Okay, great. Thank you for joining the Oppenheimer day two, the Healthcare Conference here. My name is François Brisebois. I'm one of the biotech analysts at the firm. The next presenting company here is DURECT Corporation, DRRX. We do cover the stock with an outperform rating. What we'll do in terms of format here is we'll do a fireside chat. And from the company here that's joining, we have Jim Brown, the CEO, and Tim Papp, the CFO. And so thank you very much, you guys, for joining. If you have any questions during this fireside chat for listeners here, you can put them in the Q&A tab. If not, you can email me at francois.brisebois@opco.com, and I'll do my best to get to them. But with that, I think we're a minute or two in here. Jim, maybe for those that are not as familiar with the story, it, it's been quite the story. Lots of movement and lots of big news, still news to be coming in the near term here. So if you could just help everyone understand a little bit just the background of the story here. Sure, absolutely, Frank. First off, thank you very much for having us. We really appreciate it. To talk about the background of AH. AH is an acronym for alcohol-associated hepatitis. It's a horrific disease that kills 30% of the people who contract it within the first 90 days. It's a very complex disease, and the patients die from multi-organ damage. They don't die just from liver, but also from kidney, and the GI tract, and the lungs, and the like. So we have tested larsucosterol in a number of different models over the years. We've identified it has the potential to be life-saving in a number of circumstances where multi-organ damage is at play, whether it's acetaminophen or Tylenol toxicity, or sepsis, or stroke, or acute pancreatitis. In all these models, we've shown tremendous potential for larsucosterol. And so we selected AH because it is so highly lethal, and because there's no therapy out there. And that's why we went into it. From a disease prevalence standpoint, in the United States, there are about 160,000 hospitalizations per year for AH. And with that 30% mortality, our estimation is that somewhere in the range of 40,000-50,000 people die every year in the United States. We recently completed a 300-patient trial, of which 228 of these patients were from the United States. The average age of those people in our trial were 44 years old, and we had 28% mortality. To put that in perspective, 43,000 people die from breast cancer every year in the United States. Average age is, is late sixties. So it's a, it's a huge problem for which there's no therapy out there today. Okay. No, that's very helpful, and, you know, you touched on a, a couple of things here. Can you maybe, you know, just kind of go over for everyone listening in that might not have seen it or be aware of it, the data that came out, the phase IIb data that came out, when it came out, what it, you know, what it showed, and then we'll go from there? Yeah, sure. The data came out right before the Liver Meeting in November of last year. And the data showed that we missed our primary endpoint, which was a combination of liver transplant and mortality, but we won on 90-day mortality in the United States, and we nearly won on the entire trial. We had for the 30 milligram dose, we saw a 41% reduction in mortality globally, and the statistics on that were 0.068. So it was close, but didn't quite hit. But we saw a really nice reduction in mortality globally, and we saw unbelievable results in the United States with regard to a reduction in mortality. Okay, and I know you guys, maybe just to set the stage, you have a meeting. What's next here? Are we speaking to the FDA? Are we trying to get clarity on what's going on there? Yes, we will be having communication with the FDA this quarter. And our hope is, post that, one of two things will come out. Either we'll have clarity with regard to the next step for the program, which is the most likely outcome, and that would be a phase III trial. That would be very similar to this trial, focusing now, though, entirely on mortality and conducting the trial in the United States. Or there's also an outside chance that given the lethality, given 30% of these people die, given the numbers of patients that died, and given the data that we saw in the United States with the, you know, 76% of the patients from this trial, that there is the potential for... And although it's a small potential, there's still the potential that it could gain accelerated approval at that point with the contingent confirmatory trial. Okay, and sorry, did you mention is the thought process to stay, to just focus on the U.S. here, or we don't know yet? Well, we are. Right now, when we look at the, at the data we have, if you look at the U.S. data, it's 228 of those 307 patients. It's 76% of the patients from the trial, and we had two doses we tested, a 30 milligram dose and a 90 milligram dose, and they both showed a highly statistically significant reductions in mortality. The reductions in mortality were 57% and 58%. That, you know, when in the U.S., we saw 28% of the people die, average age 44. We saw eleven or 12% in our two active arms. So a substantial reduction in mortality, and the statistics were 0.014 and 0.008, so