This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk04: Greetings and welcome to the Direct Corporation Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Ehrenberg, Chief Financial Officer. Thank you. You may begin.
spk08: Good afternoon, and welcome to our fourth quarter 2020 earnings conference call. This is Mike Ehrenberg, Chief Financial Officer of Direct Corporation. I will provide a brief review of our financial results, and then Jim Brown, our President and CEO, will provide an update on our programs. We will then open up the call for a question and answer session. Before beginning, I would like to remind you of our safe harbor statement. During the course of this call, we may make forward-looking statements regarding direct products and development, expected high 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 the SEC filings, including our 10-K and 10-Qs under the heading Risk Factors. Before I get into the financial results, it will be helpful if I explain how the sale of the Lactel product line is reflected in our financials. We sold the product line to Evonik for what we feel was an attractive price of $15 million in cash resulting in a gain on the sale of approximately $12.8 million. This gain is reflected in net income for the fourth quarter and net loss for the full year. As of December 31, the $15 million was shown on the balance sheet as cash held in escrow and it was released after a few days. Operating results related to the LACTA product line have been excluded from the continuing operations and presented as discontinued operations in the relevant financial statements for all periods presented. The total revenue in Q4 2020 was $2.2 million compared to $9 million in Q4 2019. Q4 2019 included the recognition of $6.1 million in deferred revenue from an upfront fee and milestone payment So excluding that, the comparison is $2.2 million versus $2.9 million. Product revenue, now largely from the all-debt pumps, was $1.9 million in Q4 2020 as compared to $1.7 million in Q4 2019. Our gross margin from product revenue was 78% in Q4 2020. Product revenue continues to be strongly cash flow positive. R&D expense was $6.7 million in Q4 2020 as compared to $9.3 million in Q4 2019. primarily due to lower expenses for DUR 928 and POSMIR-related expenses. SG&A expenses were $3.4 million in Q4 2020 as compared to $3.7 million in Q4 2019. Our underlying burn rate during the quarter was $7.9 million. At December 31, 2020, we had cash, cash in escrow, and investments of $56.9 million as compared to $64.8 million in December 31, 2019. In Q1 2021, we strengthened our balance sheet by raising net proceeds of $47.8 million from an underwritten public offering and sales under our ATM program. With that, thanks again for joining our call, and I will now turn the call over to Jim for an update on certain of our programs.
spk07: Thank you, Mike. Hello, everyone, and thank you for joining us today. Since the start of the fourth quarter, we have made tremendous progress. Most importantly, we initiated patient dosing in Affirm, our Phase 2b study of DOR928 in patients with severe AH. We have been steadily adding clinical sites for our firm. We currently have more than a dozen sites up and running with a plan to have 40 to 50 sites in total. The FDA granted DOR928 fast-track designation for the treatment of AH. We presented biomarker data from our NASH trial at the AASLD meeting that further supports the potential of DUR928 for this indication. The FDA approved Posimer for post-surgical analgesia for up to 72 hours after arthroscopic subacromial decompression. We appointed two highly successful and experienced biopharmaceutical executives to our board. We sold the Lactel absorbable polymers product line to Evonik for $15 million. And in February, we further strengthened our financial position through an equity offering that raised $47.8 million. Now let's move to our programs. I'll begin with the opportunity for DUR928 in the treatment of alcohol-associated hepatitis, or AH. DUR928 is an endogenous sulfated Osteosterol that acts as an epigenetic regulator that modulates the expression of multiple clusters of master genes that are involved in many important cell signaling pathways. DUR928 up and down regulates more than 1,000 genes involving functions that include stabilizing mitochondria, reducing lipotoxicity, regulation of inflammatory or stress responses, and promoting cell survival. We announced earlier this year that we are dosing patients in the AFIRM trial. AFIRM is our 300-patient phase 2B efficacy and safety trial. It is a placebo-controlled double-blind multinational study. The primary endpoint is 90-day survival. There are over 122,000 hospitalizations per year in the United States for AH. There is no approved therapy for AH. We demonstrated 100% survival at 28 days in our DUR928 phase 2A AH trial. The average historical 28-day mortality rate for AH is 26%, and the 90-day mortality rate is 29%. Based on the results from the Phase IIa A8 trial and the fact that survival is the primary endpoint for the affirmed trial, we are optimistic that if we are able to demonstrate a robust survival benefit in this trial, it may support an NDA filing. Approval based on a single trial is not uncommon. In fact, 37% of the new drug approvals between 2005 and 2012 were based on a single pivotal trial, and 42% of the new drugs launched in the United States in 2018 were approved based on just a single trial. AH is an acute form of alcoholic liver disease, or ALV. It is characterized by long-term heavy intake of alcohol, a recent period of