster, similar results were observed, that is, approximately 90% survival with 928 versus about 10% survival on placebo, when the multi-organ injury was induced by acetaminophen injection. This poster demonstrated the beneficial pharmacologic effects of 928 against both endotoxin and drug-induced acute organ injuries, including in the liver, the kidney and the lungs. This poster is available at durect.com under Science & Technologies papers.

Now to the development status of DUR-928. DURECT now has 2 open INDs for 928. One for oral use in the study of chronic conditions, and one for injectable use in the study of acute organ injury.

We are initiating our first Phase II trial for DUR-928. This study will investigate oral delivery of 928 in primary sclerosing cholangitis or PSC. We have received an orphan drug designation for 928 to treat patient with PSC. The protocol has been reviewed by the FDA, the IND is open and we are working with the clinical sites on the objective to begin patient dosing later this quarter.

PSC is a chronic liver disease characterized by a progression of cholate stasis, that is a decrease in bile flow with inflammation and fibrosis to the bile ducts. Over time, PSC leads to liver failure, infections and tumors of the bile duct or liver, ultimately, requiring liver transplant. Additionally, approximately 75% to 90% of PSC patients have concomitant inflammatory bowel disease.

We are pursuing PSC as our first chronic oral study for 928 because we believe it has the potential to treat inflammatory and metabolic liver disease from multiple causes, and that this PSC trial may allow us to see a signal in patients at 1 month without having to subject these patients to liver biopsy. We believe that DUR-928 has strong anti-inflammatory and anti-fibrotic activities that will be important in potentially modulating PSC.

Liver inflammation and fibrosis can result from many causes, and PSC is a disease in which we may be able to more rapidly gain a signal of the potential drug effect of DUR-928. PSC is also a disease in which we may be able to see an improvement of hepatocyte function through the potential reduction in bilirubin as well as a reduction in cell death through other biomarkers such as the cytokeratin-18 both full length and cleaved, which may be relevant to other chronic liver diseases such as NASH.

Various animal models provide some of the rationale for the study of 928 and PSC, in particular, the rat bile duct ligation model, where 928 treatment significantly reduced total, direct and indirect bilirubin levels in these animals that had their bile ducts ligated. Other animal models showed that 928 significantly reduced the endotoxin toxicity, has significantly inhibited inflammation fibrosis and even hepatocyte nodule formation.

Some of these study results were presented in a poster at the AASLD meeting in March of this year. It is DURECT's hope that 928 will be able to positively impact the clinical outcome of PSC patients. This belief is based on the biochemical changes demonstrated by 928 in studies conducted to date, including supportive data from our single-dose NASH study in patients.

These data were presented in a poster earlier this year at the EASL meeting in Amsterdam where we reported the changes in biomarkers affected by a singing dose of 928 in both cirrhotic and non-cirrhotic NASH patients. In this poster, we reported the ability of 928 to do what, to our knowledge, no molecule has been able to do to date, and that is, reducing bilirubin approximately 30% after a single dose in NASH patients.

Additionally, 928 significantly reduced inflammatory biomarkers, full-length CK-18 by up to 41% and cleaved CK-18 by up to 47%. These 2 were markers of cell death, all of this after just a single dose in NASH patient. Interestingly, the more severe the liver damage, the greater the effect DUR-928 seemed to have. These results were statistically significant and were demonstrated within 24 hours of dosing.

Our Phase II PSC trial will be a randomized open-label study with 2 cohorts, a low-dose group and a high-dose group. This study will involve up to 40 patients who will receive oral doses of DUR-928 for 4 weeks, with a follow-up for an additional 4 weeks. The objectives of this study include safety pharmacokinetics and measuring the percent change from baseline of serum alkaline phosphatase and other biomarkers.

