Q2 2024 DURECT Corp Earnings Call
Speaker Change: Ladies and gentlemen, welcome to the Durek Corporation second quarter 2024 earnings conference call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.
Operator: At 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 press star and zero on the telephone keypad. As a reminder, this conference is being recorded. I will now turn the call over to Tim Papp.
Speaker Change: If anyone should require operator assistance during the conference, please press star and zero on a telephone keypad.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: I will now turn the call over to Tim Papp. Thank you. You may begin.
Tim Papp: Thank you. You may begin. Good afternoon and welcome to Direct Corporation's second quarter 2024 earnings conference call. This is Tim Papp, Chief Financial Officer of Direct. Before we begin, I would like to remind you of our Safe Harbor State. During the course of this call, we may make forward-looking statements regarding direct products in development. Walla Walla.
Speaker Change: Good afternoon and welcome to Direct Corporation's second quarter 2024 earnings conference call.
Speaker Change: This is Tim Papp, Chief Financial Officer of DIRECTV.
Speaker Change: Before we begin, I would like to remind you of our Safe Harbor Statement.
Speaker Change: 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.
Speaker Change: These forward-looking statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements.
Speaker Change: Further information regarding these and other risks can be found in our SEC filings including our 10-K and 10-Q's under the heading risk factors.
Tim Papp: 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 Facts. To begin, I would like to review our second quarter 2024 financial results. Total revenues in the second quarter of 2024 were $2.2 million compared to $2.1 million in 2023. 2024 revenues were slightly higher due to a small increase in revenue from collaboration. R&D expense was $2.2 million in the second quarter of 2024 compared to $7.9 million for the prior year.
Speaker Change: To begin, I would like to review our second quarter 2024 financial results.
Speaker Change: Total revenues in the second quarter of 2024 were $2.2 million compared to $2.1 million in 2023.
Speaker Change: 2024 revenues were slightly higher due to a small increase in revenue from collaborations.
Speaker Change: R&D expense was $2.2 million in the second quarter of 2024 compared to $7.9 million for the prior year. The decrease was primarily due to lower clinical trial related expenses, facility and lower employee related costs.
Tim Papp: The decrease was primarily due to lower clinical trial related expenses, facility, and lower employee-related costs. SG&A expenses were $3 million in the first quarter of 2024, compared to $3.8 million for the prior year. The decrease was primarily due to lower employee facility, market research, and professional services expenses.
Speaker Change: SG&A expenses were $3 million in the first quarter of 2024 compared to $3.8 million for the prior year. The decrease was primarily due to lower employee facility, market research, and professional services expenses.
Tim Papp: As of June 30th, we had cash-in investments of $15.8 million, and our cash burn for the second quarter was $5.8 million. We believe our cash on hand is sufficient to fund operations through the end of 2024. Now, I would like to turn the call over to Jim for a moment. Thank you, Tim. Hello, everyone.
Speaker Change: As of June 30th, we had cash-in investments of $15.8 million, and our cash burn for the second quarter was $5.8 million.
Speaker Change: We believe our cash on hand is sufficient to fund operations through the end of 2024.
Speaker Change: Now, I would like to turn the call over to Jim for a business update. Thank you, Tim. Hello, everyone. Thank you for joining us today. I'm excited to share an update on our progress towards initiating our confirmatory phase 3 clinical trial for larsicosterol and alcohol-associated hepatitis.
Jim: Thank you for joining us today. I'm excited to share an update on our progress towards initiating our confirmatory phase three clinical trial for larsicosterol and alcohol-associated hepatitis. As I mentioned on previous calls, we have been in discussions with the FDA about our proposed clinical trial design, and I'm happy to say that the dialogue with the agency has been positive. The FDA has confirmed that a single pivotal trial would be sufficient to support an NDA filing in AA.
Jim: As I mentioned on previous calls, we have been in discussions with the FDA about our proposed clinical trial design, and I am happy to say that the dialogue with the agency has been positive. The FDA has confirmed that a single pivotal trial would be sufficient to support an NDA filing in AH.
Jim: They also clearly recognize the unmet need at AH and the strong results of our sucrose dural in our phase 2B trial affirmed this. Both doses of larsuclosterol in AFIRM reduced mortality by nearly 60% in U.S. patients, who represented 76% of the total number of patients in the trial. As a result of the AFIRM data, we were granted breakthrough therapy designation for larsuclosterol in May. Breakthrough therapy designation is a process designed to expedite the development and review of drugs that are intended to treat serious conditions.
Jim: They also clearly recognize the unmet need in AH and the strong results of our sucrosterol in our phase 2b trial affirmed
Jim: Both doses of leuciclosterol in a firm reduced mortality by nearly 60% in the U.S. patients who represented 76% of the total number of patients in the trial.
Jim: As a result of the affirmed data, we were granted breakthrough therapy designation for larsicosterol in May.
Jim: Breakthrough therapy designation is a process designed to expedite the development and review of drugs that are intended to treat a serious condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically meaningful endpoint.
Jim: And preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically meaningful end. Breakthrough status allows us to have more intensive interaction with the FDA, including senior managers, throughout the development process. Under this distinctive designation, in July, we had a very productive and positive type B meeting with the FDA to discuss our trial design. In fact, this meeting was the most productive interaction I've had with the FDA in my 30-plus year career in drug development.
Jim: Breakthrough status allows us to have more intensive interaction with the FDA including senior managers throughout the development process.
Speaker Change: Under this distinctive designation, in July, we had a very productive and positive type B meeting with the FDA to discuss our trial design. In fact, this meeting was the most productive interaction I've had with the FDA in my 30-plus year career in drug development.
Jim: We are awaiting the written minutes from this meeting and look forward to sharing more details about our proposed protocol in the near future once we receive those. In the meantime, I can share a bit more about the expected timeline for conducting our phase three trial. We've already undertaken significant action to prepare to initiate the trial, and subject to obtaining adequate funding, we are preparing to start the trial before the end of the year.
