Matthew Hogan - Chief Financial Officer James Brown - President and Chief Executive Officer.

Francois Brisebois - Laidlaw & Company Neil Gagnon - Stifel, Nicolaus & Co., Inc. Ed Arce - H.C. Wainwright & Co. Len Yaffe - StockDoc Partners Geoffrey de Sibert - KB Advisers.

Good afternoon. Greetings and welcome to the DURECT Corporation Third Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Matt Hogan, CFO. Please go ahead, sir..

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 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 briefly to our financials. Total revenue was $20.7 million in the third quarter of 2017, compared to $3.7 million in the third quarter last year. Revenue from our R&D collaborations was $5.6 million in the third quarter 2017, compared to $0.4 million in the third quarter 2016.

I should note that a large portion of that increase relates to the recognition of deferred revenue, from upfront fees already received by the Company. Having said that, even if you takeout the deferred revenue, collaborative revenue increased by about $0.7 million during the quarter compared to the third quarter last year.

Product revenue largely from the sale of ALZET pumps and LACTEL Polymers was $2.6 million in the third quarter 2017 as compared to $3.4 million in the third quarter 2016. Almost half of that difference related to some excipient sales in the third quarter 2016 and there were no similar sales in the third quarter 2017.

The ALZET and LACTEL product lines continue to be strongly cash flow positive for us. We had a new line item in revenue this quarter, which was recording the $12.5 million upfront fee received from Indivior in connection with a patent agreement signed during the third quarter of 2017, and Jim Brown will expand on that transaction later.

Cost of product sales was $3.1 million in the third quarter 2017. This was impacted by our taking a charge of around $2 million related to our excipients. We took this charge given the POSIMIR Phase III results, but you know we don't get rid of any of this material.

So if later we're able to sell these excipients then at that time we have revenue, but no associated cost of goods sold. R&D expense was $8.4 million in the third quarter 2017, which compares to $6.8 million in the third quarter 2016 driven primarily by a large increase in POSIMIR expenses as we run the PERSIST trial.

SG&A expenses were $3.1 million in the third quarter 2017 compared to $3 million in the third quarter 2016. And then due to that Indivior transaction, we reported net income of $6.1 million in the third quarter 2017 as compared to a net loss of $8.8 million in the third quarter 2016.

At September 30, we had cash and investments of $41.8 million, which compares to $33.6 million at June 30, 2017 and $25.2 million at December 31, 2016. With that, let me turn it over to Jim..

Thank you, Matt, and hello, everyone. We recently announced topline results from the Phase III clinical trial known as PERSIST. POSIMIR did not meet its primary efficiency endpoint in this trial, which was reduction in pain on movement, after the first 48 hours after surgery compared to bupivacaine as our active competitor.

While we did see trends in favor of POSIMIR they were not statistically significant. We are very surprised and disappointed by these results and we are working closely with our partner Sandoz to more thoroughly review the data from the trial and to determine next steps.

Outside of POSIMIR, DURECT has a strong pipeline of product capabilities and candidates, including two later stage programs. RBP-7000 and REMOXY ER each of which could be approved in 2018.

We also have a balance sheet of over $40 million in the bank, two product lines ALZET and LACTEL that generate approximately $7 million in annual gross profit, and of course, our flagship program DUR-928 that is initiating the first of multiple Phase II studies. DUR-928 is lead product candidate for epigenetic regulator program.

It is an endogenous small molecule, new chemical entity. We consider DUR-928 a member of new class of intracellular stress-hormones.

It may have broad applicability and chronic metabolic diseases and chronic liver disease such as non-alcoholic stale hepatitis and primary sclerosing cholangitis or PSC, also in acute organ injuries involving the liver and the kidney and in inflammatory skin disorders, such as psoriasis and atopic dermatitis.

We're developing DUR-928 for three different roots of administration. Oral for chronic metabolic or other chronic liver disorders, injection for acute organ injury and topical for localized dermatologic conditions.

We recently disclosed a new scientific findings for DUR-928, at the most recent American Association for the Study of Liver Disease or AASLD meeting in Washington DC, the poster was presented by Dr.

Shunlin Ren of Virginia Commonwealth University and the McGuire VA Medical Center, which disclosed – and which included newly disclosed data from animal studies with DUR-928 and endotoxin and drug induced acute organ injuries.