We believe that as an open-label study, it will be easier to recruit patients to participate in this trial, and we will have an ongoing opportunity to review the data throughout the duration of the study. We are working with the patient organization, PSC Partners, to help create awareness for this study. There's a lot of excitement from the patient community about the possibility of using an endogenous compound, which to date, has shown a good safety profile to help treat this disease of great unmet medical need.

It is our hope that the data generated from this trial will be relevant not only to PSC, but also to a number of other liver conditions including NASH.

I'm going to now move on to the DUR-928 injectable program. We also have an open IND for the initial Phase II trial with the injectable formulation of DUR-928. We are pursuing 928's potential in the treatment of acute organ injury but because of the effects we have observed in various animal models of acute injury, including reduced mortality, improved histology across multiple organs, reduced inflammatory markers and improved organ function markers. 928 has demonstrated the ability to protect animals from chemical, biological and ischemic/re-perfusion damage.

Another strong indicator of 928's potential to aid patients with acute organ injury, is the reduced bilirubin, inflammatory and cell death markers observed in the NASH patients after a single dose. For example, bilirubin levels are very important in calculating a liver patient's model for end-stage liver disease or MELD score -- that's MELD. A MELD score -- the MELD score system for assessing is used for assessing the severity of end-stage liver disease, and the MELD score is calculated using the serum bilirubin concentration, the serum creatinine concentration and the prothrombin time of the patient.

We are pursuing the use of 928 in acute organ injuries because of the life-saving potential and life-threatening situations and the substantial unmet medical need because there is less or, in some cases, no competition because of the short study durations and the short-term clinical outcome, and for the potential regulatory advantages.

We are currently finalizing the protocol, based on detailed input received from our expert advisers during the recent AASLD meeting in Washington, D.C. This first study will be conducted in moderate and then severe acute liver function impaired patient. A number of these patients may also have acute kidney function impairment.

Our liver and kidney specialists and clinical advisers have informed us that often these patient have concomitant liver and kidney disease. This study will focus on gathering important pharmacokinetic, safety, and pharmacodynamic data. We anticipate dosing the first patient in this trial early in 2018, and we will announce the details of this study once the protocol is finalized and the study is being initiated.

Finally, to our topical DUR-928 administration program. Based on promising results from a previously conducted exploratory Phase Ib trial in psoriasis patients, where we utilized intralesional injections of 928, we have developed topical formulations of 928 that have recently completed good laboratory practice, skin irritation and sensitization studies in 2 species. We are actively working with expert advisers to finalize our protocol for their Phase II proof-of-concept study with topically applied 928.

We have had pre-IND interactions with the FDA, and we are incorporating the FDA's comments into our upcoming IND. We expect to initiate this study in the first half of 2018, and we believe there's a large market opportunity for new topical drugs in inflammatory skin diseases, such as psoriasis and atopic dermatitis.

I'm now going to move to RBP-7000. RBP-7000 is a new opportunity for DURECT shareholders, that is in fact, our closest to market. The RBP-7000 product opportunity for DURECT is a result of a patent deal with Indivior. Indivior PLC was spun out of Reckitt Benckiser in December of 2014. They are traded on the London Stock Exchange. Indivior has a current market cap of approximately $3.6 billion, and they reported revenues in 2016 of approximately $1.1 billion and adjusted net profit of around $254 million.

RBP-7000 is Indivior's investigational once-monthly injectable Risperidone product candidate for the treatment of schizophrenia. Indivior announced they had submitted the NDA for RBP-7000 on September 28 of this year. Once the ANDA is accepted, that would put the PDUFA date sometime in August of 2018.

This NDA submission includes the result from the pivotal Phase III study assessing the efficacy and safety of RBP-7000 and an open-label long-term safety study. In the pivotal randomized double blind placebo-controlled study, RBP-7000 demonstrated a statistically critical improvement compared to placebo, based on changes in mean positive/negative syndrome scale and clinical global impression severity of illness scores at 8 weeks.

