Matthew Hogan - CFO and Secretary James Brown - Co-Founder, CEO, President and Director.

Adam Walsh - Stifel, Nicolaus & Company François Brisebois - Laidlaw & Company Edward Nash - SunTrust Robinson Humphrey.

Greetings, and welcome to the DURECT Corporation Second Quarter 2017 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Hogan, Chief Financial Officer of DURECT Corporation. Thank you. Mr. Hogan, you may begin..

Okay. 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 our business. We'll then open up the call for Q&A session. Before beginning, I'd 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 in 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 the 10-Q we will file tomorrow under the heading Risk Factors.

Let me now turn briefly to our financials. Total revenue from the second quarter was $4.3 million compared to $3.2 million in the second quarter of last year. Revenue from our R&D collaborations was $1.3 million in Q2 2017 compared to $0.4 million in Q2 2016.

And revenue from the source fluctuates from quarter-to-quarter depending on the state of development under various programs and what our role is in those programs. Product revenue, lastly, from the sale of ALZET pumps and LACTEL polymers was $3.1 million in Q2 2017 as compared to $2.8 million in Q2 2016.

This increase was largely driven by strong demand for our LACTEL polymers. Based on their backlog, our LACTEL product line should have a record year in 2017. And our gross margin on these 2 product lines was 70% in Q2 2017. So these product lines continue to be strongly cash flow positive for us.

R&D expense was $9.1 million in Q2 2017 as compared to $7.9 million in the second quarter last year. SG&A expenses were $3.7 million in Q2 2017 as compared to $2.9 million in Q2 2016. But I want to briefly explain that virtually all of that increase was due to an advisory fees we owned upon signing the Sandoz agreement for POSIMIR.

So it's a onetime event due to that. Our net loss for Q2 2017 was $9.9 million, which compares to $9 million in the second quarter of last year. And at June 30, 2017, we had cash and investments of $33.6 million compared to $25.2 million at December 31, 2016. With that, let me turn over to Jim to discuss the in detail.

Thank you, Matt and hello, everyone. We began this year by outlining 6 deliverables we were looking forward in 2017. They were as follows. First, reporting our DUR-928 Phase 1b and other data at scientific meetings.

Second, commencing at least 1 Phase II trial with DUR-928 with PSC likely the first indication to be pursued [indiscernible] was selecting lead topical formulations for DUR-928, that will be taken into proof-of-concept clinical trial in psoriasis. The fourth, was to present potentially established commercialization partnership for POSIMIR.

The fifth was completing enrollment in the Phase III POSIMIR clinical trial PERSIST, announcing top line results. The sixth was reporting on results from the Phase III clinical trial for ORADUR-Methylphenidate in Taiwan. As the second quarter has drawn to a close, I'm pleased to be able to give the following update with regard to these.

For the first, with regard to reporting our DUR-928 Phase 1b and other scientific data at scientific meetings in March, we presented data from the stand NASH model -- NASH model in mice AASLD meeting held in Washington, DC. And near the end of April, we presented NASH Phase 1b data at the EASL meeting in Amsterdam.

For the second, regarding commencing at least 1 Phase II trial for DUR-928, we now have completed the DDI studies, these are the drug-drug interaction studies that are precursor to initiate in the Phase II work in United States. Primary sclerosing cholangitis has been selected as the first oral indication that we will be pursuing for DUR-928.

We expect to begin dosing this trial in the fourth quarter. For the third, topical formulations of DUR-928 had been screened and two formulations have been selected for a Phase II proof-of-concept clinical trial in psoriasis. For the fourth, a U.S.

commercialization partnership for POSIMIR has been established with Sandoz, Novartis and the partnership is well underway with the Sandoz team actively engaging in preparing for a potential launch of POSIMIR in 2018.

And the fifth, enrollment in the Phase III POSIMIR clinical trial PERSIST completed ahead of schedule, and we look forward to announcing top line results in the fourth quarter this year.

And the sixth, the last of these, today, we announced positive results from our Phase III trial with ORADUR-Methylphenidate in Taiwan conducted by a partner, Orient Pharma. This is an exciting time for DURECT with very positive development in a number of our programs. I'll begin with POSIMIR.

In the second quarter, we established and kicked off our U.S. commercialization partnership of Sandoz, a division of Novartis and completed enrollment in the PERSIST trial ahead of schedule.