One of these new disclosures was preliminary evidence of the effect of DUR-928 in stabilizing mitochondrial membranes, which is an important factor in maintaining cell viability and prevention of cell death. Previously we have reported on DUR-928 activity in an acute animal model where multi-organ injury was caused by endotoxin or lipopolysaccharide.

In this poster, similar results were observed that is approximately 90% survival with DUR-928 versus about 10% survival on placebo. When the multi-organ injury was induced by acetaminophen injection.

This poster demonstrated the beneficial pharmacologic effects of DUR-928 against both endotoxin and drug induced acute organ injuries, including in the liver, the kidney and the lungs. This poster is available at durect.com under science and technology papers. Now to the development status of DUR-928. DURECT now has two open IND’s for DUR-928.

One for all use in the study of chronic conditions and one for injectable use in the state of acute organ injury. We are initiating our first Phase II trial for DUR-928. This study will investigate oral delivery of DUR-928 in primary sclerosing cholangitis or PSC. We have received an orphan drug designation for DUR-928 to treat patients with PSC.

The protocol has been reviewed by the FDA, the IND is open and we are working with the clinical sites on the objective to begin patient dosing later this quarter. PSC is a chronic liver disease characterized by a progression of cholestasis that is decreasing in bio-flow. With inflammation and fibrosis of the bile ducts.

Over time PSC leads to liver failure, infections and tumors of the bile duct or liver ultimately requiring liver transplant. Additionally, approximately 75% to 90% of PSC patients have concomitant inflammatory bowel disease.

We are pursuing PSC as our first chronic oral study from DUR-928 because we believe it has the potential to treat inflammatory and metabolic liver disease from multiple causes and that this PSC trial may allow us to see a signal in patients at one-month without having to subject these patients to liver biopsy.

We believe that DUR-928 has strong anti-inflammatory and anti-fibrotic activities that will be important and potentially modulating PSC. Liver inflammation of fibrosis can result from many causes and PSC is a disease in which we may be able to more rapidly gain a signal of the potential drug effect DUR-928.

PSC is also a disease in which we may be able to see an improvement of a parasite function through the potential reduction in bilirubin as well as a reduction in cell death through other biomarkers such as the cytokeratin-18 both full length and cleaved, which may be relevant to other chronic liver diseases such as NASH.

Various animal models provide some of the rationale for the Study of DUR-928 in PSC. In particular the rat bile duct ligation model. We're DUR-928 treatment significantly reduced total direct and indirect bilirubin levels in these animals that had their bile duct ligated.

Other animal models showed that DUR-928 significantly reduced the endotoxin toxicity that significantly inhibited inflammation fibrosis and even a parasite, nodule formation. Some of the study results were presented in a poster at the AASLD meeting in March of this year.

It is DURECT hope that DUR-928 will be able to positively impact the clinical outcome of PSC patients. This believe is based on the biochemical changes demonstrated by DUR-928 in studies conducted to-date, including supported data from our single dose NASH study and patient.

These data were presented in a poster earlier this year the EASL meeting in Amsterdam, where we reported the changes in biomarkers affected by a single dose with DUR-928 in both cirrhotic and non-cirrhotic NASH patients.

In this poster, we reported the ability of DUR-928 to do what to our knowledge no molecule has been able to do to date, and that is reducing bilirubin approximately 30% after a single dose in NASH patients. Additionally, DUR-928 significantly reduced inflammatory biomarkers, full length CK-18 by up to 41% and Cleaved CK-18 by up to 47%.

These two are markers of cell death. All of this after just a single dose in NASH patients. Interestingly, the more severe the liver damage, the greater the effect DUR-928 seem to have. These results were statistically significant and were demonstrated within 24 hours of dosing.

Our Phase II PSC trial will be a randomized open-label study with two cohorts, a low dose group and a high dose group. This study will involve up to 40 patients who receive oral doses of DUR-928 for four weeks with a follow-up for an additional four weeks.

The objectives of this study include safety, pharmacokinetics and measuring the percent change from baseline of serum alkaline phosphatase and other biomarkers.

We believe that as an open-label study, it will be easier to recruit patients to participate in this trial and we will have an ongoing opportunity to review the data throughout the duration of the study. We are working with the patient organization PSC partners to help create awareness for the study.

There is a lot of excitement from the patient community about the possibility of using an endogenous compound which to data has shown a good safety profile to help treat this disease of great unmet medical needs.

It is our hope that the data generated from this trial will be relevant not only to PSC, but also to a number of other liver conditions including NASH. I am going to now move on to the DUR-928 injectable program. We also have an open IND for the initial Phase II trial with the injectable formulation of DUR-928.

