Q3 2022 DURECT Corp Earnings Call
Greetings and welcome to the Durect Corporation third quarter 2022 earnings call.
This time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please kind of star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Vimpat Chief Financial Officer.
Tim you may begin.
Good afternoon, and welcome to direct Corporation's third quarter 2022 earnings Conference call. This is Tim <unk> Chief Financial Officer of direct before we begin I would like to remind you of our safe Harbor statement. During the course of this call. We may make forward looking statements regarding direct 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 can cause actual results to differ materially from those in such forward looking statements.
Further information regarding these and other risks can be found in our SEC filings, including our 10-K and 10-Qs under the heading risk factors.
To begin I would like to review our third quarter financial results total revenues in the third quarter of 2022 were $12 million compared to $2 2 million in the third quarter of 2021 revenues for the quarter include $10 million milestone payments pursuant to our policy.
Michael.
R&D expense was $9 $9 million as compared to $8 million for the prior year. The increase was primarily due to higher clinical trial expenses for our ongoing affirmed trial contract manufacturing expenses and employee benefit costs.
SG&A expenses were $3 $9 million as compared to $3 2 million for the prior year, primarily due to higher employee benefit costs and expenses and consulting expenses.
As of September 32022, we had cash and investments of $52 million as compared to $70 million at December 31, 2021, and our cash burn during Q3 was $2 3 million.
Before I turn the call over to Jim I would like to remind shareholders about the upcoming shareholder meeting scheduled for November 20.
By now all shareholders should have received a proxy statement and voting instructions. The purpose of this meeting is to approve a potential reverse split which would enable direct to maintain our listing we strongly encourage shareholders to vote in favor of this proposal is keeping the listing is vital for the company's success.
That not voting your shares is essentially the same as voting against the proposal. It is important that all shareholders return your proxy cards at your earliest convenience.
As always we appreciate the continued support of our shareholders.
And with that let me turn the call over to Jim for an update on certain of our programs.
Thank you Tim Hello, everyone. Thank you for joining us today for our third quarter 2022 update.
We had a strong third quarter with a number of positive developments across our product portfolio.
We recently announced that we expect to complete enrollment in our phase two be affirmed trial in the second quarter of 2023 ahead of our previous guidance.
Enrollment continues to progress nicely.
We have now dosed more than 200 patients out of our target of 300.
We continue to expect to report topline data in the second half of 2023.
If successful we believe our firm has the potential to support an NDA filing.
Our goal is to advance our shoe called sterile as quickly as possible to approval in a H an indication for which there are no approved therapeutics.
On the positive front, we're excited.
Lighted that our commercial partner in a call launch the product in the United States last month as Tim mentioned, we earned a total of $10 million in milestones from the Nikola agreement in the third quarter and we look forward to seeing the launch progress over the coming quarters.
The primary focus of the company remains on completing enrollment in our phase two be affirmed trial for less juco sterile in patients hospitalized with severe H.
Our firm is a 300 patient placebo controlled double blind multinational study with two active dosing arms and a placebo arm of 100 patients each.
We are pleased with the progress on enrollment and a dose more than 200 patients to date.
We now expect to complete enrollment in the second quarter of 2023. This is ahead of schedule. Despite the challenges related to enrolling trials during the Covid pandemic.
We now look forward to reporting topline data from a firm in the second half of 2023.
We currently have over 60 sites open, including leading hospitals in the United States, Australia, the EU and the U K, we continue to open new sites, including renowned liver centers, where we have the opportunity to work with some of the world's preeminent thought leaders in eight inch.
The FDA has granted our let's do called Schiro H program fast track designation and a positive result in a firm could support an NDA filing.
With this in mind Las equals Gerald has the potential to be the first FDA approved treatment for H, where there is a substantial unmet need for patients.
As a reminder, a H is a lethal and costly disease that represents an unmet medical need with no approved therapy.
H resulted about 158000 hospitalizations per year in the United States and hospitalized patients have a 90 day mortality rate of approximately 30%.
This suggests that over 40000 deaths in the United States occur from NIH.
We estimate in the United States alone on average more than 100 people Die every day from this disease.
AAM continues to represent a significant cost burden to both patients and the health care system.
For the vast majority of not receiving a transplant the average cost of treating a hospitalized a H patient can range from 53000 to $147000.
For those patients who receive a liver transplant. The average cost is approximately $875000 per patient in the United States.
And they are subject to a lifetime of immuno suppression.
With this in mind, our CECO scare all represents a potential multibillion dollar opportunity in the U S alone.
