President and CEO: Jim Brown
WSA: Good day from Wall Street. This is Juan Costello, senior analyst at the Wall Street Analyzer. Joining us today is Jim Brown, president and CEO of Durect Corporation. The company trades on NASDAQ, ticker symbol is DRRX. Thanks for joining us today there, Jim.
Jim: Thank you, Juan. Appreciate it.
WSA: Great. So starting off, please give us a history and overview of the company for some of our listeners there that didn’t catch our interview the last go-around.
Jim: Sure. To begin with, I should mention that I’ll make forward-looking statements during this interview, so I’d encourage all listeners to review our SEC filings carefully to understand the risks associated with our business. For many years, the focus at DURECT has been to develop drugs using our drug delivery technology. As a result we have a number of later-stage programs. Two of these programs are at the NDA stage and have received complete response letters. The first late stage program is REMOXY which is nearing resubmission projected for the first quarter of next year. The second late stage program is POSIDUR – we’re working on initiating a final Phase 3 trial to be able to resubmit the NDA. We also have a number of earlier stage projects. What’s really been transformative for Durect this year has been the announcement of a new program on March 2nd of this year. This new program is an epigenomic regulator program, which has allowed DURECT to grow into a biotechnology company with a focus on new chemical entities. Our epigenomic regulator program has discovered DUR-928, a naturally existing, endogenous hormone in the body, which was previously unknown, and it allows for a wonderful therapeutic opportunity for a number of diseases.
WSA: Great. And can you talk about some of the exciting positive results there from DUR-928?
Jim: I’d love to. DUR-928 is the lead molecule from our epigenomic regulator program, which is a program we’ve been working on in conjunction with Virginia Commonwealth University for about three and a half years. It’s been a program we’re working on in the background while we’ve continued to develop our drug delivery pipeline of products. We’ve kept very quiet — we think it’s a major discovery, and we wanted to make sure that we were able to lay down a strong patent position. We actually have six patent families going forward for the program. DUR-928 is one of a family of endogenous molecules that have been discovered and that we are advancing. DUR-928 is a major regulator of energy, lipids within our body, inflammation, and also cell-survival. Just to give a brief outline of what DUR-928 can mean for patients, first of all, from a class standpoint, it is a new class of steroid hormones that appears to have a very wide safety margin. We’ve been able to give a lot of this compound to normal animals and to normal people in Phase 1 and we’ve seen really no changes at all. In humans, you and I all walk around with just a few nanograms of this in our blood every day.
We’ve dosed the subjects in our Phase 1 trials with enough DUR-928 to achieve 100 to as much as 200 or 300 times normal plasma concentrations of DUR-928 and have seen no treatment related adverse events. In our animal toxicology studies, we’ve dosed to achieve 1000 times or more the natural plasma concentration and seen no changes at all. Yet when we dose animals in various disease models, we see dramatic positive changes. The effects of DUR-928 are quite impressive, and I’ll go through some of those right now. DUR-928 is involved with energy and metabolism. It inhibits cholesterol synthesis more broadly than statins. Statins inhibit the first enzyme in cholesterol synthesis. There are five others enzymes in the cholesterol synthesis cascade. DUR-928 inhibits all six enzymes. DUR-928 inhibits the synthesis of triglycerides. DUR-928 inhibits bile acid and fatty acid synthesis, very similar to what is seen with bile acid analogues that Intercept and Gilead are working on. Gilead is working with a company called Phenex. They have bile acid analogues that they’ve modified that are able to inhibit bile acid and fatty acid synthesis; DUR-928 can do that as well. DUR-928 inhibits lipid absorption by inhibiting a protein called MTP, similar to a product called Lomitapide. Lomitapide was recently approved to treat children with very high cholesterol, an orphan indication. Unfortunately, about 28% of Lomitapide patients can end up with high cholesterol in their liver as a result of taking the medication. DUR-928 reduces fats in the liver. DUR-928 is able to inhibit an enzyme called PCSK9, and it can be given orally – this is an enzyme that’s part of the process of regulating the amount of cholesterol circulating in plasma. A number of large pharma and biotech companies are making monoclonal antibodies to inhibit PCSK9. DUR-928 is able to inhibit inflammation by down-regulating TNF alpha, COX-2 and other inflammation mediators. DUR-928 enhances bile acid secretion. It enables us to get rid of excess energy by secreting more bile. It improves insulin sensitivity and glucose tolerance. We have a consultant, who’s one of the coauthors for a chapter in the pharmacology book called Goodman and Gilman. He’s and MD/PhD and has been a key researcher in the area of cholesterol control and the like for over thirty years. He’s been our consultant on this molecule for two years and is very excited about it. He’s told me it’s the most interesting molecule he’s seen in more than 30 years. One of the things he loves about DUR-928 is its capacity to improve insulin sensitivity and glucose tolerance. And DUR-928 does all of this, and it occurs in the body naturally.