highly statistically significant. If you think about it, Frank, you know, what are the odds that you're gonna have two separate doses, two, almost two separate trials come out with those kind of statistics, it's nearly improbable that that would be simply by chance. And then the other side of it is we saw these patients are, were very sick, obviously, with, you know, typically 30% dying within 90 days. And we saw fewer treatment-emergent adverse events, about 20% fewer in each of our two arms, the active arms, as compared to the standard of care. So this is one of those rare circumstances where instead of looking at a risk-benefit ratio for the drug, you're actually looking at a benefit-benefit ratio, as it were. And, I think in the past, was there a higher dose that you had looked at in the phase IIa than 90? And, you know, is this- was this a thing where it actually worked better at 30 and 90 than the- It did maybe a little bit if you looked at it. It could be... You know, we looked at 30 and 90 and 150 milligrams. We certainly didn't see any benefit for the 150 milligrams. And in the oral NASH study that we did, we dosed patients every day for a month, and the three doses there were 50 milligrams, or 150 milligrams, or 600 milligrams. And there, we saw no, you know, treatment-emergent adverse events in there, and the efficacy was very similar across all the doses. One could argue possibly the lower doses were a bit better. If you know, this is an epigenetic regulator, so it regulates, it turns on or off a large number of genes. When you see, you know, kind of complex biology, like, in those circumstances, it's really about defining the right dose, the right dose range. We believe from all of the non-clinical work we've done and some of the human studies that we have done that the 30 and the 90 would be in the right range, and we're comfortable with either one of those doses, frankly. Is there anything different in the safety profile from 30-90, or? No, I think the 30, I think, had a 24% reduction in adverse events, and the 90 had 22% or something like that, so it's really appreciated. No different, so. Okay, so safety is good here. Yeah. process of why it is endogenous, right? Like, why- Yeah ... why is it surprising that the safety was that good with these kind of trends on mortality or? Yeah, it's not by virtue of what this molecule does. What this molecule does is it changes the set point on a number of things. It changes inflammation, it reduces lipotoxicity, it stabilizes the mitochondrial membrane. It acts, to a large extent, like a stress hormone. And in the ranges where we're testing it, it... We had expected that we wouldn't see anything in the way of adverse events, and we didn't. And you know, obviously, talking about, you know, serious adverse events. If you know, if you look at the safety profile, we've dosed about 500 people with this drug from various routes at various doses over the years. And so we've got a very nice, I think, understanding of the safety profile of this drug, and it looks to be, you know, quite safe, especially when you compare it to, you know, the potential to save lives. Okay. I don't want you guys to, you know, push on something that might not be shared or anything like that, but in terms of, is there, you know, like, can you talk about maybe the difference U.S. versus ex-U.S. of this patient? Yeah. I can't get into great detail. We certainly- Yeah ... put a lot more information into the briefing book that was sent off to the FDA, but we have learned a lot since the November, you know, top-line data. The first thing is sometimes always the most obvious, but it's a small population of people outside the United States. We only had about a little bit less than a quarter of the people were outside the United States, and they were divided into three regions: Australia, the U.K., and the Franco-Belgian region. It's a relatively geographically smaller area in northern France and in Belgium. In those areas, excuse me, we had then divided amongst those. You have different healthcare systems there, and you have different approaches to the disease in these various healthcare systems and different populations. And so we ended up with different mortality rates across those regions. The, we saw the most typical responses that you would expect out of the U.K. It was a relatively small number, less, I think it was around eight or 10 patients in that region. You saw exactly what you would expect. There was a... You know, the patients who received drug lived, the ones that received placebo didn't, and so that's fine. But then, when we look at the Australian region and the European region, there are definite differences there. Some that we can talk about right now is the differences in age, in particular, with regard to the Franco-Belgian region. In the United States, our average age was 44, and in that region, they were 13 years older. The time to dosing was much longer. In the United States, it was 4 days or less between identification of the disease state and circumstance and dosing. It was because they required biopsy and other things, the timing of when they wanted their healthcare providers, that, you know, not to be in the hospital over the weekend and the