POSIMIR is our investigational postoperative pain relief that utilizes our patented SABER technology and is intended to deliver bupivacaine to provide up to 3 days of pain relief after surgery. We're delighted to working with Sandoz as our commercialization partner for the United States. With Sandoz, we get the best of both worlds.

As a division of Novartis, Sandoz brings the benefit one of the largest world pharmaceutical companies with the resources and expertise to support a successful launch and commercialization. And within the Sandoz division, we get a dedicated team of institutional sales professionals, focused on the U.S.

hospital market, about 95% of the hospitals with their significant presence. As a reminder of the economic terms, we received $20 million upfront payment with $43 million in additional development and regulatory milestones that can potentially be earned over the next approximate 12 months.

One meaningful milestone that could be achieved in 2017, one of these is a meaningful when it could be achieved in 2017 and the second one can be achieved early in 2018. We are also eligible to receive $230 million in sales-based milestones.

While we can't break these out, these milestones are structured in multiple tiers around reasonably achievable targets and several has the potential to be achieved in the first 3 years after launch. Finally, we will receive strong double-digit royalties on sales.

With regard to responsibilities, DURECT complete PERSIST and resubmit NDA and is in charge of the process through approval. We are using the expertise and the talent of the Sandoz Novartis team to aid us in this process. Sandoz is responsible for all and will pay for all commercialization activities in the U.S.

Regarding the progress this quarter, the Sandoz commercial team has initiated preparations assuming approval to assemble and ensure a successful launch in 2018. This includes, as one would expect, development, preparing, medical affairs prep, Phase IV planning and the like.

That team has vast experience and relationships in contracting and selling within the hospitals. With this relationships and expertise, we're able to get on the formularies to ensure these surgeons have access to the product.

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

The PERSIST trial completed enrollment ahead of schedule and the team is on track to report top line data in the fourth quarter this year. Assuming positive results, we are targeting the NDA's resubmission to be in the first quarter of 2018, and the resubmitted NDA to potentially be approved in the second half of 2018.

With regard to the market opportunity, there's a large and relatively untapped market with substantial room to grow. There're over $70 million surgical procedures per year in United States. We think a realistic available market for a product like POSIMIR is in the range of around 30 million surgical procedures per year.

Competitor has a forecast approximately 300 million in sales this year, which is about 1 million procedures or about 3% market penetration. This leads a substantial opportunity for Sandoz to POSIMIR in this under-penetrated market.

The key competitive features for POSIMIR are that POSIMIR has the opportunity to be best-in-class, non-opioid pain relief product for post-surgical pain. Given the known side effects of opioids plus concern about the overuse and abuse of narcotics, treating pain with a non-opioid alternatives clearly has medical benefit.

As a result of these concerns, there's a trend toward treating pain after surgery with our multimodal approach. And POSIMIR, if approved, can play a central role in these strategies.

POSIMIR also provides for a potential duration of activity of up to 3 days, which is driven in part by the large amount of -- by the large amount of drug giving 2.5x greater than competing products.

POSIMIR offers an administrative technique that is simple and rapid, continuously releasing bupivacaine into the wound next to where the nerve have been affected, rather than blindly injecting into that issue in the hope of getting enough drug close to the affected nerves to impact the pain signals.

If approved, the POSIMIR label should include data from well-controlled studies in such common and important surgical procedures as hernia, shoulder and laparoscopic gallbladder removal. The next steps for POSIMIR are we expect to have top line data in the fourth quarter of this year, and to resubmit the NDA in the first quarter 2018.

And with the 6 months review by the FDA, this commercial launch for POSIMIR in 2018. I'll now move on to DUR-928. DUR-928 is the lead product candidate in our Epigenetic Regulator Program.

DUR-928 is an endogenous small molecules, new chemical entity, which may have broad applicability in several metabolic diseases such as nonalcoholic steatohepatitis or NASH and primary sclerosing cholangitis or PSC and other disorders of the liver.

It also has the potential to be used in acute organ injury such as acute kidney injury and in autoimmune and inflammatory skin disorders such as psoriasis. We are developing DUR-928 for 3 different routes of administration. Orally for chronic metabolic disorders, by injection for acute organ injury and topically for localized dermatologic conditions.

