Q4 2022 DURECT Corp Earnings Call
Greetings and welcome to the direct Corporation fourth quarter 2022 earnings call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
I will now turn the conference over to our host Tim Pap Chief Financial Officer. Thank you you may begin.
Good afternoon, and welcome to direct Corporation's fourth 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 and 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 fourth quarter and full year 2022 financial results.
Total revenues in 2022 were $19 $3 million compared with $14 million. In 2021, 2022 revenues included $10 million of milestone payments related to our positive our agreement with N. A call. While 2021 included approximately $5 $2 million of revenue attributed to an upfront license payment and sale of menu.
<unk> supplies an excipient.
And Nicole commercially launched cause American September 2022.
For the fourth quarter of 2022 revenues were $3 3 million compared with $7 3 million for the prior year. This decrease is due to the initial upfront license revenue we recorded in Q4 2021.
R&D.
Expense was $36 $9 million in 2022 as compared to 31 8 million for the prior year and 10 million for the fourth quarter compared with $8 4 million for the prior year.
The increases were primarily due to higher clinical trial expenses for our ongoing affirmed trial contract manufacturing expenses for large tucows sterile and employee benefit costs, partially offset by a decline in R&D spending on polymer.
SG&A expenses were $15 9 million as compared to $14 4 million for the prior year, primarily due to higher employee benefit costs and patent expenses for the fourth quarter SG&A revenues were $4 3 million compared with $4 5 million for the prior year, so relatively flat.
As of December 31, 2022, we had cash and investments of $43 6 million as compared to $70 million at December 31, 2021, and our cash burn for 2022 was $26 $4 million.
We also completed a registered direct offering in February 2023, raising $8 8 million in net proceeds, bringing our pro forma cash of $52 $4 million we.
We believe our cash on hand is sufficient to fund operations into the first quarter of 2024 now.
Now I would like to 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 fourth quarter 2022 update.
The fourth quarter was a strong one with consistent forward progress on our firm trial.
We are excited to remain on track to announce top line results from our phase <unk> trial in the second half of this year.
Enrollment continues to progress nicely, we have now dosed more than 260 patients out of our target of 300, and we continue to expect completion of enrollment in the second quarter of 2023.
If successful we believe our firm has the potential to support an NDA filing.
Our goal is to advance lifecycle sterile as quickly as possible to approval and a H an indication for which there are no approved therapeutics.
The primary focus of the company is on completing enrollment in our phase two be affirmed trial for less to cluster all in patients hospitalized with severe a H.
Our firm is the 300 patient placebo controlled double blind multinational study two active dosing arms and a placebo arm 100 patients each.
We currently have over 60 sites open, including leading hospitals in the United States, Australia, the EU and the U K.
We are working very renown liver centers and some of the world's preeminent thought leader and a H.
The FDA has granted our luxury cross-sterile, a H program fast track designation and a positive result, and a firm could support an NDA filing.
With this in mind, let's circle sterile 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 represents an unmet medical need with no approved therapy.
A H result in about 158000 hospitalizations per year in the United States.
In hospitalized patients have a 90 day mortality rate of approximately 30%.
This suggests over 40000 deaths in the United States each year from a H, we estimate that in the U S alone on average more than 100 people Die every day from this disease.
Our goal as a company is to bring a safe and effective treatment to these patients to help alleviate the suffering and save lives.
Hey, H continues to represent a significant cost burden to both patients and health care system.
But the vast majority of not receiving a transplant the average cost of treating hospitalized a H patient can range from approximately 50000.
To approximately $150000.
For those patients who receive a liver transplant. The average cost was approximately $875000 per transplant in the United States.
And these patients are subject to a lifetime of immuno suppression.
Our silicon sterile represents a potential multibillion dollar opportunity in the U S alone while simultaneously providing substantial overall cost savings to the health care system.
K H, it's also a global concern.
Allow me to close to all the potential to serve ex U S H patients and their health care systems.
These ex U S markets represent additional attractive market opportunities.
Our confidence.
One trial will be successful is driven by our compelling phase Iia study data the mechanism of action of locks equal sterile, which ties directly into the biology of a H and our multiple preclinical animal studies, where we observed profound survival benefit in multiple relevant acute organ injury models.
In summary.
We continue to make great strides with the firm and have enrolled more than 260 patients to date.
