Matt Hogan - CFO Jim Brown - President and CEO WeiQi Lin - SVP, R&D, R&D Business Development and Principal Scientist Michael Arenberg - SVP, Corporate and Business Development.

Francois Brisebois - Laidlaw & Company Yasmeen Rahimi - H.C. Wainwright Len Yaffe - Stoc*Doc Partners.

Greetings and welcome to the DURECT Corporation First Quarter 2017 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 Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr.

Matt Hogan, Chief Financial Officer, DURECT Corporation. Thank you. Mr. Hogan, you may begin..

Okay. Well good afternoon. This call will begin with a brief review of our financial results and then Jim Brown, our President and CEO will provide an update on the business. We will then open up the call for Q&A 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 DURECT'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 are included in our SEC filings, including our 10-K and 10-Qs under the heading Risk Factors.

So now let me turn to a brief review of our financials. Total revenue was $4.6 million in the first quarter of 2017, compared to $3.6 million in the first quarter of last year. Revenue from our R&D collaborations was basically flat quarter-over-quarter at approximately $400,000.

Revenue from this source always fluctuates from quarter-to-quarter depending on the state of development under the various programs and our role in those programs. Product revenue largely from the sale of ALZET pumps and LACTEL Polymers was $4.1 million in the first quarter of 2017 as compared to $3.2 million in Q1 2016.

This increase was largely driven by strong demand for our LACTEL Polymers and based on their backlog our LACTEL product line should have a record year in 2017. Our gross margin, profit margin on these two product lines was 63% in the first quarter of 2017 and these product lines continue to be strongly cash flow positive for us.

R&D expense was $7.5 million in the first quarter of 2017 as compared to $6.6 million in the first quarter of last year. SG&A expenses were $3 million in Q1 2017 as compared to $3.1 million in the first quarter of last year. And so our net loss for the first quarter of 2017 was $8.1 million as compared to $7.9 million in the first quarter last year.

At March 31, 2017 we had cash and investments of $16.8 million, which compares to $25.2 million at December 31, 2016. But as mentioned in the press release, we expect to close our Sandoz agreement this quarter, in which case our pro forma cash would be more like $36.1 million, reflecting the receipt of the $20 million upfront payment from Sandoz.

There are also $43 million in development milestones we could earn under this agreement, of which an amount nearly as large as our upfront payment could be earned in the next three quarters and pre approval POSIMIR with all that potentially achievable in the next roughly 18 months.

With that, thanks again for joining the call and I’ll turn it over to Jim to discuss the rest of the business in greater detail..

we received a $20 million upfront payment and $43 million in development and regulatory milestones, which can potentially be earned over the next 18 months. One meaningful milestone could be achieved in 2017 with the second early in 2018.

We also received $230 million in sales based milestones, while we can’t break these out, these milestones are structured to be reasonably achievable and several have the potential to be achieved in their first few years after launch. Finally we received double-digit tiered royalty on sales.

Regarding the responsibilities, DURECT will complete PERSIST resubmit the NDA and is in charge of this process through approval. We intend to utilize the expertise and talent of the Sandoz, Novartis team to aid us in this process. Sandoz is responsible for and will pay for all commercial activities in the United States.

Regarding the timing of this deal, getting Sandoz involved now allows their commercial team time to prepare for a successful launch, which includes KOL development, messaging preparation, medical affairs preparation, Phase 4 planning and additional activities.

This fits into Sandoz’s strategy for growing their hospital presence with proprietary 505(b)2 products. The Sandoz has vast experience and relationships in contracting and selling within hospitals, with relationships and the expertise to get on the formularies and to ensure the surgeons have access to the product.

As an integrated pharmaceutical company, Sandoz has resources available within Novartis to support the POSIMIR launch, including a very large medical affairs and medical communications organization with these are quite important functions for a product such as POSIMIR.