Speaker Change: We are awaiting the written minutes from this meeting and look forward to sharing more details about our proposed protocol in the near future once we receive those minutes.
Speaker Change: In the meantime...
Speaker Change: I can share a bit more about the expected timeline for conducting our Phase III trial. We've already undertaken significant action to prepare to initiate the trial, and subject to obtaining adequate funding, we are preparing to start the trial before the end of the year.
Jim: We expect this will enable us to report top-line data from our Phase 3 trial in the second half of 2026. Our ultimate design for the trial will be based on the strong clinical data we generate in the firm and feedback from our discussions with the FDA.
Speaker Change: We expect this would enable us to report top live data from our phase 3 trial in the second half of 2026.
Speaker Change: Our ultimate design for the trial will be based on the strong clinical data we generated in the firm and feedback from our discussions with the FDA.
Jim: We have submitted a number of abstracts for posters and a presentation for the AASLV meeting this fall. We look forward to sharing additional data analyses and the details of the protocol in an update after we've received the written minutes from our in-person Type B meeting. We're also excited that the affirmed data was presented for the first time at an oral late-breaker presentation at the ESL conference in June. We remain encouraged by the positive reception from hepatology thought leaders and key opinion leaders for the affirmed results and their continuing support for leuciclosterol's potential to provide a clinically meaningful survival benefit in AH patients.
Speaker Change: We have submitted a number of abstracts for posters and a presentation for the AASLV meeting this fall.
Speaker Change: We look forward to sharing additional data analyses and the details of the protocol in an update after we've received the written minutes from our in-person type B meeting.
Speaker Change: We're also excited that the affirmed data was presented for the first time at an oral late-breaker presentation at the ESL conference in June.
Speaker Change: We remain encouraged by the positive reception from hepatology thought leaders and key opinion leaders for the affirmed results and their continuing support for leuciclosterol's potential to provide a clinically meaningful survival benefit in AH patients.
Jim: As a brief reminder, Affirmed was a placebo-controlled, double-blind, multinational study with two active dosing arms of 30mg and 90mg of larsicosterol and a placebo arm of approximately 100 patients each. In total, we randomized 307 patients with severe A.H. from a global network of clinical sites. Our sites included renowned liver centers in the United States, Australia, the EU, and the U.K., and we had the honor of working with some of the world's preeminent thought leaders in AA.
Speaker Change: As a brief reminder, affirmed was a placebo-controlled, double-blind, multinational study with two active dosing arms of 30mg and 90mg of garcicosterol and a placebo arm of approximately 100 patients each.
Jim: The top-line results in the key secondary endpoint of mortality at 90 days showed a 41% reduction with the 30 milligram dose of fluorescein glycerol and a 35% reduction with the 90 milligram dose of fluorescein glycerol as compared with placebo. Even more impressive results were observed in the U.S. population, which comprised three-quarters of the total enrollment in the study. That was 232 out of 307.
Speaker Change: In total, we randomized 307 patients with severe A.H. from a global network of clinical types.
Speaker Change: Our sites included renowned liver centers in the United States, Australia, the EU, and the UK. And we had the honor of working with some of the world's preeminent thought leaders in A.H.
Speaker Change: The top-line results in the key secondary endpoint of mortality at 90 days showed a 41% reduction with the 30 milligram dose of Blastuclosterol and a 35% reduction with the 90 milligram dose of Blastuclosterol as compared with placebo.
Jim: In U.S. patients, we saw reductions in 99 mortality of 57% and 58% for the 30 and 90 milligram ARBs, respectively, as compared with placebo, although not part of the original trial statistical analysis. The p-values for these results were both approximately 0.01. Very importantly, L-sucl-stero exhibited an excellent safety profile with no serious adverse events in either arm and greater than 20% reductions in the number of treatment-emergent adverse events for both active arms when compared with the placebo group in these severely ill patients.
Speaker Change: Even more impressive results were observed in the U.S. population, which comprised three-quarters of the total enrollment in a firm. That was 232 out of the 307 patients.
Speaker Change: In the US patients, we saw reductions in the 99 mortality of 57% and 58% for the 30 and 90 milligram ARDS respectively as compared with placebo.
Speaker Change: although not part of the original trial statistical analysis plan.
Speaker Change: The p-values for these results were both approximately 0.01.
Speaker Change: Very importantly, our sucrosterol exhibited an excellent safety profile with no serious adverse events in either arm and greater than 20% reductions in the number of treatment emergent adverse events for both active arms when compared with a placebo group in these severely ill patients.
Jim: Ultimately, these clinically meaningful reductions in mortality, coupled with the reduction in adverse events in these severely ill patients, reinforce the compelling risk-reward proposition of arsiclosterol. We continue to believe that the affirmed data provide compelling evidence that Lascico's gel could represent a safe and effective therapy with life-saving potential for AH patients. There are no approved therapies for AH today.
Speaker Change: Ultimately, these clinically meaningful reductions in mortality, coupled with the reduction in adverse events in these severely ill patients, reinforce the compelling risk-reward proposition of arsiclosterol.
Speaker Change: We continue to believe that the affirmed data provide compelling evidence that Lashiko's gel could represent a safe and effective therapy with life-saving potential for AH patients.
Jim: Therefore, if flush fecal sterol meets our expectations in Phase 3 and we gain approval, it would likely be the first FDA-approved treatment for this disease and establish a new standard of care. AH is the cause of more than 160,000 hospitalizations each year in the U.S. and, with a 90-day mortality rate of approximately 30%, is responsible for tens of thousands of deaths each year. In addition to this high mortality rate, AH represents a significant cost to the US healthcare system. Hospitalizations attributed to AH incur charges of $67,000 to $180,000 per patient. The total charge to hospitals is approximately $10 billion per year.