They reported positive topline results from a Phase III safety and efficacy trial in May of 2015, that involved 354 patients. And in August of 2016, they held a pre-NDA meeting that reached -- and reached agreement with the FDA on the proposed stability testing time lines and the NDA submission strategy. And then in October '16, they locked the database on the Phase III long-term safety extension trial, which involved approximately 500 patients.

A summary of the Phase III and long-term safety data for RBP-7000 include, once-a-month dosing, rapid onset of action, no loading dose with initiation of treatment, no supplemental dosing during treatment, demonstrated clinical efficacy and safety in schizophrenia, was overall well-tolerated, and a measurable quality of life and medication satisfaction benefits seen for RBP-7000.

As a result of this deal with Indivior, DURECT received an upfront nonrefundable payment of $12.5 million, with a potential $5 million milestone payment upon NDA approval. Indivior will also make quarterly earn-out payments based on a single-digit percentage of U.S. product sales. The expiration date of these patent -- of the patents covered by this agreement extend at least until 2026.

In March of 2017, Indivior stated that they were raising their guidance for the potential peak net revenues of RBP-7000, if approved, to a range of $200 million to $300 million on the assumption that no material changes occur in the U.S. market circumstances.

The last product I'll update today, is on REMOXY ER. Based on our ORADUR technology, the investigational drug, REMOXY ER, is a unique long-acting formulation of oxycodone designed to be dosed twice a day and to discourage common methods of tampering associated with opioid misuse and abuse. In March of 2017, Pain Therapeutics announced that they plan to resubmit their REMOXY ER NDA after completing 2 additional studies based on guidance obtained in a meeting with the FDA. These 2 studies are clinical abuse potential study that involves intranasal -- the intranasal route of abuse, and a nonclinical abuse potential study using household solvents.

Pain Therapeutics stated that they expect to complete these studies by year-end, after which they intend to have a pre-NDA meeting with the FDA, followed by resubmission of the REMOXY ER NDA.

Earlier this week, Pain Therapeutics announced they had a pre-NDA guidance meeting with the FDA, that is now set up for October 14, 2017, and they're planning an NDA resubmission for the first quarter of 2018.

The epidemic of opioid abuse is a national crisis that has grown dramatically these past 10 years. We see it reported on 60 Minutes and we hear about it from Congress and the White House. Yet the need for these agents to treat patients' pain remains, the market for Purdue's OxyContin product remains about $2 billion per year.

REMOXY ER has the potential to provide multiple means of tamper-resistance plus a true twice-a-day dosing, and the only 5-mg doses strength to this market. If Pain Therapeutics were successful in resubmitting the NDA in the first quarter of 2018, then the NDA would have a 6-month review and could potentially gain approval in 2018. Perhaps REMOXY time has finally come and it will be able to fulfill some of its original promise.

As a reminder, DURECT would receive a small milestone on approval and a royalty on sales that range from 6% to 11.5%.

In summary, the POSIMIR, PERSIST trial results are a disappointment. However, the other products in DURECT's pipeline made substantial progress this quarter, including adding an NDA stage product that could earn us relatively near-term future income. With the RBP-7000 deal, we were able to take a non-core patent family and leapfrog into a potential NDA that could be approved 3 quarters from now.

We have a good cash position, 2 late-stage products and RBP-7000 REMOXY ER that could gain NDA approval in 2018, each of which could afford differentiating features that could benefit patients and the health care system in large and important markets.

Lastly, we have the good fortune of DUR-928, an endogenous intracellular stress hormone that has demonstrated profound effects in various animal models, and in single doses in human patients, all of this, while seeming to offer a wide safety margin.

We have 2 open INDs, and we are initiating the PSC Phase II trial with plans to begin dosing this quarter. We also look forward to starting dosing an acute organ injury study early in 2018 and the topical psoriasis Phase II study afterwards.

So during 2018, DURECT has the potential to have 2 NDAs approved and could have data from 3 different Phase II studies with DUR-928. With that, we'd like to take any questions you might have.