increased alcohol consumption or binge drinking, as well as jaundice, fever, fatigue, weakness, nausea or vomiting, loss of appetite, and a depressed or negative mental state. While the majority of AH patients are between 40 and 60 years old and also have liver cirrhosis, approximately 20% of the AH population are in their 20s and 30s and may not have cirrhosis. Eighty-nine percent of hospitalized AH patients have insurance. Unfortunately, during the pandemic, alcohol consumption in the United States has increased. In conversations with physicians who treat this disease, they have told me the incidence of AH has also increased. According to many of these doctors, they are also seeing a larger number of younger AH patients. As I said earlier, there is no approved treatment for AH. What physicians have available for them today primarily involves abstinence and supportive care, which includes nutrition and hydration. An analysis of 77 studies published between 1971 and 2016, which included data from more than 8,000 patients, showed the average overall mortality for AH was 26% in 28 days and 29% at 90 days and 44% at six months. The high one-month mortality rate from the time of diagnosis is similar to some ferocious cancers, such as AML and advanced breast or pancreatic cancers. According to the AA-SLV guidance, steroids may be used in certain patients with severe AH. However, steroids have shown only minimal effect and may increase infection rates with AH patients. In the SCOP-AH trial, a study of more than 1,000 AH patients, steroids significantly increased the infection rate. The SCOP-AH trial also convincingly demonstrated that steroids did not improve the survival rate over placebo at 90 days or at one year. Many AH patients are not eligible for steroids. In fact, according to one recent study, less than half of severe AH patients are eligible for steroid use. Hospitalization costs for AH are more than 50,000 per patient in the first year. Alcoholic liver disease is becoming a leading cause of liver transplants in the United States, and the cost of a liver transplant exceeds $875,000. The average hospital stay for an AH patient is approximately seven days, with many staying significantly longer. In our DUR928 phase 2A trial, 14 of the 19 patients were discharged in less than four days after receiving only one IV infusion of DUR928. All of the 19 patients in our phase 2A trial survived through the 28-day follow-up period of that trial. Twelve of these 19 patients were classified as severe based on the MELD scores, Also, 15 of the 19 were classified as severe based on a scoring system that is specific to AH called Modry's discriminant function score. Prognostic scores, including Leal and Meld, as well as Dilly-Ribbon, serum creatinine levels, and INR were all improved in this Phase IIa trial. EOR928 was well tolerated by all the patients at all doses that were evaluated in this trial, including in all of the severe AH patients. There were no serious drug-related adverse events reported in this trial. To summarize the DUR928-AH program, we have initiated dosing in the AFFIRM trial for patients with severe AH. The AFFIRM trial is a 300-patient double-blind randomized placebo-controlled multinational trial. The AFFIRM trial will evaluate three treatment arms, 30 milligrams and 90 milligrams of DUR928, and a placebo arm. As with the Phase 2A trial, patients in the affirmed trial will receive an infusion of DUR928 or placebo on day one, and if they are still in the hospital on day four, they will receive a second infusion. The primary endpoint of the affirmed trial will be 90-day survival. We have more than a dozen clinical sites actively recruiting patients. We expect to have approximately 30 clinical sites in the United States and 20 sites in Europe and Australia. We were granted fast track designation by the FDA for our AH program. We expect that if we achieve a robust survivor benefit, this study may support an NDA filing. Next to COVID-19. Today, we announced that we are discontinuing our clinical trial for DOR928 in critically ill COVID-19 patients. Because of the rapidly evolving state of the pandemic, we were not able to expand beyond the original three clinical sites or enroll a meaningful number of patients in this trial. As a comparison, we have more than four times the number of clinical sites up and running for our AFIRM trial. The people and resources that we are using to support the COVID-19 trial are now being redirected to support the AFIRM trial. Next, I will update on the DOR928 NASH program. In May of 2020, we reported positive top-line results from our Phase 1b trial of DOR928 in NASH patients with stage 1 to 3 fibrosis. This was a randomized open-label and multi-center study of DUR928 in NASH patients conducted in the United States. DUR928 was dosed orally for 28 consecutive days at 50 milligrams or 150 milligrams once a day, or 300 milligrams twice a day, and followed up for an additional 28 days. A total of 65 patients completed the study, and there were at least 20 patients per dose group. Key endpoints included safety and pharmacokinetics, clinical chemistry, and biomarkers, as well as liver fat content and liver stiffness by imaging. This includes both MRI, PDFS, and FibroScan. DURNA28 treatment in this trial resulted in reductions from baseline of liver enzymes, liver fat, liver stiffness as measured by imaging, and serum lipids. Many of these reductions were statistically significant. A statistically significant 24% reduction of plasma triglycerides was seen in the 16 patients who had baseline triglyceride