Speaker Change: There are no approved therapies for AH today. Therefore, if flucicosterol meets our expectations in Phase 3 and we gain approval, it would likely be the first FDA-approved treatment for this disease and establish a new standard of care.
Speaker Change: AH is the cause of more than 160,000 hospitalizations each year in the U.S.
Speaker Change: with a 90-day mortality rate of approximately 30% is responsible for tens of thousands of deaths each year.
Speaker Change: In addition to this high mortality rate, AH represents a significant cost to the U.S. healthcare system. Hospitalizations attributed to AH incur charges of $67,000 to $180,000 per patient.
Larcega Estrella: a total charge to hospitals of approximately $10 billion annually. As a result, Larcega Estrella represents a potential blockbuster opportunity in the U.S. alone that could simultaneously provide overall cost savings to the health care system.
Operator: As a result, Larsukha sterile represents a potential blockbuster opportunity in the U.S. alone that could simultaneously provide overall cost savings to the healthcare system. With that, we'd now like to take any questions you might have. Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on the telephone keypad. A confirmation tone will indicate your line is in the question queue.
Larcega Estrella: With that, we'd now like to take any questions you might have.
Larcega Estrella: [inaudible]
Operator: You may press stars and 2 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. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from Franois Brisebois with Oppenheimer.
Larcega Estrella: Thank you.
Speaker Change: ladies and gentlemen we will now be conducting a question-and-answer session if you would like to ask a question please press star and 1 on a telephone keypad a confirmation tone will indicate your line is in the question queue
Speaker Change: You may press star and 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Ladies and gentlemen, we will wait for a moment while we poll for questions.
Speaker Change: [inaudible]
Speaker Change: The first question comes from Francois Brissebois with Oppenheimer. Please go ahead.
Franois Brisebois: Please go ahead. Hi, thanks for taking the questions. I was just wondering, you gave us a little bit of guidance in terms of timelines to start the trial, but is it fair to assume that the next kind of update to the investing community would be around the meeting minutes? And, in general, if the meeting was in July, how long does it usually take to get the minutes back and then potentially disclose whatever you can disclose from that?
Speaker Change: Hi, thanks for taking the questions.
Francois Brissebois: guidance in terms of timelines
Speaker Change: start the trial, but...
Speaker Change: Is it fair to assume that the next kind of update to the investing community would be around
Speaker Change: the meeting minutes and in general.
Speaker Change: If the meeting was in July, how long does it usually take to get the minutes back and then potentially disclose, you know, whatever you can disclose from that. Thank you.
Jim: Thanks. Yeah, sure. Hi Frank.
Speaker Change: Yeah, sure. Hi, Frank. Yeah, we're still waiting to hear back. The meeting was held fairly recently, actually, near the end of July.
Jim: Yeah, we're still waiting to hear back. The meeting was held fairly recently, actually, near the end of July. Typically, it's four-plus weeks before you get those back, and we'll be able to give an update at that point in time.
Speaker Change: and typically it's four plus weeks before you get those back and we'll be able to give an update at that point in time.
Jim: We feel pretty comfortable about the timeline because we've got a good handle on the timing of the trial and the like, but we just want to get confirmation from the agency before we discuss that further. And then, have you seen or disclosed any of the possible differences that you saw between the EU and US sites in the trial? They're just, there's such a difference probably in terms of the data.
Speaker Change: We feel pretty comfortable about the timeline because we've got a good handle on the powering of the trial and the like, but we just want to get confirmation from the agency before we discuss that further.
Speaker Change: Understood. And then have you seen or have you disclosed...
Speaker Change: Any of the maybe differences that you saw between the EU and U.S.
Franois Brisebois: What have you disclosed publicly there? And maybe just remind us of how this works. How does the patient come in when he's severe, and how much time do you have to treat him? Just any color there that might explain the difference between the EU and the US would be helpful.
Speaker Change: sites in the trial. They're just there's such a difference probably in terms of the data. What have you disclosed publicly there and maybe just remind us of how this works? How does the patient come in when he's severe and how much time do you have to treat him? Just any color there that might explain the difference between the EU and the US would be helpful. Thank you. Yeah, we'll definitely provide more color on that as the year unfolds. We have
Jim: Thank you. Yeah, we'll definitely provide more color on that as the year unfolds. We have some potential posters and presentations coming up on that.
Speaker Change: some potential posters and presentations coming up on that. And Wei-Chi is here with me, so maybe Wei-Chi you can briefly describe the patient's experience when they come in.
WeiQi Lin: And WeiQi's here with me, so maybe, WeiQi, you can briefly describe the patient's experience. Well, we actually pre-screened a thousand of them, and then basically over 300 or... Yeah, patients, and then finally enrolled 307. And there definitely were differences around the world. We know, just for example, in the Franco-Belgian region, they would only dose on Mondays because they didn't want their employees, their study coordinators, and like coming in over the weekend and drawing blood.
Wei-Chi: well we actually pre-screened
Wei-Chi: thousands of them.
Wei-Chi: Yeah. And then screamed.
Wei-Chi: basically
Speaker Change: Oh, but 300 or...
Speaker Change: Yeah.
Speaker Change: some patients and then finally enrolled 307.
Speaker Change: There definitely were differences around the world recently.
Speaker Change: We know just for example in the Franco-Belgian region, they would only dose on Mondays because they didn't want to
Speaker Change: have their employees, their study coordinators and like coming in over the weekend and drawing blood.
WeiQi Lin: And so, and they also required biopsies first, which took four to seven days. So if that patient didn't get the results back on a Monday, they had to wait till the next Monday. So certainly, the patient journeys and experiences were different. And even at times, not just in the presentation, but anyway, there certainly are some regional differences that we will share going forward. And those absolutely, in my mind, explain why we're seeing the differences that we do.