like. There was over 2 weeks in Europe for treatment. So if you think you've got, you know, this acute circumstance where you'd like to have therapy, you know, being dosed within a couple of days versus 2 weeks, there's a big difference there. And then lastly, we saw 68% of our ex-U.S. placebo patients in the Australian region, where there was generally just greater survival there. So it's just kind of the way the global distribution worked out. So all of those, and then relatively small numbers in these sites, leads to a disparity in response. So going forward, a couple of key things. For the next trial, what we'll be doing is we will be conducting the trial in the United States. Why? Because healthcare is more evenly you know, administered across our country than in a lot of you know, disparate places around the world. I think that's the most critical piece. Well, there'll be a few other things we add into it. Obviously, we'll just have one dose versus two, and so that's you know, the aspects that we're looking at. So there are learnings, and in terms of the investment community, this is, you know, should we expect sort of a, like, you know, news after you guys have this FDA interaction, you guys kind of show a little clarity on the path forward here? Is that what we should expect? Yes, I would expect that we would be as soon as we have an understanding with the agency of what that path forward would look like. We will communicate that to our shareholders and then get started on that process. So you mentioned the data came out just before AASLD, which was- Mm-hmm ... I think. Right. Is it? You know, did you have a chance to speak with the KOLs at the conference about the data so far? Were they confused by XUS? Were they excited? Were they kind of, you know, admitting that there's undeniably a response here, we just have to figure out through the data how to approach it going forward? How, what was the theme? Yeah, I think they were, first of all, very excited. I think that was the overall theme was extreme excitement. Because there's been nothing new for these patients in more than 40 years, and they, you know, desperately need something because they're out there treating these patients on a day-in, day-out basis. They intuitively understand the differences between the U.S. healthcare system, excuse me, and some of these other regions. And I had a few of them come up to me right away and say: "Well, I think what you're dealing with is this," and they're probably right. And this is that, you know, generally speaking, different patients that we're treating in the United States. In the United States, they're generally, you know, younger patients who are at a different point and still as likely to die. Obviously, we saw 28% mortality, but, you know, there's a chance to be able to help these patients. But they were, they were very, very supportive, and that has continued. We can't share anything right now, but I think in the not-too-distant future, hopefully, we can share some of the excitement and some of the good things that they have been doing to try and help this process along because they, you know, they've been so desperate to try and find something to help these patients. I mean, you're talking about 40,000+ people dying every year. You're talking about over $10 billion in healthcare costs. It's a huge problem for which there's nothing on the horizon other than larsucosterol. Why do you think that's why it's maybe not as discussed just because there's nothing for these patients? Is that, is that the issue in terms of education, of is this known, or I just feel like, you know, these, this mortality kind of number here probably warrants a little more awareness? It does. I think it's kind of threefold. I think first, it's not well known, and then part of the reason, the second reason is part of the reason it's not well known, is because there is no therapy that can help. A number of large pharmas have tried. You know, they've tested various monoclonal antibodies or apoptosis inhibitors, or anti-inflammatory drugs to try and treat this disease, but it's more complex than that, and it needs a multi-factor approach, which is what larsucosterol allows. And so I think that's been the biggest challenge, and there's nothing out there to help these patients, and nothing has shown an effect. And then, unfortunately, lastly, these patients are oftentimes alone in their fight with this disease. You know, most people know someone who has, in their family or friends, their friend circles and groups, that has had an issue or may have currently an issue with alcohol. There is a chance that that person could develop alcohol-associated hepatitis. It's oftentimes associated with binge drinking, typically, something takes a downturn in their life or something like that, and they're headed down a path. But there aren't patient advocacy groups, you know, there aren't people who are willing to stand up for these patients. They're oftentimes disenfranchised possibly from their families and their friends, and so they end up being alone in a hospital bed with a 30% chance of dying. And so part of it is the disease itself. There isn't that social awareness of it. I can tell you, most often times when I'm in a group talking