We [indiscernible] presented at the European Association for the Study of the Liver or EASL meeting in Amsterdam earlier this year, detailing the results from our Phase Ib NASH study. The patients in this study were either confirmed cirrhotic or non-cirrhotic NASH patients.

Although, this study was not designed to efficacy, we observed a dose-dependent reduction in certain biomarkers after a single-dose of DUR-928. We observed the significant reduction of IL-18 of high sensitivity C-Reactive Protein, 18 and 18 and total bilirubin.

The patients with more severe liver disease, who have liver cirrhosis or elevated bilirubin levels showed larger responses to DUR-928, but greater reduction in full CK-18 and bilirubin. The from EASL can be found on our website. Now on to update with regard to the program.

We're actively working towards initiating a Phase II trial in PSC with orally administered DUR-928. PSC is a chronic liver disease, characterized by a progression of cholestasis, that is the causes decrease in bile flow with inflammation and fibrosis to the bile ducts.

There is no established medical treatment for this chronic disease, that can ultimately lead to liver transplant or bile ducts cancer. We recently applied for and have received orphan drug designation for PSC with DUR-928.

We are pursuing PSC as our first oral indication based on DUR-928's activity in various animal models as well as the biomarkers and clinical chemistry changes we observed in the NASH patients in the Phase 1b study. DUR-928 for potentially enable changes to a number of clinical chemistry and biomarkers that are important in both NASH and PSC.

In PSC, the measurements of these affected DUR-928 can be evaluated using plasma samples rather than depending on liver biopsy, the potential exist to achieve a study in 2018. We recently conducted, in vivo drug-drug interaction space, in human volunteers with both orally administered and IV injected DUR-928.

The results demonstrate that DUR-928 did not have effect on the safety and pharmacokinetics of midazolam. Midazolam is a drug that's used for detecting drug-drug interactions via the enzyme 384. This enzyme is commonly associated with causing many clinically relevant drug-drug interactions.

And these data will be included in the upcoming INDs submitted to the FDA. The team is currently finalizing the PSC Phase II protocol by incorporating input from the FDA and with the plan to being dosing patients in this trial later this year. Now to the injectable program. We recently completed the Phase 1b kidney study in Australia with DUR-928.

This study was an open-label, single ascending dose, safety and pharmacokinetics study in patients with impaired kidney function. They were Stage III and Stage IV kidney disease patients, and matched control subjects.

The study was conducted in successive cohorts evaluating single-dose levels, first to low-dose and then high dose, which was 4x higher than the low-dose cohort. DUR-928 was administered by intramuscular injection. The low-dose cohort consisted of 6 kidney function impaired patients and 3 matched control subjects.

And the high-dose cohorts consisted of 5 kidney function impaired patients and 3 NASH controlled subjects. In this trial, DUR-928 was well tolerated among all subjects and the pharmacokinetic parameters between the kidney function impaired patients and the matched control subjects were comparable.

While we're still waiting for the biomarker data, the safety and pharmacokinetic data we generated with the primary goals of the study and are clearly beneficial to this injectable program. We are working closely with expert advisors to design Phase II trials for indications with an injectable formulation of DUR-928.

We expect to start dosing in our first injectable indication Phase II study either late this year or early in 2018. Finally, the topical program update. As previously disclosed, we completed an exploratory Phase 1b trial in psoriasis patients and 9 patients utilizing intralesional microinjections of DUR-928.

And promising activity was observed, which we believe, on further investigation. In the first half of 2017, we developed and evaluated a number of topical formulations of DUR-928.

And I think, it's interesting to notes this work was done under the guidance of the same team that worked with and some of the work they were doing in selecting the formulations. We've selected a couple of formulations from this work that we plan to use in the Phase II topical application psoriasis trial. This trial is slated to begin early in 2018.

We believe there's a large unmet need for a new topical drug for inflammatory and skin diseases such as psoriasis and atopic dermatitis. And as of the earlier trials, there is a strong opportunity for this trial to be read out next year as well. The next step for DUR-928 programs.

For the oral program, we're working to initiate a Phase II study of primary sclerosing cholangitis this year. For an injectable program, we're working to initiate Phase II study in acute organ injury late year or early 2018. And for the topical program, we are preparing for Phase II proof-of-concept study in psoriasis to begin early in 2018.

