Good day, and welcome to the DURECT Corporation First Quarter 2019 Earnings and Key Opinion Leader Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mike Arenberg, Chief Financial Officer of DURECT. Please go ahead..

Good morning. This is Mike Arenberg, Chief Financial Officer of DURECT Corporation. Welcome to our first quarter 2019 earnings conference call. During the call, in addition to financial results, we will be reporting preliminary data from our ongoing Phase IIa clinical trial of DUR-928 in patients with alcoholic hepatitis, which we refer to as AH.

We are fortunate to be joined today by three key opinion leaders in alcoholic hepatitis, Dr. Paul Kwo from Stanford, Dr. Steven Flamm from Northwestern and Dr. Tarek Hassanein from the University of California at San Diego.

I will provide a brief review of our financial results; and then Jim Brown, our President and CEO, will provide a business update on our programs; after which, we will turn things over to Dr. Kwo for an overview on AH. Jim will then present preliminary data from the ongoing DUR-928 AH clinical trial; and then Drs.

Flamm and Hassanein will provide their insights as AH experts and investigators in the ongoing trial. We will then open up the call for a question-and-answer session. Before beginning, I would like to remind you of our safe harbor statement.

During the course of the 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 can be found in our SEC filings, including our 10-K and 10-Qs under the heading Risk Factors. Let me now turn to our financials.

Total revenues were $4.1 million in the first quarter of 2019 compared to $3.5 million in the first quarter of 2018. Product revenue, largely from our sale of ALZET pumps and LACTEL Polymers, was $2.6 million in Q1 2019 compared to $2.4 million in Q1 2018. The gross margin for the combined ALZET and LACTEL product lines was 57% in Q1 2019.

These product lines continue to be strongly cash flow positive. R&D expense was $6.3 million in Q1 2019 as compared to $7.0 million in Q1 2018, primarily due to lower R&D costs associated with POSIMIR, partially offset by higher costs for DUR-928 and our depot injectable programs, which are largely covered by revenue from feasibility partners.

SG&A expenses were $3.5 million in Q1 2019 compared to $3.2 million in Q1 2018. At March 31, 2019, we had cash and investments of $28.8 million compared to $34.5 million at December 31, 2018. With that, thanks again for joining our call, and I will now turn the call over to Jim for an update on our programs..

Evaluation of Abnormal Liver Chemistries and he's won multiple awards both at the university, local and national level. Now to Dr. Kwo..

Thanks so much, and again, thanks so much for joining us this morning. I'd like to just begin by discussing alcoholic liver disease, which is a major cause of morbidity and mortality in United States. According to the NIAAA, it's been classified as an alcohol use disorder. And using these criteria, the prevalence in the U.S.

and worldwide is actually quite significant. In United States, it's estimated that 15 million adults above the age of 18 have an alcohol use disorder, men more than women. And it's estimated that approximately 88,000 deaths annually are from alcohol-related causes.

In the U.S., alcohol-related liver disease is the fourth-leading preventable cause of death in the United States.

Some of you may have even seen today in the news, there was a letter this week in the Journal of Medical -- American Medical Association, or JAMA, that shows that severe alcohol-related liver disease was on the rise according to the National Health and Nutrition Examination Survey results from 34,000 individuals, and this was possibly due to binge drinking.

So this is a considerable problem in the United States. It is a clinical histological disorder, that is, it encompasses hepatic steatohepatitis, or fatty liver, which is present in 90% of those who drink heavily. Alcoholic hepatitis occurs in 10% to 20% of heavy drinkers, with the subsequent sequela of alcoholic cirrhosis and hepatocellular cancer.

And in the past several years, as I'm going to show you, alcohol-related liver disease has now passed hepatitis C infection as the most common indication for liver transplantation in the United States and it's a leading indication for transplant in Europe as well. I show here the spectrum of liver disease and the progression.

Again, fatty liver is most common; 90% of individuals who drink develop steatosis or hepatic -- or alcoholic steatosis. Those that drink also are at risk for acute alcoholic hepatitis, which is a severe acute injury of the liver where individuals present with significant inflammation of liver, jaundice and acute liver failure.

And again, this is the disorder that we see in younger individuals who present to their physicians in hospitals with acute liver disease. And over time, individuals develop cirrhosis, again, compensated or decompensated with portal hypertension, encephalopathy, ascites, all of the signs of symptoms of end-stage liver disease.

The pathogenic mechanisms that have been postulated to meet hepatic injury are shown here. And again, there are multiple potential mechanisms demonstrated here. The precise mechanisms are not known, but it's obvious that we need novel therapies to help ameliorate this severe hepatic injury.

And I just showed here over -- as a summary some of the postulated mechanisms that have been investigated over time, including mechanisms that include cytokines, also lipid peroxidation, protein aldehyde, adducts. There are variety of mechanisms that can lead to hepatic injury.

How we assess alcoholic hepatitis and its severity has been historically attributed to 3 different risk scores.

Classically, we talked about the Maddrey's discriminant function score, and this involves the hepatocellular assessment where we use the prothrombin time and the bilirubin in a score of above 32 has implied a poor prognosis and usually an indication for our standard therapy corticosteroids.