Speaker Change: and they also required biopsies first, which took four to seven days. So if that patient didn't get the results back on a Monday, they had to wait till the next Monday.
Speaker Change: So certainly the patient journeys and experiences were different.
Speaker Change: and even at times, not just the presentation, but anyway, there certainly are some regional differences that we will share going forward, and those absolutely...
Jim: But nonetheless, the drug looks very good; more data will be okay. Yeah. Yeah, but look for A, F, L, D. Okay, perfect.
Speaker Change: in my mind, explain why we're seeing the differences that we do. But nonetheless, the drug looks very good. Yeah.
Speaker Change: more data will be okay. Yeah, yeah.
Franois Brisebois: And sorry, can you remind us where ASLB is this year? And maybe on that note, has there been any analysis, or if you can't share, you can't share yet, but has there been any more color on that impact of the endpoint of being, you know, mortality or transplant liver? Yeah, certainly.
Speaker Change: Yeah, but look for A, A, F, L, D.
Speaker Change: Okay, perfect.
Speaker Change: But can you remind us where ASLB is this year and maybe on that note has there so we talked about the sites But has there been an analysis or if you can't share you can't share yet, but has there been any more color on
Speaker Change: that impact of the end point of being, you know, mortality or transplant, liver transplant.
Jim: I mean, transplantation is not going to be a major factor in this disease, simply because there aren't enough livers to go around. I mean, that's kind of the end result of it. And also, transplantation is administered based on many different factors, a number of which are actually socioeconomic.
Speaker Change: Transplant is not going to be a major factor for this disease simply because there aren't enough livers to go around. That's kind of the end result of it. And also, transplant is administered based on many different factors, a number of which are actually socioeconomic.
Jim: If you're at a regional hospital with a certain insurance level, your odds of getting a transplant are zero, basically. And if you're at one of these tertiary centers in, say, your area in Boston or out here at UCSF or Stanford, you're in a very different circumstance if you've got the insurance, and the potential for a transplant goes way up. That being said, there are 160,000 hospitalizations per year for this disease, and there are only about 8,500 liver transplants conducted in the U.S. A quarter or so of those go to these patients.
Speaker Change: It's, you know, if you're at a regional hospital with a certain insurance level, your odds of getting a transplant are zero, basically, and if you're at one of these tertiary centers in, say, your area in Boston or out here at UCSF or Stanford, you're in a very different circumstance if you've got the insurance in.
Speaker Change: the potential for transplant goes way up. That being said...
Speaker Change: There are 160,000 hospitalizations per year for this disease, and there are only about 8,500 liver transplants conducted in the US. A quarter or so of those go to these patients. So only about 2,000 or so livers are available to, you know,
Jim: So only about 2,000 or so livers are available to well north of 130 or so thousand patients. And so 98% of these patients will never see an opportunity for a liver transplant. So at the end of the day, it really comes down to mortality, and that's been our focus. And the agency understands that as well.
Speaker Change: well north of 130 or so thousand patients.
Speaker Change: And so...
Speaker Change: 98% of these patients will never see an opportunity at a liver transplant.
Speaker Change: At the end of the day, it really comes down to mortality, and that's been our focus. And the agency understands that as well. So, you know, we're feeling pretty good about the opportunity going forward for the Phase III.
Jim: So we're feeling pretty good about the opportunity going forward for phase three. Okay, great. I can quickly Google this, but where is ASLD this year?
Speaker Change: Okay, great. I can quickly Google this, but where is ASLD this year? Oh, sorry. It's in San Diego. So, yeah, so, yeah, 15th to the 19th of November, and so it's in San Diego.
Jim: Oh, sorry. It's in San Diego. So, yeah. Okay. The 15th to the 19th of November, and so this one's going to be easier for us than for you, Frank.
Jim: All right. Thank you very much, guys. I look forward to the updates.
Speaker Change: This one's going to be easier for us than for you, Frank.
Speaker Change: Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES
Operator: Thank you. The next question is from Ed Arce with HC Wainwright. Please go ahead. Hey, Jim.
Speaker Change: Thank you. The next question is from Ed Arce with HC Wainwright. Please go ahead.
Ed Arce: Thanks for taking my questions. Sure. Congratulations on the progress and, especially, the breakthrough therapy designation. Yeah, there we go. Yeah, just had a couple questions around your upcoming meeting minutes. I know that's important, to get it straight, you know, documented. What further details that you're withholding now could we expect to be announced once you've had a chance to review those? I'm wondering about the confirmation around the primary endpoint, the powering of the trial, and perhaps the number of witnesses.
Ed Arce: Hey, Jim. Thanks for taking my questions. Sure.
Speaker Change: Congrats on the progress and especially the breakthrough therapy designation. Yeah.
Ed Arce: Yeah, just had a couple questions around your upcoming meeting minutes. I know that's important to get it straight, you know, documented.
Speaker Change: What further details...
Speaker Change: that you're withholding now, could we expect to be announced once you've had a chance to review those?
Speaker Change: meeting minutes. In particular, I'm wondering about the confirmation around the primary endpoint.
Jim: Yeah, I think it'll be those kind of things, you know, obviously, you have to wait till the minutes come back to get to be able to finalize it, but that's the type of thing one's looking for. And I do think we are. Very fortunate to have the breakthrough designation and it's also, I think, very impressive. We all know that this drug missed its primary endpoint but showed a dramatic reduction in mortality, not only globally but also, in particular, in the U.S. And the agency recognized that and granted us breakthrough, which, as I said in my talk, is...
Speaker Change: of the powering of the trial and perhaps the number of patients.
Speaker Change: Yeah, I think it'll be those kind of things. You know, obviously you have to wait until the minutes come back to be able to finalize it, but that's the type of thing one's looking for. And I do think we are...
