Analysts Keep Focus on DURECT's DUR-928


The FDA's recent Complete Response Letter for Remoxy, which is licensed by DURECT to Pain Therapeutics, has not changed the view of several analysts who follow DURECT. They are focused on DUR-928 for NASH and impaired kidney function, indications that are of great interest to Big Pharma.

On Sept. 26, DURECT Corp. announced that Pain Therapeutics received a "Complete Response Letter (CRL) from the FDA for Pain Therapeutics' New Drug Application (NDA) for REMOXY ER (oxycodone) extended-release capsules CII. Based on its review, the FDA has determined that the NDA cannot be approved in its present form and specifies additional actions and data that are needed for drug approval." DURECT would receive royalties of 6.0% to 11.5% of net sales from Pain Therapeutics.

Pain Therapeutics notes that the "CRL specifies additional actions that are needed in order to obtain approval of REMOXY ER with label claims against three routes of abuse (i.e., injection, inhalation and snorting). These actions may take approximately a year to conduct and may cost approximately $5MM, pending discussions with the FDA and outside clinical/regulatory consultants."

Analyst Jim Molloy of Laidlaw & Company, in a Sept. 30 research report, states that the FDA's action pushes back approval of Remoxy until 2019 at the earliest, and he maintains a Buy on DURECT. He notes DURECT's other programs remain on track: "DUR-928 is still expected to read out Phase 1 data in 4Q16 for both liver (NASH) and kidney, and Posimir remains on track for 4Q17 Phase 3 data on post-surgical pain relief. "He places a target price of $3.00 on DURECT, explaining, "Our price target is based on a sum-of-the-parts analysis with the Remoxy royalty at $0.50/share, the Posimir royalty at $1.00/share, DUR-928 at $1.00/share, and net cash (end-2017) tech & legacy polymer business valued at $0.50/share."

Rodman and Renshaw also is maintaining its Buy recommendation on DURECT. Analyst Raghuram Selvaraju, in a Sept. 27 report, states, "In the wake of this update, we have shifted our projection of the time frame for REMOXY commercialization from 2016 to 2018, and adjusted our price target of DURECT shares to $3.50 from $4 per share, while maintaining our Buy rating." He calls attention to DUR-928, which is being "tested in two Phase1b safety and pharmacokinetic (PK) trials in patients with NASH and impaired kidney function, respectively, in Australia. Both trials of DUR-928 are expected to be completed in 2016." Selvaraju adds, "We continue to expect positive readouts from DUR-928 trials considering the drug's multiple levels of mechanism of action."

Selvaraju also notes "DURECT's locally acting controlled-release formulation of bupivacaine for post-operativepain, POSIMIR, is being tested in the Phase 3 PERSIST study in patients undergoing laparoscopic cholecystectomy (gallbladder removal). . . We continue to expect positive data from this pivotal study."

Veteran investor Chen Lin, who writes the popular What is Chen Buying? What Is Chen Selling? newsletter, also remains confident. In a Sept. 28 letter, Lin writes, "Now I have a full [stock] position ahead of the important results of 928 phase 1. If they can show impressive results as they did in the animal trial, major pharma will be jumping in to partner with them big time. I invested in DRRX because of the 928, not the pain killer."

Leonard Yaffe of healthcare hedge fund Stoc*Doc Partners/Kessef Capital Management says, "My enthusiasm for DUR-928 is undeterred. DUR-928's success is totally unrelated to Remoxy." In a Sept. 16 note he states, "My positive opinion of DRRX relates to its Phase 1 drug, DUR-928, which is being studied for NASH and acute kidney injury. This is a high risk/high reward opportunity that if successful, should be worth $30 per share in incremental value (vs. analyst estimates of $0.50-$1.00)."

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1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
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