A very helpful model that we're going to discuss is the Lille model, which incorporates these findings, and as well as the 7- or 4-day course of corticosteroids and provides a useful futility rule for those who are not going to respond to corticosteroid therapy.

And the Model for End-Stage Liver Disease, or the MELD score, is a tool that we use to assess severity as well. The Lille model uses 6 variables to identify patients with severe alcoholic hepatitis, that is those with a discriminant function score above 32, and it's a very useful futility rule.

It's calculated after 7 days of corticosteroids dependent upon the age, albumin, bilirubin, creatine and prothrombin time, we have the link here. But a score of greater than 0.45 is associated with a large decrease in 6-month survival. So when one initiates corticosteroids, one wants to see that the Lille score is below 0.45.

And prognostically, this has been superior to other models that had been published in the literature. Graphically, this is what we are showing here; if the Lille score is less than 0.45, your survival is markedly improved compared to a Lille score of greater than 0.45.

The MELD score, or Model For End-Stage Liver Disease, which we use to risk ratify for those who have cirrhosis and are waiting liver transplantation, is also beneficial.

If the MELD score is above 21, that roughly is equivalent to a discriminant function score of greater than 32 for predicting poor prognosis, and that means, in this case, 20% mortality at 90 days. What are our current therapies? Well, abstinence is best.

Corticosteroids, which are contraindicated in patients who have active infection, are the de facto standard of care now, and we certainly use these. Recent practice guidelines have endorsed this. The efficacy, as I will show you, is not as optimal as we would like it.

And our recent surveys have suggested that there's low-level use in practicing hepatologists. There was a period where we used, and some physicians still use, pentoxifylline, although recent guidelines have removed this based on a large well-done randomized trial.

We want to control craving, address nutritional needs, there are anti-inflammatory and, of course, novel therapies as well. This was the largest study that has evaluated the role of both prednisolone as well as pentoxifylline, the STOPAH trial that was published in the New England Journal of Medicine.

And you can see the results here show that prednisolone and pentoxifylline, pentoxifylline and placebo and then the double placebo, there really weren't significant differences between these therapies. And you can see prednisolone compared to placebo did have a reduction in mortality that almost reached statistical significance but did not quite.

Part of it was because the survival of the placebo group was actually quite good. And this does seem to suggest that we are better caring for these individuals. Nonetheless, as I'm going to show you, the problem is that we are -- we still have large numbers of young individuals who are presenting with this severe acute disorder.

Liver transplantation was -- is a dramatic intervention, but it does offer a therapeutic option for these individuals. This was first shown in a small pilot study from France that showed that individuals with severe acute alcoholic hepatitis were [indiscernible] selected and did not respond to corticosteroids could benefit from transplant.

And you can see here, at 3- to 5-year post-transplant, the survival was clearly better than those who were transplanted, though there were recidivism rates that ranged from 11% to 50%. This data has now also been investigated in the United States.

And I show you here a outcome slide from the multicenter American Consortium for Early Liver Transplantation for Alcoholic Hepatitis or ACCELERATE. And again, you can see a 3-year survival here of 84% that survive. The follow-up right now is early. But you can see here, again, liver transplant is a viable option with -- for these selected individuals.

We know now that the alcoholic liver disease, based on this very nice paper that was published last year, is now the highest risk factor for liver-related mortality. And many of you who follow chronic viral hepatitis C know that we have highly effective therapies now for hepatitis C.

And we've seen the benefits of this where direct-acting antiviral agents that have been available since 2014 have now reduced HCD-related mortality considerably in the last 3 years.

That has now led to, as I said earlier, alcoholic liver disease now being the highest and the leading cause of all-caused mortality and as well as the leading underlying cause of death in those with chronic liver disease and this is obviously an area where we need to have novel therapies.

The liver transplant community is gradually accepting alcoholic liver disease and acute alcoholic hepatitis as an indication for liver transplant. And again, it is a therapeutic option. Obviously, it's a very aggressive option. And novel therapies that would address this and allow us to prevent liver transplants would obviously be desired.

So in summary, the major causes of morbidity and mortality of alcoholic liver disease are considerable. Over 300,000 hospitalizations. It's now the leading indication for liver transplant. A paper published last year in The Lancet demonstrated that worldwide in young individuals, alcohol use is the leading risk factor for female deaths and male deaths.

And so obviously, worldwide, having an option to treat alcoholic liver disease, that is acute alcoholic hepatitis, as well as the sequela of heavy drinking would be very important.

And I'm going to turn this back over, but obviously, we all look forward to these novel therapies being introduced and evaluated to help this -- us reduce this tremendous disease burden..

acute myeloid leukemia, the 1-month mortality rate is between 16% to 29%; for advanced breast cancer, it's 13%; for advanced pancreatic cancer, it's 23% over the first 3 months.

When one looks into the literature, you could see that both moderate and severe alcoholic hepatitis have short term, that is 1 month, mortality that can be in the range between 20% and 40%. We have some very compelling animal data that supports the use of this molecule in this disease state.