Speaker Change: Very fortunate to have the breakthrough designation and it's also, I think, very impressive. You know, we all know that this drug missed its primary endpoint but showed a dramatic reduction in mortality.
Speaker Change: not only globally but also in particular in the US and the agency recognized that and granted us breakthrough which as I said in my talk I mean it's
Jim: It's wonderful to be able to have face-to-face meetings again, to be able to sit down with them and have open conversations. They've got highly experienced hepatologists on their team who are very aware of the impact and the fact there's really nothing to help their patients out there, and they see this as an opportunity. So they're very excited about that. They're not excited, I guess, but very encouraged and working with us on the potential.
Speaker Change: It's wonderful to be able to have face-to-face meetings again, to be able to sit down with them and have open conversations. They've got highly experienced hepatologists on their team who are very aware of the impact and the fact there's really nothing to help their patients out there, and they see this as an opportunity.
Speaker Change: So they're very excited about that. They're not excited, I guess.
Operator: 2nd quarter, 2024, earnings conference call. At this time, all participants are in a listening mode. A brief question and answer session will follow the formal presentation.
Speaker Change: very encouraged and working with us on the potential for this drug.
Jim: I know we've had discussions around the end point before, especially the differences between the U.S. and ex-U.S. Is it your intention for phase three to be only 90-day mortality? I want to wait for the minutes to finalize that conversation, but certainly, as I was suggesting in that with the prior questions, we have learned a lot about this disease, and I think ours was, I would say, the most comprehensive, controlled study done on this disease in many, many years.
Speaker Change: Okay. I know we've had discussions around the endpoint before, especially the differences between the U.S. and ex-U.S. Is it your intention for the Phase III to be...
Operator: If anyone should require operator assistance during the conference, please press star and zero on a telephone keypad. As a reminder, this conference has been recorded.
Speaker Change: only 90-day mortality.
Speaker Change: I want to wait for the minutes to finalize that conversation, but certainly, as I was suggesting with the prior questions, we have learned a lot about this disease, and I think ours was...
Tim Papp: I will thank you. You may begin. Good afternoon and welcome to Direct Corporation, 2nd quarter, 2024, earnings conference call.
Tim Papp: This is Tim Papp, 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 10K and 10Qs under the heading risk factors.
Speaker Change: I would say the most comprehensive,
Speaker Change: controlled study done on this disease in in many many years and and so it we really did understand we understand a lot more now about how to construct this trial and
Jim: And so we really do understand a lot more now about how to construct this trial and how to conduct it, and the type of patients to enroll, when to enroll patients, and the like. And so I'm extremely confident, personally, that this trial has a very good chance. Okay, maybe just a couple final questions then from me first.
Speaker Change: how to conduct it and and the type of patients to enroll when to enroll patients and the like and so I'm extremely confident Personally that this trial has a very good chance of success
Tim Papp: To begin, I would like to review our 2nd quarter 2024 financial results. Total revenues in the 2nd quarter of 2024 were 2.2 million compared to 2.1 million in 2023. 2024 revenues were slightly higher due to a small increase in revenue from collaborations. R&D expense was 2.2 million in the 2nd quarter of 2024 compared to 7.9 million for the prior year. The decrease was primarily due to lower clinical trial-related expenses, facility, and lower employee-related costs.
Jim: Is it your intention, again, given, you know, the results and the bifurcation from the firm... Is it your intention to conduct a Phase 3 only at U.S. sites? And then, what is the overall cost that you expect for the Phase 3 trial? Yeah, I would think right now that we are comfortable to say that we're looking at the U.S. right now. It's not that we don't believe there is a great opportunity outside the U.S., but it is. I think it's just simpler.
Speaker Change: Is it your intention, again, given, you know, the results and the bifurcation from a firm
Speaker Change: Is it your intention to conduct a Phase III only in U.S. sites? And then, what is the overall cost that you expect for the Phase III trial?
Speaker Change: I think right now we are comfortable to say that we're looking at the U.S. right now. It's not that we don't believe it's a great opportunity outside the U.S., but it is. I think it's just simpler. We know that there's continuity in the U.S. healthcare system and the diagnosis of these patients and the presentation of these patients.
Jim: We know that there's continuity in the U.S. healthcare system and the diagnosis of these patients and the presentation of these patients, all of those things. And we're treating U.S. patients first. I mean, the average age in the United States for these patients was 44 years old, and we had almost a 28 percent mortality rate in these patients. And we're talking about minus one percent mortality rates in these patients. That's what the U.S. government is looking at.
Tim Papp: SGNA expenses were 3 million in the 1st quarter of 2024 compared to 3.8 million for the prior year. The decrease was primarily due to lower employee facility market research and professional services and expenses. As of June 30th, we had cash and investments of $15.8 million and our cash burn for the 2nd quarter was 5.8 million. We believe our cash on hand is sufficient to fund operations through the end of 2024.
Speaker Change: all of those things. And we're treating the U.S. patients first. I mean, our average age in the United States for these patients was 44 years old, and we had about almost a 28 percent mortality in these patients. And we're talking...
Jim: It's not just a one percent mortality rate in these patients. We're talking, you know, 28% out of 160,000 hospitalizations dying at an average age of 44. That's more people that die in automobile accidents. That's in the same range as those who die from breast cancer, only 20 years younger.
Speaker Change: [inaudible]
Tim Papp: You know, 28% out of 160,000 hospitalizations die at an average age of 44. That's more people that die in automobile accidents. That's in the same range as die from breast cancer. Only 20 years younger. It's a horrible circumstance for us. And it is different outside the U.S., so that's absolutely the case. As far as the cost, I'll let Tim speak to that. Go ahead, Tim.
Jim: Now, I would like to turn the call over to Jim for a business update. Thank you, Tim.