We are pursuing DUR-928 potential on the treatment of acute organ injury with because of the effects we have observed in various animal models of acute injury, including reduce mortality, improved histology across multiple organs, reduced inflammatory markers, and improved organ function markers.

DUR-928 has demonstrated the ability to protect animals from chemical, biological, and ischemia/reperfusion damage. Another strong indicator of DUR-928s potential to aid patients with acute organ injury as they reduced bilirubin, inflammatory and cell death markers observed in the NASH patients after single dose.

For example, bilirubin levels are very important in calculating a liver patients model for end stage liver disease or MELD score. The MELD score system for assessing is used for assessing the severity of end stage liver disease.

And the MELD score is calculated using the serum bilirubin concentration, the serum creatinine concentration, and the prothrombin time of the patients.

We are pursuing the use of DUR-928 in acute organ injuries because of the lifesaving potential and life threatening situations and the substantial unmet medical need, because there is less or in some cases no competition, because of the short study durations and the short-term clinical outcome, and for the potential regulatory advantages.

We are currently finalizing the protocol based on detailed input received from our expert advisors during the recent AASLD meeting in Washington DC. This first study will be conducted in moderate and then severe acute liver function impaired patient. A number of these patients may also have acute kidney function impairment.

Our liver and kidney specialist and clinical advisors have informed us that often these patients have concomitant liver and kidney disease. This study will focus on gathering important pharmacokinetic, safety, and pharmacodynamic data.

We anticipating dosing the first patient in this trial early in 2018 and we will announce the details of the study once a protocol is finalized and the study is being initiated. Finally, to our topical DUR-928 administration program.

Based on promising results from a previously conducted exploratory Phase Ib trial in psoriasis patients where we utilized intralesional injections of DUR-928. We have developed topical formulations of DUR-928 that have recently completed Good Laboratory Practice skin irritation and sensitization studies in two species.

We are actively working with expert advisors to finalize our protocol for a Phase II proof-of-concept study with topically applied DUR-928. We’ve had pre-IND interactions with the FDA and we are incorporating the FDAs comments into our upcoming IND.

We expect to initiate this study in the first half of 2018 and we believe there is a large market opportunity for new topical drugs and inflammatory skin diseases such as psoriasis and atopic dermatitis. I'm now going to move to RBP-7000. RBP-7000 is a new opportunity for director shareholders that is in fact our closest to market.

RBP-7000 product opportunity for DURECT is a result of a patent deal with Indivior. Indivior PLC was spun out of Reckitt Benckiser in December of 2014. They’re traded on the London Stock Exchange.

Indivior has a current market cap of approximately $3.6 billion and they reported revenues in 2016 of approximately $1.1 billion and adjusted net profit of around $254 million. RBP-7000 is Indivior’s investigational once monthly injectable risperidone product candidate for the treatment of schizophrenia.

Indivior announced they had submitted the NDA for RBP-7000 on September 28 of this year. Once the NDA is accepted that would put the PDUFA date sometime in August of 2018. This NDA submission includes the result from the pivotal Phase III study assessing the efficacy and safety of RBP-7000 and an open label long-term safety study.

In the pivotal randomized double blind placebo controlled study RBP-7000 demonstrates a statically clinical improvement compared to placebo based on changes in mean positive/negative syndrome scale and clinical global impressions severity of illness scores at eight weeks.

They reported positive topline results from a Phase III safety and efficacy trial in May of 2015 that involved 354 patients. And in August of 2016 they held a pre-IND meeting that reached and reached agreement with the FDA on opposed to stability testing timelines and the NDA submission strategy.

And then in October 16, they locked the database on the Phase III long-term safety extension trial, which involved approximately 500 patients.

A summary of the Phase III in long-term safety data for RBP-7000 include once a month dosing, rapid onset of action, no loading dose with initiation of treatment, no supplemental dosing during treatment, demonstrated clinical efficacy and safety in schizophrenia was overall well tolerated and a measurable quality of life and medication satisfaction benefit scene for RBP-7000.

As a result of this deal with Indivior DURECT received an upfront non-refundable payment of $12.5 million with a potential $5 million milestone payment upon NDA approval. Indivior will also make quarterly earnout payments based on a single-digit percentage of U.S. products sales.

