DURECT CORP [DRRX] Filings

10-Q 1 drrx-20230930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-31615

DURECT CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

94-3297098

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

10260 Bubb Road

Cupertino, California 95014

(Address of principal executive offices, including zip code)

(408) 777-1417

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock $0.0001 par value per share
 

DRRX

The NASDAQ Stock Market LLC
(The Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by a check mark whether the registrant a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 13, 2023, there were 29,828,891 shares of the registrant’s common stock outstanding.

INDEX


		Page

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	5

	Condensed Balance Sheets as of September 30, 2023 and December 31, 2022	5

	Condensed Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022	6

	Condensed Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022	7

	Condensed Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	8

	Notes to Condensed Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4.	Controls and Procedures	31

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 5.	Other Information	39

Item 6.	Exhibits	40

Signatures		41

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this Quarterly Report on Form 10-Q or elsewhere by management from time to time, the words “believe,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “may,” “will,” “could,” “potentially,” “possibility,” and similar expressions are forward-looking statements. Such forward-looking statements contained herein are based on current expectations and beliefs. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors. Forward-looking statements made in this report include, but are not limited to, statements about:

•

the clinical trial plans and timelines for larsucosterol;

•

potential uses and benefits of larsucosterol to treat alcohol-associated hepatitis (also called “alcoholic hepatitis” or “AH”), non-alcoholic steatohepatitis, or other conditions;

•

the results and timing of clinical trials;

•

the likelihood of future clinical trial results of larsucosterol being positive with statistical significance and/or similar to results from previous trials, the possible commencement of future clinical trials;

•

our plans to meet with the FDA and other regulatory agencies to review the results of our Phase 2b AHFIRM trial and to discuss the Phase 3 registration trial design in the first quarter of 2024;

•

our intention to seek, and ability to enter into and maintain strategic alliances and collaborations;

•

the potential benefits and uses of our products, product candidates and technologies, including larsucosterol, POSIMIR, and our SABER, CLOUD and ORADUR technologies;

•

the potential milestone and royalty payments we may receive from Innocoll Pharmaceuticals Limited related to POSIMIR, earn-out payments we may receive from Indivior UK Limited related to the commercialization of PERSERIS, and milestone, sub-license fees and royalty payments we may receive from Orient Pharma Co., Ltd.;

•

market opportunities for product candidates in our product development pipeline;

•

potential regulatory filings for or approval of larsucosterol;

•

the progress and results of our research and development programs and our evaluation of additional development programs;

•

requirements for us to purchase pre-clinical, clinical trial and commercial supplies of product candidates and/or products, as well as raw materials or active pharmaceutical ingredients from third parties, and the ability of third parties to provide us with our requirements for such supplies and raw materials;

•

conditions for obtaining regulatory approval of our product candidates;

•

submission and timing of applications for regulatory approval and timing of responses to our regulatory submissions;

•

the impact of FDA, European Medicines Agency and other government regulation on our business;

•

our ability to obtain, assert and protect patents and other intellectual property rights, including intellectual property licensed to our collaborators, as well as avoiding the intellectual property rights of others;

•

products and companies that will compete with our products and the product candidates we develop and/or license to third-party collaborators;

•

our employees, including the number of employees and the continued services of key management, technical and scientific personnel;

•

our future performance, including our anticipation that we will not derive meaningful revenues from our products and product candidates in development for at least the next twelve months, potential for future inventory write-offs and our expectations regarding our ability to achieve profitability;

•

sufficiency of our cash resources, anticipated capital requirements and capital expenditures, our ability to comply with covenants of our term loan, our need or desire for additional financing, including potential sales under our shelf registration statement and our ability to continue to operate as a going concern;

•

our expectations regarding research and development expenses, and selling, general and administrative expenses;

•

the composition of future revenues; and

•

accounting policies and estimates.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors. For a more detailed discussion of such forward looking statements and the potential risks and uncertainties that may impact upon their accuracy, see the “Risk Factors” section and “Overview” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations. These forward-looking statements reflect our view only as of the date of this report. We undertake no obligations to update any forward-looking statements. You should also carefully consider the factors set forth in other reports or documents that we file from time to time with the Securities and Exchange Commission.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DURECT CORPORATION

CONDENSED BALANCE SHEETS

(in thousands)

(unaudited)