We have shown in a model that studies the effect of acetaminophen and alcoholic exposure in a mouse model where just a single injection of 928 can change the outcome from 90% mortality to 90% survival.

And then in a model -- and we've done this multiple times, endotoxin models, we can show when one gives an LD90 single injection can save 90% versus 90% dying. And these data were published in a Metabolism paper in 2017.

And the most important point for bringing this up is this paper shows that we have multiple organ support and that is, we're able to show histologically protection of not only the liver, but also the kidney and the lungs. And a lot of these patients, if you look at it into the reasons for mortality, it's multiple organ failure.

So to be able to support these organs beyond the liver is very important for patient outcomes. Now to our trial itself. We have, as we said earlier, completed the 30-milligram cohort and we're now dosing in the 90-milligram cohort. The enrollment in the severe patients has been faster than in the moderate patients. 10 patients have been dosed to date.

We have seen no drug-related safety issues through the first 10 patients dosed. And I'm pleased to report today that there is -- we've seen no difference in the pharmacokinetics between the 30-milligram moderate and severe groups in this trial. Now to the data.

What we're doing here is we have a comparison of bilirubin change from baseline for the UL study on the left, separate study, and our study on the right. You can see that what these graphs are set up to look at, what is the baseline bilirubin level set at 0 and then what are the percent drops on day 7 and on day 28 post-dosing.

And on the left, we're looking at either dosing with steroids or supportive care or both. Obviously, both. But anyway, and so what you'll see here is the -- that with the DUR-928 group at the 28-day time of point, we have a statistically significant change, reduction in baseline for bilirubin. The following slide shows similar type of data.

Now this is with regard to MELD score. On the previous slide, it was actually statistically significant both on day 7 and day 28. But for the MELD score, what we saw is a trend on day 7 for 928 and a statistically significant reduction on day 28 for DUR-928. The following slide briefly reviews what Dr. Kwo already has with regard to Lille model.

And one of the first papers that came out on this looked at 6-month survival. And the important thing, as Dr. Kwo mentioned, was looking at the score with regard to the level of 0.45. If you have a patient with less than 0.45, then their 6-month survival looks quite -- much better at 85% versus greater than 0.45, where it goes down to just 25%.

The following slide now compares the population from the UL study with a comparable population from our study. And this is important. If you look at the little box on the far right, you'll see the Lille score ranges. The DUR-928-treated patients had ranges that was from 0.01 to 0.19 with a median Lille score of 0.4 -- 0.04, sorry.

The University of Louisville study had a range of 0.02 to 0.96 with a median Lille of 0.41. It's important if you look at these graphs that the bottom, the x axis on these graphs show a range of MELD scores. These are the initial MELD scores for these patients.

You can see these populations are fairly similar in that the average MELD scores are about the same. And yet, if you look at the differences here, they're pretty dramatic in the end result, the resulting Lille score in post-treatment.

And those, the little black squares, are the patients that passed away in the UL study within 30 days and the diamonds are the patients that passed away within 3 months of the study. There was another paper put out on Lille score in 2011. And this paper then looked at the 28-day survival.

And it broke the patients down into 3 different groups, and they were defined as complete response, partial response or no response. And so if you have a score of less than 0.16, you're considered a complete responder, and your potential of mortality in the first month is less than 10%.

If you have 0.16 to 0.56, then the mortality goes up to about a little bit over 20%. And if you have greater than 0.56, it goes up to almost 50%. We've then stratified our patients in comparison to some other historical patients in the following slide.

And on the far left, you see a population of 51 patients that were treated with prednisone, and they're from a study, a controlled trial that was reported out at the AASLD meeting in November of this past year. And there, you can see they had 8% of the population was 0 response, 43% were partial response and then 49% were complete response.

And then you see the University of Louisville study that we're comparing against in the prior slide here with 47% being in the 0, and then 20 and 33 for complete, and the 928 group ends up being 88% in complete, with 22% at the point in the partial response and their scores were obviously quite low at 0.19.

And that ends up being a statistically significant to 0.0023 comparison to the UL patient population. So now we've just broken down one last time the data. Looking now at the 0, partial response and complete response line, so you can see how that stacks up there.

And it's important to note here, when you look at the 928 data on the right, you see these solid circles. Those are the 30-milligram patients, and the 290-milligram patients are the ones at the very bottom. One patient had a MELD score of 19, the other had a MELD score of 25, and they ended with Lilles of 0.01 and 0.02 post-dosing.

To summarize on the trial. We've seen and we understand there's significant unmet need with over 300,000 hospitalizations per year and no apparent treatments for AH that results in high mortality rate and hospitalization costs and that alcoholic liver disease itself is a leading cause of transplants.

We have compelling survival data in multiple animal models with regard to this drug. We have encouraging preliminary data from our 30- and 90-milligram dosed AH patients with reductions of serum bilirubin and MELD scores and resulting low Lille scores. There's good safety to date with the potential for this to be a life-saving therapy.

This year, we're anticipating data from the remaining patients, and the subsequent FDA meeting regarding next steps for the program, looking to start the pivotal trial in 2020.