The expiration date of the patents covered by this agreement extend at least until 2026. In March of 2017 Indivior stated that they were raising their guidance for the potential peak net revenues of RBP-7000 if approved to a range of $200 million to $300 million, on the assumption that no material changes occur in the U.S. market circumstance.

The last product I'll update today is on REMOXY ER. Based on our order technology, the investigational drug REMOXY ER is a unique long-acting formulation of oxycodone designed to be dose twice a day and to discourage common methods of tampering associated with opioid misuse and abuse.

In March 2017, Pain Therapeutics announced that they plan to resubmit the REMOXY ER NDA after completing two additional studies based on guidance obtained in a meeting with the FDA.

These two studies are clinical abuse potential study that involves intranasal, the intranasal route of abuse and a non-clinical abuse potential study using household solvent.

Pain Therapeutics stated that they expect to complete these studies by year-end, after which they intend to have a pre-NDA meeting with the FDA followed by resubmission of the REMOXY ER NDA. Earlier this week, Pain Therapeutics announced they had a pre-NDA guidance meeting with the FDA that is now set up for October 14, 2017.

And they're planning an NDA resubmission for the first quarter of 2018. The epidemic of opioid abuse is a national crisis that has grown dramatically these past 10 years. We see reported on 60 minutes we hear about it from Congress and the White House.

Yet the need for these agents to treat patient’s pain remains, the market for produce oxycodone product remains about $2 billion per year. REMOXY ER has the potential to provide multiple means a tamper resistant, plus a true twice a day dosing and the only five milligram doses strength to this market.

A Pain Therapeutics were successful in resubmitting the NDA in the first quarter of 2018 and the NDA would have a six-month review and could potentially gain approval in 2018. Perhaps REMOXY time has finally come and will be able to fulfill some of its original promise.

As a reminder, DURECT would receive a small milestone on approval and a royalty on sales that range from 6% to 11.5%. In summary, the POSIMIR persist trial results are disappointment.

However, the other products in DURECT pipeline made substantial progress this quarter, including adding an NDA stage product that could earn us relatively near-term future income. With the RBP-7000 deal, we were able to take a non-core patent family and leapfrog into a potential NDA that could be approved three quarters from now.

We have a good cash position to late state products in RBP-7000 REMOXY ER that could gain NDA approval in 2018 each of which could afford differentiating features that could benefit patients and the healthcare system in large and important markets.

Lastly, we have the good fortune of DUR-928 and endogenous intracellular stress-hormone that has demonstrated profound effects in various animal models and in single doses in human patients. All of this while seeming to offer a wide safety margin.

We have two open IND’s and we are initiating the PSC Phase II trial with plans to being dosing this quarter. We also look for to starting dosing an acute organ injury study early in 2018 and the topical psoriasis Phase II study afterwards.

So during 2018 DURECT has the potential to have two NDAs approved and could have data from three different Phase II studies with DUR-928. With that, we'd like to take any questions you might have..

Thank you. At this time, we will be conducting the question-and-answer session. [Operator Instructions] First question is from Francois Brisebois, Laidlaw. Please go ahead..

Hey, gentlemen, thanks for taking the question.

I was just wondering how much color, can you guys give us on the trend of the POSIMIR data?.

It's just a trend right now and we don't want to break it down much beyond that because we're still working with Sandoz. Our teams are working closely together and they will be for a number of weeks going forward. So we're still getting all the data in from the biostatisticians and looking at different ways of cutting the data.

But that being said, there's a trend, but it's not statistically significant so..

Okay. All right. Thank you, now understood. And then in terms of the importance of the DUR-928 stabilization of the mitochondrial membrane data AASLD.

Is there what specific about – what specifically about that? Is that different from meaning had been found before or can you elaborate more on that?.

We've hinted at it before Dr. Ren has yet to publish a paper on that and we're looking forward to that. These are kind of the first peek into this function of the molecule.

We do know that the molecule, the backbone of the molecule itself is made in association with the mitochondria and the sulphur is put on into cytoplasm and then it goes to the nuclear.

So it is seemingly produced at a time of mitochondrial stress and then has a cascade of activity that occurs in the cell to help protect the mitochondria and that's it that's a very important feature in so many different disease states.

I can't tell you I mean that's why we look at it, that's what we're seeing I think effects from chemical damage, from biologic damage, from ischemic damage that kind of thing.

There are a lot of things going on that that can influence and negatively impact mitochondrial including kind of chronic late stage disease states that occur, where adipose tissue is created when you lose mitochondria and in certain cells and there's a lot of things going on with that, but I think it's very exciting.