(Operator Instructions) First question is from François Brisebois with Laidlaw.

I was just wondering how much color can you guys give us on the trend of the POSIMIR data.

It's just a trend right now and we don't want to break it down much beyond that because we're still working with Sandoz, our teams are working closely together and they will be for a number of weeks going forward. So we're still getting all the data in from the bio-statisticians and looking at different ways of cutting the data. But that being said, there's a trend, but it's not statistically significant.

All right. Understood. And then in terms of the importance of the DUR-928 stabilization of mitochondrial membrane data at AASLD. Is there -- what's specific about -- what's specifically about that? Is that different from anything that's been found before? Can you elaborate more on that?

Well, we've hinted at it before. Dr. Ren has yet to publish a paper on that, and we're looking forward to that, these are kind of the first peek into this function of the molecule. We do know that the molecule -- the backbone of the molecule itself is made in association with the mitochondria and then the sulphur is put on into the cytoplasm and then it goes to the nucleus. So it is seemingly produced at a time of mitochondrial stress, and then it has a cascade of activity that occurs in the cell to help protect the mitochondria. And that's a very important feature in so many different disease states. I can't tell you, I mean that's why we'd look at it, that's why we're seeing effects from chemical damage, from biologic damage, from ischemic damage, that kind of thing. There are a lot of things going on that can influence and negatively impact the mitochondria, including kind of chronic late-stage disease states that occur, where adipose tissue is created when you lose mitochondria in certain cells, and there's a lot of things going on with that. But I think it's very exciting. The science is obviously cutting edge, but it just hints to the breadth of what 928 might be able to do.

Okay. Great. And then, lastly, just thoughts on -- AASLD was just a week ago, any thoughts that could relate to 928 other than the these findings here and maybe in terms of MRI-PDFF just all the -- versus biopsy in Phase IIs or any chatter that at one point biopsies might not be necessary in Phase III or anything that you took out of AASLD?

There's a lot of stuff in the air around liver and chronic disease in general, and I think that's -- that's going to be the case for a while because it's virgin territory that's never been traversed, and so we're trying to figure out how to get from point A to point B, all the companies are, and so I think that's part of it. What we do know about 928 is that it seems to touch multiple places where you want to. It has an influence on inflammation and all the problems that are caused there. It has -- and a potential benefit on preventing cell death and it has the same on modulating functionality and metabolism, and those are the areas where you want -- if you look at anybody, any of the companies out there that are trying to oftentimes put together 2 or 3 molecules to try and control inflammation, prevent cell death and fibrosis and improve the functionality of the liver, and 928 brings all of those things in one package, and it's a naturally occurring endogenous molecule -- small molecule that does that. So that's -- that I think puts us in a very good position. We're really excited about what we might see from this PSC trial. If we can go into these PSC patients and replicate some of the things we've seen in these NASH patients, that would be dramatic. I think that may be a game changer for the space, quite frankly. And one of the things that I briefly stated, but it -- maybe it's worth reiterating, is the patients who had the cirrhosis, had the worse liver disease, seem to have even greater impact from being dosed with 928, and if that holds up, that's going to be really important because some of the molecules -- some of the leading molecules out there right now kind of shrink away in the face of more fibrosis and a more damaged liver, and we may actually stand up to the fight.

Interesting. And then lastly, you just touched on PSC. So just quickly, can you remind us of why you can possibly see a month out of activity, why is it so quick with PSC versus PBC -- or NASH?

Well, I think it's more not so much PSC as it is the molecule itself, we see a dramatic change in these NASH patients with the single dose of 928. We saw something no one has ever seen before, and that is bilirubin down 30% from a single dose, that's just not seen typically. If bilirubin is improved, it's improved over months of making the liver better and it functions better. So we're seeing up to almost half of the drop in cytokeratin-18, that takes months for other molecules to do. And so we think the changes that we're seeing with 928 in the NASH patients if we see similar kind of changes in the PSC patients, it may only take a month to get that readout. And so that will be enough to allow us then to focus to the next clinical trials and, obviously, I think it's a direct read-through or at least a semi-direct read-through to what may happen in NASH as well.