I'll now briefly update on our ORADUR programs. Beginning with our ORADUR-Methylphenidate program. ORADUR-Methylphenidate ER capsule is an investigational drug candidate for the treatment of attention deficit hyperactive disorder or ADHD. It has the potential for rapid onset of action and long duration with once a day dosing.

It utilizes a small capsule size when compared to the leading existing long-acting products that are on the market today. And it incorporates our order anti-tampering technology. pharma is our licensee in certain Asian and specific countries.

And they conducted a Phase III study in Taiwan with ORADUR-Methylphenidate ER that achieved the primary endpoint.

This Phase III study was a multi-center randomized double-blind placebo-controlled IIa crossover study designed to demonstrate the efficacy of safety of ORADUR-Methylphenidate in children and adolescents with ADHD that range from 6 to 18 years of age. There were 110 subjects enrolled in this study and 99 subjects completed the study.

The primary efficacy measured in the study was to demonstrate superiority of ORADUR-Methylphenidate over placebo using the score. The rating scale continues 26 questions that are classified under the 3 components of ADHD symptoms. Those are inattention, hyperactivity/impulsivity and oppositional defiant disorder.

For the primary efficacy endpoint, that ORADUR-Methylphenidate was superior to placebo and in a significant manner. There were no serious adverse events in this pivotal study. And Orient Pharma safety analysis indicates that the incidence of adverse events was generally consistent with other ADHD products.

ADHD is estimated to affect over 5 million children in the United States between the age of 3 and 17, which is approximately 9% of the population. And prevalence of ADHD in Taiwan has been reported to be approximately 5% to 7% among the schoolchildren.

It is estimated that over 50% of the children with ADHD in The United States are being treated with medication with stimulants such as or as first-line treatments. The U.S. sales of ADHD treatments were approximately $10.4 billion in 2016.

And the 2010 national survey on drug use and health estimates that 1.1 million Americans over the age of 12 abuse stimulants for and increased performance or this product all other market world, notably the U.S., Europe and Japan.

We intend to reach out with these Phase III data to potential development and commercialization partners from major worldwide markets. The last update is with regards to ER. We don't have much report on waiting to see what update pain therapeutics provide.

As a reminder, in March of 2017, Pain Therapeutics announced that it plans to resubmit the NDA after completing 2 additional studies of REMOXY ER based on guidance obtained in the meetings with the FDA. The 2 studies are clinical abuse potential study via the intranasal route and the nonclinical abuse potential study using household solvents.

Pain Therapeutics stated that it expect to complete the study by the end of the year, after which, it intends to have pre-NDA meeting with the FDA followed by resubmission of the REMOXY NDA. With that, we'd like to thank you for your time. And we'll now take any questions that you might have..

[Operator Instructions]. Our first question comes from the line of Adam Walsh..

Adam Walsh from Stifel here. So I had a couple of questions. First on ORADUR ADHD.

I'm just curious if we can remind us of the royalty rate coming from Orient, when you think they could file for approval, and if you think any royalties would be material?.

Yes. I think the royalties are actually small. It's in the single-digit range and the market is very small. So I don't think it's going to be a to think for us. But I think it's important to the standpoint of business development opportunities outside that market..

Absolutely, and that leads to my follow-up question there. Can you speak to a little bit about the prospects for deals in the U.S., Japan and Europe. I know it's early days. You just got the data, thinking about getting out there and talking to people.

I'm just curious where you think about the prospects for that is in terms of getting it done and then also any kind of thoughts on timing?.

I think the timing is -- I never like to project timing on business development, it's just impossible to do. I can tell you we have spoken to people previously, they always preclinical data. We show them these things that we call the green curve and all different what we expect the performance to be like and it's all well and good.

But it's the actual clinical data. So I think, having these data in hand, will definitely enhance the potential for deal, hard to say though. It's a huge market, as you know, and there seems to be an opportunity for another product out there. But we have to find the right partner. So I would give some time, I think..

Fair enough. And then one final one, if I could just one more in there. Jim, I get the question a lot about the evidence and you touched on a little bit in your prepared remarks. The evidence of the available for taking 928 into and I know that we talked in the past about ligation model.

Can you just remind us what you saw there in the animal studies that got you interested in the..

I'm happy. It was actually recommended to us by physician, who is at the University of Leuven, who is expert in field of lot of patient that region has quite a few.

And some others in the area, notably ones who recently got some clinical data actually had tested in this model and the way the model this works actually bile ducts of these rat and then they dose with DUR-928 excuse me with whatever they want to look for an effect.

