Durect Corp. (NASDAQ:DRRX)
On Monday, Durect Corp stock fell by 32% after Pain Therapeutics (PTIE) received a Complete Response Letter — CRL — from the Food and Drug Administration — FDA. The drug that received the CRL is known as Remoxy ER, and was Pain’s drug obtained through a license from Durect Corp. The FDA noted that it could not approve the drug in the current form. The reason for the rejection was cited as the FDA not being comfortable enough with the labeling of the drug, and its abuse deterrent properties.
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Investors were greatly shocked with respect to this CRL, and sent Durect’s stock trading lower by 32%. Pain Therapeutics took more of a hit with a 52% drop in its stock price. Pain Therapeutics received the CRL from the FDA, and states that it will evaluate the letter. Most importantly mentioned by the company is that it will have to run trials that satisfies the FDA’s conditions. Running such another trial will take at least one year to complete. If that was the only issue it wouldn’t be so bad, but there is another problem. That trial will cost at least $5 million to run which will greatly affect Pain Therapeutics as it attempt to bring Remoxy ER back to the FDA.
If Remoxy ER is a drug that Pain Therapeutics licensed from Durect Corp., then why did DRRX stock tank so badly? There are two reasons why this happened. Before getting into that it would be wise to explore the original license deal both companies made. About a decade ago, Pain Therapeutics decided that it wanted to license Durect Corp’s drug Remoxy ER. The agreement made was that Pain Therapeutics would gain the right to develop and commercialize the drug. In addition, it was responsible for all clinical costs associated with the drug. Durect was set to receive development and regulatory milestone payments.
This is where Durect Corp’s stock tanking comes in. Durect was set to receive a royalty up to 11.5% of net sales of Remoxy ER. That means that this revenue Durect would have made is now being delayed by at least a year. Even then, there is no guarantee that the FDA will approve on the next go around. There is another reason why Durect fell as well. The Remoxy ER drug was originally owned by Durect, and the fact that the FDA felt that the application wasn’t enough to warrant approval spooks investors. This is because it puts Durect’s pipeline into question, and maybe brings about more risk.
This is why investors decided to dump the stock even though Durect wasn’t responsible for the clinical trials. Even with this problem of a CRL, there may be some good news after all. The good news is that the FDA doesn’t have a big issue with the safety or efficacy of the drug. Instead, it just needs to see more clinical date to persuade it for approval. This is good news for both Durect and Pain investors.
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That means that the application issue can be fixed, and may be refiled by next year. While investors may have lost a lot in Durect stock there is a chance for recovery with a new NDA filing by Pain Therapeutics. There is an additional way the stock can recover, and that is dependent upon clinical trial data from the company. Durect is expected to release some clinical trial data for its drug candidate DUR-928. This drug candidate is treating patients with Chronic liver disease and acute organ injury. If the results come out positive, then there is a chance for stock appreciation from this as well.
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