Jim: It's a horrible circumstance for us, and it is different outside the U.S. So that's absolutely the case. As far as the cost is concerned, I'll let Tim speak to that. But he has to go ahead.
Jim: Hello, everyone. Thank you for joining us today.
Jim: I'm excited to share an update on our progress towards initiating our confirmatory Phase 3 clinical trial for Larsucho sterile and alcohol-associated hepatitis. As I mentioned on previous calls, we have been in discussions with the FDA about our proposed clinical trial design, and I'm happy to say that the dialogue with the agency has been positive. The FDA has confirmed that a single pivotal trial would be sufficient to support an NDA filing in AH.
Tim Papp: Yeah, the outside costs for the trial are around $25 million, and then we'll also have to fund the G&A to operate the company alongside that. If you look at our most recent quarter, we reported a burn of about $5.8 million, $2.1 of that was debt service, so that leaves between about $3.5 or $1 million for G&A.
Tim Papp: Yeah, Ed, the outside costs for the trial are around $25 million.
Tim Papp: And then we'll also have to fund the GNA to operate the company alongside that. If you look at our most recent quarter, we reported a burn of about 5.8 million.
Jim: They also clearly recognize the unmet need in AH, and the strong result of Larsucho sterile and our Phase-2B trial affirms. Both doses of Larsucho sterile and affirms reduce mortality by nearly 60% in the U.S, patients who represented 76% of the total number of patients in the trial. As a result of the affirmed data, we were granted breakthrough therapy designation for Larsucho sterile in May. Breakthrough therapy designation is a process designed to expedite the development and review of drugs that are intended to treat a serious condition.
Tim Papp: 2.1 of that was was debt service so that leaves between three about three and a half four million of GNA.
Tim Papp: We think that can come down or be roughly consistent from where it is, so that kind of gives you a sense of how much we're expecting the total spend to be over the life of the trial, which we expect to report data in the second half of 26.
Speaker Change: Great, thanks so much.
Speaker Change: Thank you.
Tim Papp: We think that can come down or be roughly consistent from where it is, so that kind of gives you a sense of how much we're expecting the total spend to be over the life of the trial, which we expect to report data on in the second half of 2016. Great, thanks so much. Thank you. The next question is from Carl Byrnes with Northland Capital Markets. Please go ahead. Thanks for the question, and congratulations on your progress.
Speaker Change: Thank you. The next question is from Carl Burns with Northland Capital Markets. Please go ahead.
Jim: And preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically meaningful end. Breakthrough status allows us to have more intensive interaction with the FDA, including senior managers throughout the development process. Under this distinctive designation, in July, we had a very productive and positive type B meeting with the FDA to discuss our trial design. In fact, this meeting was the most productive interaction I've had with the FDA in my 30 plus year career in drug development.
Tim Papp: Most of my questions have been answered, but I'm wondering what guidance, if any, you might be able to give us for the third and fourth quarters, the second half of the year, in terms of operating income. Thanks. Tim. Yeah, Carl, it's Tim.
Carl Burns: Thanks for the question and congratulations on your progress. Most of my questions have been answered, but I'm wondering what guidance, if any, you might be able to give us on the third and fourth quarter, second half of the year in terms of OPEX. Thanks.
Carl Byrnes: So second half of the year, again, I think we would expect our operating expenses to be roughly the same in that kind of $3.5 million, $4.5 million range. And that's before we pay down the Oxford term loan. No reason to expect that it goes up significantly. The majority of the incremental expense in Phase 3 will be external costs.
Speaker Change: So, second half of the year, again, they think we would expect our operating expenses to be roughly the same in that kind of $3.5 million, $4.5 million range, and that's before we pay down the Oxford term loan.
Jim: We are awaiting the written minutes for this meeting and look forward to sharing more details about our proposed protocol in the near future once we receive those minutes. In the meantime, I can share a bit more about the expected timeline for conducting our Phase 3 trial. We've already undertaken significant action to prepare to initiate the trial and subject to obtaining adequate funding we are preparing to start the trial before the end of the year.
Speaker Change: No reason to expect that goes up significantly. The majority of the the incremental expense in the Phase 3 will be external costs. We feel like we have the appropriate staffing to conduct the Phase 3.
Tim Papp: We feel like we have the appropriate staffing to conduct Phase 3. Got it. Great. Thank you. Thank you. We have a follow-up question from Francois Brisebois with Oppenheimer.
Speaker Change: Got it. Great. Thank you.
Speaker Change: Thank you.
Jim: We expect this would enable us to report top-line data from our Phase 3 trial in the second half of 2026. Our ultimate design for the trial will be based on the strong clinical data we generated in a firm and feedback from our discussions with the FDA. We have submitted a number of abstracts for posters and a presentation for the AASLD meeting this fall. We look forward to sharing additional data analyses and the details of the protocol in an update after we've received the written minutes from our in-person type B meeting.
Speaker Change: Thank you.
Speaker Change: We have a follow-up question from Francois Prisbois with Oppenheimer. Please go ahead.
Franois Brisebois: Please go ahead. Hi, uh, Tim, can you just quickly remind us of the terms on that? Yeah, it's a straightforward term loan. We make a monthly amortization payment of about $720,000. It's interest-bearing at a low teens interest rate.
Tim Papp: The final payment date is September of 2025, and there is a $2 million final payment as well. Thank you. Thank you. As there are no further questions, I would now like to hand the conference over to Jim Brown for closing remarks. We'd like to thank you for your time today, and, as always, if you have any follow-up questions, please feel free to reach out to us here, and we look forward to talking to you. Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thanks for watching!
Francois Prisbois: Hi, Tim, can you just quickly remind us of the terms on that Oxford loan?
Speaker Change: Yeah, it's a straightforward term loan. We make monthly amortization payment of about $720,000. It's interest bearing at low teens interest rate.