And have over 60 clinical sites open.
We are on track to complete dosing the last patient in the affirmed trial in the second quarter of this year, which would enable reporting top line results in the second half of this year.
If successful we believe our firm has the potential to support an NDA filing.
We would now like to take any questions you may have.
Thank you.
And ladies and gentlemen at this time, we will be conducting our question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is in the question queue.
You May press Star followed by the number two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question comes from Francois beer, So quad with Oppenheimer. Please state your question.
Hi, Thanks for taking the question.
And congrats on staying on track here and I was just wondering in terms of the potential off the data to have an NDA filing what what gives you that confidence that you wouldn't need another trial before filing.
It comes from a couple of directions, but the primary one is that there.
Are no approved therapies today for this disease and the mortality rate is so high you know the 90 day mortality is 30% and depending on your meld score can be even higher.
If its up I'll, let Norman speak to this as well, but I think it's north of 25 meld against significantly higher so you've got a very high mortality and no therapy out there that being said we've had some communications with the FDA that have indicated as well.
Potential for that but they will never commit to anything until.
They have the data in hand, quite frankly until they have the submission in hand, but that's where we sit right now both with the FDA and EMA.
But normally would you want to add anything to that.
No I think Hello, Frank I think I think that covers it all.
It is one of the FDA regulations it is specific.
It's specific.
So the topic of specifically address.
And.
Can you confirm that it does qualify under the circumstance that Jim just mentioned.
And maybe a second one here Norman on on.
In terms of the eligibility of patients here for getting a liver transplant can you just maybe discuss the percentage of patients with H that arent, even eligible just because of how recently they have been consuming alcohol.
So it's it's it's a moving target because until a few years ago. There was an absolute rule that was observed in those centers that people had to be extended for six months.
That started to fall away and.
Cintas increasingly drops.
The requirement the absolute requirement for six months and so.
Even the a S. L D changed the guidance to say you could consider in the severe patients.
Having said that.
It's never going to be a solution to the problem because.
There are only about 9000 transplants available.
So for things other than alcohol. So if you see four and a half thousand.
<unk> and <unk>.
160000 admissions.
Huge imbalance will never be able to solve that through transplant.
Time factor has become.
Hum.
Unless you Richard.
It comes down more now too to numerous social factors and behavioral taxes.
Yes.
Oh go ahead, you know.
No I was just going to say no.
Norman already mentioned, it but the social factors, whether or not you have the insurance whether you can pay for it also comes to play Unfortunately.
And is there a percentage of people that you would expect would be insured two two.
Be treated here.
Well, we have patients who have a H that there is over 85% or so have insurance, but one one needs that in order to get a transplant pretty much.
Right.
Okay.
Yeah Yeah.
The trial there are a lot of experts who work in transplant centers, but a lot of patients admitted to places where transplant isn't an option unless the patient gets transferred.
Got you, Okay, and then lastly.
Just as where this is this is the year, where the data is coming here. So it's very exciting for I guess the old dairy 928, like as a sterile now but.
Any thoughts on commercialization is just in terms of the U S. You talked about the ex U S opportunity as well, which is unfortunately, a large opportunity.
But I was just wondering any thoughts about maybe.
The amount of reps. So just the commercial build that would be necessary if able to file off this data.
In order to get ready just to get a better feel for what will be necessary to take this.
On your own and you know it.
Starts to take it commercial on your own in the EU and.
In the U S or just any color on commercial thoughts would be helpful. Thank you. Thank you yeah first off yeah ex U S. We would expect that we would have a partnership in place and and so that's a process that's ongoing.
Within the U S. We look forward to doing it ourselves and there are some long tail things that Keith Louis who is our head of commercial here at Durect and business development as well is already has underway and he can speak to some of his initiatives. So yeah.
Yeah. It's a good question. Thanks, Francois I would say as far as commercial activities at this point in the development process. We're certainly looking into the market access aspect of things given that this is likely going to be delivered under the inpatient system and under DRG.
A lot of landscaping work on current status of care.
And those processes as far as.
Marketing strategy, we have various launch readiness review processes already underway to ensure that all of our cross functional teams are aligned on the same plan.
Going into topline results and as soon as we turned that card so.
I can't give you specifics on sales force sizing and all of that work is ongoing right now, but surely by the time, we get to the top line.