If DUR-928 continues to show early reductions in bilirubin and improved prognostic scores like MELD and Lille in the future placebo-controlled trial, it could play an important role in treating alcoholic hepatitis, reducing mortality and potentially having a relatively rapid path to market. It's now my pleasure to introduce Dr. Hassanein and Dr. Flamm.

Following their statements, I will then give a quick summary and we will then have time for your questions. Dr.

Hassanein is currently a Professor of Medicine at the School of Medicine and Director of Outreach Services for the Liver Transplantation at the University of California San Diego and Director of the Southern California Research Center and Medical Director of Southern California GI & Liver Centers and the Medical Director of Gastroenterology Services and Comprehensive Liver Care Services at Sharp Coronado Hospital in Coronado, California.

Dr. Hassanein has been recognized for his work in gastroenterology and has been a recipient of many awards and honors. He has been the principal investigator on multiple international trials and has been extensively published.

He is currently on editorial board of Hepatology and Gastroenterology, Digestive Diseases & Sciences, the Arab Journal of Gastroenterology and other journals. He's also a reviewer of more than -- for more than a dozen publications. Dr.

Stephen Flamm is Professor of Medicine and Surgery with the Division of Hepatology at Northwestern University, a Feinberg School Of Medicine. He also serves as the Chief of Transplant Hepatology. Dr. Flamm has published and speaks widely in the field of hepatic diseases.

He has an active clinical research program in chronic viral hepatitis, HBV and HCV and immune hepatitis. Dr.

Flamm is a member of the American Gastroenterological Association and the American Association for the Study Liver Diseases where he recently served as the chair for the AASLD Development and Publication and Practice Guidelines Committee as well as the AASLD Foundation. I will now turn the call over to Dr. Hassanein and Dr.

Flamm to discuss their experiences with DUR-928 in their patients. Dr.

Hassanein?.

Okay. Good morning. Thank you for advising me to participate in this meeting. Just to give you an idea, Southern California Liver Centers is up to 7 centers in Southern California. We get our share of acute alcoholic hepatitis, alcoholic liver disease, and we tend to do a number of clinical trials in that area.

We have been into the research of acute alcoholic hepatitis for quite some time, and we're actively seeking more clinical trials because the field is missing a treatment to manage these patients.

It's a dramatic disease because patients drink, they don't know that they are getting into trouble until they turn yellow, and someone around them will tell them, "Oh, you're turning yellow. You'd better go and see a doctor." And they can come early in the face of the disease or they can come late when their liver is almost totally into failure.

The sad story is none of these patients at this point is a candidate for liver transplant although they are presenting with liver failure because the transplant rules mandates at least documentation of 6 months of sobriety before these patients can get a liver transplant. These patients don't have the 6 months.

And it's always sad because a majority of these patients tend to be young at age. So at this point, you already have heard the percentage of mortality and the limited access to any medication to have these patients. Steriods. We have been struggling with steroids for the last 40 years. So to a great extent, we keep recycling these studies with steroids.

In my hands, when I get a lot of these patients, I rarely can use steroids. We estimate that our patients, when they come to our center with mostly moderately to severe alcoholic hepatitis and its complications, they tend not to be good candidates for steroids because they have infections, renal failure, you name it.

When we get them to steroids, we might actually push them into faster death from sepsis, which is part of that disease. So steroids, although we talk about numbers, we have to talk about how many people really coming through to the center that are candidates for steroids, and that number is down to 20%, 25% in our center to be able to use steroids.

Now once you use steroids, not everyone responds. And the Lille score, and we've heard about the Lille scores, it help us to decide very quickly, within 4 days, if the patient is responding or not. If we are worried about it, maybe we push it to 7 days. And if the steroids is not working, we stop.

Okay, if we're going to stop the steroids -- or first, if the patient is a candidate for steroids, yes or no. Most of the patients are not candidates. If we start -- if the patient is a candidate, then we start steroids, and it fails, what do we have? We don't have anything. We used to put them on liver devices like liver type of dialysis.

And the last trial that ended a few months ago showed it wasn't helpful to these patients to get them to recover. So to a certain extent, this is a field that's missing a lot of study. When you do a quick review of clinical trials in the [indiscernible] of the nation, you don't see much happening compared to hepatitis C or hepatitis B.

Now hepatitis C study is not there anymore. But hepatitis B NASH studies, when you compare alcoholic hepatitis study, there is very limited number of studies. So that's our experience with these patients with our study, the DUR-928. We actually got impressed with the first 2 patients because these were patients that would have feel they will respond.

And with one single injection in the study, because the study is a dose-finding study, can 1 infusion -- with 1 infusion, our first 2 patients have had response. And again, 2 patients doesn't mean much. But when we have patients that are dying every day from this disease, any patient who responds gets our attention to what we are doing.

We have more than 2 patients. And we have consistently -- in my patients in the study, we have seen improvement. And you have seen the summary. Small numbers of patients but give us tremendous hope in this study drug. And the beautiful thing about it so far is the safety.