about this disease, someone will come up and say: "You know, I have a friend who passed away from this or who almost did." I personally have had friends who have died from this disease, so I do know the heartbreak from it, and so yeah, it's definitely something that does need to be addressed. Yeah, right. Still a stigma a little bit in society that- Yeah. Yeah, I think so. How, you know, did a lot of patients just like, you know, get sick and never get to the hospital based on how quickly this evolves? Or is it a situation where you kind of have to get yourself to the hospital here, like it is obvious what's going on is. You know, what, what, what does a patient feel to push them to get to the hospital? And what I'm trying to get to is, you guys have. I'm sure you've looked at every little part of this trial inside out for the past couple of months, the past couple of years, probably, but especially now with the data. Is there, like, a fear where, like, maybe patients are too heterogeneous when they get to the hospital? If you're trying to treat them, it's like someone have had it for too long. Some are, you know, too short. Like, what, how does that- No. Yeah. Yeah, I think we actually. It's interesting. I mean, there were some complications of the pandemic. The pandemic overlaid this, and what we saw there was more drinking. We saw more alcohol-associated hepatitis, absolutely. But a lot of these patients weren't coming to the hospital until they were very, very ill. That's true. They were too ill to qualify for our study, and so that certainly is the case. But that being said, we showed very well, and we'll get into this more later during scientific presentations of these data, but the sicker patients actually did quite well. Where there's still a bit of a question mark out there is if you're at an end— 'cause there are two things going on here. There's alcohol-associated hepatitis, which is an acute disease. That can occur if you have cirrhosis or not, that is associated oftentimes with fatty liver and binge drinking. You can also, underlying the disease of alcohol use disorder, is chronic alcohol use disorder, where you'd have someone, let's say, my age, who's been drinking for many, many years and has cirrhosis. And if you have an end-stage cirrhotic, then that type of patient typically doesn't have really much liver left at all to try and save, or kidney. In fact, most of these patients die of kidney disease at the end of the day. But they're just so end-stage that there's really not a lot of help left for those patients. And so that's a different type of patient from an acute alcohol-associated hepatitis patient, and so. Understood. You know, and a lot of discussion before the data was about the mortality rate. Mm-hmm. This is a strange issue where if the mortality rate is too low, well, it's very hard to win on- Right ... mortality, right? So, would you say that the data that came out of the phase IIb was in line with what the literature had shown, and, you know, you're around 30% mortality at the time you were looking at it? It was. We saw it. Well, in the overall trial, we saw about 25% mortality. In the United States, it was 28%, and so that was right where one would have expected. You know, we thought it would be somewhere in the 25%-30% range. And certainly in the United States, it was dead on. I think it was slightly less outside the U.S. because of the patient population enrolled in Australia, where surprisingly there was just overall less mortality in the Australian population. And that holds up if you look at deaths per 100,000 patients, and for alcohol, not for alcohol-associated hepatitis, those data really aren't easily available, but for alcohol use disorder generally. Australians die at about half the rate of the U.S. and about a third of the rate of Europeans, for whatever reason. Okay, but I guess... So do you have the U.S. was 28. You said overall it was about 25? Mm-hmm. Right. Given there were so many more patients in the trial in the U.S.- Mm-hmm ... was it, like, do you have the number ex-U.S., what it was? Or it's like Australia was really actually too low, and it's hard to say, there's so much variability? Yeah, there's just variability, and it's small numbers of patients. I mean, you can play games and, you know, and shift and say, if these patients were here versus there, and everything else. But I think going forward, it's just simpler for us to... And we will just do this trial in the United States because the healthcare system is more homogeneous across our country. And so. And this is where, you know, we want to address the problem first. We do believe that it's got an opportunity to help patients outside the U.S., so we would extend it out there as well, certainly. There, we would then look for sites where we can get the patients dosed within, you know, 4 or 5, 3 or 4 days of diagnosis, things like that, you know, and I think do a better job of getting the medicine to the patients when they need it. But within the United States, we feel very comfortable with where we are. Doing 90-day mortality, doing it in the United States, I think, you know, we've already sketched out a trial where we think we can have 90% power with a trial that's equal to or a