The next question is from Adam Walsh with Stifel.

It's Neil Carnahan on for Adam. Just was wondering if you guys could provide any further color on the 928 trials overall, which of the oral injectable or the topical data we can expect for us? Just any further color that you guys can provide at this point?

Well, we've only given the greatest detail on the PSC trial, which is the oral trial. That trial are -- we're starting to work right now, we hope to dose our first patients this quarter. That's going to be an open-label study. So we'll have a chance there then to have a look and understand how the drug is doing what it's doing. So we may get a sense to be able to readout something, say, in the middle of next year or something depending on the number of patients we enroll, and have a sense of how the molecule is doing. If the molecule does something similar to what we have seen in the NASH patients then I think we're going to be really pleased about where we are with that -- with that disease state because then we'll see some modulation of -- if it holds the same, of bilirubin, which speaks to the functionality of these inflammatory markers which speaks to the reaction of the inflammation potentially. And then, of course, [death] markers which would mean fewer cells are dying. And so those are the things that we'll be looking at and hoping to get readouts as the trial progresses, that's really important. We haven't given greater detail on the acute injectable study yet, we will in the near future, and once we do, then we'll give a lot more detail on how that might readout and the like, but the goal is to also have data from that next year. And then lastly, the psoriasis trial, which will start third in line, but that trial is actually each patient serves as their own control, it will be a placebo-controlled trial, and -- but because of that, I don't -- we haven't finalized the exact number of patients yet, but it will be a small enough number that one can actually enroll that and get data next year as well. So that's our goal.

We have a question from Ed Arce, H.C. Wainwright & Co.

I have a few. First is on POSIMIR. When do you expect to conclude your analysis between you and Sandoz? And when would you expect to announce any sort of final decision on that program? And...

I was going to say, to answer that one first, I don't know yet. We're working with them and a decision will be made after all the data had been analyzed, so it's going to take some time, I think. They're turning over every rock as we are, to look and see what can be learned, what can be gleaned, what can one do, and so. I don't have much more to say other than we're working on it. But it's a matter of weeks, not days, that's for sure.

Right. Okay. Understood. So then, turning to your PSC program, I appreciate giving us some more details around the protocol. I was wondering if you could let us know -- you did mention that results could come in depending on the number of patients you enroll, sometime perhaps in the middle of next year. How many patients would you expect to enroll in each of those 2 treatment cohorts?

We have -- we're planning on approximately 40 patients, so that would put about 20 per group, and we won't be reporting out with onesie, twosies kind of things. I think if we have enough patients, that we're starting to see something, then we'll talk about it. So that's why I'm kind of guessing midyear, it really does depend. I think it's helpful that we're working with the patient groups. This is a great -- these are just great organizations and really wonderful people working. I mean they are -- it's such a tough disease because they go along living their lives with the shortcomings and all the problems that they have, which is itchiness and other problems that they have and they could possibly at any time in the future, get an understanding that they have cancer of the bile duct or cancer of the liver, which is a horrible, horrible circumstances going forward. So they are very well read, they know our literature very well, they know it's an endogenous molecule, they have seen what appears to be a reasonable safety index. And they even may have gone as far as to look at the STAM data. It's an example where we showed fewer precancerous nodules in that, that was presented at the AASLD meeting in March. And they are looking at that and they're making a leap forward, obviously, but hoping that maybe this could help them long term as well. So certainly reducing inflammation and preventing more cells from dying and having their livers function better, would all help these patients, so we're hoping for the best to be able to make a difference in their lives because nobody deserves to be saddled with that.