We went from the 30-milligram dose to the 90, and we have -- we haven't seen any significant signals of any safety issues. And so far, every patient we've put in my group that had a response to the treatment. And the main response we see bilirubin improving. Once bilirubin improving, everything starts to change. The MELD score changes.

The MELD rate changes. Whatever scoring system you use, bilirubin is a key element in this disease, and we have been seeing improvement in the bilirubin within the first few days. And you have seen the data. Actually, this is my first time to see the collected data together. So I'm very enthusiastic.

I'm -- as a physician taking care of patients, I'm always trying to push to get more patients in the study and to expand the study and expand the criteria.

And hopefully, we will have -- we might be getting into a drug that can help us tremendously in this diagnosis of acute alcoholic hepatitis where we don't have enough options out there except transplant. Thank you very much..

Thank you, Dr. Hassanein. Now Dr.

Flamm?.

Hello, everybody.

Can you hear me?.

Yes..

you are looking for a signal; and you're looking for toxicity. And the beautiful thing about this product is we haven't seen really toxicity at all. And we're still in the dose escalation phase part of the early trial. And I think everybody today is very encouraged because of the lack of toxicity.

Remember, we're giving this to patients that are very sick, and still, there doesn't seem to be any toxicity. Liver failure, these patients have -- I mean, the product, again in my experience, there have been no issues. And then the efficacy signal, as Dr.

Hassanein just said, this is the first time I've seen the cumulative data myself, and this is very encouraging for an efficacy signal here. I mean the other beautiful thing about this disease data is you can tell us it works in a very short period of time, within a month. This is not a NASH trial where it takes 2 years until you get a readout.

This study is -- in 1 month, you can tell if labs are getting better and if mortality is affected. So there are lots of patients out there. The trial should not be difficult to enroll when the later-phase trials come through because really there's no other option for patients.

Their choice, if they want to choose to enroll on the trial, it's really to just cross your fingers and hope for the best with support of medical care. And there's lots of patients out there, so -- and we'll be able to tell very quickly on a readout whether or not this product has the tolerability and efficacy we need to really advance the field.

So those are my comments. I've used it here at Northwestern. We just had a couple of patients in the trial, and I've been very happy to date. And I'm looking forward to enrolling more.

Jim?.

Thank you so much, Dr. Flamm. So I want to give thanks to Dr. Kwo, Dr. Hassanein and Dr. Flamm for taking the time today from all of your busy schedules. One of the reasons we had this call so early our time is because all 3 of these people are in the clinic constantly, I mean constantly.

And if you get sick with your liver, you want to be in a place where you can see one of these guys. They're really good. So thank for you taking your time. I also want to give special thanks to Dr. Craig McClain from the University of Louisville for allowing us to use the data from his ongoing trial as a way to compare the DUR-928 group.

It's been a pleasure to be able to work with such dedicated physicians. So thank you to all 4 of you. In summary, the data from DUR-928, the AH trial, though preliminary, compelling. And the drug may be lifesaving in this disease state. The median Lille scores of 0.04 were compared to the 0.41 from the UL patients is most impressive.

We look forward to completing the 90-milligram severe patient cohort and advancing the study into the 150-milligram cohort in these patients. Once the AH trial is completed, we plan to meet with the FDA to explore advancing this program into pivotal studies.

We want -- we're very thankful for the strong support and encouragement from our expert advisers and our clinical investigators. We also look forward this year to the DUR-928 28-day NASH. It's a trial, a data which is on track to yield data by the end of the year.

And as well unto our Phase II proof-of-concept psoriasis trial, we're looking forward to data by the end of the year. And just to wrap up, we're also looking forward to so many complete response for POSIMIR this quarter. And if successful, the NDA could to approved and could lead to a potential commercial partnership.

With that, I'd like to turn it over to any questions that people might have..

[Operator Instructions]. Our first question today comes from Adam Walsh of Stifel..

This is Edwin Zhang on for Adam. A few questions on NASH and AH. Maybe first on NASH. You have studied the Phase Ib study in NASH patients in March. We know you have conducted a similar Phase Ib study some years ago.

Could you just remind us what are the key difference between these 2 studies other than dosing? And what do we expect to learn from this study? Also, what is your long-term plan on NASH? Do you intend to find a partner on this indication?.

Thank you for the question on NASH. So we did a single-dose study in 50 milligrams and 200 milligrams. And what we saw is we saw statistically significant drops in CK-18, dramatic drops. These were down 30%, 40%, in some cases, greater than 50% at 12 hours after dosing.

And then we also saw 30% reductions in bilirubin and a nice reduction in C-reactive protein, in IL-18. So we're very pleased with what we saw from the single-dose studies. And what we wanted to do there -- two things on this molecule. You've heard the physicians who were treating our AH patients talk about the safety profile.

But that same kind of safety profile has been seen in the animals. We've not seen any toxicity to date. And so in order to dose longer durations, longer than a month, we actually had to scale up this product to commercial scale. We can now make it at commercial scale, 10 kgs per batch and more.

And we had to do that in order to do the chronic tox because we had to give very, very high dose, at 20 kilograms a molecule, to test. And now those studies are nearing completion. They'll be completed by the end of this year.

