A Nov. 2 research report by Zeng for Zacks Small Cap Research indicated that DURECT Corp. (DRRX:NASDAQ) total Q3/17 revenue was $20.7 million versus $3.7 million in Q3/16, and all forms of revenue were up year over year. DURECT's reported net income for Q3/17 was $6.1 million. This compares to a net loss of $8.8 million in Q3/16.
In Q3/17, research and development (R&D) collaborations generated $5.6 million versus $0.4 million in Q3/16. "A large portion of that increase [is] related to the recognition of deferred revenue from upfront fees already received by the company," Zeng wrote.
Product revenue primarily came from the sales of ALZET pumps and LACTEL polymers, which "continue to be strongly cash flow positive for the company," Zeng indicated. That Q3/17 revenue was $2.6 million, which was lower than that in Q3/16 of $3.4 million. "Almost half of that difference related to some excipient sales in Q3/16, and there were no similar sales in Q3/17."
A new revenue source for DURECT resulted from an agreement it entered into with Indivior UK in October to purchase some of its U.S. patent rights. "This assignment may provide further intellectual property protection for RBP-7000, Indivior's investigational, once-monthly injectable risperidone product for the treatment of schizophrenia," Zeng added. As outlined in the agreement, Indivior paid DURECT $12.5 million upfront.
Zacks believes the deal is "great" for DURECT, as "it not only boosts its balance sheet but also validates the company's long-acting risperidone formulation technology."
In terms of the biotech's Q3/17 costs and expenses, cost of product sales was $3.1 million. "This was impacted by a charge of around $2M related to the company's excipients. The company took this charge given the negative POSIMIR Phase 3 results. But the company did not get rid of any of these materials. If the company is able to sell these excipients later, then at that time, the company would have revenue, but no associated cost of goods sold." Zeng explained.
R&D expense was $8.4 million, greater than that of Q3/16 at $6.8 million. This was "driven primarily by a large increase in POSIMIR Phase 3 trial expenses," wrote Zeng. Q3/17 sales, general and administrative expenses of $3.1 million compared to $3 million in Q3/16.
DURECT ended Q3/17 with "cash and investments of $41.8M," Zeng wrote, "which compared to a $33.6M at June 30, 2017 and $25.2M at December 31, 2016."
In the future, DURECT will focus on advancing DUR-928, which, out of the many candidates, Zeng said, "may be the most promising one in our view because this compound has the potential to target multiple indications including nonalcoholic fatty liver disease/nonalcoholic steatohepatitis and acute kidney injury." Currently, DUR-928 is "on track to enter Phase 2 studies, and holds great potential for long-term growth."
"We continue to be optimistic about Durect story even with the failure of POSIMIR program," Zeng noted. "If the company can show positive DUR-928 data for NASH and/or acute kidney injury in the planned Phase 2 trials, share price can easily double."
Zacks values DURECT at $6 per share; it is currently trading at ~$0.79 per share.
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