Yes. Of course. Thanks, Jim for that. Two more, if I may. On this PSC, you've mentioned a couple of times this really remarkable results of bilirubin reductions with the compound of about 30%, with just a single dose. Given that result, do you have any sense for what you would expect as the treatment effect after a month of treatment on the primary endpoint here of ALP and perhaps any other enzymes that you're looking at?

Yes. It's impossible to say for sure. I can tell you we did this bile duct ligation study where other molecules that had been tested in PSC, were tested in the literatures out there, and they were lethal in a lot of these animals that had their bile ducts tied off, we weren't. The animals not only survived, they had improvement in body weight gain and body temperature, which means their livers are making ATP, and most impressively, a statistically significant drop in total direct and indirect bilirubin, which means that it's working. And then we replicated that bilirubin effect in the patients when we dosed the NASH patients and the more severely cirrhotic patients had the greater response. And it was the same on the cell death markers. So if you look at alkaline phosphatase, that's out there because liver cells are dying and they're dumping that enzyme into the plasma. Well dropping CK-18 is going to track right with those enzymes. Those liver enzymes will be going up and down based on cell death as will the CK-18. So I'm certainly -- we're all hopeful that we'll see some of these changes sooner rather than later, but we haven't done it yet, so we don't know.

Okay. Final question then on your topical program. I understand that (inaudible) that one doesn't yet have an IND open yet, but you did mention some details around that. Is there anything further you can share at this point in regards with the protocol of that study?

Just to give you -- we're still working on it, but the concept is to test 1 or 2 formulations, we're still working through that, and to test them and each patient would serve as their own control. So if I were such a patient, unless I had a lesion behind my knees, I would -- or on my forearm or wherever, I would use one side of my body, the right side would get active and the left side will be placebo or vice versa and then we can track that for some given duration and that's still to be defined. So we're working out the detail, but each patient serves as their own control vehicle versus active, and should be a reasonable quick readout. And just so people are knowing that the thought process behind that should we get a positive outcome, would be -- there's been a lot of interest from potential partners in this area, so our concept here would be to actually put a partnership in place around the derm development of this product.

The next question is from Len Yaffe, Stoc*Doc Partners.

I had a couple of questions for you today. The first is the data coming out of the liver meetings seems to suggest increasingly that ultimate NASH therapy will end up being (inaudible) only one drug used in the patients with (inaudible). And it looks like you're in a unique position where there are many FSRs and HECs and all these other drugs and these seem to have the type of drug that would be able to be used in combination with someone else's therapy. I was just wondering, my first question is that anything you've considered or (inaudible)?

Yes, it's a tough connection, but I believe I heard the right -- the question was, a lot of people look at combination therapies FSR, HEC inhibitors, anti-inflammatory and modulators of metabolism and the like and we do have the great fortune that 928 does influence inflammation and cell survival and metabolism and -- but there's no reason that 928 couldn't be used in combination with some of these therapies to shore them up as it were. And I would venture to guess that if we see the kind of results in the PSC patients that we've seen in the NASH patients, that I think we're going to be in a very strong position and that if I were in a large company out there, I can name the 3 or 4 or 5 that are out there today, we all know who they are, you almost -- it's -- I think you need 928 maybe to help your program be successful because there have been more disappointments than not in these chronic studies. When you look back after a year, have they reduced fibrosis year 1, they don't reduce it to for year 2 or they have this, they have that, and so it's not as clear-cut. They're starting to shy away in some cases from more severely ill patients where you can really make a difference because the less severely ill, there's a lot of people walking around the United States today. There's more and more seen of what is NASH versus ASH. If you were to do a bell-shaped curve of this population, how many people are just pure straight up, too many calories coming in, metabolic challenges NASH patients? How many are straight up just alcoholic hepatitis, thin people with the hard liver, that kind of thing. You can cut in both ends of that bell shaped curve and you probably only have 30% of the population or so. I think the remainder, 60% 70% are a combination of alcohol and eating. That's your average American who is in that circumstance, right? And that's where we do think 928 can make a big difference.