The science is obviously cutting edge, but it's just hints to the breath of what DUR-928 might be able to do..

Okay, great.

And then lastly just thoughts on AASLD was just a week ago, any thoughts that they could relate to DUR-928 other than these findings here, maybe in terms of the MRI PDFF, just versus biopsy and Phase II, and any chatter that at one point biopsies might not be necessary in Phase III or anything that you took out of AASLD?.

There's a lot of stuff in the air around liver and chronic disease in general and I think that's going to be the case for a while because it's territory has never been traversed and so we're trying to figure out how to get from Point A to Point B all the companies are. And so I think that's part of it.

What we know about DUR-928 is that it seems to touch multiple places where you want to. It has an influence on inflammation and all the problems that are caused there. It has a potential benefit on preventing cell death and it has the same on modulating functionality and metabolism. And those are the areas where you want.

If you look at anybody, any of the companies out there they're trying to oftentimes put together two or three molecules to try and control inflammation, prevent cell death and fibrosis and improve the functionality of the liver and DUR-928 brings all of those things in one package, and it’s a naturally occurring endogenous molecule, small molecule, it does that.

So that I think puts us in a very good position. We're really excited about what we might see from this PSC trial. If we can go into those PSC patients and replicate some of the things we've seen in these NASH patients that would be dramatic. I think that maybe a game changer for the space quite frankly.

And one of the things that I briefly stated, but it maybe is worth reiterating is the patients who had the cirrhosis now the worst liver disease seem to have even greater impact from being dose with DUR-928.

And if that holds up that's going to be really important because some of the leading molecules out there right now kind of shrink away in the face of more fibrosis and a more damaged liver and we may actually stand up to the fight..

Interesting. And then lastly you just touched on PSC, so just quickly can you remind us why you can possibly see a month out of activity.

Why is it so quick with PSC versus PBC here in NASH?.

Well, I think it's more not so much PSC as it is the molecule itself. We see a dramatic change in these NASH patients with a single dose of DUR-928. We saw something no one has ever seen before and that is bilirubin down 30% from a single dose, that's just not seen.

Typically if bilirubin improved, it's improved over months and making the liver better and it functions better. So we're seeing up to almost 0.5 of the drop in cytokeratine-18, that's takes months for other molecules to do.

And so we think the changes that we're seeing with DUR-928 in the NASH patients if we see similar kind of changes in the PSC patients, it may only take a month to get that readout.

And so that will be enough to allow us then to focus to the next kind of a trial and obviously, I think it's directly through or at least a semi directly through to what may happen in NASH as well..

Great. That's it for me. Thank you very much..

The next question is from Adam Walsh with Stifel. Please go ahead..

Hey guys. It’s Neil Gagnon on for Adam. I just was wondering if you guys can provide any further color on the DUR-928 trials overall which of the oral injectable topical data we can expect first.

Just any further color that’s you guys can provide at this point?.

Well, we've only given the greatest detail on the PSC trial, which is the oral trial. The trials were starting to work right now. We hope to dose our first patients this quarter.

That's going to be an open-label study, so we'll have a chance there then to have a look and understand how the drug is doing what it's doing, so we may get a sense to be able to read out something say in the middle of next year or something depending on the number of patients we enroll.

And have a sense of how the molecules doing if the molecule does something similar to what we have seen in the NASH patients, and I think we're going to be really pleased about where we are with that disease date because then we'll see some modulation if it hold the same of bilirubin which speaks to the functionality of these inflammatory markers just speaks to the reaction inflammation potentially.

And then, of course, that markers which would being fewer cells are dying and so those are the things that we will be looking at and hoping to get readouts as the trial progresses. That's really important.

We haven't given greater detail on the acute injectable study yet, we will in the near future, and once we do then we'll give a lot more detail on how that might readout and the like, but the goal is to also have data from that next year.

And then lastly, the psoriasis trial which will start third in line, but that trial is actually each patient serves as their own control.

It will be a placebo-controlled trial, but because of that I don't know – we haven’t finalized the exact number of patients yet, but there will be a smaller number that one can actually enroll that and get data next year as well, so that's our goal. .

Okay. Great. Thank you, guys. Appreciate it..

You have a question from Ed Arce, H.C. Wainwright & Co. Please go ahead, sir..

Great. Thanks for taking my questions guys. I have a few.