And when other molecules have been tested, a lot of times the animals don't survive, and particularly, if the molecules have such a relationship to bile acid, you tend to get back up of that and it makes worse for the livers and worse for the animals, obviously.

And so miniscule doses that frequent -- in-frequent dosing average three days or so in order to get through the study. So we use this as no go for us. Basically, saying could we test the does that we thought would be applicable and then we actually went to a higher dose.

And we were quite -- and if it was good and we obviously look at potential indication, but if it wasn't, then we look elsewhere. And we were actually very surprising, very pleased with the results and the results for that even at the highest dose that we dosed all the animals survived.

And not only did they survive, but we saw improvements in liver function. They were making the better body temperatures, they had improved weight gain.

And I think, the most impressive thing was we saw the total bilirubin was down, we saw the indirect bilirubin was down, we saw the direct bilirubin down and they were all down statistically significantly.

And this directly correlates with what we saw in those NASH Phase 1b patients when we gave them a dose of We also saw they had such a significant drop in their bilirubin, with it being most notably in the higher and more severely ill patients. We think that fits really well.

You got a disease that is causing bile to back up, that is making it more difficult for the liver function in that regard. And you have something that can help relieve that.

And we know the genes that nitrate associated with it reducing the production and stop reduction the resorption of it and all the rest of it, all kind of comes to play and adequate anti-inflammatory components 70% of these patients more had inflammatory bowel disease.

We know 928 has always anti-inflammatory kind of components to it, so should be helpful there, which -- we know probably have leaky they probably have endotoxin issues. We know they've got there, we've seen paperwork there paper recently published today.

I think we've got a lot of reasons to believe that this will help these patients and naturally occurring on top of that, that therapeutic index. So we're really excited about it and potential to help patients..

And the next question comes from the line of François Brisebois..

So just wanted to touch on just drug-drug interaction. I know for you guys, 928, especially, if you're thinking back on therapies. So far, the safety has been great.

But could you just give us a little bit more color on, again, how many people in this trial and is this understood that looking at this specific enzyme is usually acceptable for DDI or going forward?.

Yes. We actually we use that protocol with the FDA. So that was important for us and it should be [indiscernible]..

The reason is we are looking at this particular enzyme, in vitro DDI studies. Apparently, this one is the 1, its worthwhile to look at. The other ones are really 928 doesn't affect that much. That's why we thought that, in particular, these is the most important enzyme involved in drug-drug interactions.

So we thought we just, as well, to move forward with Phase I trial and then after discussing with FDA. So the trial actually include helping human subject, which has more than enough for the meaningful. And results came out was very clear, very obvious that 928 does not affect the safety and PK of midazolam, which is very clean for that.

And so after we basically that study was also we discussed with a number of consultants. And that the design of the study includes both orally administered as well as IV infused of DUR-928. Therefore, the program actually covers both of our overall program as well as injectable program..

And then just follow on that. Should we be expecting an IND filing this quarter or is this -- and then I know you're looking -- I'm just trying to get a better idea of the time line here. I think I've got it right.

But just if you can touch on the injectable again, the oral and when you expect to have this IND filing?.

We already have -- we have actually -- I'm working a lot to detail, but we have open IND are ready. And we'll have 2 more INDs, I hope, open by the end of the year. 1 will be for injectable, 1 will be for oral and 1 will be for topical. So we will have 3 INDs at the end of the day.

And it's more important now about using the INDs to interact with the FDA with regard to what kind of structure and what kind of protocol we want for the Phase II trials for these 3 indications or 3 programs. It's better to kind of think about 3 separate programs, I think, oral, topical and injectable.

And so we will be giving more clarity -- I think, what we'll do is, I do not know, Matt, when we announce the, I mean, the....

I think we finished work with our advisers outline of the protocol, then we'll feel more comfortable giving more color have to change it and of course you'll get more..

We started this trial, I think, with x number of patients, this is the structure and that kind of thing..

Okay. That's make a lot of sense.

And then in terms of your remarks, I know hands a lot you've got involved here, but should we -- when you say it's completed by fourth quarter '17, here the additional testing, should we expecting data by year-end or did you mean completing the testing and then probably data early '18?.