While simultaneously, providing substantial overall cost savings to the health care system.
We also believe that <unk> is a global concern and that X U S markets represent additional attractive market opportunities.
Now, we'd like to reemphasize why we're so optimistic about the use of <unk> in the treatment of patients with severe a H.
As I mentioned before a H patients stay for 90 day mortality rate of approximately 30% and there is no approved treatment for this disease.
Therefore, we were excited by the data from our phase Iia trial of a CECO sterile and the moderate to severe <unk> patient.
All 19 patients, including the 12 severe <unk> patients survived the 28 day trial.
Additionally, 14 of the 19 patients were discharged in less than four days after receiving only a single IV infusion of Lexington sterile.
The prognostic scores from the H patients in this trial, including Lille and meld scores bilirubin and other biomarkers were improved as compared to baseline.
<unk> was also well tolerated by all of the patients at all the doses evaluated in the phase Iia trial.
There were no serious drug related adverse events reported in the trial.
In addition to the clinical trial results, we have generated supporting preclinical data that demonstrated large tucows Charles protection against multi organ failure and numerous in vivo animal models.
This is important to highlight as multi organ failure is not only the primary driver of mortality in AAV patients, but also reflects largely cluster barrels potential to provide a benefit in multiple indications in addition to age.
Our CECO steroids mechanism of action is an endogenous epigenetic modulator helps us to better understand the remarkable results, we've observed and its impact on patients.
Our CECO sterile binds to and inhibits the activity of three DNA metal transformations.
<unk>, one <unk> and <unk>.
These three enzymes regulate the epigenome by adding medical groups to DNA in a process called DNA methylation.
In some diseases, including H right of DNA methylation is abnormally high resulting in severe even life threatening consequences.
In treating stress liver cells, whose DNA is HEICO methylated marsico sterile return DNA methylation levels closer to those observed in healthy liver cells.
Furthermore, prior studies of the H patients published in the medical literature have demonstrated that these DNN teas are elevated in a H patients.
Resting mechanistic password sukkoth Charles potential benefit for these patients.
And now I'd like to move on to <unk>, one of our last remaining legacy products.
<unk> is a novel non opioid sustained release local anesthetic that is FDA approved to provide post surgical analgesia for up to 72 hours following arthroscopic Subacromial decompression.
Late last year, we announced that we license the development and commercialization rights for <unk> in the United States to Intercall Pharmaceuticals.
We selected <unk> as a commercial partner because of their strong commercial team and because they are focused on the post surgical pain market.
Through this partnership we earned a total of $10 million in milestone payments from in the call during the third quarter.
In August we were issued a new patent by the U S patent office, extending the U S patent coverage for <unk> to at least 2041.
Under our agreement within a call. This triggered an $8 million milestone to direct we also earned a $2 million payment upon the first commercial sale, which occurred in September .
Following these two payments and the initial $4 million upfront payment direct remains eligible for an additional $122 million in.
<unk> regulatory and intellectual property milestone payments.
We also received tiered low double digit to mid teen royalties on net product sales in the United States.
Yeah.
In summary, we continue to make great strides with the firm and have enrolled more than 200 patients to date with over 60 clinical sites up and running.
We are on track to complete dosing the last patient in the FERC trial in the second quarter of 2023.
Which would enable reporting of top line results in the second half of 2023.
Our confidence that the affirm trial will be successful is driven by.
Our compelling phase Iia study data.
The mechanism of action of <unk>, which ties directly into the biology of a H <unk>.
And our multiple preclinical animal studies, where we observed the profound survival benefit in multiple relevant acute organ injury models.
We expect that if we achieve a positive outcome in the firm trial. This could support an NDA filing.
We would now like to take any questions that you may have.
Thank you we will now be conducting a question and answer session if.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you May press.
Start to if you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Okay.
Yeah.
Thank you. Our first question is from Christian cluster with Cantor Fitzgerald. Please proceed with your question.
Hi, good afternoon, everybody. Thanks for taking my question.
The first one I had for you is we've noticed that other nations are putting out some research, suggesting similar trends to what can occur.
In terms of number of cases first severe AE rising so I wanted to ask how you're starting to think about maximizing the opportunity here given it is a global study and perhaps.
Other regulatory down the line.
That's a great question Christian.
Thank you for asking and I'll I'll start, but then I'll also I'll hand, it over to Keith.
Keith Louis who is.
Responsible for both business development and commercialization here in Quebec, but you're absolutely right. It's a it's a it's a worldwide.
The problem and especially if one looks at the EU at Western Europe in particular.