First, just on POSIMIR, when do you expect to conclude your announce – you and Sandoz and when would you expect to announce any sort of final decision on that program?.

To answer that one first, I don't know yet. We're working with them and a decision will be made after all the data have been analyzed. So it's going to take some time. I think they're turning over every rock as we are to look and see what can be learned, what can be gained, what can one do and so.

I don't have much more to say other than we're working on it. But it's a matter of weeks, not days that's for sure..

Okay, understood. But then turning to your PSC program, I appreciate giving us some more details around the protocols, wondering if you could let us know – you did mention that results could come in, depending on the number of patients we enroll sometime perhaps in the middle of next year.

How many patients would you expect to enroll in each of those two treatment cohorts?.

We’re planning on approximately 40 patients, so that include about 20 per group and we won’t be reporting out with 1Z, 2Z kind of things. I think if we have enough patients that we're starting to see something that we’ll talk about it. So that's why I'm kind of guessing midyear, it really does depend.

I think it's helpful that we're working with the patient groups. This is a great – these are just great organizations and really wonderful people working. I mean it's such a tough disease because they go along living their lives with the shortcomings and all the problems that they have, which is itchiness and other problems that they have.

And they could possibly at anytime in the future get an understanding that they have cancer of the bile duct, or cancer of the liver, which is a horrible, horrible circumstances and going forward. So they are very well read. They know our literature very well. They know it’s an endogenous molecule.

They have seen what appears to be a reasonable safety index. And even we've gone as far as to look at the STAM data.

It’s an example where we showed fewer precancerous nodules in that that was presented at the AASLD meeting in March, and they’re looking at that and they're making a leap forward obviously, but hoping that maybe this could help them long-term as well.

So certainly reducing inflammation and preventing more cells from dying and having the livers function better, would help these patients. So we're hoping for the best to be able to make a difference in their lives because nobody deserves to be saddled with that..

Yes, of course. Thanks Jim for that. Two more if I may, on this PSC, you mentioned a couple times, there is really remarkable results of bilirubin reductions with the compound of about 30%, just a single dose.

Given that results, do you have any sense for what you would expect the treatment effect after a month, a treatment on the primary end point here of ALP and perhaps any other enzymes that you are looking at?.

It’s impossible to say for sure. I can tell you we did this bile duct ligation study where other molecules that have been tested in PSC were tested in the literatures out there and they were lethal in a lot of these animals that had their bile ducts tied off. We weren't.

The animals not only survived, they had improvement in bodyweight gain and body temperature, which means livers are making ATP and most impressively and statistically significant drop in total direct and indirect bilirubin, which means that it's working and then we replicated that bilirubin effect in the patients when we dosed the NASH patients and the more severely cirrhotic patients had the greater response.

And it was the same on the cell death markers. If you look at alkaline phosphatase, that's out there because liver cells are dying and they're dumping that enzyme into the plasma. Well, dropping CK-18 is going to track right with those enzymes. Those liver enzymes will be going up and down based on cell death as will the CK-18.

So I'm certainly – we’re hopeful that we'll see some of these changes sooner that rather than later, but we haven't not yet, so we don't know..

Okay. Final question then on your tropical program. I understand – that one doesn't yet have an IND open yet, but you did mention some details around that.

Is there anything further you could share at this point in regards with the protocol of that study?.

Just to give you – we’re still working on it. But the concept is to test one or two formulations. We’re still working through that. And to test them and each patient serves as their own control.

So if I were such a patient, I must add a lesion behind my knees or my forearm or wherever, I would use one side of my body, the right side would get active and the left side with placebo or vice versa and then we can track that for some given duration and that's still to be defined.

So we are working on the details that each patient serves as their own control. Vehicle versus active and should be a reasonably quick readout. And just so people are knowing that there is a thought process behind that, should we get a positive outcome.

There's been a lot of interest from potential partners in this area, so our concept here would be to actually put a partnership in places around the development of this product..

Okay, great. Thanks a lot..

The next question is from Len Yaffe with StockDoc Partners. Please go ahead..

Thank you very much. I had a couple of questions.

The first is the data coming out of the meetings seems to suggest increasingly that ultimate NASH therapy [indiscernible]?.

Yes. It's a tough connection, but I believe I heard the right. And the question was a lot of people looking at combination therapies FSR HEC inhibitors, anti-inflammatory and modulators of the metabolism and the like.