Speaker Change: The final payment date is September of 2025, and there is a $2 million final payment as well.
Jim: We're also excited that the affirmed data was presented for the first time at an oral late-breaker presentation at the EASLD conference in June. Remain encouraged by the polluter reception from hepatology thought leaders and key opinion leaders for the affirm results and their continuing support for LeSucristeral's potential to provide a clinically meaningful survival benefit in AH patients. As a brief reminder, affirmed as a placebo controlled double-blind multinational study with two active dosing arms of 30 milligram and 90 milligram of LeSucristeral and a placebo arm of approximately 100 patients each.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: As there are no further questions, I would now like to hand the conference over to Jim Brown for closing remarks.
Jim Brown: With that, we'd like to, excuse me, we'd like to thank you for your time today. And as always, if you have any follow-up questions, please feel free to reach out to us here, and we look forward to talking to you. Thank you and take care.
Jim: In total, we ran in my 307 patients with severe AH from a global network of clinical types. Our sites included renowned liver centers in the United States, Australia, the EU and the UK, and we had the honor of working with some of the world's preeminent thought leaders in AH. The top-line results in the key secondary endpoint of mortality at 90 days showed a 41 percent reduction with a 30 milligram dose of LeSucristeral and a 35 percent reduction with a 90 milligram dose of LeSucristeral as compared with placebo.
Speaker Change: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Jim: Even more impressive results were observed in the US population, which comprised at three quarters of a total enrollment in a firm that was 232 out of the 307 patients. In the US patients, we saw reductions in the 98 mortality of 57 percent and 58 percent for the 30 and 90 milligram odds, respectively, as compared with placebo. Although not part of the original trial statistical analysis plan, the p-values for these results were both approximately 0.01.
Jim: Very importantly, our Sucristeral exhibited an excellent safety profile with no serious adverse events in either arm and greater than 20 percent reductions in the number of treatment emergent adverse events for both active arms when compared with a placebo growth in the severely ill patients. Ultimately, these clinically meaningful reductions in mortality coupled with the reduction in adverse events in the severely ill patients reinforce the compelling risk-reward proposition of our Sucristeral. We continue to believe that the affirmed data provide compelling evidence that LeChicostral could represent a safe and effective therapy with life-saving potential for AH patients.
Jim: There are no approved therapies for AH today. Therefore, if LeChicostral meets our expectations in Phase 3 and we gain approval, it would likely be the first FDA approved treatment for this disease and establish a new standard of care. AH is the cause of more than 160,000 hospitalizations each year in the U.S, and with a 90-day mortality rate of approximate 30% is responsible for tens of thousands of deaths each year. In addition to this high mortality rate, AH represents the significant cost to the U.S, healthcare system.
Jim: Hospitalizations attributed to AH incur charges of $67 to $180,000 per patient, a total charge to hospitals of approximately $10 billion annually. As a result, LeChicostral represents a potential blockbuster opportunity in the U.S, alone that could simultaneously provide overall cost savings to the healthcare system.
Jim: With that, we now like to take any questions you may have. Thank you.
Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on a telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 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. Ladies and gentlemen, we will wait for a moment while we poll for questions.
Francois Brisevois: The first question comes from Francois Brissevois with Oppenheimer. Please go ahead. Hi. Thanks for taking the questions. I'm just wondering, is there, you gave us a little bit of guidance in terms of timelines to start the trial, but is it fair to assume that the next kind of update to the investing community would be around the meeting minutes? And in general, if the meeting was in July, how long does it usually take to get the minutes back and then potentially disclose whatever you can disclose from that?
Francois Brisevois: Thank you. Yeah, sure. Hi, Francois, Frank. Yeah, we're still waiting to hear back. The meeting was held fairly recently, actually, near the end of July. And typically it's four plus weeks before you get those back and we'll be able to give an update at that point in time. We feel pretty comfortable about the timeline because we've got a good handle on the powering of the trial and the like, but we just want to get confirmation from the agency before we discuss that further.
Francois Brisevois: Understood, and then have you seen or have you disclosed any of the maybe differences that you saw between the EU and US sites in the trial? There's such a difference probably in terms of the data. What have you disclosed publicly there? And maybe just remind us of how this works. How does the patient come in when he's severe and how much time do you have to treat him? Does any color there that might explain the difference between the EU and the US would be helpful?
Francois Brisevois: Thank you. Yeah, we'll definitely provide more color on that as the year unfolds. We have some potential posters and presentations coming up on that. And wait for you to share with me. So maybe which you can briefly describe the patient's experience, when they come in. Well, we actually pre-screened thousands of pages and then screened basically over 300 or some pages and then finally enrolled 377 pages. And there were definitely differences around the world regionally.
Francois Brisevois: We know just for example in the Franco-Belgian region, they would only dose on Mondays because they didn't want to have their employees, their study coordinators, and like coming in over the weekend and drawing blood. And so, and they also required biopsies first which took four to seven days. So if that patient didn't get the results back on a Monday, they'd wait till the next Monday. So certainly the patient journeys and experiences were different.
Francois Brisevois: And even at times the not just the presentation but this, anyway, there certainly are some regional differences that we will share going forward. And there was absolutely in my mind explain why we're seeing the differences that we do. But nonetheless, the drug looks very good. Yeah. Would look for a. Okay. Perfect. And so actually you remind us where is the is this year and maybe on that note has has there. So we talked about the sites, but has there been an analysis or if you can't share, you can't share yet, but has there been any more color on that impact of the end point of being, you know, mortality or transplant, liver transplant?
Francois Brisevois: Yeah, there certainly is there is, I mean, transplant is not going to be a major factor for this disease simply because there aren't enough liver to go around. I mean, that's kind of the end result of it. And also transplant is administered based on many different factors, a number of which are actually social economic. It's, you know, if you're at a regional hospital with a certain insurance level, you're also getting a transplant or there's zero basically.
