DURECT Corporation

Greetings and welcome to the Direct Corporation fourth quarter and full year 2024 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 shall require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Tim Papp, Chief Financial Officer.

Good afternoon and welcome to Direct Corporation's fourth 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 10K and 10Qs under the heading Risk Factors. To begin, I would like to review our fourth quarter and full year 2024 financial results. The following financial information relates solely to our continuing operations and therefore does not include the operations of our all set product line, which we sold in the fourth quarter of 2024. Total revenues in 2024 were $2 million compared with 2.6 million in 2023 and half a million for the fourth quarter of 24 compared to 0.9 million for the prior year. 2024 revenues were lower due to lower earn out revenue from Indivior, lower revenue recognized from feasibility agreements with other companies, and lower sales of excipients. R&D expense was 10.4 million in 2024 as compared to 29.4 million for the prior year, and 1.9 million for the fourth quarter compared with 5.6 million for the prior year, 2023. The decreases were primarily due to lower clinical trial related expenses following completion of the affirmed trial. We also experienced lower contract manufacturing expenses and other external expenses as well as lower employee-related costs. SG&A expenses were $10 million in 2024 as compared to $12.7 million for the prior year and $2 million for the fourth quarter of 24 compared with $2.2 million for the prior year. These decreases were primarily due to lower employee expenses as well as lower consulting, patent, and audit-related expenses. As of the end of 2024, we had cash in investments of $12 million as compared to 29.8 million at December 31st, 2023. We believe our cash on hand is sufficient to fund operations through the third quarter of 2025. As I previously mentioned, we completed the sale of the AllZap product line during the fourth quarter of 2024. We used a portion of the proceeds to repay the remainder of our term loan and are now debt free. This transaction both strengthened our balance sheet and was consistent with our corporate strategy of streamlining our operations to focus on developing Lirsucosterol for alcohol-associated hepatitis. We are continuing to explore all options for funding the clinical development of Lirsucosterol, including strategic partnerships and financing through the capital markets. Now, I would like to turn the call over to Jim for a business update.

Thank you, Tim. And hello, everyone. Thank you for joining us today for our fourth quarter 2024 update. I'd like to use our call today to provide some context for the rare opportunity we have here at Direct. Our lead asset, Larcicosterol, for the treatment of alcohol-associated hepatitis, has shown life-saving potential for a disease with no approved therapy. About 30% of the 164,000 US patients hospitalized due to AH will die within 90 days of hospitalization. This means AH is responsible for greater than 40,000 deaths each year in the U.S., more than 100 people each day. This is roughly equivalent to the number of deaths from breast cancer or car accidents, but the awareness of this disease remains limited. We believe we have a potential solution that can save a large portion of these patients. In our phase 2B trial, we saw nearly 60% reductions in mortality with both doses of varicosterol compared with placebo in the 232 U.S. patients. This represents approximately 75% of the total patients enrolled in this study. These strong results have garnered significant attention in the medical and scientific community. Highlighted by the FDA granting varicosterol breakthrough therapy designation, the New England Journal of Medicine's publication of our phase 2B results in NEJM evidence, and the late-breaker presentation of our top-line data at EASL last year. We are committed to developing Lorsuclosterol to provide hope for our AH patients, for their families and loved ones, and for the medical professionals who have no effective treatments to offer these patients. Our sole focus as a company is to secure the funding to complete our phase three trial, whether through financing or business development. With such funding, we are ready to initiate our Phase III trial, and once underway, we expect to be able to report top-line data in approximately two years. We firmly believe that Larcico-Sterol represents the best hope for a breakthrough in the treatment of AH, and look forward to the opportunity to demonstrate this in our Phase III trial.