levels above 200 milligrams per deciliter. Forty-three percent of the patients in this trial had at least a 10% reduction in liver fat, as measured by MRI PDFF. In this group of patients, liver fat, liver stiffness, liver enzymes, and serum lipids were statistically significantly reduced from baseline. CUR928 was well-tolerated, all three doses evaluated. There were no serious adverse events reported during this study. Pharmacokinetic parameters after repeat dosing were comparable to those after a single dose from a prior NASH study, indicating no accumulation after repeat dosing. Also, drug exposure was dose-dependent. A poster reviewing additional data from this trial was presented at last November's AASLD conference. This poster showed reduction in biomarkers from baseline, including full and cleaved cytokeratin-18, C-reactive protein, plasmidogen-activated inhibitor 1, interleukin-1 beta, interleukin-6, interleukin-17, interleukin-18, tumor necrosis factor, and adipotectin. These biomarkers moved in concert with reduction of liver enzymes, liver stiffness, and serum lipids. This is particularly impressive when you consider the patients were only dosed for four weeks. These results, together with the continued safety profile of DUR928, supports further evaluation of DUR928's potential in NASH. We are currently planning our next steps for NASH. Next, to the POSMIR program. This quarter also marked the FDA approval of POSMIR. Posimer is a novel, non-opioid, sustained-release local analgesic that is approved to produce post-surgical analgesia for up to 72 hours following arthroscopic somochromial decompression. This approval provides an important new option to orthopedic surgeons in their effort to minimize opioid use while managing acute pain for up to 72 hours after this painful surgery. We are in discussions with potential commercial partners for Posimer. Our plan is to use the proceeds from the partnership to help fund our epigenetic program and our flagship product, DUR928, for the treatment of alcohol-associated hepatitis. Osmer is the only approved sustained-release bupivacaine product indicated for up to 72 hours of post-surgical analgesia from a single administration. Infusion pumps were the first systems to enable sustained delivery of bupivacaine within a surgical wound to treat post-operative pain. The infusion product literature indicates that the minimal bupivacaine exposure needed to maintain sustained postoperative analgesia is approximately 10 milligrams per hour. Based on this, the product would need to contain approximately 720 milligrams of bupivacaine hydrochloride in order to provide up to 72 hours of post-surgical pain relief. Cosimer contains 660 milligrams of bupivacaine base, which is equivalent to 743 milligrams of bupivacaine hydrochloride. We believe this is enough bupivacaine to provide sustained analgesia for up to three days without the need for a pump and catheter system. And Posimer was indeed approved for post-surgical pain reduction for up to 72 hours following surgery. Posimer contains more bupivacaine than any other approved single-gose sustained relief bupivacaine product. We believe this may be an important differentiator in the market. Another potential differentiator for Posimer is the ease of application. At the end of surgery, Posimer is administered into the subacromial space under direct arthroscopic visualization, where it continuously releases bupivacaine for 72 hours or more. Posimer is applied directly into the surgical wound, the primary source of post-surgical pain. The FDA approval is based on positive data from a randomized placebo-controlled clinical trial in patients undergoing arthroscopic subacrobial decompression surgery with an intact rotator cuff. The primary outcome measures were mean pain intensity and total opioid rescue analgesia administered, both evaluated over the first 72 hours after surgery versus placebo. Coggenberg demonstrated a statistically significant improvement in both primary outcome measures. A 1.3 point reduction in mean pain intensity on a 0 to 10 point pain scale. This represents a 20% reduction in pain and is statistically significant at 0.01. This trial also demonstrated a 67% reduction in IV morphine equivalent rescue opioid use, from the median of 12 milligrams in the placebo group to 4 milligrams in the Posner group. This is also statistically significant to 0.01. When we started the post-operative pain control program that led to Posner, we did so because of the opioid epidemic. Stories of the families impacted by this epidemic are heartbreaking. Unfortunately, the opioid epidemic in our country has not improved over the years. It has gotten much worse. Today in the United States, approximately 200 people die every day due to opioid abuse. The objective of the POSIMR program is to give healthcare providers and in turn their patients a non-opioid alternative for post-operative pain control or at a minimum, a way to reduce the amount of opioids required to reduce post-surgical pain. Osimer is a product that can provide up to 72 hours of pain relief, and in the pivotal trial demonstrated a statistically significant reduction of both pain and the use of opioids. Double-chromial decompression is a shoulder surgery used to treat impingement syndrome, a common repetitive use injury that causes pain when the arm is raised over the head. The procedure is typically performed arthroscopically, meaning that several small incisions are made in the skin and muscle of the shoulder through which a camera lens called an arthroscope and surgical instruments are