It's all relevant because going to the next stage in the NASH studies will require unlimited exposure as far as duration is concerned, and we'll have that by the end of the year. So we're doing this 28-day study to understand what the dose response might look like over a month and to see whether or not we can see changes that we saw.

If we can -- what we're hoping to do is some replication of what we saw from a single dose over 28 days. And if we can see reductions in some of these markers of inflammation and survival and the like, and possibly, we're also going to have a look at -- through imaging at liver fat because we've seen some pretty dramatic changes in the animal model.

So we'll have a good sense coming out of this Phase Ib study what the dose 2 response would look like. We're looking at SID once-a-day dosing. We're looking at twice-a-day dosing over the month. And we'll get some sense of that will set us up for doing a true fulsome Phase II trial in NASH patients.

And our plan for that will be we'll kind of follow our nose here. We'll see how the data come out. And we'll see where the company is as far as whether or not we seek to partner that or whether we take that on our own.

But as you can hear from everyone's enthusiastic and focused today, we're looking hard at each [indiscernible], where just 1 or 2 injections might be the difference in a patient's life. And so we're looking at 928 in alcoholic hepatitis. We've seen very interesting data preclinically in pancreatitis and other potential opportunities as well.

So -- but we're starting with alcoholic hepatitis because there's more consistency in these patients than there are in the pancreatic patients and the like. So I hope that answers your question..

Yes. So AH, congrats on the new data. So my question is if Lille or MELD, M-E-L-D, score, approval endpoint for the AH trials and also -- yes. Go ahead..

No, go ahead, please. Finish your question..

And what are the baseline of Lille scores of those patients are high? I don't think I see it in the presentation.

Or what is the change from the baseline for the Lille scores?.

Okay. Got it. Let's start with that last one first. Lille score is at a point in time, and so it's not -- there's no baseline Lille score. What Lille has been designed to do is to look at the effective therapy.

So you take a patient and you treat them, and then you look and say how do they look, how is the liver functioning, how is their body functioning a week after therapy. It's the most commonly used practice for determining Lille. And so that's why we didn't have an initial.

And that's why we study with that initial MELD because that initial MELD allows you to stratify the patients across what's the general state of their livers coming in. If you look at the UL data, you'd see -- you can look across that x-axis. There you can see that those patients are distributed fairly equally, actually the same range of MELD scores.

And the mean, the average MELD score was almost the exact same for our population and their population. And so you can see that both these populations started from a similar standpoint, right, but then we look and say how are they doing a week later.

In the case of the 928-treated patients, you can see our median, excuse me, Lille score was 0.04, dramatically lower than the others, where it was 0.41. And then obviously, the survival speaks for itself. And then that leads into your question about what does it take for approval. I'm sure these prognostic scores will be helpful.

And we had to sit down with the FDA to define that, but my guess is you'd have to look at survival would be my guess. But these prognostic indicators will be part of it all, but that will be defined with meeting with the FDA. That's why.

But I put it in the cancer slide a death rate just to give people a sense of I think we're looking at an opportunity here to be able to save patients' lives. And as such, we'll take that approach with the agency rather than kind of what is chronic NASH things. Go ahead.

So next question?.

We will now take a question from Ed Arce of H.C. Wainwright & Co..

Congratulations on this really compelling or early data. It's -- it really does speak to how effective this is, that in just a few patients and just over a short amount of time, you can see these kind of results.

So as you just said, it does seem that the path here for acute settings with 1 or 2 injections, and you can see definitive survival as opposed to something like a surrogate and allows you rapid path to market, this is really -- looks like your strategy is evolving to that.

Perhaps you could just expand a bit as you look at these different ongoing studies where AH is very acute and severe as opposed to NASH, which is a very long and slow-progressing disease..

Yes. I think I really appreciate that. This -- I think you really hit the nail on the head. This is a game-changing moment for DURECT. To have a therapy where you can change a person's course of their life and possibly save their lives from just a single -- 1 or 2 injections is amazing.

It's a once-in-a-lifetime kind of opportunity to be able to help patients. And that's what really gets us up and helps us go and do what we do at DURECT, and so we're really excited about that. It's not that we don't like the opportunity for NASH or we don't like the opportunity for psoriasis, but those are much longer time frame studies.

I mean this trial, if this trial continues as it is, we'll complete it this year, and we'll meet with the FDA. And then our goal will be to start the pivotal trial next year. And I don't know whether it'll be 1 trial or 2 trials. That will be up to the FDA. But then post that, then we'll see where we go.

But we're positioning ourselves to be able to submit the NDA as soon as we possibly can, as soon as we show a signal where we're making a difference in the outcome for these patients..

Okay. Great. And then just a follow-up on that, obviously, it's still early in terms of the data, but certainly in terms of the registrational path at the agency. What do you know at this point? Obviously, this is subject to discussions, as you just mentioned....

Right..

Later on in the year or early next year. But what do you know so far about any sort of explicit path? Just in the absence of any therapies for this disease, it does seem like you're going to be working closely with the agency to create something..