I think the patient numbers from everything we've gleaned to date are pretty similar to what we have seen here in the United States and so it's a major problem.
Some of the best thought leaders.
On this disease actually come from the U K and from France in Europe in General, who we're working with already so I think it certainly is.
There is a substantial unmet need out there and we're looking to.
To position ourselves to be able to get to these patients to help them and obviously also helped our local health care systems and in turn our shareholders by bringing.
This to market internationally, we started some of the regulatory processes.
But we arent going to be commercializing. This ourselves overseas, we were most likely having a partnership in place with Keith do you want to maybe speak to.
Some of the potential ex U S.
Sure. Thanks, Jim Thanks, Kristen for the question.
This is Keith Louie.
Our commercial.
Installation efforts and business developments as Kevin stated.
And it's true we've seen.
The 2020 data as you saw on that Jim talked to in today's call as up to 158000 <unk>.
Charges here in the U S and we're seeing similar trends in Europe as well I think we are taking the time to work with European data vendors to better understand both primary and secondary diagnoses of H <unk>.
In Europe .
And we are taking efforts on the medical affairs side too also.
Educate around identification of a H N CBRE H.
And ensure that our physicians and.
Across Europe are aware of our trial and aware of our timelines as well as we hope to report data by the end of this year or by the end of 2023.
So we are taking strides to educate the market.
As well as better understand.
And quantify that opportunity in Europe .
Thank you for that and would love to get more color around thinking about the 60 plus sites that you have up and running and also the ones that you planned to open in the near term.
Okay clinical trials Dot Gov. It does seem that they are pretty spread out but also in major cities as well so would love to get your thoughts about.
This particular strategy and where you chose site given that this is.
Problem all over the country not specialized centers necessarily and then also how you think this could translate should you see the data at <unk> in terms of getting these centers to be early users and it is commercialized.
That's a great question and I think.
I think I'd like to hear both from Norman and from then follow up with Keith on this but certainly we have looked to expand this to.
Thoughts, where initially where we had relationships with thought leaders and then and then spreading out to where the patients were and across not only the United States, but obviously in Australia, Europe and the U K, but normally do you want to speak first to the.
The breadth of the sites and maybe a little bit of initially and how we'll reach out to the thought leaders there post approval and then Keith you can follow up.
Yeah, Hi Christian.
So the you know running a clinical trial requires experienced clinicians and so that's why we are focused on this trial.
The high volume sites.
Patients who are admitted for EHR frequency transferred to referral centers, where they get the usual care, including the possibility of being evaluated for transplant.
As you pointed out there are literally thousands of community hospitals had also see these patients and.
I think we see this as a phase II or step number one is getting this behind us.
You know how easy the drug is to use and so if if it is approved we would definitely wants to expand that to a much broader base with currency.
Currently it's just much easier for us to do a clinical trial and assure high quality data by doing this team very experienced centers.
Thank you and then last question from me wanted to ask if you had if you were planning to have a presence. This weekend at the liver meeting I know the trials, obviously enrolling right now but in the past.
Shared metrics around some of the market researcher conducting as well.
Right well I'll, let Keith finished up answering a little bit of a last question and then also address <unk> So Keith.
Yes, maybe on the last question.
I would say that I agree with Norman that the nature of the disease is not one that specialize just a tertiary care centers. According to our conversations with thought leaders and just tracking the data both in the U S and and and in Europe .
And just given that the dosing and administration nature of our Super sterile given that it's only given on days one and eight four if the patient is still hospitalized that its a fixed dose so very non complicated dosing and administration protocols our side effect profile.
Seen in the phase Iia.
It's fairly straightforward.
That we feel like because of those attributes and because H is diagnose anywhere it's not just referrals to tertiary care centers.
That there is the opportunity.
That any hospital that admit patients with.
With H could potentially be prescribers and treaters with our super sterile.
Following positive top line results. So we do think that it will be.
A potentially large opportunity and that any hospital that and its patients of this nature.
Could stock and and prescribed the drug.
As it relates to a S. L. D. In fact, we had worked on some worked on a poster abstract that was admitted and we will be presenting that on Sunday.
It looks at some CNS data as it relates to H and costs in health care utilization.
Knowing that the health care utilization rates for patients diagnosed with with <unk> within a particular DRG codes.
Our costlier than those who don't have an H diagnosis either in the primary or secondary position.
So we're excited to bring that data to light.
And we will have a 10 by 20 booths there.
Medical Affairs staffed booth.
And just providing education around our firm trial.