	September 30, 2023			December 31, 2022

A S S E T S
Current assets:
Cash and cash equivalents	$	38,985		$	43,483
Accounts receivable, net		883			3,423
Inventories, net		2,521			2,113
Prepaid expenses and other current assets		1,391			2,375
Total current assets		43,780			51,394
Property and equipment, net		127			188
Operating lease right-of-use assets		4,374			1,943
Goodwill		6,169			6,169
Long-term restricted investments		150			150
Other long-term assets		128			256
Total assets	$	54,728		$	60,100
L I A B I L I T I E S A N D S T O C K H O L D E R S’ E Q U I T Y
Current liabilities:
Accounts payable	$	1,314		$	3,106
Accrued liabilities		8,539			7,896
Deferred revenue, current portion		178			—
Term loan, current portion, net		18,700			21,170
Operating lease liabilities, current portion		1,527			1,832
Warrant liabilities		6,494			—
Total current liabilities		36,752			34,004
Operating lease liabilities, non-current portion		2,927			260
Other long-term liabilities		643			851
Commitments and contingencies
Stockholders’ equity:
Common stock		23			23
Additional paid-in capital		601,960			586,357
Accumulated other comprehensive loss		(12	)		(13	)
Accumulated deficit		(587,565	)		(561,382	)
Stockholders’ equity		14,406			24,985
Total liabilities and stockholders’ equity	$	54,728		$	60,100

The accompanying notes are an integral part of these condensed financial statements.

DURECT CORPORATION

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

(unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Collaborative research and development and other revenue	$	506		$	10,585		$	1,657		$	11,686
Product revenue, net		1,238			1,392			4,222			4,282
Total revenues		1,744			11,977			5,879			15,968
Operating expenses:
Cost of product revenues		312			345			1,059			1,073
Research and development		7,199			9,881			23,738			26,909
Selling, general and administrative		3,790			3,883			11,712			11,570
Total operating expenses		11,301			14,109			36,509			39,552
Loss from operations		(9,557	)		(2,132	)		(30,630	)		(23,584	)
Other income (expense):
Interest and other income		653			284			1,681			465
Change in fair value of warrant liabilities		7,016			—			8,601			—
Interest and other expenses		(700	)		(623	)		(2,175	)		(1,745	)
Issuance cost for warrants		(427	)		—			(1,627	)		—
Loss on issuance of warrants		—			—			(2,033	)		—
Other income (expense), net		6,542			(339	)		4,447			(1,280	)
Net loss		(3,015	)		(2,471	)		(26,183	)		(24,864	)
Net change in unrealized loss on available-for-sale securities, net of reclassification adjustments and taxes		(6	)		17			1			2
Total comprehensive loss	$	(3,021	)	$	(2,454	)	$	(26,182	)	$	(24,862	)

Net loss per share
Basic	$	(0.11	)	$	(0.11	)	$	(1.04	)	$	(1.09	)
Diluted	$	(0.14	)	$	(0.11	)	$	(1.07	)	$	(1.09	)

Weighted-average shares used in computing net loss per share
Basic		27,211			22,777			25,175			22,773
Diluted		27,511			22,777			25,433			22,773

The accompanying notes are an integral part of these condensed financial statements.

DURECT CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)

(unaudited)


	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance at December 31, 2022		22,785	$	23	$	586,357	$	(13	)	$	(561,382	)	$	24,985
Issuance of common stock in the February 2023 registered direct offering		1,700		—		—		—			—			—
Stock-based compensation expense from stock options and ESPP shares		—		—		2,338		—			—			2,338
Net loss		—		—		—		—			(11,987	)		(11,987	)
Net change in unrealized loss on available-for-sale securities, net of reclassification adjustments and taxes		—		—		—		6			—			6
Balance at March 31, 2023		24,485	$	23	$	588,695	$	(7	)	$	(573,369	)	$	15,342
Issuance of common stock pursuant to the 2021 Sales Agreement, net of issuance costs of $13		118		—		658		—			—			658
Issuance of common stock upon exercise of stock options and from the ESPP		6		—		23		—			—			23
Stock-based compensation expense from stock options and ESPP shares		—		—		657		—			—			657
Net loss		—		—		—		—			(11,181	)		(11,181	)
Net change in unrealized loss on available-for-sale securities, net of reclassification adjustments and taxes								1			—			1
Balance at June 30, 2023		24,609	$	23	$	590,033	$	(6	)	$	(584,550	)	$	5,500
Issuance of common stock in the July 2023 registered direct offering, net of issuance costs of $673		2,991		—		8,540		—			—			8,540
Issuance of common stock upon warrant exercises		924		—		2,726								2,726
Stock-based compensation expense from stock options and ESPP shares		—		—		661		—			—			661
Net loss		—		—		—		—			(3,015	)		(3,015	)
Net change in unrealized loss on available-for-sale securities, net of reclassification adjustments and taxes		—		—		—		(6	)		—			(6	)
Balance at September 30, 2023		28,524	$	23	$	601,960	$	(12	)	$	(587,565	)	$	14,406