Regarding the market opportunity, there is a large and relatively untapped market with room to grow. There are over 70 million surgical procedures per year in the United States. We think that realistic available market for a product like POSIMIR is in the range of about 30 million surgical procedures per year.

By competitors forecast $290 million to $310 million in sales this year, which suggests about 1 million procedures or approximately 3% market penetration. This leaves us a substantial opportunity for Sandoz to do well with POSIMIR in this underpenetrated market.

Some of the key competitive features for POSIMIR, POSIMIR has the opportunity to be best-in-class non-opioid pain relief product for post-surgical pain. Given the non-side effects of opioids plus concerns about overuse and abusive narcotics, treating pain with non-opioid alternatives clearly has medical benefit.

As a result of these concerns there is a trend toward treating pain after the sugary with a multi-modal approach and POSIMIR if approved can play a central role in these strategies.

Regarding opioids in our society, according to the CDC website on prescription drug abuse, in 2015 approximately 15,000 people died of prescription drug overdose that's more than 41 people a day in the United State.

In our pivotal POSIMIR shoulder and hernia trails the POSIMIR treated groups had more than 20% pure fewer taking narcotics after surgery. POSIMIR also provides a potential for duration of activity of up to three days, which is driven by the amount of medicine that we give and also by the location.

We deliver about 2.5 times more bupivacaine than the competing product and yet we never have higher plasma concentrations if one looks at the amounts in our NDA versus theirs, which means that we've got to be meeting ours out 2.5 times longer.

POSIMIR offers an administration technique that is simple and rapid and enables continuous releases of bupivacaine into the wound next to where the nerves have been affected.

If approved the POSIMIR label when include data from well controlled studies in such common and important surgical procedures as hernia, shoulder and laparoscopic gall bladder removal.

The next steps for POSIMIR, the dosing in PERSIST is ahead of schedule and today we are updating our guidance, we now expect to dose the last patient of PERSIST this quarter in the second quarter of 2017, whereas our prior guidance had been for third quarter of this year.

As a reminder in a previous clinical trial of 50 patients in the same surgical model, which is gall bladder removal POSIMIR was compared with the active controlled bupivacaine hydrochloride.

Against which POSIMIR demonstrated in a post stock analysis an approximate 25% reduction in pain intensity down movement for the first three days after surgery using the same statistical methodology that we will be utilizing in PERSIST.

We expect to have top-line data in the fourth quarter of this year and resubmit the NDA shortly thereafter with a six month review by the FDA this could set up for a commercial launch of POSIMIR in 2018.

One last point I want to make is that the upfront and near-term milestones from our Sandoz deal and assuming a positive PERSIST trial with eventual FDA approval will provide a stream of financing that will put us in a position to drive our DUR-928 initiatives forward.

In the longer term, I'd like to emphasize how the sales based milestones and royalties from POSIMIR could provide an enormous return for our shareholder, with any reasonable commercial success. And bearing that in mind, all of those revenues would basically fall to the bottom-line with no associated cost.

Now onto DUR-928, the lead product candidate in our epigenetic regulator program, DUR-928 is an indigenous small molecule new chemical entity, which may have broad applicability in several metabolic diseases such as non-alcoholic nonalcoholic steatohepatitis hepatitis or NASH and other disorders of the liver, in acute organ injuries such as acute kidney injury, and in autoimmune/inflammatory skin disorders such as psoriasis.

We are developing DUR-928 in three different routes of administration, orally for chronic metabolic disorders by injection for acute organ injuries and topically for localized dermatologic conditions.

Since our last earnings call there have been two poster presentation at scientific meetings and one scientific publication describing some of the important activities of DUR-928.

First off a poster describing the results from two STAM, NASH mouse model studies were presented at the American Association for the Study of Liver Diseases Emerging Trends in Non-Alcoholic Fatty Liver Disease Conference in Washington DC, which was held on March 17th of this year.