inserted during surgery. Arthroscopic subacromial decompression is generally considered outpatient surgery, and most patients go home within a few hours of surgery. The recovery period may extend from weeks to months, but the most intense pain typically occurs during the first three days after surgery and is often managed with oral opioids. There are over 600,000 surgeries involving arthroscopic subacromial decompression performed each year in the United States. We view subacromial decompression as a beachhead to get POSMAR on the market, and we believe the opportunity to expand the label to cover a broader group of surgical procedures represents significant upside. To summarize, we believe there are a number of product features that have the potential to differentiate POSMAR on the market. POSMAR is the only sustained-release bupivacaine product indicated for up to 72 hours of post-surgical analgesia from a single application. Posimer contains more bupivacaine than any other approved single-dose sustained-release bupivacaine product. And according to investigators in our clinical study, Posimer's ease of application will be a welcome benefit. In addition to these attractive features, we believe there are a number of potential avenues available to expand the label to include more surgical indications going forward. Regarding the business development process, we have multiple interested parties, and the process is underway. We are working to put a deal in place in time for our partner to launch in the second half of this year and expect that the deal would include an upfront license fee and royalties. Moving on to other accomplishments. This quarter, we also appointed two new members to our board of directors, Gail Medeiros, MBA, and Mohammad Azab, MD, Master of Science and MBA. These two senior industry veterans bring extensive drug development clinical research, and medical experience. Their addition to our board is part of the evolution of DIRECT. In summary, since our last quarter's call, we initiated dosing and affirmed our Phase 2B study of DOR928 in patients with severe AH. The FDA granted fast-track designation for the use of DOR928 in the treatment of AH. Based on the results from the Phase 2a AH trial with survival as the primary endpoint for AFIRM, we are optimistic that if we are able to demonstrate a robust survivor benefit in this trial, it may support an NDA filing. We presented biomarker data from our NASH trial at the AASLD meeting that further supports the potential of DOR928 for this indication. Since coming on board in November, our new CMO, Dr. Norman Sussman, and his team have greatly expanded the number of clinical sites for the affirmed trial in the United States and are on track to initiate sites in Europe this year. The FDA approved Posner for post-surgical analgesia for up to 72 hours after arthroscopic subacromial decompression. We appointed two highly experienced biopharmaceutical board members. We sold the Lactel absorbable polymers product line to Evonik for $15 million, which we believe was a very attractive price. And in February, we further strengthened our financial position by raising $47.8 million in equity, so we now have a strong balance sheet as we focus on the affirmed trial. With that, we'd now like to take any questions that you may have.
spk04: Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 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 key. Our first question comes from the line of Francois with Oppenheimer. Please proceed with your question.
spk03: Thank you, guys, on the corridor. Thanks for taking the question. My first question here was just you guys have mentioned in the past submitting a manuscript for publication maybe to help us understand a little bit the mechanism of action of DIRT 928. And I'm just wondering any updates on that and or we're just obviously still waiting and can you share any color I guess on what to be expected on the mechanism or is this there's so many signaling pathways that might be expected here. So just any color there would be helpful. Thank you.
spk07: Sure. Yeah, absolutely, and hello. So, first off, yes, we're getting close, very close, but as you know with these things, they have their own time, so we're still waiting. I do believe that there'll be quite a bit of clarity by virtue of knowing what we do know and what's in the manuscript, but as with any epigenetic interactions, there's a lot of information. There are a lot of, you know, master switches involved and genes involved. So, but it'll be, I think, a very interesting conversation with you and with a number of other knowledgeable people in the area. I don't know, Weiqi, would you add something to the timeline or to the substance of it all?
spk10: Yeah, sure. Sure. We are actually, we ourselves are checking every day to see if the paper is impressed. So it's a subject, and then we are just waiting for any moment to be impressed, so it will show up online. But then certainly, there are a couple of review articles out there. You might get a hint of the mechanism of action. Of course, there's a particular manuscript that have been accepted. present a lot of data to show what genes and what pathways might be affected with the treatment of 928. Just like every study, there are limitations for each study. So we open up the door to let the world see that what the 928 affects and which pathway but then there will be more questions I'm sure you would have for the exact mechanism of action. So ultimately, we look at the functions of 928. What does it do in patients or in the disease state?
