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TICKERS: DRRX

Biotech Launches Trial Dosing Against Backdrop of Strong Balance Sheet
Research Report

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Four analysts provided updates regarding the status of this firm's financials and one of its clinical programs.

A March 2 research note indicated that DURECT Corp. (DRRX:NASDAQ) began dosing patients in its Phase 2a trial evaluating DUR-928 as a treatment for primary sclerosing cholangitis (PSC), "for which there is no established medical treatment," wrote Grant Zeng, an analyst with Zacks Small-Cap Research. As such, DURECT has received, from the FDA, orphan drug designation for its compound in treating this disease.

Zeng relayed that in this randomized, open-label study, two cohorts of 20 patients each will receive DUR-928 orally for four weeks. One cohort will be administered 10 mg, the other, 50 mg. A second round of similar dosing will follow for an additional four weeks.

Zacks has a $6 per share price target on DURECT.

Patrick Dolezal, an analyst with LifeSci Capital, explained in a Feb. 27 report, that the primary goals of the trial are to evaluate safety and changes in the participants' serum alkaline phosphatase levels. Secondarily, fluctuations in their liver enzyme levels and other biomarkers will be assessed.

He concluded, "The open-label design of this study may help patient recruitment and allows for interim data looks, which are expected in 2018."

Dolezal then summarized the comments of key opinion leader Dr. Keith Lindor, professor of medicine at the Mayo Clinic, made during his presentation on PSC to DURECT. Lindor explained that "PSC is a liver disease associated with reductions in the flow of bile acids, known as cholestasis, and is characterized by inflammation and fibrosis of the bile ducts." Co-morbidities include irritable bowel disease, and colon and hepatobiliary cancers. PSC can evolve into serious problems, such as cirrhosis, hepatocellular carcinoma or liver failure. "There are currently no recommended therapies for PSC, and the treatment landscape remains wide open," Dolezal reiterated. "Novel treatment options for PSC are greatly needed."

Instead, PSC patients are typically monitored for progression, Lindor said, via blood tests for liver function, colonoscopies for colon cancer, and ultrasound for bile duct or liver cancer. Because physicians tend to mostly use noninvasive tests for following these individuals, the potential for underdiagnosing exists, he added. For DURECT and other companies developing therapeutics for PSC, "this is beneficial, as a simple shift in diagnostic modality (to include imaging modalities) may increase the size of the total addressable market," Dolezal noted.

Finally, Lindor said it's likely that for conditional approval of PSC therapies, noninvasive endpoints could be used, such as stability of or improvement in fibrosis and/or normalization of alkaline phosphatase levels.

Ed Arce, an analyst with H.C. Wainwright & Co., noted in a March 6 report that when "we downgraded DRRX shares to Neutral in October 2017 on the Phase 3 failure of then lead pain drug Posimir (bupivacaine ER depot), we noted a lack of clarity on meaningful value creation from pipeline programs RBP-7000, REMOXY ER and DUR-928, as well as our uncertainty around near-term catalysts. We also noted poor investor sentiment on the name given how the shares had come to depend on the prospects of Posimir. Now, nearly six months later, we believe much progress has been made on all these fronts. "

"DURECT's lead development asset is now DUR-928, its novel first-in-class endogenous epigenetic regulator," Arce noted. "Given our favorably view on the prospects of DUR-928 in PSC and multiple near-term catalysts, we raise our rating on DRRX shares to Buy," he added.

H.C. Wainwright raised its target price on DURECT to $3.50 a share.

Analyst Francois Brisebois, in a March 2 research note, reported DURECT Corp.'s Q4/17 financial results and indicated Laidlaw & Co. raised its price target on the company to $2.50 from $2 per share. Its rating on the life sciences firm is a Buy.

DURECT's earnings per share in Q4/17 of $0.05 was "mostly in line" with Laidlaw's estimate of $0.06, Brisebois said. Reported revenue was $19.5 million compared to an expected $3.5 million, but the majority, about $15.4 million of it, was "deferred revenue from the $20M upfront payment in the Sandoz agreement."