This STAM model is a proprietary model run by a CRO unmet [ph] in Japan in which the majority of the compounds that are currently being evaluated clinically in the NASH fields have been tested. DUR-928 was tested in two phases in this model. In the first phase, DUR-928 demonstrated a reduction in the NASH score and in developing fibrosis.

In the second phase of this model, DUR-928 demonstrated a reversal of hepatocyte ballooning and a trend for reversal of fibrosis. In addition it greatly reduced the number and size of pre-cancers hepatocellular nodules that formed in these mice.

This last point is particularly important as 100% of the mice in this model develop hepatocellular carcinoma at only 16 weeks of age. This poster can be found on our website. Dr. Ren, the Scientist and Physician who discover DUR-928 recently had a paper published in the Journal Metabolism.

This paper described the molecules capability to protect from endotoxin shock in an animal model. There are few things one can glean from this paper. First, the reduction of mortality by DUR-928 in this model is striking. Only 10% of the animal survival 96 hours without DUR-928 versus 90% survival with DUR-928.

Second, the potential utility of DUR-928 for the treatment of multi organ injury. Third, the potential anti-inflammatory effect of DUR-928. This is shown by the significant reduction cytokine and inflammatory cell and filtration in the tissues.

Lastly this paper also demonstrated the differences between self-aided [indiscernible] and versus just [indiscernible] in general. The effect in the same model by the later [indiscernible] was reported in volume 84 of the science paper in 2014.

On April 22nd, we were pleased to present a poster at the European Association for the Study of Liver Diseases or EASL meeting in Amsterdam detailing the results from our first Phase 1b NASH study. The data presented in this poster were from our first patient while utilizing DUR-928.

This study was an open label single ascending dose safety and PK trail in liver function impaired NASH patient and match control subjects. These patients where either confirm cirrhotic or non- cirrhotic NASH patients.

The study was conducting in Australia and it evaluated single dose level first a low dose then a high dose of orally administrated DUR-928 in successive cohorts. 20 subjects with NASH and 12 NASH control subjects received DUR-928.

Although the study was not designed to assess efficiency, we observed a dose depend reduction of certain biomarkers after a single oral dose of DUR-928. The highlights of these observations are noted in the following.

First in the high dose cohort of the NASH patients we observed a 5% and 12% reduction on the average of IL-18 and high sensitivity CReactive Protein respectively. IL-18 is an inflammatory mediator implicated in both liver and kidney disease and CRP is a marker inflammation. These changes were observed at 12 hours after a single dose.

We also observed full length CK-18, which is a generalized sell death marker was decreased 33% on average in the NASH patient than in the low dose cohort and 41% on average in the high dose cohort. These changes were observed at 12 hours post dosing.

Cleaved CK-18 which is a marker of apoptosis was decreased 37% on average in the low dose NASH group and 47% on average in the high dose. These changes are also observed at 12 hours post dosing. The reduction of both CK-18 cleaved and full length was even greater among the cirrhotic NASH patients.

At the EASL meeting researchers from biopharmaceutical companies, clinics and universities working in the field of NASH were quite impressed with the magnitude of the reductions in both full length and cleaved CK-18 after just a single dose of DUR-928 in these patients.

The magnitude of these changes also compares very favorably to results reported by other companies with compounds in development after dosing for much longer durations.

Total bilirubin, which is a liver function impairment marker at 12 hours after dosing in the NASH patients was decreased by 27% on average in the low dose and 31% on average in the high dose cohort. Elevated bilirubin levels in plasma is an important indicator of liver dysfunction.

The clinicians some who are leading hepatologist, who came by our poster were very impressed with the effect of DUR-928 in bilirubin reduction and told us they did not know of any other therapeutic agent that could produce such a reduction in only 12 hours.

Typically bilirubin reduction is seen as a secondary effect overtime as liver function is improved. Patients with more severe liver disease who have liver psoriasis or elevated bilirubin levels showed larger responses to DUR-928 with greater reductions in the full and cleaved CK-18 and bilirubin. This poster EASL can also be found on our website.