Working on DUR-928 is an amazing opportunity and one that should be to be able to make a big difference. I first learned about DUR-928 from studies that were done in mice. The mice were fed either a regular diet or a high fat diet for ten weeks. The mice that were fed a high fat diet ended up becoming overweight. Then the animals were treated with either a placebo or DUR-928. The ones who were on a normal diet that received placebo had, of course, normal looking livers and normal metabolic profiles. The animals that were fed the high fat diet for ten weeks were then treated with either the placebo or DUR-928 for six weeks while being maintained on that high fat diet. The animals that received placebo ended up with fatty livers, they had a lot of triglyceride and cholesterol accumulating in their livers, and a whole host of other things that occur from fatty liver disease. In the DUR-928 animals, we didn’t see this at all. In fact, if one looks at the histology, the livers look basically normal. With DUR-928 you didn’t see fat accumulating in the liver. We saw a statistically significant improvement in insulin sensitivity, glucose tolerance, reduction in the liver triglycerides and cholesterol, and also a statistically significant reduction in ALT and AST, the enzymes that are associated with the death of liver cells. We also saw a statistically significant reduction in plasma cholesterol.
Very impressive data and all of this is from a naturally occurring molecule. We’re actually developing DUR-928 in two different programs. The first program we’re pursuing is an injectable form for acute organ injury, and I’ll get into more about that in a minute, and the second program uses an oral formulation for chronic metabolic diseases such as lipid disorders, things like non-alcoholic fatty liver disease, or NAFLD, or NASH, non-alcoholic steatohepatitis, and a host of various orphan diseases.
If we think about an endogenous molecule, what does that mean? It means it’s a molecule that naturally occurs within our bodies. There have been a number of endogenous molecules that have become very important medicines. Examples include insulin, corticosteroids, thyroid hormone, growth hormone, and the like. Those have all become very important medicines that help a lot of people. And DUR-928 is in that same vein. I can go into more detail. How would you like to do it? Would you want to ask a few questions?
WSA: Yeah, well talk about some of the other uses and applications and some of the key trends that you’re focused on right now in the sector, how you’re using some of those applications to look at future trends.
Jim: Okay. Good idea. What we see with DUR-928 is it inhibits certain key enzymes that have biochemical influence that lead us to believe that we should have great activity in the treatment of chronic liver disease and acute organ injury. The fascinating thing about DUR-928 is how it works. It is a regulator that’s in a new field of science, epigenomics. It’s a molecule that goes into the nucleus of a cell and binds to a protein that influences the expression of various genes. DUR-928 inhibits the performance of a number of nuclear receptors without actually binding to them because it binds to a protein that functions above or upstream. I think that’s one of the reasons why we have seen no side effects so far. I’m sure at some point, we’ll see something. But so far, it’s been amazing.
We have three models that investigate the potential of DUR-928 in acute injury. These are a liver injury model, an endotoxin shock model, and an ischemia model, or cutting off blood supply to the kidney, model. We have three chronic disease animal models. The first one is the high fat mouse diet model, which I described earlier. The next was a high fat hamster model, and the third is a NAFLD/NASH model in mice.
I’ll go through these starting with the chronic use models, these represent the oral use indications. The first was that high fat mouse model, already described. The next model we tested is hamsters because hamsters handle cholesterol much more similarly to humans than do mice. The hamsters were fed a high fat diet for ten weeks, and one could see a dramatic increase in the fats accumulating in the liver. These animals were then treated for six weeks with DUR-928 while being maintained on the high fat diet. The results were a dramatic statistically significant reduction in fat accumulation in liver and more normal liver morphology.
