DURECT Corporation (NASDAQ: DRRX) is a biopharmaceutical company developing therapeutics based on its Epigenetic Regulator Program and proprietary drug delivery platforms. DUR‑928, a new chemical entity in Phase 1 development, is the lead candidate in DURECT’s Epigenetic Regulator Program.
On May 2nd, 2018, DURECT Corporation (Nasdaq: DRRX) announced financial results for the three months ended March 31, 2018 and provided a corporate update. The positive highlights of the third quarter included recent progress on company’ lead internal candidate DUR-928, with its first two Phase 2 trials in different indications now underway and a third Phase 2 trial in another indication expected to commence in the third quarter of this year.
On other fronts, DDRX has economic stakes in two drug candidates that have approaching PDUFA dates. Indivior’s NDA for RBP-7000, in development for schizophrenia, has a PDUFA target action date of July 28, 2018, and Pain Therapeutics’ REMOXY ER has a PDUFA target action date of August 7, 2018.
More recently on May 9th, the company announced it has entered into an amendment to the development and commercialization agreement with Sandoz AG, a division of Novartis (NYSE: NVS), regarding POSIMIR® (SABER®-bupivacaine) in the United States. Pursuant to the amended agreement, DURECT is now eligible for up to $30 million in milestone payments based on NDA approval and remains eligible for up to an additional $230 million in sales-based milestones.
Potential key drivers – Upcoming catalysts:
On the flip side, the company recently reported that a joint meeting of the Anesthetic and Analgesic Drug Products Advisory Committee and Drug Safety and Risk Management Advisory Committee of the U.S. Food and Drug Administration (FDA) voted 14 to 3 against the approval of REMOXY® ER. The news disappointed investors as Remoxy ER is Pain Therapeutics’ lead candidate. Also, given the committee’s negative opinion on the formulation, a positive outcome from the FDA review is unlikely.
On the financial front, total revenue was $3.5 million in the first quarter of 2018 compared to $4.6 million in the first quarter of 2017. As at March 31, 2018, cash and investments were $44.3 million, compared to cash and investments of $36.9 million at December 31, 2017. Debt at March 31, 2018 was $19.8 million.
The ALZET and LACTEL product lines continue to be strongly cash flow positive for the company. Product revenue from the sale of ALZET pumps and LACTEL polymers was 2.4 million in the first quarter of 2018 compared to 4.1 million in the first quarter of 2017. Q1 2017 had been far and away the strongest quarter for LACTEL polymers shipments in the company’ history, so that set up a tough comparison. The gross margin for the combined ALZET and LACTEL product lines was 51% in the first quarter of 2018, and these product lines continue to be strongly cash flow positive for the company.
Analysts believe that DRRX has better prospects with DUR-928 and endogenous intracellular stress-hormone that has shown meaningful impacts on animal models and in single doses in human patients. All of this lends support to the overall business and operational risk profile of the company. 928 has demonstrated positive results in more than ten different animal models and has achieved reductions in important biomarkers or other signals of potential clinical activity in Phase 1a single-dose studies in NASH, psoriasis and chronic kidney disease patients. The company now have two INDs open with two Phase 2a studies underway investigating DUR-928 in PSC and acute alcoholic hepatitis.
DUR – 928, 2018 planned studies:
Notwithstanding, disappointing news regarding REMOXY ER, the company has other target indications that could put the company on a rapid growth trajectory. Anyone of the programs showing positive data in the coming months could be the next major catalysts for the company. The average twelve-month price target is $2.75, suggesting that the stock has a possible upside of 83.33%. The high price target for DRRX is $3.50, and the low-price target for DRRX is $2.00. There are currently one hold rating and two buy ratings for the stock, resulting in a consensus rating of “Buy.”
Most recent rating from the brokerage firm
About the company: Durect Corporation is a biopharmaceutical company with research and development programs. The Company’s products candidates include DUR-928, oral for metabolic/lipid disorders, and DUR-928, injectable for acute organ injuries. Its other product candidates include POSIMIR (controlled release injection of bupivacaine), REMOXY (oral controlled-release oxycodone), ORADUR-ADHD, ELADUR (controlled release injection of bupivicane), Relday (risperidone), ORADUR-based opioid (hydromorphone) and SABER-based ophthalmic.
Latest Quarter Financial position:
- Total revenues were $3.5 million, and net loss was $8.3 million for the three months ended March 31, 2018, as compared to total revenues of $4.6 million and a net loss of $8.1 million for the three months ended March 31, 2017.
- At March 31, 2018, cash and investments were $44.3 million, compared to cash and investments of $36.9 million at December 31, 2017. Debt at March 31, 2018 was $19.8 million.
Key risk factors and potential stock drivers:
- Durect recently had disappointing developments regarding Remoxy ER. The favorable outcome of the upcoming catalysts (as mentioned above) is necessary to provide a boost to the stock to retain its momentum.
- The other risk that remains is that Durect is low in cash. Also, the company presently has net level losses. Therefore, any crunch in its liquidity and financial flexibility will further impact its business & financial profile.
- Also, a next round funding could entail significant dilution for the existing shareholders.
- Biotech space in itself is a high-risk sector due to uncertainties associated with the novel drug development. Therefore, favorable outcome of the upcoming catalyst is necessary for the stock to retain its momentum. Any adversities related to the same could impinge the stock performance significantly.
- On Friday, July 20th, 2018, DRRX closed at $1.51 on an average volume of 0.74 million shares exchanging hands. Market capitalization is $244.181 million. The current RSI is 32.61
- In the past 52 weeks, shares of DRRX have traded as low as $0.75 and as high as $2.55
- At $1.51, shares of DRRX are trading below its 50-day moving average (MA) at $1.85 and near its 200-day moving average (MA) at $1.55
- The present support and resistance levels for the stock are at $1.44 & $1.58 respectively.
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