So what are the next steps for our DUR-928 program? For the oral program we are working to initiate a Phase 2 study in primary sclerosing cholangitis later this year.

For the injectable program we are working to initiate a Phase 2 study in acute organ injury this year and for the topical comparable program we are developing topical formulations for testing in the Phase 2 psoriasis study early to be -- initiated early in 2018. I will now review the old program in little more detail.

We are actively working towards the Phase 2 trial in primary sclerosing cholangitis or PSC, with orally administer DUR-928. PSC is a chronic liver disease characterized by a progression of progressive cholestasis that is a decrease in bio-flow overtime. With inflammation and fibrosis of the bile ducts.

It’s an orphan medical condition for which there is no established medical treatment. Directors working with PSC, patient efficacy groups to facilitate the study of DUR-928 in this important orphan disease. We anticipate initiating a Phase 2 study of DUR-928 in PSC patients later in the United States later this year.

For the injectable program of DUR-928, our third Phase 1b study with DUR-928 which is being conducted in Australia is an open-label single ascending dose safety PK study in patients with impaired kidney function. These are patients who have stage 3 and 4 chronic kidney disease. Our matched and also matched control subjects with normal kidney function.

This study has been conducted in successful cohorts evaluating a low dose and a high dose of IM injected DUR-928. Both cohorts will consist of six kidney function impaired patients and three matched control subjects.

Data from the low dose cohort showed the PK parameters between the kidney function impaired patients and those subjects with normal kidney function were comparable.

After a PK safety review of this cohort patients are now being enrolled in the high dose cohort, utilizing a dose four times larger than the low dose cohort and we expect to complete this study shortly.

We are currently working closely with expert advisors to design Phase 2 trial in one or two more indications with an injectable formulation of DUR-928 and expect to begin Phase 2 in the United States later this year. And lastly for our topical program for DUR-928.

As previously disclosed, we completed a Phase 1b trial in psoriasis patients utilizing a microplaque assay with intralesional injection of DUR-928.

This study demonstrated promising activity, which we believe warrants further investigation and we are currently developing topical formulations of DUR-928, which will be evaluated in a Phase 2 psoriasis trial. We believe there is a large unmet medical needs for new drugs to treat skin inflammatory diseases such as psoriasis or atopic dermatitis.

Since many currently available treatments are either dissatisfactory or are associated with unwanted side effects. In summary, the results of these studies evaluating the effects of DUR-928 are impressive, even with just a single dose. This molecule is highly conservative across all seven mammalian species we have studied to-date.

There are no toxic signals observed in any of our GLP talk studies even when we dosed to extremely high levels. Not surprisingly our healthy volunteers now more than 100 tolerated DUR-928 very well. Even when plasma concentration in some subject were great than a 1,000 times their endogenous levels.

Yet, when DUR-928 is given at low doses in more than 10 different animal disease models, the beneficial effects have been striking. Similarly the biologic activities we saw after single dose of DUR-928 has shown in our Phase 1b study results have been impressive in both NASH and psoriasis patients.

The more data we generate, the more we are convinced that DUR-928 may represent a new class of therapeutics that has the potential to treat a range of important indications. I want to thank you. And we'll now take any questions you might have. .

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions]. The first question is from Francois Brisebois. Please go ahead sir. .

Thanks for taking the question guys and congrats on the progress. Alright, so I had a couple of here, so in terms of DUR-928, why is it that you guys shows PSC for your first trial in that for DUR. .

WeiQi I'll let you answer that one like. .

Well first of all the reason we chose PSC is based on some of our animal studies. And our animal studies in bile duct ligation animal model, which is a representative of cholestatic level injury diseases in human. And clearly show that DUR-928 is highly beneficial in the cholestatic liver injury.