As well as around alcohol associated hepatitis as well.
Great. Thanks, everyone and didn't mean to cut you off on the previous answer so sorry about that.
Thank you, Chris and great great questions.
Thank you. Our next question is from Francois <unk> with Oppenheimer. Please proceed with your question.
Hi, Thanks for taking the question just quickly on Mark didn't mortality and or liver transplant endpoint. There was changed as local can you. Maybe you could just go over that again just to make it clear here.
Sure. Thank you.
Thanks, a lot.
I'll, let definitely enormous speak mostly to this but it really is in and looking at the world today because what's.
What's happened is there are more livers available now for patients that weren't available back when hepatitis C was was raging as hot as it was with the pharmaceutical therapeutics available to patients now few of those patients of Hep C. Patients that are now being transplanted that being said there is still.
There arent a lot of levers around men's we heard from Keith.
And as I stated earlier 158000 hospitalizations per year.
Just for a H that doesn't mentioned all the other potential reasons for liver transplant, they inherited diseases and other conditions and there are only 9000, approximately 9000 transplants per year in the United States. So.
It's it's.
Available to patients, but only a few patients that being said if a patient does get a liver transplant than their chance for survival is very high and and so we wanted to make sure we were able to track that potential.
Potential in our trial until now we are having an endpoint that is mortality.
The patient at 90 days.
Or.
They received a liver transplant, so there'll be I kind of think about it would be death of the patient or death of the liver, but I think Don can speak to is much more eloquently than I.
I think Jim more or less summarized spend upfront.
We realize when the protocol was first written transplant it wasn't quite as big of an issue, but it's really grown in popularity and success.
Alcohol now count more than.
So.
Yeah.
So the Big question was if you have a lethal disease and you're only tracking yes.
Yes, and someone who is heading for a bed ending and coke transplants, a chance of being alive at 90 days.
Super High it's.
In the U S over 90%.
So we felt that that would give us a very.
It's very inaccurate picture.
So, although we won't be looking at this as an endpoint as well we felt that we had to include transplant is a potential outcome.
So if you.
I know you know the details of this but if you look at the mills.
Our conclusion is 21 to 30.
You are say 25, and youre getting worse.
When you get about two thirds of your chances are of transplants are higher if you get start getting better lower youll melt coast to lower their risks.
Almost we hope it'll be a self correcting kind of kind of problem.
We spend a lot of time thinking about this and we came to conclusion that including transplant was definitely the better option.
Yeah, I think it totally makes sense for I'm just trying to.
To clarify here is prior to changing this endpoint.
If someone's got a transplant where are they considering.
Having survived or did you just have to count that in the trial.
Good good question.
Good catch so actually.
Only one patient falls into that category the remaining.
The remainder of the trial actually included transplant as an endpoint so patients who get to a transplant are considered terminated.
Hi, Thanks very much.
So they wouldn't be considered having survived they would just you just have to find another patient.
No no they are considered as a single therapy.
I think his question.
Alright.
Excuse me.
Thank you Andrew.
They would you know if the mortality is the endpoint than it would have failed the therapy. So it basically would bring up the placebo.
It is a surrogate for death correct.
Correct, Okay excellent and then just wanted to make sure that.
That's what you've got fast track, but any potential for breakthrough therapy designation.
Is that something that can only happen post data here.
Yes.
Need for breakthrough is you need to have a control group and since we didn't have a control group in the phase Iia that wasn't possible to do.
The contemporaneous study, which looks very favorable but.
So if a firm is positive then there is an opportunity for us to have breakthrough at that point in time.
And I just think right Goldman.
Thank you Frank I think to be clear on the first question.
One patient who was transplanted I think the question was would that patient be counted as a death or would that patient would then be rolled over.
It would be I guess in either case right.
So we are still trying to decide statistically how to deal with that single patient.
As a single event under 300 <unk> program, a very minor effect.
Right I would agree thank you.
Understood. Thank you.
Thank you. Our next question comes from Ed Arce with H C. Wainwright. Please proceed with your question.
Hello, everyone. This is Thomas Yip asking a couple of questions for Ed. Thank you very much for taking my questions.
Perhaps first just trying to understand since your update on.
On October six.
Ken can you tell us how many patients.
Been an ROE in the firm since update it was structured.
<unk> hundred patients.
And then also trying to understand the timeline better here.
As you pointed out in the press release complete enrollment has been pushed up and now its second quarter 2023.
For a 90 day study period.
How long should we estimate for the data to process from that point.