little bit less than in size of our current trial that we just completed, but it would be obviously one dose versus, you know, the placebo. Okay, and you're not guiding. You guided to FDA discussions in the first quarter. Absolutely. Yeah. You're not guiding to timing of, You're not saying, "We will give you guys an update in the first quarter," necessarily. It's just after. Most likely we'll be able to, but we can't say for sure, because the agency is busy, and so we, you know, we want to leave ourselves as much flexibility as possible. So, yeah. Have they been receptive overall? It just seems like this is a pretty serious problem. They truly have been. I mean, when we had our conversations around our this last trial, AHFIRM, that we just finished, the phase IIb, they communicated to us that if those data were good enough, that they would consider potentially approving the drug on that single trial. And now, obviously, you know, we have a missed primary endpoint, but we have pretty remarkable survival data from the United States and maybe fewer adverse events. And so does that allow for that? That's that, you know, slim chance that an accelerated review could be enabled from this. If not, then, you know, we would hope to have direction to put in place a pivotal trial to enable approval. Well, it's difficult for the business, but I mean, so it happens all the time that trials fail drugs versus drugs failing trials, right? It's learning. Oh, yeah. I mean, I tell my team, I mean, we have the great fortune here. Obviously, we're, you know, we're, we're in a small company right now, but we have the great fortune of having a drug that can have a huge impact on the healthcare system. This can save $ millions, excuse me, $ billions, and possibly tens of thousands of lives in the United States every year. You know, that's a very rare chance to be able to work on a drug that can do that. Do you? You know, you talked about maybe more data. Is it like EASL? Is it AASLD next year? Is that too far away, or this year? Well, yeah, we're, we're looking at that. You know, we-- I don't wanna put the cart too far in front of the horse here, but yeah, certainly EASL's coming up, and then AASLD after that. So with, with any luck, we might have something at both, you know, talking about these data. These data are the really large study conducted in this group. There have been 100-patient studies, 150-patient studies done here and there that have shown, you know, no effect, and now we've got a dramatic effect. You know, in the United States, almost 60% reduction in mortality. Globally, you know, the two doses, 35% and 41% reduction in mortality. So, and what we've learned about the healthcare system's diagnosis and treatment and approach to this disease is fascinating. I think there'll be a lot of information that comes out of this study. Then just, you know, for the ones that are, you know, in terms of paths forward here, and I don't know, Tim, if you wanna opine on this, but are, you know, partnerships discussions interesting or on the table or any color you can share there? It just seems to me that people deep in the weeds on this stuff might have seen stuff in the data at one point you could share. I just... You know, obviously you guys want color from the FDA here, but is that off the table? Is it interesting, you know, to look at that kind of path going forward to get some, you know, credibility behind the data that came out, or just any thoughts there? Yeah, we're looking at a number of paths forward for the drug, and partnerships are always on the table. Strategic transactions are, you know, constantly... You know, those discussions are ongoing from before the data to today, and, you know, no expectations necessarily that we will or will not enter into a partnership. But, you know, certainly that is one of the options that's on the table to provide capital. Regardless of the path forward for the drug, we will need to access more capital going forward. Okay, excellent. You know, in the last minute here, it's, you know, you guys are hard at work, and I'm sure this meeting is a high priority for you guys. Anything, Jim or Tim, that you guys wanna close out with, just in terms of your messaging here to investors? Well, I've been talking a lot. Tim, what would you like to say as a wrap-up here? Yeah, I think, you know, what we really want investors to be focused on is the highly effective mortality reduction in the United States, and that forming the basis for a future trial for this drug and this indication. We think it's a, it's got the life-saving potential that Jim has discussed, and it's in a very safe package as well. We see nothing concerning on the safety side. So, you know, from a druggability standpoint, we think this is clearly a, you know, this has a real strong rationale for further development, and we look forward to taking the next steps with it once the FDA responds. That's great. Yeah, it definitely seems like it, it definitely warrants a path forward. We've just gotta get all the little details out of the way here. So, well, thank you very much for joining. Hopefully, this was helpful to you guys- Mm ... and investors, and I really appreciate your time. Thank you, Frank. I appreciate it. See you.