And as in comparison with competitive compounds, our compound clearly showed first of all its effect is very quick, very rapid just as our Phase 1b study in the NASH patient shown. And secondly that the important markers to show in the cholestatic liver injury was significantly reduced.

So that's why we believe that the 928 will be super effective in a way in these cholestatic liver injury. And for the NASH on the other hand, unless you do a long-term study of using biopsy to confirm the efficacy right now there is no non-invasive biomarkers allow you to measure the efficacy of any drugs.

But in contrast where the PSC you have well accepted biomarkers, which is non-invasive. So you can look at the results much more quickly and then much more in the timely fashion..

Yes I think that's very true. I think we see reductions in these markers of cell that the CK-18 full in cleaved which we'll be tracking in these patients.

The enzymes have longer half-life so they when come up after a single dose, but we'll be able to track those overtime, and we’ve seen these various enzyme drop in these animal models we'd expect to see similar results in humans and as well the bilirubin.

We saw it going down in only 12 hours in these patients, we saw it down statistically significantly in these animal models with the excluded bile ducts. And so these are all very important pieces.

And talking to the patients, one of the things they are really drawn to is what we saw out of our STAM model where we saw reduction in pre-cancerous lesions of liver cancer because in number of these PSC patients eventually do develop cancer. And so they're very excited about the possibility of it helping there as well.

So we have a number of reasons why we think it make sense. And so we're excited about it. .

Great, that makes a lot of sense. And then in terms of bilirubin that's very interesting that clearly in the medical community came up at EASL.

Why is it that they -- what's your opinion on the fact that it's so underappreciated right now or no one else is hitting that kind of reduction in bilirubin?.

I think at the bilirubin typically like Jim mentioned, typically you wouldn't see the reduction of bilirubin until it's very slowly or secondary effect of the therapy. And when the lever functioning finally recovers then the bilirubin start to drop.

But in this case with the DUR-928 because we believe it acts on the lipid homeostasis inflammation and cell that’s all simultaneously that's why you will able to see the effect much more rapidly much more potently. And then it just acting on directly improving the liver functions..

Okay, great. And then one last one if I could here. In terms of POSIMIR, the Sandoz deal is all those milestones and opportunities are in the U.S., how should we think about POSIMIR's opportunity Ex-U.S. and are you guys trying to partner that for Ex-U.S..

Yeah, I'll let Mike Arenberg, who is our Head of our Strategic and Corporate Development speak to that..

Yes we have a lot of interest in the product ex-U.S. as you can imagine I think we see several markets outside of the U.S. is very attractive for this product as well where there is a big unmet need. But in this case we wanted to focus on getting the U.S. partner in place first and then we'll move onto discuss things with ex-U.S. partners now..

Okay, excellent. Thank you very much and congrats on the progress. .

Next question is from Yasmeen Rahimi. Please go ahead sir. .

Great, thank you so much. It's Yasmeen Rahimi from taking the questions congratulations on the continued progress. Coming out of EASL, I mean, the data is so remarkable, I mean the fact that you're hitting robust changes in many of the inflammatory markers within couple of hour.

So talking to KOLs at EASL what was the perception when they came on and saw the data if you could comment on that. And then I had two follow-up questions. .

Okay, yes they were very impressed. We had -- as I said we had thought leaders who are from Academia [ph] we had thought leaders who were investigators who run clinics that do these studies. And then we had a lot of people as you would expect from industry.

And they were all quite impressed, I think the more research I think it's the best way research kind of focus people we’re more focusing on CK-18 both cleaved and full lengths. And the fact that we had a such a dramatic reduction in such a short time that was very impressive to them.

And then the people who are more clinically focused that saw more patients they were drawn to the bilirubin I think. And all of them like the fact that the inflammatory markers were down and they thought that was very important and that should continue overtime and continue to improve the outcome of the patients.

But I would say that's kind of the way it broke down, the researchers are more CK-18 and full and cleaved and the clinicians more bilirubin yes. .

