Greetings, and welcome to the DURECT Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Papp, Chief Financial Officer. Thank you, sir. You may begin. .

Good afternoon, and welcome to DURECT Corporation's First Quarter 2024 Earnings Conference Call. This is Tim Papp, Chief Financial Officer of DURECT. Before we begin, I would like to remind you of our safe harbor statement.

During the course of this call, we may make forward-looking statements regarding DURECT 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. .

To begin, I would like to review our first quarter 2024 financial results. Total revenues in the first quarter of 2024 were $1.8 million compared to $2.1 million in 2023. 2024 revenues were lower primarily due to lower revenues from feasibility agreements as well as lower revenue from product sales.

R&D expense was $4.1 million in the first quarter of 2024 compared to $8.6 million for the prior year. The decrease was primarily due to lower clinical trial-related expenses as we substantially completed the AHFIRM trial and lower employee-related costs. .

SG&A expenses were $3.1 million in the first quarter of 2024 compared to $4.1 million for the prior year. The decrease was primarily due to lower market research expenses, lower patent expenses as well as lower employee costs.

As of March 31, 2024, we had cash and investments of $21.6 million as compared to $29.8 million at December 31, 2023, and our cash burn for the first quarter was $8.9 million, excluding net proceeds of approximately $650,000 from ATM financing. We believe our cash on hand is sufficient to fund operations through the end of 2024. .

Now I would like to turn the call over to Jim for a business update. .

Thank you, Tim. Hello, everyone, and thank you for joining us today. We're making good progress towards initiating our Phase III clinical trial for larsucosterol in alcohol-associated hepatitis.

Through a Type C meeting with the FDA, we have received feedback that a single Phase III trial, if successful, could be sufficient to support an NDA filing in AH. We're in the process of designing a pivotal trial that incorporates the FDA feedback and the key learnings from our AHFIRM Phase IIb trial.

We are continuing to analyze the clinical data from AHFIRM and believe the data provide a strong foundation for the design of our registrational Phase III trial. .

We look forward to sharing additional data analyses and the details of the protocol in an update later this year. We're also excited that the AHFIRM data has been accepted for an oral, late-breaker presentation at the upcoming EASL conference in June of this year.

This will be our first opportunity to share the AHFIRM data with the medical community at a scientific meeting.

We are very encouraged by the continued enthusiasm of the hepatology thought leaders and key opinion leaders for the AHFIRM results and their recognition of larsucosterol's potential to provide a clinically meaningful survival benefit in AH patients. .

As a brief reminder, AHFIRM was a placebo-controlled, double-blind multinational study with 2 active arms of 30 milligrams and 90 milligrams of larsucosterol and a placebo arm of approximately 100 patients each. .

In total, we randomized 307 patients with severe AH from a global network of clinical sites. Our sites included renowned liver centers in the United States, Australia, the EU and the U.K. We had the honor of working with some of the world's preeminent thought leaders in AH.

The top line results and the key secondary endpoint of mortality at 90 days showed a 41% reduction with the 30-milligram dose of larsucosterol and a 35% reduction with the 90-milligram dose of larsucosterol as compared with placebo.

We also reported a numerical improvement in the primary endpoint of reduction in mortality or liver transplant at 90 days, though neither the primary or key secondary endpoint results achieved statistical significance. .

Even more impressive results were observed in the U.S. population, which comprised 3/4 of the total enrollment in AHFIRM and that was 232 out of the 307 patients. In the U.S. patients, we saw reductions in the 90-day mortality of 57% and 58% for the 30 and 90-milligram arms, respectively, as compared with placebo.

Although not part of the original statistical analysis plan, the p-values for these results were both approximately 0.01.

Very importantly, larsucosterol exhibited an excellent safety profile with no serious adverse events in either arm and greater than 20% reductions in the number of treatment-emergent adverse events for both active arms in these severely ill patients. .

Ultimately, these clinically meaningful reductions in mortality coupled with the reduction in adverse events in these severely ill patients reinforce the compelling risk/reward proposition for larsucosterol.

We continue to believe that the AHFIRM provide compelling evidence that larsucosterol could represent a safe and effective therapy with life-saving potential for AH patients. There are no approved therapies for AH today.

So if larsucosterol meets our expectation in the Phase III, and we are able to gain approval, it would likely be the first FDA-approved treatment for this disease and establish a new standard of care. .

AH is the cause of more than 160,000 hospitalizations each year in the United States and with a 90-day mortality rate of approximately 30% is responsible for tens of thousands of deaths each year. In addition to its high mortality rate, AH represents a significant cost to the U.S. health care system.