Yes. I think we will. And we're lucky to have the people that assisted us with the -- absolutely we'll be working closely with the agency. It might be something like a subpart H or where you have an opportunity to get out there much quicker.

But we -- on this call alone, we have just really just amazing thought leaders, people who meet with the FDA and go with the guidelines for approval. And maybe I'll ask Dr. Kwo to speak to that. But Dr. McClain, who's not on the call, is actually -- both these two guys as well as Dr. Hassanein and Dr. Flamm are all key people. But Dr.

Kwo, would you like to maybe speak to the regulatory strategies?.

Right, right. So again, this is all -- we'll have to see what data readouts are. And then what we'll need to do is sit down.

Because this is an area of unmet need, I would just like to say that everyone involved in developing all of these novel therapies for alcoholic hepatitis are going to want to be able to try to get the therapy to these individuals particularly because they're so young when they present. Like Dr. Flamm and Dr. Hassanein did a great job of saying that.

And then as far as endpoints go, there are multiple routes here. Survival clearly is most important, but there will be other aspects as well. And we'll just have to again see what the readout is from this dose ascending study. But I think Jim said it very nicely. This is going to be a negotiation, and it's just very encouraging as part of this therapy.

And the preliminary dosing has proven to be not only efficacious but also appears to be well tolerated. So it's hard to predict the future but -- and again, we'll have to wait the final results of this study.

But everybody hopes that this and other therapies move forward rapidly and are accessible to all of us who care for individuals with alcoholic hepatitis because I think that Dr. Hassanein and Dr. Flamm said we all see people whose lives are curtailed too quickly with this disorder, and it's a problem worldwide..

Absolutely. And I understand, Dr.

Flamm, you'd like to make a statement on this?.

Yes, I just want to echo the same thing. I think the FDA will be very, very excited to have a product in this field that's presented to them and shows efficacy in this underserved patient population. I would be shocked if they didn't fast-track it because there are no other therapies and the outcomes are so terrible.

So I think the path to get this product approved, when you look at NASH and all the other things that we do studies in, I mean those are years and years and years. If this product is tolerable and efficacious as it looks like early on, the track, in my mind, would be relatively quick..

Thank you so much..

We will now take our next question from Len Yaffe of Stoc*Doc Partners..

I had a question for Drs. Flamm and Hassanein. I know it's only a few patients that you've seen treated on DUR-928 and even in the [indiscernible].

But if you could give your overall personal experience of the patients who you have treated with the drug versus what you might have expected, and I know it's hard to make this comparison, had they been treated with prednisone or what differences you saw with this drug versus what you've seen historically with prednisone, I would very much appreciate it.

And then secondly, given the mechanism of action of this drug or the fact that you mentioned that bilirubin improves quite rapidly, in your experience as hepatologists, could you comment please on if you see any reason why this drug might have efficacy in NASH given that NASH is such a very prevalent disease state, and the initial drugs, the ones most furthest along, seen as monotherapy, not to be sufficiently effective? So if you see a place for this drug, I know I'm asking you to project out in the future, either as combination therapy or [indiscernible] in NASH that look beneficial..

Thank you, Dr. So why don't we start with Dr. Hassanein, and then we'll have Dr. Flamm answer that..

Okay. Look, this is a very, very important question. And I wouldn't compare alcoholic hepatitis to NASH. They are totally different diseases. And the acute alcoholic hepatitis patients, we have an acute disease that kills people in a very short period of time. And there's what we call cytokine storm that happens when the alcohol toxicity occurs.

And there's a lot of acute inflammation, lots of cytokine and rapid progression of the disease. So when I say rapid progression means every day, the bilirubin is going up. So when I get the patient, for example, bilirubin of 20; the next day, it's 21 or 22; and within 7 days, it's 26, 27, 30.

And these patients gets up to 50, and then they start dying because the all -- the organs start shutting down, kidney, lungs, brain. And the patient dies with what we call multi-organ failure. So when we have the drug that comes, and once we infuse it, we'll start to see it change in bilirubin within a day or 2.

And the trending is down, this is a big thing for us. So if I start again with my patient with bilirubin of 20 or 25, and then I put them on that infusion, and the patient -- and I'm giving you 2 examples here -- bilirubin of 25; and over the next 2, 3 days, bilirubin now is down to 20; next 2, 3 days, it's down to 17, 15.

This is -- for us is a big thing because we don't see this in steroids. When we start people on steroids, it takes 2, 3 days, and you should start to see a little bit improvement in bilirubin. And if you are lucky, this patient, if they respond to steroids, you will see 20%. We want to see 20% drop in bilirubin by day 7.

And that's the Lille model issue. So what is exciting here that for the first time, we have a therapy that has a quick, fast impact on the -- in the patients who has severe inflammatory response that is really killing their organs one after the other. So that's the alcoholic model. The NASH is a totally different thing.

The NASH is -- in my mind, is fibrosis that's going to kill the patient. If the patient never develops fibrosis, it will never die from the NASH. But it's a different long-term model, as we have heard. So that's the exciting thing about this molecule, that in these 6 patients, we haven't seen a safety signal.