And we do have the great fortune that DUR-928 does influence inflammation and self survival and metabolism, but there's no reason that DUR-928 couldn't be used in combination with some of these therapies to show them up as it were.

And I would eventually guess that if we see the kind of results in the PSC patients that we've seen in the NASH patients that I think we're going to be in a very strong position. And if I were in a large company out there, I can name the three or four or five that are out there today. We all know who they are.

I think you need DUR-928 maybe to help your program to be successful because there are been more disappointments and not in these chronic studies. When you look back after a year, they reduce fibrosis year-one, they don't reduce it for year-two or they have this, they have that. And so it's not as clear cut.

They're starting to shy away in some cases from more severely ill patients where you can really make a difference and it is the less severely ill, there's a lot of people walking around the United States today. There's more and more seen of what is NASH versus ASH.

If you were to do a bell shaped curve of this population, how many people are just pure straight up, too many calories coming in metabolic challenges NASH patients, how many are straight up just alcoholic hepatitis then people with a hard liver that kind of thing.

You could cut in both ends of that bell shaped curve and you probably only have 30% of the population or so. I think the remainder 60%, 70% are a combination of alcohol and eating that's kind of your average American, who's in that circumstance right, and that's where we do think DUR-928 can make a big difference..

Yes. I'll be clear now. The other thing was presenting data that suggested that the various drugs that have been advancing to clinical studies the [indiscernible] seeing which is consistent – what you are seeing is only in 50% of the population, so single drug therapy doesn't seem like it's going to succeed.

The other question I had is previously you talked about in the injectable formulation and not only looking at potential liver injury, but also by itself acute kidney injury, and I was just wondering if that was still a program you – we're expecting to pursue, it seems like from my knowledge there's no drug out there today to treat acute injury for kidneys, the last one failed from Abbott a few years ago and so it's a large underserved market, and I was just wondering what your plans were in acute kidney injury itself without concomitant liver injury?.

We absolutely love acute kidney injury as an indication for DUR-928 and we are evaluating that along with others. What we're doing with this next round of Phase II trial is getting a sense of where we can have an impact, that's why we selected PSC.

We hope that can help PSC patients absolutely, but there's a read through for other multiple indications. And it's the same for this first acute injectable study we're going to do.

There’s absolutely an opportunity to help the patients we're talking about, but there's a read through to other organs that could be damaged including kidney and lung and other places where we're going to get a sense.

And so we really do like kidney and at some point in time, we will be testing an AKI as a standalone, but we may learn a lot more between then and now as well..

And then on the topical formulation, you mentioned in 2018 I think starting a study on psoriasis.

Is there also a potential efficacy here in atopic dermatitis or eczema, which is also very large underserved market?.

We think there is just given the anti-inflammatory and kind of reduced cell death marker. We think there's a direct read through there. They’re just a little bit more variability in those patients.

And so enrollment is a little bit slower typically and so we're looking at psoriasis, because it’s an easier proof-of-concept study and our idea here is to demonstrate proof-of-concept and then potentially put a partnership in place and then that partner would pursue it for atopic and psoriasis..

Great.

And then it may actually turnout significantly to your benefit to do PSC now and do NASH at a later time because I know as an earlier caller alluded to, it seems like the liver form panel group that's come together to come up with a group of biomarkers or enhanced liver function, tests that they working on to avoid the need for biopsy both for initial diagnosis and for monitoring progress, which will limit probably the applicability of the drug.

They are probably about three years away from some sort of non-biopsy panel and that sounds like a lot of time when you'll be more involved in this. So it may actually say the significant difficulty in setting up trials and getting them going..

Yes, it depends and it depends, I don't disagree with any of the thing you just said, but we might be there sooner than three years that's for sure. And if we have a partnership in place, we maybe in there any year from now, so still up in the air..

Great. Thank you very much..

Okay, thanks..

We have a question from Geoffrey de Sibert, KB Advisers. Please go ahead..

Thanks for taking my call. I’ve got four questions and I'm happy to get back in the queue if you want to give other people a chance. First of all and I guess this is a question for Matt.

Could you give us in light of the 41 odd million cash you record at the end of the quarter, could you give us some sense of what you expect cash burn to be going forward in the next few quarters, especially in light of the various DUR-928 trials you're looking at?.

Well, historically we've been a little bit reluctant to give a whole lot of future guidance. So let me just speak at a higher level. We have recently been spending a lot of money on POSIMIR conducting the Phase III trial, which is now behind us.