spk07: Thanks, Lucy. I do think just one other thing, Francois. I think the other piece of it all is, there is a nice connection between the literature out there of what is dysregulated in AH patients and in NASH patients, and it makes the data that we see, I think, much more logical. It's kind of a logical sequence to that. Sorry.
spk03: Okay. Okay, no, great. That's helpful. And then in terms of Affirm, obviously started dozing here, but can you just remind us, sometimes you've compared, to help us with the timeline a little bit, you've compared it to the Gilead trial. that, you know, ran a few years ago. And can you just help us kind of compare and contrast the differences in the trial with Gilead and the time it took them to help us understand the percent of time?
spk07: Yeah. I think, you know, we're in a different environment now that we're just coming as we get through this last wave, hopefully, of the pandemic. You know, we think things will open up. And we do have a number of sites, a good number of sites actually having money now and riding more all the time. But if one looks at that – The FD1 inhibitor trial that Gilead did, they dosed 100 patients, and they enrolled that number of patients in about 18 months to finish the entire trial. But that was a six-month follow-up, you know, from dosing to the end of the patient's involvement. And ours would be three months. So one could then take three months off of that. So instead of 18 months, it would be 15 months. And the other aspect of that is they required biopsy of all their patients and biopsy Because typically, in fact, it will restrict the number of patients available and enrollment rates just because it's a dangerous thing and a lot of patients don't want to do that. And on top of that, they also required that all of their patients use corticosteroids. And we know from the literature that only about 43% of AH patients are eligible for corticosteroids. you basically cut your patient population in half again. So you can look at being able to add these multiples together and get a sense that we have an opportunity to do hopefully a more rapid enrollment than they have. And the other side of it is, you know, we're now in the hospitals just coming out of being overwhelmed with COVID. But the reality of it is COVID also unfortunately dramatically increased the alcohol consumption and the incidence of AHS-PAL probably followed the document and we've gotten to the position. So I think all of that points to probably a more rapid normal. And we'll be in a better position to project once we have some months under our belt here in a more normal society.
spk03: Okay. And just lastly here, in order to try to figure out a little bit, it's difficult, but it's our job to try to project things sometimes and think about what's going to happen here. But on the positive side, can you help us understand the label, you know, the subacromial decompression in terms of, you know, its percentage versus the surgeries in the U.S.? And obviously, some of the other drugs in the market weren't always, you know, approved for specific you know, surgeries like this. But I guess, can you help us understand the size of the market of the subacromial decompression space?
spk07: Yeah.
spk03: And why, you know, any news from the FDA or anything on why not include hernia in there?
spk07: Well, I'll take the first one first. Anyway, so with regard to patient numbers, there are over 600,000 subacromial decompression surgeries a year that we think for which plasma could be used. And so you've got that as a starting case, which is a very good number of patients in surgery. And we saw, you know, 67% fewer narcotics taken, 20% less pain, both statistically significant. And quite easy to use. You just simply squirt it in. So it takes seconds of the surgeon's time at the end of surgery. And so all of those things we think are going to be advantages. And it lasts the full 72 hours, which is what the surgeons are looking for. When we first started the POSMIR program way back when, we had a meeting with a It was more than a dozen surgeons in a room. I remember we sat down talking to them about how, what kind of duration are they looking for, because we can go kind of 24 to hours to five days. And they felt like 72 hours, three days was really what they were looking for. Beyond three days, they want to know whether or not a patient's in normal or, you know, has more pain than they expected, then they could be coming into some other challenges. And so that's why we designed it as we did for the three days, and we're thankfully able to get that approval. As far as, you know, why not hernia, that certainly is a regulatory question that will be answered as we go forward. And we and or potential partners as well will be investigating that because we certainly got some really nice data from the hernia trial that we reported on. So we'll have to see what happens in the future on that.
spk03: Okay. Thank you very much.
spk07: Sure.
spk04: Our next question comes from the line of Kristen Kluska with Cantor Fitzgerald. Please proceed with your question.
spk02: Hi, everyone. Thanks for taking my question.
spk04: Sure.
spk02: The first one I have here is, you know, thanks for your comments related to the increased alcohol, liver disease hospitalizations we've seen during this pandemic. But I wanted to ask, based on your conversations with these centers and physicians, whether they might expect this trend to continue once the world starts to return to be a little bit more normal. While, you know, patients may not be as isolated anymore, their daily structures and job status still might be unchanged. So anything, you know, you've heard about the long-term outlook there. And then secondly, you know, this is a large orphan market, but do you think from an awareness standpoint that that's grown as well, especially considering a lot of these hospitals are citing you know, 30 to 50% increases in hospitalizations over the last year.