Francois Brisevois: And if you're at one of these tertiary centers and say your area in Boston or out here at UCSF for Stanford, you're in a very different circumstance. If you've got the insurance and the potential for transplant goes way up, that being said, there are 160,000 hospitalizations per year for this disease. And there are only about 8,500 liver transplants conducted in the US, a quarter of so of those go to these patients.
Francois Brisevois: So only about 2,000 are so livers are available to, you know, well north of 130 or so thousand patients. And so, you know, 98% of these patients will never see an opportunity at a liver transplant. So at the end of the day, it really comes down to mortality and that's been our focus and the agency understands that as well. So, you know, we're feeling pretty good about, about the opportunity going forward for the phase three.
Francois Brisevois: Okay, great. I can, I can quickly Google this, but where is SOV this year? Oh, sorry, it's in San Diego. So yeah. 15 to the 19th of November. And so it's, this one's going to be easier for us than for you, Frank. All right. Thank you very much, guys. Look forward to the update. All right. Thanks. Thank you.
Ed Arce: The next question is from Ed Arce, with HC Wendrite, please go ahead. Hey Jim, thanks for taking my questions. Congrats on the progress and especially the breakthrough therapy designation. Yeah, just had a couple questions around your upcoming meeting minutes. I know that's important to get it straight documented. What further details that you're withholding now, could we expect to be announced once you've had a chance to review those meeting minutes? In particular, wondering about the confirmation around the primary endpoint, and how we're going to trial and perhaps the number of patients?
Ed Arce: Yeah, I think it'll be those kinds of things, obviously the other way to the minute to come back to get to be able to finalize it, but that's the type of thing once looking for. And I do think we are very fortunate to have the breakthrough designation, and it's also, I think, very impressive. You know, we all know that this drug missed its primary endpoint, but showed a dramatic reduction in immortality.
Ed Arce: Not only globally, but also in particular the U.S., and the agency recognized that and granted us breakthrough, which as I said in my talk, I mean, it's wonderful to be able to have, you know, face-to-face meetings again, to be able to sit down with them and have open conversations. They've got highly experienced hepatologists on their team who are very aware of the impact and the fact there's really nothing to help their patients out there, and they see this as an opportunity. So they're very excited about that. They're not excited. I guess they're very encouraged and working with us on the potential for this drug.
Ed Arce: Okay. I know we've had discussions around the endpoint before, especially the differences between the U.S and XUS. Is it your intention for the phase three to be only 90-day mortality as the prime minister? I want to wait for the minutes to finalize that conversation, but certainly as I was suggesting with the prior questions, we have learned a lot about this disease. And I think ours was, I'm going to say the most comprehensive, controlled study done on this disease in many, many years.
Ed Arce: And so we really did understand a lot more now about how to construct this trial and how to conduct it and the type of patients to enroll, when to enroll patients and the like. And so I'm extremely confident, personally, that this trial has a very good chance to success. Okay.
Jim: Maybe just a couple of questions then for me first.
Jim: Is it your intention, again, given the results and the bifurcation from a firm? Is it your intention to conduct the phase three only in U.S, sites? And then what is the overall cost that you expect from the phase three? I would think right now we are comfortable to say that we're looking at the US right now. It's not that we don't believe it's a great opportunity outside the US, but it is.
Jim: I think it's just simpler. We know that there's continuity in the US healthcare system and the diagnosis of these patients and the presentation of these patients, all of those things. And we're treating the US patients first. I mean, our average age in the United States for these patients was 44 years old. And we had about almost a 28% mortality in these patients. And we're talking, you know, 28% out of 160,000 hospitalizations dying at average age of 44.
Jim: That's more people that die in automobile accidents. That's in the same range as die from breast cancer, only 20 years younger. It's a horrible circumstance for us. And it is different outside the US. So that's absolutely the case.
Tim Papp: As far as the cost, I'll let Tim speak to that. So he has to go ahead, Tim. Yeah. The outside costs for the trial are around 25 million. And then we'll also have to fund the the GNA to operate the company alongside that. If you look at our most recent quarter, we've reported a burn of about 5.8 million. 2.1 of that was was that service. So that was, you know, between three, about three and a half or a million of GNA.
Tim Papp: We think that can come down or be roughly consistent from where it is. So that gives you a sense of how much we're expecting the total spend to be over the life of the trial, which we expect to report data in second half of 26.
Tim Papp: Great. Thanks so much. Thank you.
Carl Burns: The next question is from Carl Burns with Northland Capital Markets. Please go ahead. Thanks for the question and congratulations on your progress. Most of my questions have been answered.
Tim Papp: I'm wondering what guidance if any of you might be able to give us on the third and fourth quarter or second half of the year in terms of our facts. Thanks. Yeah, Tim. Yeah, Carl. Tim. So second half of the year, again, I think we would expect our operating expenses to be roughly the same in that kind of three and a half, four million, a quarter range. And that's before we pay down the Oxford term loan.
Tim Papp: No reason to expect that goes up significantly. The majority of the incremental expense in the phase three will be external costs. We feel like we have the appropriate staffing to conduct the phase three. Got it. Great. Thank you.
Francois Brisevois: We have a follow-up question from Francois Bristvois with Open Imer. Please go ahead.
Tim Papp: Hi. Can you just quickly remind us of the terms on that Oxford loan? Yeah, it's a straightforward term loan. We make monthly amortization payment of about $720,000. It's interesting at low teams interest rate. The final payment date is September of 2025. And there was $2 million final payment as well.
Francois Brisevois: Thank you.
Jim Brown: As there are no further questions I would now like to hand the conference over to Jim Brown for closing remarks. I would like to thank you for your time today and as always if you have any follow-up questions please feel free to reach out to us here and we look forward to talking to you. Thank you and take care. Thank you.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.