Yes, I would like to add that at one of our clinical advisors meeting and all of our clinical advisors who have world's leading hepatologist. They were extremely impressed with the CK-18 data. And then especially with the reduction we saw in such a quick time and then with a single dose.

And then if I believe at EASL there are several companies they are presenting their results on the CK-18 data, but that's all after multi-months daily oral dosing of the drugs then they see either fall in CK-18 or cleaved the CK-18 only one company showed the both CK-18 reductions.

But we were able to show more favorably the reduction by a single dose in several hours. .

And that advisory panel that WeiQi is referring to actually had four past presidents of ASOD and they were very impressed with this four various acute organ damage programs that we're actually evaluating for our injectable program.

There is -- we think it's going to be very important those will be very important markets for us going forward in the clinic..

Absolutely, I mean with 41% reduction in full length CK-18 and 27% a lot... .

And it was even greater in this anyway, it's really pretty nice. Anyway, sorry, go ahead..

Well that's fantastic. So and then the next question is more tailored to your Phase 2 that you're planning for PSC.

So maybe can you guide us in terms of the size and the design and what the primary endpoint would be?.

I think it's probably a.... .

Well we are still working with our clinical advisors at this time to draft out the protocol. So we're planning on submitting the IND when we are ready. .

Yes it's not too far away, but just little bit early for us to talk about it..

And we're also involving the patient efficacy groups and we had a good chance to meet with a number of them from different countries around the world at the EASL meeting..

Excellent.

And then one last question, maybe any timing or catalyst for the injectable program and the topical that you could maybe share a little bit more in detail with that?.

I think, sure there is catalyst for the injectable program will be from the kidney patients. Now we have to take this in its stride because these are chronic kidney patients. And to my knowledge there is really nothing out there one can give to a chronically damaged kidney and make any difference.

So if we happen to see any of these biomarkers move like camera one of these I doubt that if we did, but if we did that would be either at the bar of the door that would be amazing I think from that standpoint from biological standpoint and a medical standpoint.

But we want to demonstrate that we can dose safely in patients with damaged kidneys and that’s what we are looking to do from this trial. And then post that it will be the IND starting the Phase 2 trials not even IND, starting the Phase 2 trials. And for topical we now are actually screening formulations.

And so we are on track to start that trial very early in 2018 that will be our Phase 2 trial in psoriasis tropically applied in the United States..

Great, congratulations again for the great work..

Thanks so much..

[Operator Instructions] We have a question from [indiscernible]. Please go ahead. .

Good afternoon and congratulations on the progress.

A couple of very practical questions, matt could you give us an idea again of what you expect cash utilization or what was cash utilization in Q1 and how do you see it going forward over the next three quarters?.

Sure, in the first quarter our basic burn rate was about $9.1 million we don’t think it will be that high in the next quarter or two.

One of the implications of the more rapid enrollment with the POSIMIR trial is that short-term your expenses go up, but of course if you can finish the trial one or two or three months earlier than you expected, the total cost of trial go down. So some of this is kind of acceleration of the expenses associated with the PERSIST trial.

Beyond that I don’t think we give too much guidance, but we think that was kind of high water mark the first quarter burn rate. I guess maybe I’ll transition to one more comment, which I kind of made in my remarks earlier.

Besides the upfront payment from Sandoz, which is obviously considerable, we have these other $43 million in development based milestones. And they are structured so that we would hope and expect to receive another payment this year followed by another payment pre approval.

And then of course a nice milestone on full approval of the product and all of that could start to come in this year and completed in, in roughly 18 months or so. So we think that’s another important source of funding for us..

Thank you. As far as the, the royalty levels you have just alluded to double-digit.

Could you comment perhaps a touch more how would you say the royalties on POSIMIR under this agreement would compare with the previous Hospira agreement or possibly the Pfizer, Remoxy royalty levels could you give us a little bit of sense of what we might look for?.