Hospitalizations attributed to AH incur charges between $67,000 to $180,000 per patient, a total charge to hospitals of approximately $10 billion annually. As a result, larsucosterol represents a potential blockbuster opportunity in the U.S. alone and could simultaneously provide overall cost savings to the health care system. .

We would now like to take any questions you may have. .

[Operator Instructions] Our first question comes from Frank Brisebois with Oppenheimer & Co. .

I was just wondering if you can share anything around EASL late break? Is there -- should we be expecting new data? Or can you share anything about kind of progress with the FDA? Or just any thoughts on EASL would be helpful. .

Yes. Sure, Frank. First of all, good to catch up. Yes, the late breaker is the first time we'll have an opportunity to present the data from AHFIRM. And so we'll be focusing on a lot of what's understood today. We won't be giving additional FDA updates beyond what we just talked about at this call.

But it certainly is quite an honor to receive an oral late-breaker opportunity here and to present the data. They're very important data. And as well, I believe we should be presenting some additional data this fall at the AASLD meeting as we continue to learn more and more about the results from this trial. . .

Okay. That's helpful. And then in terms of the patient severity based on MELD scores. Is there -- I know there's moderate-to-severe was kind of a thought. Has there ever been a thought of the milder patient population? Or is that patient population not necessarily going to the hospital? Just any thoughts about the milder additionally. .

Yes. Yes, we certainly -- we look at all, and I believe this drug will have an opportunity to help all. We certainly saw that tendency in the Phase IIa. It's a smaller trial, but we treated both moderate and severe patients in that. But our focus right now has been on the severe patients, patients with a MELD score of 21 to 30.

Put that in perspective, you have a MELD of 21 that means you got about 20% chance of dying in the next 90 days; and if it's -- MELD is 30, you have about a 60% chance of dying. So they're very ill. That being said, moderates still have 7% to 10% to 15% to 20% chance of dying. So they're not -- they're in a dangerous position as well. .

So a lot of the patients in the hospital are "moderate" patients. But with the objective here and the ultimate goal is to get this product approved with the opportunity to hopefully save lives. That's what we're focusing on with this molecule.

And we think the fastest way to do that is to stay in the severe patient population where it's easier to distinguish a benefit of the drug, which we certainly saw in the U.S. data and now with further analysis, we're seeing information that helps really understand things globally as well.

So all that being said, we feel very good about where we're going with the severes. I think eventually, if the product is approved for severe, we will roll it out for use in moderates as well with additional studies. .

Our next question comes from Carl Byrnes with Northland Capital Markets. .

Understanding that you're yet to define the pivotal study in terms of the trial design, do you have any target in terms of initiation date internally or anything that you can disclose at this juncture?.

Yes. We'll be breaking that out as the year unfolds, but we are working on the protocol right now. The hope would be to start it -- get it underway as soon as we possibly can. So I mean that's -- there's every month that goes by, more patients are at risk of dying from this disease.

And so we're doing everything we can to get the opportunity lined up from a business perspective to be able to do that. And so that's our entire focus. .

Our next question comes from Ed Arce with H.C. Wainwright. .

This is Thomas Yip asking a couple of questions for Ed.

So first, can you discuss some preliminary thoughts on the trial design, key elements of the Phase III study, especially efficacy end point and, perhaps, any parallels or contrast between the Phase III study and the Phase II study?.

What we're looking at the number of patients, the way the trial will be designed and administered. There certainly are some key lessons learned from AHFIRM that I think will help make this a very efficient trial and with an opportunity to amplify the potential efficacy and as I said, get this thing going and get it on the market as soon as we can. .

Understood. And then perhaps the other key elements with the Phase III study, perhaps, is the way to finance this study. Can you discuss what are some options and, perhaps, the timing of any such decisions to move into phase III. .

Yes. We certainly have a number of options in front of us, and there's a large effort that, that Tim is undertaking. So perhaps, Tim, maybe I'll let you jump in on that one. .

Yes, absolutely. I don't think we're doing anything that is unexpected at this point. We obviously will need additional financing to complete the Phase III and that can come from a variety of sources, as Jim referred to, whether it's business development or the financial markets.

So we can't give you any specifics on the details at this point around timing or what that might look like. But rest assured, we're undertaking the appropriate processes to find that financing. .

we'll look forward to the EASL presentation and then with the Phase III trial design later this year. .

It appears that there are no further questions at this time. I would now like to turn the floor back over to Jim Brown for closing comments. .

Yes. With that, I just want to thank you all for your attention and your time. And as always, please feel free to reach out. We look forward to catching up with all of you. Take care. Bye. .

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