2023-04-03 08:55:43 ET
Summary
- DRRX is a forever laggard company.
- In 2021, I noted its strong phase 2a data.
- There's phase 2b data this year, but the market is completely ignoring this stock.
More than two years ago, when I last covered DURECT Corporation ( DRRX ), I noted that DUR-928 produced impressive data in Alcoholic Hepatitis patients. However, I also noted that this was from a phase 2a trial, and data from the larger, potentially registrational phase 2b trial was two years away. Well, two years have passed, and a lot of changes have happened to DURECT - which are mostly bad. I have heard that they are now finally planning to topline this phase 2b trial soon. Interestingly, no one else has covered this name on Seeking Alpha in the last two years. Time to take another look, I think.
The phase 2b trial in subjects with Alcohol-associated Hepatitis to evaluate safety and efficacy of larsucosterol (DUR-928) treatment (AHFIRM) was started in January 2021 and estimated primary completion date was September 2023. This was planned as a randomized, double-blind, placebo-controlled, multi-arm trial in 300 patients. Two doses of DUR-928 were tested, 30mg and 90mg. The primary endpoint was the difference in 90-day mortality or liver transplant between the various groups.
In the phase 2a trial earlier, we saw that DUR-928 was able to significantly improve the mortality rate in patients over a 28-day period compared to historical rates. There was a 150mg dose in the phase 2a, which is not being used in the 2b. This is because there was a 100% treatment response rate (Lille score <0.45) in patients receiving 30 or 90 mg doses, while the 150mg dose produced a lower response rate. Other metrics like bilirubin were also reduced significantly by the drug.
In their latest earnings call , the company announced that they remain on track to announce topline results from the Phase 2b trial in the second half of this year. They will have completed enrolment by June, and have already dosed 260 of the targeted 300 patients. They plan to complete dosing by the middle of the year and announce topline data by the end of 2023. They also clearly mention that:
If successful, we believe AHFIRM has the potential to support an NDA filing.
Now, they said in their last earnings call that they dosed some 200-odd patients. So that is 60 patients in 3 months. Now they hope to enroll 40 more patients in the next 3 months. It is not an unrealistic estimate. There is considerable chance of success in this trial because it closely follows the design of the phase 2a trial, with some changes based on trial outcome.
There are some 60 enrolment sites across the United States, Australia, the E.U. and the U.K. AH is a disease with no approved therapies, and the company estimates that more than 100 US patients die from AH every day. The key opportunity statement is this:
AH continues to represent a significant cost burden to both patients and the health care system. For the vast majority not receiving a transplant, the average cost of treating a hospitalized AH patient can range from approximately $50,000 to approximately $150,000. For those patients who receive a liver transplant, the average cost is approximately $875,000 per transplant in the United States, and these patients are subject to a lifetime of immunosuppression.
Financials
DRRX has a market cap of $106mn and a cash balance of $44mn as of December. They had about $3.3mn in revenue. In February, they raised some $8.8mn through a secondary. Last year, they spent some $55mn in total operating expenses, so, if that rate continues, they have just enough cash to last them a year. Expect a large dilution if the data is good.
DRRX has a large retail ownership, who hold 60% of the stock. There is no large institutional ownership.
The company launched POSIMIR in September 2022. This is a legacy pain medication. US rights have been sold to Innocoll.
Bottom Line
From one perspective, DRRX looks so investible. They have strong phase 2a data, an upcoming data catalyst, a potential registrational trial, and so on. On the other hand, in November, they had to do a 10:1 reverse stock split to survive on NASDAQ. They are also low on cash. For the last two years, there's been very little activity at the company in terms of press releases and so on. Considering all these, I will stay on the sidelines.
For further details see:
Durect: Upcoming Catalyst, Strong Previous Data, Market Does Not Care