DURECT Corporation

Greetings and welcome to the Direct Corporation first 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. If anyone should require operator assistance during the 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, Tim Papp, Chief Financial Officer. Thank you, sir. You may begin.

Good afternoon and welcome to Direct Corporation's first 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 statement. During the course of this call, we may make forward-looking statements regarding Direct's products and development, expected product benefits, our development plans, future clinical trials, or projected financial results. These forward-looking statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Further information regarding these and other risks can be found in our SEC filings, including our 10-K and 10-Qs under the heading Risk Factors. To begin, I would like to review our first quarter 2024 financial results. Total revenues in the first quarter of 2024 were $1.8 million compared to $2.1 million in 2023. 2024 revenues were lower primarily due to lower revenues from feasibility agreements as well as lower revenue from product sales. R&D expense was $4.1 million in the first quarter of 2024 compared to $8.6 million for the prior year. The decrease was primarily due to lower clinical trial related expenses as we substantially completed the affirmed trial and lower employee related costs. SG&A expenses were $3.1 million in the first quarter of 2024 compared to 4.1 million for the prior year. The decrease was primarily due to lower market research expenses, lower patent expenses, as well as lower employee costs. As of March 31st, 2024, we had cash and investments of $21.6 million as compared to 29.8 million at December 31st, 2023. And our cash burn for the first quarter was 8.9 million, excluding net proceeds of approximately $650,000 from ATM financing. 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 business update.

Thank you, Tim. Hello, everyone, and thank you for joining us today. We're making good progress towards initiating our Phase III clinical trial for leucicosterol and alcohol-associated hepatitis. Through a Type C meeting with the FDA, we have received feedback that a single Phase III trial, if successful, could be sufficient to support an NDA filing in AH. We're in the process of designing a pivotal trial that incorporates the FDA feedback and the key learnings from our AFIRM Phase 2B trial. We are continuing to analyze the clinical data from AFIRM and believe the data provide a strong foundation for the design of our registration of Phase 3 trial. We look forward to sharing additional data analyses and the details of the protocol in an update later this year. We're also excited that the affirmed data has been accepted for an oral late breaker presentation at the upcoming EASL conference in June of this year. This will be our first opportunity to share the affirmed data with the medical community at a scientific meeting. We are very encouraged by the continued enthusiasm of the hepatology thought leaders and key opinion leaders for the AFIRM results and their recognition of leucicosterol's potential to provide a clinically meaningful survival benefit in AH patients. As a brief reminder, AFIRM was a placebo-controlled, double-blind, multinational study with two active arms of 30 milligrams and 90 milligrams of leucicosterol and a placebo arm of approximately 100 patients each. In total, we randomized 307 patients with severe AH From a global network of clinical sites, 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% reduction with a 30 milligram dose of leucocosterol and a 35% reduction with a 90 milligram dose of leucocosterol as compared with placebo. We also reported a numerical improvement in the primary endpoint of reduction in mortality or liver transplant at 90 days, though neither the primary or key secondary endpoint results achieved statistical significance. Even more impressive results were observed in the U.S. population, which comprised three-quarters of the total enrollment in the firm, and that was 232 out of the 307 patients. In the U.S. patients, we saw reductions in the 90-day mortality of 57% and 58% for the 30 and 90 milligram arms, respectively, as compared with placebo. Although not part of the original statistical analysis plan, the p-values for these results were both approximately 0.01. Very importantly, Larcicosterol 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 in these severely ill patients. Ultimately, these clinically meaningful reductions in mortality coupled with a reduction in adverse events in these severely ill patients reinforce the compelling risk-reward proposition for larcicosterol. We continue to believe that the affirmed data provide compelling evidence that larcicosterol could represent a safe and effective therapy with life-saving potential for AH patients. There are no approved therapies for AH today, so if our sickle sterile meets our expectation in the phase three and we are able to 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 United States, and with a 90-day mortality rate of approximately 30%, is responsible for tens of thousands of deaths each year. In addition to its high mortality rate, AH represents a significant cost to the U.S. healthcare system. Hospitalizations attributed to AH incur charges between $67,000 to $180,000 per patient, a total charge to hospitals of approximately $10 billion annually. As a result, Larchicosteol represents a potential blockbuster opportunity in the U.S. alone and could simultaneously provide overall cost savings to the healthcare system.