DURECT Corporation is a late-stage biopharmaceutical company pioneering the development of epigenetic therapies to address serious and life-threatening conditions. The company’s lead candidate, larsucosterol, is in clinical development for the potential treatment of alcohol-associated hepatitis (AH), a severe liver condition with high mortality rates and no approved therapies.
Business Overview and History
DURECT was incorporated in the state of Delaware on February 6, 1998, as a biopharmaceutical company focused on developing novel drug delivery technologies. Over the years, the company has evolved its focus to epigenetics, the study of heritable changes in gene expression that do not involve changes to the DNA sequence, which has been a key driver of its research and development efforts.
In the early 2000s, DURECT developed its SABER delivery technology platform and received FDA approval for its first product, POSIMIR, a non-opioid local analgesic for post-surgical pain reduction. However, commercialization of POSIMIR faced challenges. The company has also explored the development of other product candidates, including PERSERIS, an extended-release injectable suspension for the treatment of schizophrenia in adults. DURECT has received milestone payments and royalties from the commercialization of PERSERIS by its partner Indivior.
Throughout its history, DURECT has manufactured and sold ALZET osmotic pumps used in laboratory research and certain excipients included in other marketed products. The company has faced recurring operating losses and challenges in securing sufficient funding to advance its research and development programs. DURECT has relied on collaborative agreements, product sales, and equity financing to support its operations, carefully managing its resources and exploring strategic alternatives to sustain its business.
Product Pipeline
DURECT’s product pipeline is anchored by larsucosterol, a new chemical entity that has demonstrated the ability to regulate lipid metabolism, stress and inflammatory responses, and cell death and survival in both in vitro and in vivo studies. The company is currently developing larsucosterol for the treatment of AH, a life-threatening acute liver condition characterized by high short-term mortality rates of 20-26% at 28 days and 29-31% at 90 days.
Larsucosterol binds to and inhibits the activity of DNA methyltransferases (DNMTs), which are epigenetic enzymes that are elevated and associated with hypermethylation in AH patients. In November 2023, DURECT reported positive topline results from its Phase 2b AHFIRM trial evaluating larsucosterol in patients with severe AH. The data showed clinically meaningful reductions in 90-day mortality, with the 30 mg and 90 mg doses of larsucosterol reducing mortality by 41% and 35%, respectively, compared to placebo. Notably, the reductions were even more pronounced in the U.S. patient population, which represented 76% of the total enrollment, with 57% and 58% reductions in the 30 mg and 90 mg arms, respectively.
Following these promising results, DURECT received Breakthrough Therapy Designation from the FDA for larsucosterol in the treatment of AH in May 2024. The company subsequently held a Type B meeting with the FDA in July 2024 and finalized the design of a planned Phase 3 registrational trial. The Phase 3 trial will be a randomized, double-blind, placebo-controlled, multi-center study to be conducted in the U.S. with approximately 200 patients with severe AH, with a primary endpoint of 90-day survival. DURECT plans to initiate the trial as soon as possible, subject to obtaining sufficient funding, and expects to have topline results within two years of trial initiation. The company estimates the cost of the Phase 3 trial to be in the range of $20 million to $25 million for external costs, plus an additional $3 million to $4 million per quarter for internal G&A expenses.
In addition to AH, DURECT is also exploring larsucosterol’s potential in treating metabolic dysfunction-associated steatohepatitis (MASH), previously known as non-alcoholic steatohepatitis or NASH.
DURECT’s pipeline includes POSIMIR, a non-opioid, sustained-release bupivacaine solution for post-surgical pain reduction, which received FDA approval in February 2021 for post-surgical pain reduction for up to 72 hours following arthroscopic subacromial decompression. POSIMIR utilizes DURECT’s innovative SABER platform technology to enable continuous sustained delivery of bupivacaine, a local anesthetic, over three days in adults. In December 2021, the company had licensed the U.S. commercialization rights for POSIMIR to Innocoll Pharmaceuticals, but on November 8, 2024, DURECT received notice that Innocoll is terminating the licensing agreement, effective May 6, 2025. DURECT is currently evaluating next steps for the commercialization of POSIMIR.