Could sort of try, it starts double-digit therefore it’s much higher than any royalty we would have gotten from Remoxy. And it’s structured so that it goes up in multiple tiers. So as many of these deals do.

So this is an -- but as an example from zero to $100 million you get a certain percentage from $100 million to $200 million you get a higher percentage et cetera. So if we were to get to some modest assumption of $300 million in revenues for POSIMIR alone, which is what it is supposed to do this year.

We would be looking at a royalty stream that’s $35 million to $40 million or more per year. And we have no cost associated with that. So it can become quite meaningful. I think that’s about as much granularity as we can get unfortunately.

So a similar comment those sales based milestones were met to be structured to be very achievable, you often hear about bio-buck where it have milestones that in canter you never think you’re going to achieve because they kick in at $1 billion or above.

But this has many different tiers of sales based milestones that are met to kick in at very reasonable levels. So in the first couple years after launch we would expect to achieve some of those..

Okay.

And if I could follow-up on that, so if we were thinking of what the highest here you might have to achieve under this agreement, would it be a sub-billion revenue that you’d be at the pick of potential royalties?.

Yes..

Okay, thank you very much. That's very helpful. One final question, it’s likely that dealing with the group like Novartis you have had to share a great deal of detailed information as part of this agreement.

Is there anything in your agreement that provides any kind of a stand still for their ability to buy part of the company or all of the company given the very close look they’ve had on the product, is there anything in agreement that protects DURECT from an unwanted hostile action?.

No, that would be pretty non-typical for a deal like this..

And they have no -- they have not received -- this was just a POSIMIR deal. So it’s -- they haven’t -- we haven’t opened the book to other program..

But I think to take your question a slightly different direction Jeffry. You don’t do a licensing deal of this magnitude with a blue-chip major pharmaceutical company without them doing extensive due diligence on your product.

You’d have to expect as they did that they came in a review to all of clinical data associated with the program, all of our regulatory correspondence with the FDA. Manufacturing issues, the patent portfolio and then they presumably did their own market research and assessment.

And it’s pretty unlikely they would want to in-license a product like this if they thought the commercial opportunity was modest why bother. So, this process that we went through with them you’ve got to assume they did all that and if I was a shareholder I’d take some level of comfort from that..

And I think also one can assume they look at the competition and the like because they certainly have the size to do whatever they wanted whether products on the market or not. So, I think the fact that there our partner speaks well for the product and its potential..

By all means and then congratulations to the team on outstanding deal just at $150 million market cap for a large pharma who have limitless resources one wonders whether they acquire enough information to make them take certain strategic decisions. But you’ve answered my questions. Thank you very much..

We have a question from Len Yaffe. Please go ahead, sir..

Thank you. I had two different questions.

The first is on an old front REMOXY the opioid epidemic is becoming so great in this country that even the insist for clinical and economic review is physician addressed evidence report is under taking a hearing on it in a couple of months to discuss the abused deterrent drugs that are available out there? And I was just wondering and I know it’s been a long road, if you can give us any update that you might be able to share as it relates to REMOXY and as of your last understanding, how you think it compares with some of the abused deterrent products that are out there on the market? And then my second question goes back to DUR-928, and what I’m wondering there is I can appreciate you are looking at PSC first, which is an orphan indication, but obviously the extremely huge market potentially is the NASH indication.

And the data from the KOLs continues in their opinions continue to suggest that fibrosis is the determining fact or the effect on that in terms of the efficacy of the drug and not some of the -- in my opinion I’ll say and not some of the drugs that are much earlier on in the treatment paradigm.

And I was just wondering if you could discuss DUR-928 as it relates to action on fibrosis/L8 [ph] cells and also even though it would require greater resources and you just deal with your biopsy there are seven or so drugs currently in Phase 2/3 clinical trials that have the patients that are willing to undergo those probably because of the severity of their disease.

So could you give us some timeframe when you think it will start to purse the NASH indication more aggressively? Thank you..