So we're going to scrutinize future investment if any in that category, but certainly it would be lower than we've been recently experiencing because of the PERSIST trial.

At the same time as you allude, we will be conducting more trials with DUR-928, but these are relatively modest sized studies as Jim mentioned PSC up to 40 patients and it's open-label and it's a month.

That's a very different animal than a 300 patient post-surgical pain trial, so each of those studies, the outside expenses individually is pre-modest quite frankly. So I think that our burn rate will – underlying burn rate will actually moderate net-net.

Beyond that, I guess I'm hesitant to put hard numbers around given all the uncertainty we have around where we're going with POSIMIR and things like that..

All right. Well thank you. And if I can just follow-up on that specific point, so if we were to presume that there was no future for POSIMIR and perhaps some adjustment in headcount, notwithstanding the DUR-928 trials you've described, we could probably look for a lower trend in quarterly cash burn..

Correct, yes..

All right.

My second question is just a quick detail one, any stock sales under your ATM sense September 30? I know you'll be releasing your 10-Q, but can you give us any color on that?.

No, we haven't sold anything since September 30..

All right. And in terms of the existing and I want to exclude DUR-928 in this third question.

In terms of the existing activity you have, I mean could you give us a little color on what kind of order of magnitude if anything came to fruition, might we expect, is it few million dollars maybe in the next six to 12 months, and again I'm excluding the 5 million Indivior potential payment on an NDA approval, but in terms of the other programs excluding DUR-928, can you talk about a little bit what you see is any kind of potential..

I guess it depends on – I’ll take the later stage ones. We have obviously RBP-7000 which doesn't cost us anything and could potentially get approved as soon as next August. REMOXY doesn't cost us anything and there would be a small amount on approval and if they submit end of first quarter that would be a six-month review.

So those are two things that could payout, but not cost us anything. I think are you kind of asking about feasibility programs and that kind of thing as far as money coming in from those..

Well in ORADUR-ADHD you know and the program in Japan and perhaps the answer is well there's nothing really in the 12-month pipeline, but just to refresh our collective memories on what might be out there?.

Maybe I’ll chime in just a little bit. Early in my little spiel, I did mention that our collaborative revenue went up in the third quarter by about 700,000 and when you take out deferred revenue.

And that's a function of the fact that we've been quiet about it, but we actually have had some success recently in listing some interesting feasibility projects that are larger than normal with some big pharma companies. So we have those going on and we expect those to continue.

In terms of other business development activities, the ADHD program we mentioned last quarter that our partner Orient Pharma had a successful Phase III trial in Taiwan and that they only have the rights to that in certain Southeast Asian countries. We retained the big markets U.S. and Europe.

And that it's our intention to take that data as well as other information we have and sort of reboot the licensing effort for those major territories. And actually we've recently gone to work with a firm, an outside firm that assisted us previously on a project.

So we're in the early days, but we're kicking that off as well, so we will be pursuing hopefully some other licensing opportunities, ADHD being one of those..

All right. Thank you.

And my final question it's circling back to DUR-928 you've got a number of programs underway and to those of us who are not biopharmaceutical experts? Could you give us a sense of which of those programs might be the earliest candidates for some kind of partnership assuming you know favorable early look data?.

I would say the two that that would come out right away would be the PSC, if you know we're collecting kind of real time input from that trial. So if we have some readouts next year on that that look favorable that kind of reflects what we've seen in the NASH patients.

I would think given the question Len had and the competitive nature and the kind of general disappointment that a lot of the companies bigger companies in the NASH base have been experiencing there might be a desire to partner up in that regard. And I think there's also an opportunity on the topical side.

Where as that trial we doubted that it's in a placebo controlled proof-of-concept study if that comes and we doubt positively then I think there's an opportunity there as well.

So I think those would be the two that one could see maybe initiating next year that they would come to completion next year really depend on the competitive nature of the process.

And then the acute injectables actually something that we would prefer to carry ourselves and we think that there is there can be just an amazing opportunity there to step into places where there is nothing today and patients are in a very bad way and we can make maybe change that and so that's the hope and the desire there..

All right. Well, thanks very much for taking my questions. And then those were very helpful answers..

Thank you Jeff. End of Q&A.

Gentlemen, there are no further questions at this time..

Okay that being the case like to thank you for your attention and people have a question to always feel free to call management would be happy to chat with you. Thank you..

This concludes today’s conference. You may disconnect your telephone lines at this time. Thank you for your participation..