Okay, well I'll, let <unk> speak to that second one but as far as the first one we're not going to we don't want to give updates every couple of weeks. Because then we will start having people being concerned how many did we enroll this every week and that kind of thing, but suffice to say, we I think we announced in the beginning of August that we were at 170, and we announced at the beginning of October There were you were.
Sure.
200, I believe.
More than 200.
People can start to do the math, there and estimate that was two months you know how many patients do we enroll and kind of project that forward and see that second quarter looks like a very reasonable thing to be able to achieve.
And but normally there was a question if we can give maybe a general answer on when the last patient.
Last visit after 90 days approximately.
Right. So as you pointed out to Thomas's the 90 day follow up so they can see.
The last patient in the 90, plus 90 days gets you to the end.
The.
We're collaborating with <unk> on this trial and they're doing a fantastic job of keeping the records up to date. So we are continuously running at about 80% completion.
I don't expect it will probably take us several months to.
Collect the data we have to make decisions on.
The analysis before we unblinded so one.
Well I'm very intense period of discussing any other analyses we plan to do prior to unwinding.
And so I.
I don't want to give an exact number but I think we will be well positioned to use the data within within a few months.
I missed that.
Thank you so much for the additional details.
And then and then us.
You pointed out Jim.
Pittsburgh enrollment.
Well based on the complete enrollment target has been pushed up.
Can you outline some underlying reasons.
Uh huh.
Enrollment <unk> seem to have accelerated.
Can you expand on what are some efforts.
That that's driving the pace of enrollment.
Another good question. Thank you so much.
I think there's an overall environmental.
Circumstances going on and then there's also just the defined effort that Norman and the team together with.
Keith's team are doing and just getting the word out.
Driving the trial the first is with Covid waning where.
Hospitals have opened back up again, and so theyre more back into a normal circumstance where.
Eddie coordinators were not considered essential workers and wouldn't be able to be there and that kind of thing during the during the pandemic. It was it was a greater challenge.
<unk> have opened.
It's been easier for patients and they feel more comfortable going in to the hospital for a condition with EMEA stayed home too long and become two hill to even qualify for our study during the pandemic and so I think thats helpful from an environmental standpoint and from.
The process standpoint that really has been assigned work by Norman and the team. So maybe normally you can you can speak to that.
Normally.
<unk>, thank you for that.
[laughter].
The from.
From the beginning.
Kovac with just a huge disruptor so.
We were seeing.
Slanted view of sicker patients, who is coming to the hospital.
People were delaying youre going to see their doctors and doctors are denying patient's sickness for two sided in addition, coordinators, where really unavailable and was quite frustrating in the number of trial has suffered from the same problem with this opening up.
<unk>.
We're seeing people returning back to a much more normal schedule.
We have been very.
We followed the science very closely.
And then on lagging we call to make sure that they don't have any issues that we can help them with.
And and then buy.
The initial initially took a while to get some of the European sites.
Australia inside.
More than pulled their weight.
And so now we have nearly a full complement there are only a few additional sites that we're adding because they're such high volume.
Such high volumes in prior studies.
And I just.
It's always dangerous to make an assumption, but I assume that will continue on this.
On this path.
Hi, I completely support what Jim said about.
Initiative.
Understood. Thank you. Thank you again for the details.
For a firm perhaps one final from us.
Related to customer what would you expect.
So top line for the fourth quarter and also for the next 12 months from <unk> as well and also if there's any initial feedback from the field.
I appreciate it thank you.
Okay.
As far as projecting sales that that's not.
For us that would be for a partner to do and I certainly wouldn't want to do that.
In front of them, but I know that in talking to the group as well as the CEO of going to call. He's very pleased with the way the launch went and I did hear back for through him some anecdotal information that.
<unk>.
The initial feedback from surgeons, who use the product we're tremendously satisfied with it.
And so it fills a surgery can be very painful experience and we saw good results in a clinical trial, where patients had dramatic reductions in narcotic use and in pain and seemingly is continuing.
Everyday as always so rewarding to see a product finally get out on the market and you get the feedback from everyday users and to hear back from these patients and the physicians very positive feedback actually.
That's really nice.
Yes.
And Mr.
Thank you again for taking my questions looking forward to progress in the firm.
Thank you.
Thank you there are no further questions at this time I would like to turn the floor back over to Jim Brown for any closing comments.
Thank you Paul and we want to thank all of you for your time and as always please feel free to reach out.
Happy to take your calls thank you and have a wonderful evening.
This concludes today's conference you may disconnect your lines at this time thank.
Thank you for your participation.