Yes, I'll be clear now. The other thing is there was presenting data that suggested that of the various drugs that are -- had been advanced in clinical studies, the max efficacy they're seeing, which is consistent with what you're seeing is only in 50% of the population, so single-drug therapy doesn't seem like it's going to succeed. The other question I had is, previously you talked about in the injectable formulation, not only looking at the potential liver injury but also, by itself, acute kidney injury and I was just wondering if that was still a program you can -- were expecting to pursue. It seems like from my knowledge there's no drug out there today to treat acute injury for kidneys, the last one failed from Abbott a few years ago, and so it's a large undeserved market and I was just wondering what your plans were in acute kidney injury itself without concomitant liver injury?

We absolutely love acute kidney injury as an indication for 928, and we are evaluating that along with others. We're also -- what we're doing with this next round of Phase II trials is getting a sense of where we can have an impact. That's why we selected PSC. It's -- we hope that we can help PSC patients, absolutely. But there's a read-through for other multiple indications. And it's the same for this first acute injectable study we're going to do. There's absolutely an opportunity to help the patients we're talking about, but there's a read-through to other organs that could be damaged, including kidney and lung and other places where we're going to get a sense. And so we really do like kidney, and at some point in time, we will be testing an AKI as a stand-alone. But we may learn a lot more between then and now as well.

And then on the topical formulation you mentioned in '18, I think, starting a study on psoriasis. Is there also potential efficacy here in atopic dermatitis or eczema, which is also a very large underserved market?

We think there is. Just given the anti-inflammatory and kind of reduced cell death markers, we think there is a direct read-through there. There's just a little bit more variability in those patients and so enrollment is a little bit slower typically, and so we're looking at psoriasis because there -- it's an easier proof of concept study and our idea here is to demonstrate proof of concept and then potentially put a partnership in place and then that partner will pursue it for atopic and psoriasis.

Great. And then it may actually turn out significantly to your benefit to do PSC now and do NASH at a later time because I know as an earlier collar alluded to, it seems like the liver form panel group that's come together to come up with a group of biomarkers or enhanced liver function tests that they're working on to avoid the need for biopsy both for initial diagnosis and for monitoring progress which will limit probably the applicability of the drug. They're probably about 3 years away from some sort of non-biopsy panel, and that sounds like -- by the time when you'll be more involved in this, so it may actually save you significant difficulty in setting up trials and getting them going.

Yes, it depends and it depends -- I don't disagree with anything you just said, but we might be there sooner than 3 years, that's for sure. And if we have a partnership in place, we may be in there in a year from now, who knows, so it's all up in the air.

We have a question from Geoffrey de Sibert, KB Advisers.

I've got 4 questions and I'm happy to get back in the queue, if you want to give other people a chance. First of all, and I guess this is a question for Matt, could you give us in light of the $41-odd million of cash you reported the end of the quarter, could you give us some sense of what you expect cash burn to be going forward in the next few quarters, especially in light of the various 928 trials you're looking at?

Well, historically, we've been a little bit reluctant to give a whole lot of future guidance. So let me just speak at a higher level. We have recently been spending a lot of money, as you know, on POSIMIR, conducting the Phase III trial, which is now behind us. So we're going to scrutinize future investment defending in that category, but certainly it would be lower than we've been recently experiencing because of the PERSIST trial. At the same time, as you allude, we will be conducting more trials with 928, but these are relatively modest sized studies, as Jim mentioned, PSC, up to 40 patients and it's open label and it's a month, that's a very different animal than a 300-patient postsurgical pain trial. So each of those studies, the outside expenses individually is pretty modest, quite frankly, so I think that our burn rate will -- underlying burn rate will actually moderate net-net. Beyond that, I guess I'm hesitant to put hard numbers around, given all the uncertainty we have around where we're going with POSIMIR and things like that.