We next tested DUR-928 in a non-alcoholic steatohepatitis model, or a NASH model, in Japan. This is a well respected NASH model and group in Japan that conducted the study. The study is conducted in mice that have a damaged pancreas, so they are diabetic mice that are then fed a high fat diet. Over a number of weeks, the mice end up developing initially non-alcoholic fatty liver disease, and then non-alcoholic steatohepatitis, and eventually cirrhosis, and finally hepatic carcinoma. The mice in this model were treated with DUR-928, and in four weeks the DUR-928 treated mice demonstrated a dramatic reduction in the fibrosis and cirrhotic changes in the liver, when compared to the group treated with placebo. The DUR-928 treated mice demonstrated a statistically significant reduction in liver fibrosis. We also saw a statistically significant reduction in their NASH scores. The people who run this lab told us they have tested over 180 molecules, and they wouldn’t give us an exact number, but they said this is definitely in the top five of everything that they had tested. They were quite impressed.
So we have three models, the mouse, the hamster, and the NASH model for chronic use. The various genes that are influenced by this drug led us to investigate its potential for the treatment of acute organ disease.
We evaluated the effect of DUR-928 in a mouse model of acetaminophen and alcohol toxicity. In this case, these mice were given a lethal dose of acetaminophen and ethanol, a very high dose. These animals were then given injections of either DUR-928 or placebo. 90% of the animals that received the vehicle died while 90% of the animals that received DUR-928 lived. DUR-928 was able to protect the animals from the toxicity of a very high dose of acetaminophen and ethanol.
We next tested DUR-928 in mice against endotoxin. This model is designed to mimic endotoxic shock. In this case, the animals were treated with just a single shot of DUR-928 versus the vehicle. 60% of the vehicle treated animals died within three days, while 100% of the DUR-928 treated animals lived. At three days post exposure to endotoxin, the DUR-928 group had 100% living versus only 40% of the vehicle group.
DUR-928 had demonstrated the ability to protect against both acute biological and acute chemical organ injury. The next question was, how would it do protecting against restriction of blood flow to an organ? To better understand this, we worked with a physician who’s done a lot of work in the area of organ transplant and ischemia. He has a model where he takes rats and restricts the blood flow to one kidney for almost an hour. He then restores the blood supply to the now ischemically damaged kidney and removes the good kidney, forcing the animals to survive on the damaged kidney. He’s been doing this model for about 30 years. He’s been associated with getting drugs approved to help organ transplantation. He told us that the DUR-928 data were the best he has seen in this model and that DUR-928 performed better than his positive control. We saw a statistically significant reduction in creatinine, which reflects the function of the kidney — it was an improvement of about 2.4 milligrams per deciliter.
The importance of kidney protection would be the potential to protect cardiovascular patients who have surgery from kidney damage. Patients who have cardiovascular surgery have shown greater mortality when they have an increase of serum creatinine of 0.5 milligram per decileter or more. There is nothing out there today that is approved to protect kidneys in this situation. We’re very fortunate to have a molecule, a naturally occurring molecule, that when dosed in animals that undergone some damage, can help treat high fat, treat non-alcoholic steatohepatitis, or NASH, treat chemical injury, biological injury, and blood flow injury. It offers the opportunity potentially make a significant improvement to patients’ lives. We’re going to pursue this molecule for oral use in NAFLD/NASH and a number of the chronic orphan indications. We will also pursue the injectable formulation for acute kidney injury after surgery and other acute organ damage. We’ve completed two different Phase 1 trials, and have seen no adverse safety signal.
WSA: Well, good. And what key goals and milestones are you hoping to accomplish here over the course of the next six to 12 months?
Jim: Certainly, we announced the program after three and a half years of working on it, when we felt we had a stronger patent position. We wanted to make as much progress as we could as quietly as possible. We now have six patent families going forward. We had expected to start the multiple-dose Phase 1, for the oral indication, in the middle of the year. We actually were able to start it in March and reported the data on Monday of this week. So we now have completed the multiple ascending dose Phase 1 for the oral program. The next steps for the program will be to start doing Phase 2 work, which we expect to be next year. We’re going to spend the remainder of this year picking through the various indications, because there are a number of different indications, both on the orphan side and of course NASH and some others where we can apply the drug. We’re working with thought leaders to make our selection for our Phase 2 work. The other half of this program is the injectable program for the treatment of acute organ damage. We expect to be starting the single ascending dose Phase 1 in the second half of the year, and the multiple ascending dose hopefully in the fourth quarter and with those data in hand, to start the Phase 2 for the injectable program in 2016. So 2015 is going to be Phase 1 for the oral and injectable, and then Phase 2 for these programs in 2016.
WSA: Great. And so as far as investors in the financial community, do you believe that the Durect story, and your message, and upside are starting to catch on with them? And if not, what do you wish investors better understood about you guys?