spk07: You know, I think that we're very fortunate to have Dr. Sussman on here who recently left the clinic and can speak to that because he was working at a transplant center for almost 20 years. So, Norman, maybe you can address that question.
spk06: Yeah, thanks. Can you hear me okay?
spk07: Perfectly, yes.
spk06: Oh, great. Okay. So, that is a very interesting question. Of course, we don't know what will happen. We had seen a significant surge in alcohol, especially among young people, even before the pandemic. So, there's been a lot of press on increasing a number of the, you know, the lay press has had multiple articles on this. So, yes, there has been more obvious, but this really preceded the pandemic and it may fall off a little. It's impossible for us to say, but there was such a need even before the pandemic. And then, Kristen, I'm sorry, I forgot your second question.
spk02: The second question was just that given it is a large orphan market, whether generally speaking from the increased hospitalization since the pandemic, from an awareness standpoint, if you're feeling that Maybe physicians who in the past hadn't seen as many of these patients or were less familiar with the indication, whether that knowledge base has grown in light of what we've seen this past year.
spk06: Yes. I think, well, the, I can't point to any specific literature on that, but all of the, so most of these people, I shouldn't say most, a lot of these people end up as a transplant center because, If you are very ill and you have liver failure for whatever reason, even if the outside hospital doesn't recognize the cause, they would prefer to have that patient managed by an expert. And most smaller hospitals don't have a liver expert on staff. So they end up coming, if possible, they end up coming to transplant centers. I do think that there is also a growing awareness and a lot of societies are reaching out to their membership and encouraging conversations with community providers because of this unrecognized disease. Many times they just say, oh, the patient has hepatitis and it turns out to be alcohol. So I think there's generally a strong push by the professional societies to increase awareness. We are also participating, and when I say we, the company, but also through several charitable organizations of trying to increase awareness through community outreach.
spk02: Okay, thanks. And then my last question is you noted that the demographics are starting to change a little bit, particularly more young people are developing age. So with that, basis, based off of different metabolisms and other factors and, you know, particularly we've seen the difference between men and women and hence the number of drinks per person. But do you anticipate any changes with the drug or, you know, do you think there's like a patient population who might benefit more based off of kind of these understandings?
spk06: That's an excellent question. I think I don't really know. We know that there are certain populations, there's genetic aspects to why some people are more sensitive. There are obviously people who drink a lot and may have mild or even moderate or severe fatty liver but don't get AH. And the actual transition to from just fatty liver to AH is not is not really very well understood. Some recent work suggests some epigenetic regulators, and as Jim mentioned, some of those are possibly going to be reversed by the mechanism of action of DOR928. So it's a lot of conjecture, but we're getting, people are getting closer to finding the answer. There's more interest in epigenetic regulation, and we're certainly interested on the back end as a therapeutic.
spk02: Great. Thank you, everybody, for taking the questions.
spk04: Sure. Thank you. You're welcome. Our next question comes from the line of Mayank Mamtani with V. Riley FBR. Please proceed with your question.
spk09: Hi, Dean. Good afternoon. This is Sahil Kazmi. I'm from Mayank. Thanks for taking our question. Okay. Just a couple of brief ones from us. You know, noting that the focus seems to be on AH and, you know, look forward to incremental updates there. We did see that you made the decision to discontinue the COVID-19 program, and just wondering if there's, you know, any opportunities you're thinking about leveraging some of the, you know, data generated on acute organ injury, if there are other indications that might be pursued, and maybe on the same train of thought, if you could discuss, you know, kind of where else might Posamir be applied, and is that something that, you know, you aim to do with a partner in the future in terms of indications beyond the subacromial depression? Thank you.
spk07: Sure. With regard to DUR928, you know, we have done a huge number of studies in modeling, in vivo modeling, and we've shown potential in everything from stroke to sepsis to pancreatitis, acute pancreatitis, a number of acute kidney injury, a lot of interesting opportunities, and that still, Certainly those opportunities are there. We want to, as a company, focus on AH right now because it's such an important thing to be able to help these people. It's a huge problem from a societal standpoint. It's a huge problem from a medical system standpoint. And these patients cost at a minimum kind of $50,000. And if they need a transplant, they go up close to $900,000 or more. So it's a huge cost and burden to our health care system and, of course, the families and the patients' lives. you know, a three-month mortality of almost 30%. So, if we can make a difference there, we want to make sure that we have a chance to be able to help those patients. That being said, though, we are investigating, you know, other opportunities for the use of DR928. I've always said, you know, if this molecule were in the hands of a large company, we'd probably have seven Phase IIs ongoing right now because there's just so much potential outside of where we are. And once you see the mechanism of action, you can start to investigate how that would interplay with various genes and various syndromes, and you'll see that there are multiple potential opportunities. So, that is definitely, certainly an opportunity going forward. As far as Posimer is concerned, as was mentioned earlier, we do have, you know, some nice data from hernia, and so we would certainly hope at some point in time Posimer would actually be able to be approved for use in a general surgical way. Certainly, bupivacaine is applied that way. This is you know, been shown, you know, to have the potential as well. So that is something we will be investigating with our commercial partners.
