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DURECT(DRRX): A $293 Million Deal with Sandoz for POSIMIR® in the United States

05/08/2017
By Grant Zeng, CFA

NASDAQ:DRRX

The Development and Commercialization Deal 

Earlier today (May 8, 2017), Durect  Corporation (NASDAQ:DRRX) announced a development and commercialization agreement with Sandoz AG, a division of Novartis (NVS), to develop and market in the United States DURECT's POSIMIR® (SABER®-Bupivacaine), an investigational locally-acting, non-opioid analgesic intended to provide up to three days of continuous pain relief after surgery.

Under the terms of the agreement, Sandoz will make an upfront payment to DURECT of $20 million, with the potential for up to an additional $43 million in development and regulatory milestones, up to an additional $230 million in sales based milestones, as well as a tiered double digit royalty on product sales in the United States. The $43 million could be received when Durect resubmits the NDA and get approval for Posimir which could be done in 1Q18.

DURECT will remain responsible for the completion of the ongoing PERSIST Phase III clinical trial for POSIMIR as well as FDA interactions through approval. The deal is expected to close in the second quarter of 2017. 

The Posimir (SABER®-Bupivacaine) Program

The company expects to finish dosing patients in PERSIST, a POSIMIR Phase III clinical trial consisting of patients undergoing laparoscopic cholecystectomy (gallbladder removal) surgery, in the third quarter of 2017 and to have top-line results this year which would then tee up a resubmission for NDA. 

In a previous clinical trial of 50 patients in the same surgical model (laparoscopic cholecystectomy), POSIMIR was compared with the active control bupivacaine HCl, against which POSIMIR demonstrated in a post hoc analysis an approximately 25% reduction in pain intensity on movement for the first 3 days after surgery (p=0.024) and for the first 2 days after surgery (p=0.0198), using the same statistical methodology specified for the current trial. 

POSIMIR is the company’s investigational post-operative pain relief depot that utilizes the company’s patented SABER technology and is intended to deliver bupivacaine to provide 3 days of pain relief after surgery. The company is in discussions with potential partners regarding licensing development and commercialization rights to POSIMIR, for outside the US. 

Our Takeaway

We think this is a great deal for Durect. Sandoz has a very strong sales/marketing team and has a great presence in the US. Sandoz has a differentiated product portfolio including a range of state-of-the-art technologies, formulations and devices. In the U.S., Sandoz Inc. has a dedicated hospital sales and marketing organization, with expertise and relationships, which will be employed to deliver POSIMIR to the market.

The deal not only boosts Durect’s balance sheet, but also validate the company’s technology and clinical program. 

The market for a non-opioid post-surgical pain product is quite large.  One piece of evidence for this is Pacira and their product Exparel.  Pacira has a $1.9 billion market cap on the basis of Exparel, which is projected to have about $300 million in revenue in 2017.  If approved, POSIMIR will compete quite effectively in this marketplace:       
• There is an unmet medical need for a product with POSIMIR’s extended duration of action and potential to reduce the need for opioids (with their associated side-effects, risks of leading to addiction, and costs).
• POSIMIR would have an extended duration of action (up to 3 days).
• Durect’s development program will have generated data from multiple common surgeries including hernia, shoulder and gall bladder removal.
• POSIMIR is administered simply and rapidly into the surgical site under visual supervision, which puts the drug closer to the affected nerves.
• This administration technique also facilitates use in laparoscopic procedures with multiple ports, which is relevant given the number of laparoscopic surgeries today and the overall trend toward less invasive procedures.

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