I have no idea. That's -- I just kind of -- we're all spectators on this. And so we're -- they have expect to complete it, and I think, they will. I mean, they have got very professional group going after. So I assumed that they will complete these study by the end of this year.

And they said they want to have pre-NDA meeting, I don't know when that we'll occur, but I would assume early next year, then sometime after data depending on input they got from the FDA. So it's -- I think we have to just into them when they do their call, which is going to be pretty soon I would think..

Great. And then lastly, probably more that. The R&D had a little jump here $9 million.

Should we be expecting that to kind of $9 million average to going or more 7.5, which has been in the first quarter?.

Well, we don't usually give granular guidance. However, let me at a high level, make a couple of comments. Jim mentioned that we finished enrolling the PERSIST trial ahead of schedule. So that would have been in the second quarter. And so that drives up the expense.

And I guess, a little anecdote is we wanted to actually enrolling 294 patients in part 2 of PERSIST, we'd originally targeted 264. But the enrollment ramped very nicely at the end. And we didn't want to turn away any surgeons or patients who had gone those screening, and then say, you're not on the trial, sorry.

And we also thought in the margin, it's helpful you get more safety data present to FDA and we submit NDA and probably helps with the p value. But each patient does cost you a little bit more. So there was a long saying that number includes [indiscernible] a lot money for the Phase III, which is now in the phase where you're not enrolling patients.

You're cleaning up the files of each patient and then we're doing the data analysis of it. So at least the POSIMIR piece will go down. And then probably late this year, next year has the Phase II studies for 928 kick in, then the clinical trial expenses for those who go up somewhat.

I didn't give you a number, is that directionally helpful?.

Our next question comes from the line of Ed..

Just wanted to start off with POSIMIR. And just I know kind of working with you and sort of planning out the whole commercial strategy. But if you could go over that again, just outline, timelines and how you see that rolling out that? And then I got couple of follow-ups as well..

I wouldn't presume to outline and I don't think they want to their commercial strategy. But I can give you a sense of timing of the whole thing. We will have the data in the fourth quarter this year. And assuming those data are good, we all expect there will be an hope they will be, then we will look to resubmit the NDA in the first quarter of 2018.

After that resubmission, there's a -- because it's a resubmission, there's a 6-month PDUFA time line. So for whenever we submit it, you can add 6 months on. And our objective and Sandoz and their team's objective is to be able to launch the product as quickly as possible after approval.

So we would have clinical -- commercial in place and everything ready to rock and roll, the labeling and everything. So you just kind of back off from whatever date might be and you start doing all the work and then they do all the prep work for the leaders and with all the work they do on committees and everything else and the hospital.

They got a machine and they can put that in to their place as I said they are in about 95% of the hospitals, they've got, I think, over $10 million in sales. So they know what they're doing..

And on -- with the data that you released from your licensee at Korea today and the very large competitor market as you well know.

I'm just wondering if you could highlight for us what you see as a critical differentiating attributes and what those might some from the perspective of any likely potential commercial partners?.

Yes, I think -- appreciate the question. I think Orient Pharma has been great partners, by the way. There in Taiwan a very strong company and it's been a pleasure working with them. So we want to thank them and all the work they've done in this regard.

And their part of the relationship that is very helpful for us and for our shareholders is that we are the right for this product, most of the rest of the world out of Southeast Asia. And so what are the advantages of this technology. I think the advantageous as far as first off, that it does have characteristics order.

It fits everything that we hope for and dream out one day getting REMOXY out there and that is, I think, impossible because it's it doesn't mix with alcohol and cannot readily. You can't smoke it or inject it and those kind of things to get out.

So makes it much more difficult to abuse and the other thing that this nice piece of its relatively comparatively to other methylphenidate products out there. It's a relatively small capsule. And that's important because for children so you got small capsules which will be easier to swallow. So those are the kind of things.

And then when I look at the duration, I think, we play in the right game there as well as being kind of the right direction. The duration is being you want to be pay attention to school, home after school, you want to be able to drop of such that can go to bed and go to nice sleep.

And so we're hoping that we have those kind of components for the right duration, the right size and then some of these characteristics that can help us our new partner, whoever might be to be able to compete in that space..

Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for closing comments..

Okay. Well, our way of closing comment, we just like to thank you for participating. And as always, if you have further questions, do please feel free to reach out to management. We'll be happy to challenge you some more. Thank you very much..

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