<unk> I think we're on the right.
A preparation state of mind and at the right level to be able to move very quickly upon positive results.
No I think you can safe to say it would be under 100 reps.
Yeah, Yeah for hospital product like this again.
Yes, we always start with somewhere on every launch I've worked on somewhere between 50 and 100.
And for a hospital based product like that I think that range is still applicable.
And for some of the longer tail things like the codes and the like.
<unk> already got the process in motion Yep Yep.
Okay, Okay, Okay, great and in terms of awareness for Msos and whatnot is age something that a liver transplant docs are very much aware of or is it something based on the fact that there is nothing really that's been working in the steroids that have really been working for a long time that there's a lot of education that still need it.
I think both maybe you can speak in enormous can follow up on that cause it to different perspectives about the same yeah.
It's a very good point and one that we certainly took to heart and actually.
It's a great entry point for our new disease awareness site that we actually just launched its called explore a H epigenetics and so there is awareness of the H, particularly over the past couple of years, we've seen an increase.
And the incidence of de H. Unfortunately over the course of the past couple of years in the pandemic.
So it has become higher on folks radar screens for a gastro and herpetologist.
But the intersection between a H the current treatment paradigms, which.
We all think in hematology I think are sub par and why they are still high unmet medical need.
The intersection between a H and the role that epigenetics may play.
Is the reason why we developed this educational website at.
That's an unbranded just purely looking at.
That again that intersection of epigenetics and alcohol associated hepatitis.
So I would encourage you and others to two proves that website, but.
And between now and top line results and until we actually are able to launch the product certainly education around H and the role of the Epigenetics may play in that is a high priority for US absolutely enormous maybe you can speak to it from the clinicians perspective, an awareness of this molecule.
Yeah, and especially.
Thank you for the patients that get admitted to be hospitalized.
<unk> can be a pretty broad spectrum, some very mild disease with very little risk to that.
Mission level, where people come into the hospital, and we expect somewhere between 30 and 50% debt rate.
For people, who work in hospitals, it's it's no surprise, it's completely overwhelmed most transplant herpetology practices and most transplant programs sort of displace so much stuff that's become it's it's a crisis and in many ways.
I I can't having not worked in a community hospital most of the people, we see with severe HR transferred from somewhere else.
So that's sort of second level, where you have.
Hospitals that take reasonably high acuity patients.
That's right.
I I'm pretty sure those people know because you know.
And in my practice that would get cold from hospital, its not always gastroenterologist, saying, Hey, I've got this patient with age. So I think there's very wide recognition in hospital practices.
At the.
To add to Keith's comment in terms of Herpetologist there is.
I would be prepared to say there is not herpetologist in the United States, who is unaware of either a H or of this product. It is it has received extremely.
Extremely close scrutiny people are very excited about it.
I hope the results are as good as we expect them to be.
Awareness is not going to be a big issue and to the to the site that Keith mentioned, that's really sort of for the next level of people that teach you know more about age. So it's really designed to spread the word downstream as it were.
Great. Thank you very much and congrats on staying on track here. Thank you.
Thanks, Mike.
Our next question comes from Kristen <unk> with Cantor Fitzgerald. Please state your question.
Hi, good afternoon, Thanks for taking my questions and you're getting very close to that finish line.
So the first question I had was what is your understanding on whether or not there are different pathological phenotype of these patients and even if that is indeed, the case would you expect a 19 eight to behave differently across different populations or is the mechanism I'm quite broad you addressed this.
Okay I'll, let John .
Speak to that for sure but there are.
Maybe some subtle suggestions of certain genetic components with certain populations.
Somewhat sneak once it about a population in South America, where that's a possibility, but I think generally there isn't much known dorman, what do you think yes.
Yes.
The history of pathological.
Diagnosis is more or less.
Well you know from our previous discussion in the U S. Practically no one biopsy these patients.
Some people actually.
Including the object to the gym.
Despite up she proven it's really just.
There was a constellation of finding there's no there's no classic histologic finding that defines a H.
It usually shows a number of features it's a mixed number.
The diagnosis in I would guess, 95% or more of cases is when they called the the prognostic value of the biopsy there've been a few pages that referred to it but.
My opinion and the opinion of several of my senior colleague is the biopsy gives very little additional prognostic or diagnostic value.
And then the last.
