Durect Corp. (DRRX) filed Quarterly Report for the period ended 2009-09-30.
Durect Corp. is pioneering the treatment of chronic diseases and conditions by developing and commercializing pharmaceutical systems to deliver the right drug to the right place in the right amount at the right time. Its pharmaceutical systems combine engineering innovations and delivery technology from the medical device and drug delivery industries with its proprietary pharmaceutical and biotechnology drug formulations. Durect Corp. has a market cap of $173.44 million; its shares were traded at around $2.11 with and P/S ratio of 6.68.
Highlight of Business Operations:
Since our inception in 1998, we have had a history of operating losses. At September 30, 2009, we had an accumulated deficit of $305.3 million and our net losses were $5.5 million and $21.7 million for the three and nine months ended September 30, 2009. Our net losses were $43.9 million, $24.3 million and $33.3 million for the twelve months ended December 31, 2008, 2007 and 2006, respectively. These losses have resulted primarily from costs incurred to research and develop our product candidates and to a lesser extent, from selling, general and administrative costs associated with our operations and product sales. We expect our research and development expenses to increase in the near future as we expect to continue to expand our nonclinical studies, clinical trials and other research and development activities as well as to incur additional stock-based compensation costs related to research and development personnel. We expect selling, general and administrative expenses to remain comparable in the near future. We do not anticipate meaningful revenues from our pharmaceutical systems, should they be approved, for at least the next twelve months. Therefore, we expect to incur continuing losses and negative cash flow from operations for the foreseeable future.
We received a $10.0 million upfront fee in connection with the license agreement signed with Endo in March 2005 relating to TRANSDUR-Sufentanil. The $10.0 million upfront fee was recognized as revenue ratably over the term of our continuing involvement with Endo with respect to TRANSDUR-Sufentanil. For the three and nine months ended September 30, 2009, we recognized zero and $875,000, respectively, in collaborative research and development revenue related to this upfront fee, compared to $547,000 and $1.6 million for the corresponding periods in 2008. Our estimate of the remaining term of our continuing involvement was adjusted in the fourth quarter of 2008 as a result of Endo’s termination notice received by us in February 2009. The $10.0 million upfront fee from Endo has been fully amortized as of September 30, 2009.
We also received a $14.0 million upfront fee in connection with the development and license agreement with Nycomed in November 2006 relating to POSIDUR. The $14.0 million up-front fee is recognized as collaborative research and development revenue ratably over the term of our continuing involvement with Nycomed with respect to POSIDUR. For the three and nine months ended September 30, 2009, we recognized $381,000 and $1.1 million, respectively, in collaborative research and development revenue related to this upfront fee, compared to $763,000 and $2.3 million for the corresponding periods in 2008. Our estimate of the remaining term of our continuing involvement was adjusted in the first quarter of 2009 as a result of an updated development plan for POSIDUR in Europe.
Cost of revenues. Cost of revenues was $2.8 million and $4.5 million for the three and nine months ended September 30, 2009, respectively, compared to $870,000 and $2.7 million for the corresponding periods in 2008. The increase in the cost of product revenue in the three and nine months ended September 30, 2009 was primarily the result of recognizing $2.0 million of cost of goods sold for the sale of excipients to King, partially offset by lower units sold from our ALZET mini pump product line and improved manufacturing efficiency from our LACTEL polymer product line. Cost of product revenue and gross profit margin will fluctuate from period to period depending upon the product mix in a particular period. Cost of service contract revenue was $3,000 and $9,000 for the three and nine months ended September 30, 2009, respectively, compared to $8,600 and $27,600 for the corresponding periods in 2008. Stock based compensation expense recognized related to cost of revenues was $91,000 and $286,000 for the three and nine months ended September 30, 2009, respectively, compared to $44,000 and $110,000 for the corresponding periods in 2008.
outside costs. Research and development expenses were $7.6 million and $25.4 million for the three and nine months ended September 30, 2009, respectively, compared to $11.4 million and $31.0 million for the corresponding periods in 2008. Excluding the impact of stock-based compensation expenses, research and development expenses decreased by $4.2 million and $6.6 million in the three and nine months ended September 30, 2009 compared to the corresponding periods in 2008. The decreases in the three and nine months ended September 30, 2009 were primarily attributable to lower development costs associated with ELADUR, Remoxy and other select ORADUR-based opioid drug candidates and our biologics programs, partially offset by higher development costs associated with POSIDUR and other research programs compared to the corresponding periods in 2008 as more fully discussed below. In addition, we paid $2.25 million to EpiCept in the third quarter of 2008 under the amended agreement with EpiCept and recorded this amount as a research and development expense in the three and nine months ended September 30, 2008. Stock-based compensation expense recognized related to research and development personnel was $1.7 million and $5.3 million for the three and nine months ended September 30, 2009, respectively, compared to $1.3 million and $4.3 million for the corresponding periods in 2008.
Our research and development expenses for POSIDUR increased to $2.9 million and $9.3 million in the three and nine months ended September 30, 2009 from $2.0 million and $6.3 million in the corresponding periods in 2008 due to higher employee related costs as well as higher costs associated with clinical trial expenses and contract manufacturing development activities for POSIDUR. Research and development expenses for POSIDUR incurred by us but reimbursable by Nycomed under the terms of our agreement with Nycomed were $975,000 and $2.9 million in the three and nine months ended September 30, 2009, respectively, compared to $960,000 and $2.6 million for the corresponding periods in 2008, which are accounted for as a reduction of research and development expenses. Research and development expenses for POSIDUR incurred by Nycomed but reimbursable by us under the terms of our agreement with Nycomed were $1.1 million and $3.1 million in the three and nine months ended September 30, 2009, respectively, compared to $441,000 and $1.5 million for the corresponding periods in 2008, which are accounted for as additional research and development expenses. As a result of the collaboration agreement with Nycomed, our research and development expenses were increased by $75,000 and $199,000 in the three and nine months ended September 30, 2009, respectively, compared to a reduction of $519,000 and $1.1 million for the corresponding periods in 2008. The net increase or reduction in research and development expenses represents a net reimbursement from or a net payment to Nycomed reflecting that both parties bore 50% of the development expenses defined under the collaboration agreement for POSIDUR.
DRRX is in the portfolios of Robert Bruce of Bruce & Co., Inc..
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