In these 6 patients in my group of patients, it's a small number of patients, but for me to have every patient responding, to me, this is big. I just finished a big study putting people on the DTI, ELAD machine, liver support systems to put to drop the bilirubin, and the whole study failed.

After all these efforts, we couldn't get the bilirubin to improve. We do experimental trials with abdomen dialysis. We can improve the bilirubin. Once we stop it, it goes up again.

Here, we have a molecule that every individual that we -- I used so far, although it's again a small number, the bilirubin trended down and continued to trend down with only one injection. And I'm very curious to see what would be the impact if we repeat that infusion. Then hopefully, in the future protocols, we'll have the ability to do that..

Thank you, Dr. Hassanein. Dr.

Flamm?.

Yes. Just succinctly because I think there were a couple of questions in there, as far as bilirubin and alcoholic hepatitis, usually when the bilirubin goes down, I mean if it's a meaningful decrease, that's a sign that the patient is getting better. That's a pretty good surrogate marker for clinical outcomes.

I mean there aren't that many patients that get better. We haven't had good products in the past that have actually worked so that we can compare those products to this, which is actually why this is so exciting. But generally, when patients' bilirubins decline meaningfully, then they get better, and that's exciting.

As far as our individual experience, there we're talking literally than 10 patients in the trial. I've had a couple. It's hard to really make any good conclusions, I think, on that. Both of mine have survived and done well, but I'm not sure -- and their bilirubins have declined, and I've been very positive about it.

Again, but only 2, so I'm not sure I could drive a conclusion for you there yet. But again, I think the cumulative experience that you saw today, again, it's first time I've seen the cumulative experience. We're not getting paid for this, at least I'm not.

I volunteered to do this call today, and the reason I volunteered is because I'm very excited about this. This is a space, an unmet medical need and an exciting product, and that's why I want to talk about it this morning. As far as NASH goes, as you -- guys are all very sophisticated about NASH. There are dozens and dozens of companies.

We're doing dozens of trials here at Northwestern. We are a fatty liver center here in Chicago. And I have a feeling, in the end, it's going to be quite a while before products are approved.

Probably the combination therapy, because I think there are many different mechanisms that we don't fully understand at least to NASH, this product absolutely could be part of a regimen that works. I think mechanistically. It's a product that should be looked at in fatty liver NASH. And I know the company is planning to do that.

And again, it would not be a surprise to me at all if this product were part of a regimen that's effective in that disorder. But again, it's complete speculation. And -- but the product, it's being used in psoriasis. It seems to have widespread effects and -- or it potentially has widespread effects in very many disease states.

And that speaks well for additional disease states that are complicated like fatty liver..

We will now take a question from Hans Bernstein of Kaplan Securities [ph]..

Congratulations on a very, very persuasive presentation. It occurs to me that DUR-928 and alcoholic hepatitis AH is the fastest path to market for this drug.

And therefore, my question is, first, is the protocol call for, for this drug a one-and-done procedure? Or are there a number of injections that are required for the long-term success of this drug for AH?.

Well, the first answer from that is we're testing right now 1 or 2 injections. And you heard the physicians speak to the cytokine storm and the short-term, desperate circumstances these patients are in. And the reason I referenced that one endotoxin or lipopolysaccharides paper that Dr.

Ren put out was because of the multiple organ support that, that paper demonstrated. And when these patients get into a bad way, it's because their livers are shutting down; and in turn, the kidneys just can't take the toxins that are coming out of the liver and to chronic assault there; and then the lungs, unfortunately, also take a hit.

And so you've got these 3 organs, and then you can also have the G.I. tract become leaky. And so all of these systems start to break down. And 928 has the potential to support those and I think help these patients. So it could well be that, that 1 or 2 injections get them over the really dangerous, scary component.

And then if they've got enough reserve within their bodies, then they can pull themselves out..

I see. And a follow-up to my question relates to the fact that you're involved in obviously NASH and psoriasis trials, which are long and costly. I encourage you to aggressively pursue partnerships especially with the AH indication since that is the clearest and fastest route to market..

Yes. With regard to POSIMIR, as an example, we'll be looking to find a commercial partner there. I think if the psoriasis trial turns out positive, we've already -- we've had a number of very substantial leaders in the field actually help us design the studies, so I think there's a good chance for a partnership there.

NASH, there's obviously a lot of unmet need. We've seen a lot of struggling circumstances with the trials that have been recently read out to the negative, and so there's a lot of potential for partnerships there.

AH, as you rightly point out, is the quickest opportunity to market, and it's the one where we're putting our shoulder to the wheel as hard as we can. And we're so fortunate to have the great thought leaders that we have helping us with regard to that..

There are no questions at this point of time. I will now hand the call back to management for closing remarks..

Okay. Well, thank you, everyone. Especially to our expert advisers, really, really appreciate all of you sharing your thoughts and wisdom with us. And thanks to everyone for participating, and we look forward to talking to many of you soon..

Thanks again..

Thanks, everybody..

Thank you..

This concludes today's call. Thank you for your participation. You may now disconnect..