It's just it's somewhat there are people, who really believe the biopsy shows some somehow.
Some value.
And I didn't mean to.
Danny Great those people's opinions, but.
A lot of people do not think that the biopsy adds much in any regard.
Yeah.
Okay. Thanks can you remind us what you've shared publicly related to the powering that went into this trial.
And what's your latest understanding or expectation on how the placebo arm would behave and might've published findings in natural history around this 90 day point it sounds like you're citing about.
30% mortality at this time.
Yes.
Okay.
Okay. So it's a blinded study so we don't know, which who's falling into what groups, but our.
Our endpoint.
Endpoint observed endpoints are very close to a projected eight points.
The statistician and I and several other people at Durect worked on prior to coming up with a final protocol, so where we're more or less on track.
Yeah.
Okay. Thanks for that.
Youre, referring to is very surprising paper that was published.
Hum.
Surprisingly low mortality, but that is a historic low and no other papers have not demonstrated that.
That number.
For sure.
Our inventory is well above that.
Yeah.
Okay, and then outside of the primary endpoint 90 day mortality or liver transplant can you remind us some of the key secondary outcome measures youre going to be looking at as well.
Whether you are looking at different markers cell counts or other factors that are going to help you understand the contribution to liver injury. Thank you again.
Yeah.
So we have a we have a lot of secondary endpoints.
Two most problem looking at 28 day outcomes for both mortality. So we have in the hierarchical fashion.
Transplant.
So event meeting transplant or death, followed by death, followed by 28 day transplant or death, followed by 28 day mortality.
And then a variety of all.
Biomarkers.
That's.
In terms of all of the top of my head, but seems like Middle School meld progression.
And then will also stratify by.
Enrollment milk.
Got it thanks again.
Thanks Christian.
Thank you just a reminder to ask a question press star one to remove yourself from Q Press Star two.
Our next question comes from Ed Arce with H C. Wainwright. Please state your question.
Hi, everyone. Thanks for taking my questions and let me add my congrats on the continued progress and staying on track.
I wanted to ask a couple questions around that piece.
Just to make sure that's come June 30th we've reached full enrollment.
First just looking at the piece.
Given.
Over 200 patients.
Were enrolled on the November 2nd update and now have over 260.
As of today, so over the last four months that comes out to about 15 patients a month a month and I'm. Just wondering if that's a fair way of thinking about the progression that wouldn't be.
From from the current point get you.
To the target of 300 by the end of June .
And then the second question just again, along the timelines, but also the activities that are involved.
From the point of last patient last dose.
If a second doses necessary for that last patient.
Two of the data readout.
What what activities are involved.
In the process of those number of months.
Sure first off your calculation I think is fine. It's it's in my from my where I sit probably a bit on the pessimistic side I certainly hope, we'll do better than than just barely squeaking in but the team is doing a great job I've been rolling and whenever that last patient last visit occurs and it actually isn't from the last dose it's from when they were enrolled in the <unk>.
Study day, one they get the first dose that's when the 90 day clock starts.
And so from that last patient.
Dosed, one can count for 90 days.
Then and as even now we are doing real time cleanup and normally can give us a specific number but it's a very high percentage already of the data that we're looking to clean up and that's a constant process with any clinical trial.
To the extent that you can you'd like to in real time keep the data is for.
For each of the patients.
As well organized and and query anything that needs to be queried and kind of iron out any any discrepancies or any data points that are missing and the like.
And.
So, let's just say, we have north of 80% of that.
Wrapped up our in hand by the time they get last patient last visit then you've got another.
The team feels very optimistic they feel too I'm kind of saying probably closer to three but it'll be in that two to three month timeframe that we will continue to clean up the data until we get to the point, where we feel comfortable enough to where that we want to go.
Hans that pencils down and we're going to have data lock and at that point within just a very short time within just a few days we'll have the.
We'll have the information that we'll have the data we look forward to announcing so.
It will come pretty quickly and it's really just a matter of cleaning up the data to make sure. It was once you lock the database, it's really difficult and you should never actually go back if you want to use it as a pivotal trial you've got to be really done when you win when you are.
Lock it and so that's the most critical piece actually as those last few months or year.
Going through and making sure that you've got everything.
Well understood and well in hand Norman.
Yes.
I agree I think Jim just said were.
The activities.