Jim: I think they’re starting to see a change. We’ve certainly seen a dramatic increase of the stock this year with the progress on our drug delivery programs, and on the announcement of DUR-928, we’ve seen the stock substantially increase in value this year. It’s gone from below a dollar to about $2.30 right now. With the wonderful opportunities we have in front of us, I think there’s a long way for it to go. We have all the good work I just described around DUR-928, we also still have wonderful opportunities with POSIDUR and Remoxy, and a number of other programs here. Just as a quick reminder, POSIDUR is a product that’s put into the wound at the time of closure after surgery. Once approved it would be a competitor to the Exparel product from Pacira. Pacira has been quite successful with their product. They have a 24-hour product, whereas we hope to have POSIDUR approved based on efficacy for three days. Ours will be a little bit easier to apply in that you just squirt it in the wound instead of injecting it around the wound. What POSIDUR would require is one more trial, that we hope to initiate this Fall. We are also in discussions with a number of potential commercial partners for POSIDUR so there’s a possibility that we could put a deal in place, which would be a great milestone for the product, a nice way to bring in some additional cash, and also to help prep the commercial market as we get ready for resubmission and potential approval of that product.
Remoxy is an abuse-deterrent version of oxycodone, this product is controlled by our licensee, Pain Therapeutics. They recently announced that they expect to resubmit that product in the first quarter of next year. This product offers a large potential market opportunity – Oxycontin, the lead product in this space, had sales of over $2 billion in the US in 2014. So we expect that Remoxy should do very well. It’s a hard gel-cap versus the tablets that are out there today, and Remoxy is based on our ORADUR technology, which makes it much more difficult to crush and snort. In fact, it’s like Vaseline, it can’t be snorted. If one tries to inject it, it’s too viscous to be injectable. If you try to smoke it or chew it, it’s much more difficult, and probably most importantly from an abuse standpoint, if you mix it with alcohol, it doesn’t dose dump – it comes out much more slowly. So it’s a safer way to be able to deliver this drug. It’s a nice opportunity for us.
Behind those two programs we have a once a month injectable of Risperidone called Relday with our partner Zogenix. They’re doing a multi-dose Phase 1 trial this year. From there, it can go into Phase 3. Their plan is to have an end-of- Phase 2 meeting with the FDA in early 2016, and then be ready to start Phase 3 for that program. That’s quite an exciting product for schizophrenics because it’s something that the doctor can give – it’s a small injection under the skin that will allow for a full month of controlled dosing for the patient. Behind that, we signed a deal at the beginning of this year with Santen to deliver a drug to the eye for a chronic eye condition that we haven’t been able to describe yet, but it’s quite an exciting opportunity for long long-term delivery, and a number of other earlier stage products. So the drug delivery business is very healthy, growing nicely, nice opportunities that we think will provide great revenue opportunities for Durect. Then we have, obviously, the wonderful opportunities, not only with DUR-928, but it’s one of a family of molecules. We have a number of these endogenous molecules that we’ve discovered that we think have the potential to really make a difference.
WSA: Well, good. And once again, joining us today is Jim Brown, president and CEO of Durect Corporation. The company trades on NASDAQ, ticker symbol DRRX, currently trading at $2.35 a share. Market cap is around $285 million. And before we conclude here, to recap some of your key points, why do you believe investors should consider the company as a good investment opportunity today?
Jim: A great question, thanks Juan. I think the reason to look at Durect is basically the two components of our business – the drug delivery side, and the new chemical entity side with DUR-928. DUR-928 offers an amazing opportunity in the area of NASH and orphan diseases, and we’ll see that advance nicely this year and into next year into Phase 2. So you’ve got the potential of a biotech company with an endogenous molecule that appears to have tremendous upside and then you’ve got the floor of POSIDUR, Remoxy, Relday and the Santen program. These projects have been through the drug development process with tremendous upside value. You’ve got POSIDUR that can compete with Exparel; you’ve got Remoxy that can compete with Oxycontin. We’ll see possibly the Remoxy NDA resubmitted in the first quarter next year, followed by a six month FDA review. That product could be on the market in the second half of 2016. For POSIDUR, there’s a nice opportunity to start that final trial this year, a potential deal to follow. So we think there are a lot of drivers, not only from the DUR-928 side, but also from the drug delivery side that will strengthen our company over time.
WSA: Well, we certainly look forward to continuing to track the company’s growth and report on your upcoming progress. We’d like to thank you for taking the time to join us today, Jim, and update our investor audience on DRRX. It’s always good to have you on.
Jim: Well, thank you so much, it was great talking to you.