In a July 12 research report, Stifel announced it was raising its rating for DURECT Corp. (DRRX:NASDAQ) "to Buy from Hold and increasing our target price to $3 from a prior $1.25." The research firm also transferred coverage to analyst Adam Walsh.
In outlining the firm's investment thesis for the biotech, the report noted that "Durect appears poised for upside over the next 12-18 months, in our view. We expect Posimir to remain in focus near-term ahead of upcoming pivotal P3 PERSIST results due 4Q17 and potential approval/launch as soon as 2H18."
Walsh described Posimir as "a nonopioid analgesic that is designed to provide three days of local pain relief following one-time intraincisional instillation at the close of surgery. The drug forms a biodegradable depot that releases bupivacaine directly into the surgical site at a constant rate over 72 hours."
Should Posimir receive FDA approval, "we believe the drug could potentially play a role in reducing the duration and cost of hospital stays, decreasing the use of postoperative opioids, and reducing the resources required to manage postoperative pain," Walsh noted.
"We also like the recent Sandoz deal for U.S. rights to the drug."
"We also like the recent Sandoz deal for U.S. rights to the drug, as it brings large pharma validation, experienced marketing muscle, and a potential steady source of future milestone/royalty revenue that can be leveraged to support the ambitious development program for key emerging pipeline asset DUR-928 ('928)," the report stated.
The report also commented on DURECT's lead compound, DUR-928, in development for treatment of NASH (nonalcoholic steatohepatitis, a type of nonalcoholic fatty liver disease) and other indications.
"DUR-928 is the company's lead candidate from its Epigenetic Regulator Program currently in P1 development and soon to be entering P2 studies," the Stifel report stated. "Based on our review of available data, '928 appears a highly safe, potent, and active compound with broad therapeutic potential. We are encouraged by recent P1b data in NASH patients, which showed that single dose '928 produced rapid and meaningful improvements in several key biomarkers of liver disease just 12 hours after dosing."
Walsh also mentioned DURECT's intent to launch a trial for DUR-928 in primary sclerosing cholangitis, another liver condition, in H2/17. "While some investors have questioned management's decision to prioritize PSC over NASH in the initial P2, we view it as a smart move," the report states. "Compared to NASH, PSC represents a vastly more efficient indication to demonstrate rapid proof of concept for '928 in liver disease. In addition, since 80% of PSC patients have associated inflammatory bowel disease (IBD), the PSC trial may have the added benefit of defining '928's potential utility in IBD."
In addition to addressing liver disease, Walsh noted DURECT is also looking at the compound's utility as "an injectable for acute organ injuries (i.e. kidney); and a topical for inflammatory skin conditions such as psoriasis and atopic dermatitis."
While DURECT's Remoxy, "an extended-release formulation of oxycodone," is not included in Stifel's model, the report notes that the compound, which has faced regulatory challenges, "provides optionality."
DURECT's shares are currently trading at $1.86.
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