Where we are.
The.
Trial is proceeding at a decent pace.
Sure.
I don't think.
Zinc.
I'm more optimistic than your projections they caused it.
Typically during the holidays, both trials slow down a little bit so.
We have picked up the pace again.
Confident that we will finish on time.
In terms of.
What what to do we are preparing for the final analysis so were tomorrow.
The moment, we are preparing all of the reporting shareholders and all of the.
This is one of the tables already to be populated as you can imagine.
A trial of this size they are.
Sort of data points, and then as Jim since we want to.
Make sure that we decided on all of our analyses.
You can always do a post hoc analysis, but.
Doing doing it prospectively gives everyone a lot more confidence and so we're trying to make sure. We haven't left anything else before we before we do the data.
David Lock.
Yeah.
Great. Thank you that's very helpful. Maybe just a couple more for me more on the commercial side.
And.
I'll open it up to anyone but of course, who he wants to hear.
Some comments.
I appreciate that so.
As you had mentioned earlier I think Jim.
Theres a wide recognition of the problem in the hospital, where I think actually it was normal.
And also.
No herpetologist in the U S is unaware of either age or Lars who cost rule.
Which is also of course very encouraging from the prescribers perspective.
Given that background I was just wondering if you could comment on the.
85%.
Patients that have insurance what breakdown.
Do you think.
That's it.
<unk>.
And to the degree that you've had any sort of interactions.
<unk>.
You know even just tangentially.
What are your thoughts about the degree of receptivity.
On the payer side. Thanks.
Well I'll, let I'll, let speak excuse me can you speak to the payer piece.
But as far as the.
The percentage of patients who have insurance of the 150, some odd thousand hospitalizations per year I would say the vast majority from what we can glean, it's north of 80, maybe north of 85% of those patients.
And so.
That would put them in the right place from from that standpoint, and the cost of this disease. Unfortunately.
Terrific when you take that number of 150000 and you multiply it by a number that somewhere between 50 and 150000.
You're clearly running.
A huge bill.
It's in the five plus billion dollar range and that's not taken into account at all the.
The cost of liver transplant, which is normal tells us there arent that many liberals available. There's maybe 4000, some odd but that's 4000 times almost 1 million. Each so that's that's a very expensive component as well. So you add all this together and you're talking about a substantial cost to the health care system in the United States.
Somewhat less than that in Europe , but not much it's still quite quite large in Europe as well as the patient population is a little bit bigger I think and in other markets around the world.
So we think that sets us up very well to have a product that can save lives remember about 30% of these people are dying and.
And can be very rewarding to our shareholders as well. So we think that we can create a very successful product for direct save the health care system, and an equal amount of money in that range and and still be there could be able to save lives, but maybe Keith you can speak more specifically to.
Enhancing awareness and Payors, Yeah, Hi, Ed. This is Keith good question and of that 80% or so that are insured I would say it is a mix of Medicare Medicaid and private insurance, probably being a little bit more heavily towards the Medicare and Medicaid when we look at the 2019 data.
That we propose to them previously.
But I think the value proposition to the hospitals, we are certainly doing a lot of research around that in building our case.
Just going back to the primary endpoint of a firm being.
Statistically significant reduction and.
And in mortality and liver transplant that in and of itself would be a huge benefit to deter people and have them.
Take them off of the off the wait list and off the liver transplant list because that's normal stated previously there is way too much demand for the limited supply of.
Livers for transplant, but.
But in addition to that primary endpoint, obviously theirs.
A number of market access and reimbursement factors in the hospital that I think mark.
Mark Superstar, all could help offset things like decreasing length of stay decreasing diagnostics.
Diagnostics and health care at other health care utilization.
Hopefully decreasing the time spent in ICU that these severe H patients typically comprise.
So I think there are a number of.
Potential cost offsets that we are.
Investigating in depth between now and top line data and obviously after a topline data.
The market access and reimbursement.
Division of our commercial team will certainly be.
One that is active now and we will certainly ramp up after topline results.
Great. Thank you thanks, everyone appreciate it.
Sure.
Thank you there are no further questions at this time I'll hand, the floor back to management for closing remarks.
Well with that we just like to thank you for your time and as always please feel free to give us a call or contact us we look forward to catching up take care.
Thank you. This concludes today's conference all parties may disconnect have a great evening.