spk09: Great, thank you. And then maybe just one more brief one. Could you give us a bit more color on how you're thinking about the enrollment mix for a firm in terms of the U.S. versus ex-U.S. split?
spk07: Yeah, it's a great idea or a great question, sorry. Right now we're expecting about 30 sites in the United States and then another 20 plus between Europe and Europe would be then UK and the EU. And also we're investigating Australia as well. So we'll end up with, you know, probably around 50 sites in total. Not quite a 50-50 split. USXUS, we're pretty close to that.
spk09: Great. Thanks for taking our questions and congrats on all the progress.
spk07: Thank you.
spk04: Our next question comes from the line of Michael Morbido with Chardon Capital Markets. Please proceed with your question.
spk05: Hi, James. Thanks for taking the questions. You mentioned that the current survival rate at 90 days is 29%, I believe you said. With the size of the affirmed study, how large of an improvement in that 90-day survival rate is the study powered to see? And then I was hoping you could just give us a little bit of thought on how you expect R&D expense to grow throughout the year as a firm opens more sites and how that might be countered by any OPEX savings that you are getting from discontinuing the COVID trial?
spk07: Sure. So I don't want to lose any of these things. So first of all, the COVID trial wasn't a particularly expensive trial, but maybe, Mike, you want to speak to as you look at the calendar year budget-wise with a firm adding more sites every month?
spk08: Sure, yeah, I'll take that one first. As you saw, the Q4 number for DR928 was down a little bit, and now it'll start ramping up as the enrollment ramps up. But overall, as you said, there's an offset there from stopping the COVID trial, and overall, you know, it's not going to be a huge change from where we've been in terms of the overall burn rate when you mix everything together.
spk07: Yeah, we projected that the trial is about a $30 million total external expense, so that'll just be unrolling as it goes. And then as far as the power calculation, we certainly have worked that in spades for sure. I guess Norman or Weiqi, whoever wants to, who spoke with the statisticians most recently?
spk06: Because about every day. Yeah. So we, without giving the exact calculation, we're finalizing some of the numbers. But we've given a somewhat pessimistic view to the DUR and a somewhat optimistic view to the control. So that is, we've underestimated depth in the control, overestimated, we think, overestimated in the DUR to give ourselves 82% power. Sorry, power. Eighty-two percent probability.
spk07: Yeah. And that's with 100 patients.
spk05: And just wanted to see, and forgive me if you mentioned it on this in the call, do you have any expectations for timing of when you may take the next step in NASH or when you might expect to make an announcement on post-severe licensing?
spk07: Yeah, the post-severe licensing is something we're working on right now, and our hope is that we would have a partnership in place to launch, you know, this year, so that would mean you know, the deal would come prior to that. So, certainly, that's something to be looking for as the months unfold. As far as next steps for NASH, you know, we're looking at it. It's an interesting place where we are right now because we've got, you know, phase two, phase, excuse me, 1B data that are pretty impressive. I mean, we've got everything moving in the same direction, in a positive direction. We've got liver fat and liver stiffness and liver enzymes and circulating enzymes. biomarkers of cell death and biomarkers of inflammation and other categories, all moving as you would expect, and then this clean profile that we've been fortunate to be able to have with 928 from a safety standpoint. So it certainly speaks well to something that can help in this patient population. But then we see the NASH environment changing, right? And so it'll be interesting to see kind of we're trying to select the place to enter where we can have the most impact and learn from those who are in front of us, who are kind of out there in the water trying to swim across that channel. They didn't give an answer yet because we're still doing the work, but we will be announcing it as we get closer.
spk05: Okay.
spk07: Thank you very much. Sure.
spk04: Our next question comes from the line of Ed Arcee with H.C. Wainwright, please continue with your question.