All right. And if can just follow up on that specific point. So if we were to presume that there was no future for POSIMIR and perhaps some adjustment in headcount, notwithstanding the 928 trials you've described, we could probably look for a lower trend in quarterly cash burn.

Correct. Yes.

My second question is just a quick detail one. Any stock sales under your ATM since September 30? I know you'll be releasing your 10-Q, but can you give us any color on that?

No, not -- we haven't sold anything since September 30.

All right. And in terms of the existing -- and I want to exclude 928 in this third question, in terms of the existing activity you have -- I mean, could you give us a little color on what kind of order of magnitude, if anything came to fruition, might we expect? Is it a few million dollars, maybe in the next 6 to 12-months? And again, I'm excluding the $5 million Indivior potential payment on an NDA approval, but in terms of the other programs, can you -- excluding 928, can you talk to that a little bit? What you see is any kind of potential?

I think -- I guess it depends on -- I'll take the later stage ones. We have, obviously, RBP-7000, which doesn't cost us anything and could potentially get approved as soon as next August, REMOXY doesn't cost us anything and there would be a small milestone approval and if they submit end of first quarter, that would be a 6-month review. So those are 2 things that could pay out but not cost us anything. I think that you are -- are you kind of asking about feasibility programs and that kind of thing, as far as money coming in from those?

Well, in ORADUR ADHD and the program in Japan, and just -- and perhaps the answer is, well there's nothing really in the 12-month pipeline but just to refresh our collective memories on what might be out there.

So, maybe I'll chime in just a little bit. Early in my little spiel, I did mention that our collaborative revenue went up in the third quarter by $700,000 and when you take out deferred revenue, and that's a function of the fact that we've been quiet about it but we actually have had some success recently in enlisting some interesting feasibility projects that are larger than normal with some big Pharma companies, so we have those going on and we expect those to continue. In terms of other business development activities, the ADHD program, we mentioned last quarter that our partner Orient Pharma had a successful Phase III trial in Taiwan, and that they only have the rights to that in certain Southeast Asia countries, we retain the big markets: U.S. and Europe. And that it's our intention to take that data, as well as other information we have, and sort of reboot a licensing effort for those major territories. And actually, we've recently gone to work with a firm -- an outside firm that assisted us previously on a project. So we're in the early days but we're kicking that off as well. So we will be pursuing, hopefully, some other licensing opportunities, ADHD being one of those.

Alright. And my final question is circling back to 928, you've got a number of programs underway, and to those of us who are not biopharmaceutical experts, could you give us a sense of which of those programs might be the earliest candidates for some kind of partnership, assuming favorable early look data?

I would say the 2 that would come out right away would be the PSC, because if we're collecting any kind of real time input from that trial. So if we had some readouts next year on that, that look favorable, that kind of reflects what we've seen in the NASH patients, I would think, given the question Len had and the competitive nature and the general disappointment that a lot of the companies -- bigger companies in the NASH space have been experiencing, there might be a desire to partner up in that regard. And I think the -- there's also an opportunity on the topical side, whereas, if that trial reads out, it's a placebo-controlled proof of concept study, if that comes and reads out positively, then I think there's an opportunity there as well. So I think those would be the 2 that one could see maybe initiating next year, I don't know that they would come to completion next year, it would really depend on the competitive nature of the process. And then the acute injectable is actually something that we would prefer to carry ourselves, and we think that there is -- there can be just an amazing opportunity there to step into places where there's nothing today and the patients are in a very bad way, and we can make -- maybe change that and so that's the hope and the desire there.

Gentlemen, there are no further questions at this time.

Okay. That being the case, I'd like to thank you for your attention and if people have questions, always feel free to call, management would be happy to chat with you. Thank you.

This concludes today's conference. You may disconnect your telephone lines at this time. Thank you for your participation.