Maybe Jim, you want to tackle REMOXY..

Yes, I will go after REMOXY, first of all my opinion that REMOXY is from a abuse determined standpoint really the superior product, potential product that’s out there, I mean we have shown five different ways by which we can reduce abuse from, from snorting, from injecting from mixing with alcohol, inhaling and chewing. okay so we got all those.

So and we’ve shown it in various different studies and alike. So clearly it’s got a nice opportunity. As far as the timing of it all that’s entirely of the pain therapeutic I think the last thing I heard as they were looking at the end of this year is it..

Yes, they have to do two other abuse studies, which they have said they think they can complete by the end of the year. And that they had talked about the outline of those studies extensively with the FDA. So they are -- hopefully they are very much in line with what the FDA wants to receive.

So they will get that data hopefully by the end of the year and then they are going to have a pre-NDA meeting as we understand it with the FDA and then recently that. And you would certainly hope that the political wins are in our favor. It’s almost tragic that this isn’t available for patients..

I would agree. And then likewise the POSIMIR fits, I think so nicely in there because of the percent of patients who are not taking any narcotics.

We are seeing in our two payroll trials one in five patients not taking any and if you apply that even a small fraction of a penetration in that marketplace, the potential for reduced prescriptions and reduced narcotics on the street is dramatic.

And also there is a percentage of people who have this prettiest position when exposed first to narcotics they end up with problems later on so by never being exposed maybe save their lives and their families the problem might.

I was at a conference in San Francisco a year and half and so ago that it was very eye opening on prescription drug abuse and the like and there were some parents they are talking about their children who had just been exposed because hurt a shoulder in high school sports or something and were into huge problems.

And I will never forget this one mom talking about how she had 20 something year old son who had become addicted after surgery, shoulder surgery. And she said she went to sleep every night praying the she wouldn’t that call and waking up every morning thanking god she didn’t’ and I just think it’s really something that is very important to all of us.

And so we’re hoping that both REMOXY and POSIMIR can help. As far as reducing fibrosis we do -- we have seen this kind of stuff with our molecule we know that the mechanism of actions by which we work and maybe WeiQi speak a….

Yes, in fact for the fibrosis about half of our patients in the Phase 1\b trail those NASH patients are either severe fibrosis or advanced fibrosis or psoriasis.

So that’s just a single dose we were able to see these biological activities as matter of fact these patients with a psoriasis or advanced fibrosis or sever fibrosis they responded greater than rigorous NASH patients. So we clearly see in addition in animal studies we saw that strong anti-fibrotic product activities of DUR-928.

So we strongly believe that DUR-928 certainly with the half what that demonstrate anti-fibrotic activities in the NASH trial. But in time we certainly would do NASH trial and it’s just because right now as we know there is -- first of all there is no non-invasive measurement for NASH therapeutic effect.

So in other words you have to do relatively longer term of clinical trial in order to see the efficacy if you do a relatively shorter trial it’s just not justifiable to do biopsy in these patients. And then second of all there are multiple non-invasive diagnostic tools are being developed at this time, such as MRI or fibro scan or MREs.

However all these methods as well as biomarkers are still beginning validated it’s not fully accepted by the greater society. So in other words we would have rather wait till when these methods are available because we believe DUR-928 can be effective in NASH patients in relatively short timeframe than most other therapeutics testing in the trials.

So in the shorter time it’s just not reasonable to do about if we can use the non-invasive method. .

And in the interim as a smaller company, we can really make a lot of progress moving the ball down the field and one of these indications which may achieve approval much faster than a NASH approval..

That's true..

And that would make a big difference to our shareholder and to the patients by which we reserve..

Great, thank you very much..

There are no further questions at this time. I would like to turn the floor back over to management for closing remarks..

Okay. We would just like to thank you all for participating. And of course if people have questions after this, they are always free to call us and we would be happy to talk to you. Thank you..

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..