spk01: Hi, Jim. Thanks for taking my question. Sure. Congrats on all the progress recently, especially with the approval of Palsimer. Thanks. So a few for me. First question, just wondering, on Affirm, looks like in the U.S., you know, you just started a few months ago enrolling Obviously, this is a pretty specific subgroup of severe AH patients. It seems like enrollment in the U.S. with the sites and the number of subjects is going pretty well. I know you've mentioned before how the particular dynamic of these severe patients in the hospital actually sidesteps largely a lot of the issues that other companies have with COVID. I'm wondering if that dynamic has shifted at all lately, and if you're seeing the same sort of perspective in Europe as well, now that you're ramping up enrollment there.
spk07: Well, we haven't started SICE in Europe yet. We're still going through all the paperwork and everything you have to do to get going there. So Europe is a number of months still away, but certainly in the U.S., We are signing up a good number of sites, and Norm and the team are really cranking. I don't know, Norm, what would you say specifically to that?
spk06: Sorry, would you just – I'm not sure I understood exactly the question.
spk01: Sure. So the enrollment of these severe AH patients into the hospital amid the pandemic – In other sorts of trials involving hospital admittance, obviously there's been trouble in getting patients enrolled in these sorts of studies, but I think the dynamic that has been discussed previously that's expected would in many ways sidestep that issue. I'm wondering if You know, if you've had already a few patients enrolled, if you're seeing that or if there's anything different from what you've got.
spk06: Yeah, I get it. So the dynamic is you're correct in that they're competing for bed space to some extent with COVID patients. But then, you know, that's true of all very ill patients. The entire enrollment process is patients already admitted with a certain level of severity. We've chosen a range that is ill to be sure that we can differentiate between people in control and people who get therapy. So the trial is built on Model that says you have this level of illness you will Have this expected mortality and we are hoping to see a difference in that in that outcome at 90 days the The thing is these patients are ill and so by and large if if someone like that goes to a doctor's office they're most likely going to be admitted and so then they're there. So, I think you're correct in that we don't expect a big change in the frequency. We are very obviously being very strict on the entry criteria to keep the study clean.
spk01: Okay, great. Thank you. That's helpful. Next question is around POSIMR. Again, congrats on finally getting that across the finish line. I know it's been a long time coming. You mentioned the commercial partnership discussions that you're having. Obviously, you can't really talk about any of those details, but I was just wondering if you think that the prior Janssen commercialization collaboration uh, stands now as a good proxy for the scale of economics that you might expect from a new partner?
spk07: Well, I think, you know, it's, it's always, you know, every, every deal and every time is always at its own place in time. So, but, uh, but the opportunity is still, is a very valuable one for sure. And we are talking to, uh, you know, as we put the deal in place, I would expect that, uh, that there'll be, um, a very valuable deal for Direct and also a valuable deal for our partner. And that's the, I think we've been able to, over the years, the history of Direct has been able to, you know, been able to do good deals and have a, you know, potential for both parties to do well. And I would expect that would be the case here without getting into any granularity.
spk01: Sure. Okay. Understood. And then final question, again, You mentioned you're pursuing, you know, potential next steps with partners in moving forward with DUR 928 in NASH. And, again, there I realized that there's little that you can discuss about those until, you know, there's something actually signed and done. However, I'm wondering if as you go through this process, this BD process, if there's any specific criteria that you're considering or perhaps any sorts of scenarios that you would outright exclude?
spk07: I think as we look at any business development opportunity, we don't exclude anything unless something just is not unreasonable. But I think if we think about NASH right now, We are in early days in NASH. We just have Phase 1b data. They're remarkable data, especially considering one month and the safety profile. So when you look at that, you say, okay, there's something there. But I think what the industry is trying to figure out is what is, where does NASH fit and how does it fit into the healthcare environment and system and what is the appropriate you know, type of therapy to develop, you know, because you've got on one side, you know, things that simply just weight loss, exercise, diet, and things like that, things that assist with that can certainly help. To the far side, you've got, you know, fibrosis, cirrhosis, you know, people dying of liver failure, and maybe there's nothing that can help, and there's this gradation in between. So the interesting thing about 928 is it probably can help across the board probably greater potential to help the further along you are in the disease process. So, you know, it's exciting to me to think about, but at this point in time, it's a very early days on all of it. I do think eventually we will see 938 out there helping people who are damaged metabolically from a number of fronts. but right now we're really focusing on Affirm and on the first acute use, which is in helping the patients at age 8 and then ongoing other acute use opportunities to help patients with as well.
spk01: Got it. Thanks, Jim, for your perspective.
spk04: Sure.
spk07: Thank you.
spk04: If there are no further questions in the queue, I'd like to hand the call back to CEO Jim Brown.
spk07: Okay. Well, with that, I just want to thank you all for your time, and if you do have any further questions, please feel free to give us a call, and take care. Talk to you all later.
spk04: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
Disclaimer