Balance at December 31, 2021		22,768	$	23	$	583,818	$	(10	)	$	(526,049	)	$	57,782
Issuance of common stock upon exercise of stock options		1		—		8		—			—			8
Stock-based compensation expense from stock options and ESPP shares		—		—		678		—			—			678
Net loss		—		—		—		—			(10,842	)		(10,842	)
Net change in unrealized loss on available-for-sale securities, net of reclassification adjustments and taxes		—		—		—		(19	)		—			(19	)
Balance at March 31, 2022		22,769	$	23	$	584,504	$	(29	)	$	(536,891	)	$	47,607
Issuance of common stock upon exercise of stock options		7		—		27		—			—			27
Stock-based compensation expense from stock options and ESPP shares		—		—		617		—			—			617
Net loss		—		—		—		—			(11,551	)		(11,551	)
Net change in unrealized loss on available-for-sale securities, net of reclassification adjustments and taxes								4			—			4
Balance at June 30, 2022		22,776	$	23	$	585,148	$	(25	)	$	(548,442	)	$	36,704
Issuance of common stock upon equity financings, net of issuance costs of $506		3		—		25		—			—			25
Stock-based compensation expense from stock options and ESPP shares						579								579
Net loss		—		—		—		—			(2,471	)		(2,471	)
Net change in unrealized loss on available-for-sale securities, net of reclassification adjustments and taxes		—		—		—		17			—			17
Balance at September 30, 2022		22,779	$	23	$	585,752	$	(8	)	$	(550,913	)	$	34,854

The accompanying notes are an integral part of these condensed financial statements

DURECT CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine months ended September 30,
	2023			2022
Cash flows from operating activities
Net loss	$	(26,183	)	$	(24,864	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of fixed assets		112			—
Depreciation and accretion		154			109
Stock-based compensation		1,923			1,874
Amortization of debt issuance cost		345			358
Net amortization on investments		81			16
Changes in operating lease liabilities		(69	)		(55	)
Change in fair value of warrant liabilities		(8,601	)		—
Loss on issuance of warrants		2,033			—
Issuance cost for warrants		427
Changes in assets and liabilities:
Accounts receivable		2,540			3,248
Inventories		(409	)		(399	)
Prepaid expenses and other assets		1,000			1,630
Accounts payable		(1,792	)		828
Accrued liabilities		2,172			(516	)
Deferred revenue		178			(98	)
Total adjustments		94			6,995
Net cash used in operating activities		(26,089	)		(17,869	)
Cash flows from investing activities

DURECT CORP [DRRX] Filings
10-Q	[2023-11-14]
10-Q	[2023-08-10]
10-Q	[2023-05-09]
10-K	[2023-03-08]
10-Q	[2022-11-03]
10-Q	[2022-08-05]
10-Q	[2022-05-05]
10-K	[2022-03-08]
10-Q	[2021-11-03]
10-Q	[2021-07-30]
10-Q	[2021-05-05]
10-K	[2021-03-05]
10-Q	[2020-11-03]
10-Q	[2020-08-04]
10-Q	[2020-05-11]
10-K	[2020-03-05]
10-Q	[2019-11-05]
10-Q	[2019-08-02]
10-Q	[2019-05-07]
10-K	[2019-03-08]
10-Q	[2018-11-08]
10-Q	[2018-08-02]
10-Q	[2018-05-09]
10-K	[2018-03-08]
10-Q	[2017-11-02]
10-Q	[2017-08-09]
10-Q	[2017-05-10]
10-K	[2017-03-15]
10-Q	[2016-11-01]
10-Q	[2016-08-02]
10-Q	[2016-05-06]
10-K	[2016-03-01]
10-Q	[2015-11-03]
10-Q	[2015-08-04]
10-Q	[2015-05-01]
10-K	[2015-03-03]
10-Q	[2014-11-04]
10-Q	[2014-08-08]
10-Q	[2014-05-02]
10-K	[2014-02-28]
10-Q	[2013-11-05]
10-Q	[2013-08-06]
10-Q	[2013-05-03]
10-K	[2013-03-01]
10-Q	[2012-11-06]
10-Q	[2012-08-07]
10-Q	[2012-05-04]
10-K	[2012-03-02]