Financial Performance and Liquidity
For the fiscal year 2023, DURECT reported total revenue of $8.55 million, with a net loss of $27.62 million. Operating cash flow was negative $34.41 million, and free cash flow was negative $34.47 million.
As of September 30, 2024, DURECT had $10.5 million in cash, cash equivalents, and investments, down from $29.8 million at the end of 2023. The company reported total revenues of $1.9 million and $5.9 million for the three and nine months ended September 30, 2024, respectively, compared to $1.7 million and $5.9 million in the corresponding periods of 2023. The decrease in revenue compared to the prior year quarter was due to lower collaborative research and development revenue, partially offset by higher product sales.
DURECT’s research and development expenses decreased significantly to $2.2 million and $8.5 million for the three and nine months ended September 30, 2024, down from $7.2 million and $23.7 million in the prior-year periods. This was primarily due to lower costs associated with the larsucosterol program, as the company completed the AHFIRM trial.
Selling, general, and administrative expenses were $3.2 million and $9.3 million for the three and nine months ended September 30, 2024, down from $3.8 million and $11.7 million in the corresponding periods of 2023. The decreases were largely attributed to lower employee, professional services, and legal expenses.
Despite the cost reductions, DURECT reported net losses of $4.3 million and $15.6 million for the three and nine months ended September 30, 2024, compared to $3.0 million and $26.2 million in the prior-year periods. The company’s cash burn for the third quarter of 2024 was $5.3 million.
In terms of liquidity, DURECT had a debt-to-equity ratio of 9.67 as of September 30, 2024. The company’s cash and cash equivalents stood at $9.09 million, with a current ratio of 0.71 and a quick ratio of 0.60. DURECT has a $20 million secured term loan facility with Oxford Finance, of which $10.47 million was outstanding as of September 30, 2024.
DURECT sells its products globally, with 62% of revenue coming from the United States, 22% from Europe, 8% from Japan, and 8% from other regions in the first nine months of 2024.
As of September 30, 2024, DURECT had $10.5 million in cash, cash equivalents, and investments, which the company believes is sufficient to fund operations through the first quarter of 2025. However, the company has concluded that substantial doubt exists about its ability to continue as a going concern for at least the next 12 months, as it does not currently have sufficient capital resources to fund its planned operations, existing debt and contractual commitments, and planned capital expenditures.
Risks and Challenges
DURECT faces several key risks and challenges, including the need to secure additional funding to initiate and complete the planned Phase 3 trial of larsucosterol in AH. The company’s recurring losses, negative cash flows, and limited cash resources raise substantial doubt about its ability to continue as a going concern.
Additionally, the company’s reliance on third-party collaborators for the commercialization of certain products, such as POSIMIR and Methydur, exposes DURECT to risks related to the performance and strategic decisions of its partners. The termination of the Innocoll Agreement for POSIMIR is one example of this risk.
DURECT also faces the inherent uncertainties and risks associated with the development of pharmaceutical products, including the potential for clinical trial failures, regulatory delays, and competition from other therapies. The company’s research and development programs may span many years, and the estimation of completion dates and costs to complete these programs can be highly speculative.
Conclusion
DURECT Corporation is a late-stage biopharmaceutical company focused on developing novel epigenetic therapies to address serious and life-threatening conditions. The company’s lead candidate, larsucosterol, has shown promising results in a Phase 2b trial for the treatment of alcohol-associated hepatitis, a severe liver condition with high mortality rates and no approved therapies.
Despite recent cost reductions and revenue growth, DURECT faces significant challenges, including the need to secure additional funding to initiate and complete the planned Phase 3 trial of larsucosterol. The company’s recurring losses, negative cash flows, and limited cash resources raise substantial doubt about its ability to continue as a going concern. Navigating these financial and operational hurdles will be crucial for DURECT as it seeks to advance its pipeline and potentially bring transformative treatments to patients in need.
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