As of Dec. 31, 2017, the biotech had $36.9 million in cash and investments, which "should enable it to complete its three Phase 2 trials" involving DUR-928, concluded Brisebois.

Overall, Brisebois noted that this year is "crucial," and news flow from the company should be heavy. Upcoming catalysts include PDUFA dates for Remoxy (Aug. 7, 2018) and RBP-7000 (July 28, 2018) along with potential oral and injectable Phase 2a results by year-end in PSC and alcoholic hepatitis. "We see 2018 as far from dull," he commented.

In Zeng's research piece, he wrote that the biotech "exited 2017 with a strong balance sheet," adding that "we continue to be positive about the DURECT story." He provided more financial details for Q4/17. Net income was $8.2 million compared to -$2.8 million the year before.

Revenue from research and development collaborations was $16.3 million versus $0.7 million in Q4/16. Similarly, revenue from product sales, mostly Alzet pumps and Lactel polymers, was up year over year, to $3.3 million in Q4/17 from $2.8 million.

DURECT Corp. is currently trading at around $1.68 per share.

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Disclosures from Zacks Small-Cap Research, DURECT Corp., Mar. 2, 2018

ANALYST DISCLOSURES I, Grant Zeng, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report. I believe the information used for the creation of this report has been obtained from sources I considered to be reliable, but I can neither guarantee nor represent the completeness or accuracy of the information herewith. Such information and the opinions expressed are subject to change without notice.

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SCR Analyst compensation is not, was not, nor will be, directly or indirectly, related to the specific valuations or views expressed in any report or article.

Disclosures from LifeSci Capital, DURECT Corp., Feb. 27, 2018

Analyst Certification: The research analyst denoted by an "AC" on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an "AC" on the cover or within the document individually certifies), with respect to each security or subject company that the research analyst covers in this research, that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or subject companies, and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

DISCLOSURES This research contains the views, opinions and recommendations of LifeSci Capital, LLC ("LSC") research analysts. LSC (or an affiliate) has received compensation from the subject company for producing this research report. Additionally, LSC expects to receive or intends to seek compensation for investment banking services from the subject company in the next three months. LSC (or an affiliate) has also provided non-investment banking securities-related services, non-securities services, and other products or services other than investment banking services to the subject company and received compensation for such services within the past 12 months. LSC does not make a market in the securities of the subject company. Neither the research analyst(s), a member of the research analystís household, nor any individual directly involved in the preparation of this report, has a financial interest in the securities of the subject company. Neither LSC nor any of its affiliates beneficially own 1% or more of any class of common equity securities of the subject company.

Disclosures from H.C. Wainwright & Co., DURECT Corp., March 6, 2018

I, Ed Arce, certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.

None of the research analysts or the research analystís household has a financial interest in the securities of DURECT Corporation (including, without limitation, any option, right, warrant, future, long or short position).

As of February 28, 2018, neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of DURECT Corporation.

Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.

The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.

The Firm or its affiliates did not receive compensation from DURECT Corporation for investment banking services within twelve months before, but will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.

The Firm does not make a market in DURECT Corporation as of the date of this research report.

Disclosures from Laidlaw & Co., DURECT Corp., Company Report, March 2, 2018

ANALYST CERTIFICATION The analyst responsible for the content of this report hereby certifies that the views expressed regarding the company or companies and their securities accurately represent his personal views and that no direct or indirect compensation is to be received by the analyst for any specific recommendation or views contained in this report. Neither the author of this report nor any member of his immediate family or household maintains a position in the securities mentioned in this report.

Laidlaw & Co (UK) Ltd. has not provided any investment banking services for the company (ies) mentioned in this report over the last 12 months.

As of the date of this report, neither the author of this report nor any member of his immediate family or household maintains an ownership position in the securities of the company (ies) mentioned in this report.

Associated persons of Laidlaw & Co (UK), Ltd not involved in the preparation of this report may have investments in securities/instruments or derivatives of securities/instruments of companies mentioned herein and may trade them in ways different from those discussed in this report. While Laidlaw & Co (UK), Ltd., prohibits analysts from receiving any compensation. Bonus or incentive based on specific recommendations for, or view of, a particular company, investors should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest.




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