Durect Corporation: DUR-928 Data In Severe Alcoholic Hepatitis To Be Showcased At Upcoming AASLD Meeting

Oct. 24, 2019 11:49 AM ETDURECT Corporation (DRRX)6 Comments
Leonard Yaffe profile picture
Leonard Yaffe
2.29K Followers

Summary

  • DURECT Corporation has a promising drug, DUR-928, a sulfated oxysterol that is being studied in alcoholic hepatitis, NASH and psoriasis.
  • Separately, it has legacy drug delivery technologies that led to a recent partnership with Gilead, including an upfront $25 million payment and an already achieved $10 million development milestone.
  • The company is seeking approval for POSIMIR, a non-narcotic for post-operative pain control.  An FDA AdCom meeting has been scheduled for January 16, 2020.
  • Abstracts have been released for the upcoming AASLD (November) meeting in Boston.  There will be two presentations on DUR-928 in alcoholic hepatitis, including a late breaking oral one on November 10.
  • DURECT Corporation has a market capitalization of $365 million, with $73 million in cash and $21 million of debt as of June 30.

DURECT Corporation (NASDAQ:DRRX) has a drug, DUR-928, that is being studied in alcoholic hepatitis (AH), non-alcoholic steatohepatitis (NASH) and psoriasis. There will be two presentations on DUR-928, including one oral late breaker, at November's AASLD meeting on AH, which is an important cause of liver-related morbidity leading to the need for a liver transplant and has no approved therapy. Current pharmacological therapies include corticosteroids (for which a significant percentage are contraindicated due to infection or acute kidney injury) and pentoxyphylline, but these have not been shown to be very effective. A 2015 study published in the Journal of Clinical Gastroentrology concluded that there are 325,000 alcoholic hepatitis-related hospitalizations in the US annually, with 65,000 representing a primary diagnosis. The study further suggested that, as it relates to the primary AH hospitalization, the cost was $46,000 and the in-hospital mortality rate was 5.8%. The study also noted that the thirty day mortality rate for severe alcoholic hepatitis has historically been in the 30-50% range. Liver transplant is indicated for patients who are steroid failures, but its cost can approach $600,000.

The Phase 2a data on DUR-928, as discussed in the abstracts, showed that the drug was safe at all IV doses. Treatment responders, defined by a Lille score of less than 0.45 were 89%, and among the severe AH patients it was 87%. It was noted that these response rates were significantly better than comparative published historic data. A larger Phase 2b trial is being planned for 2020.

NASH has become a leading cause of liver disease and liver transplant paralleling the obesity epidemic. It is estimated that 10-20 million Americans have the disease, though this could increase given that, according to the OECD, the adult obesity rate in the US is forecast to increase from 38% in 2014 to 47% in 2030. There are currently no approved medications, and it has been shown that a 10% weight loss can reduce the disease severity. The first drug, Ocaliva, should be on the market in mid-2020, but its benefit as monotherapy was seen in only about 23% of patients. I have long maintained that, given the complexity of the disease, pharmacologic treatment is likely to involve a polydrug regimen, and I expect Novo's (NYSE:NVO) oral semaglutide, Rybelsus, to be a cornerstone. DUR-928, in an oral formulation, would be very complimentary, given the beneficial effects it has shown in animal studies on fibrosis and ballooning, and on inflammation, bilirubin and liver injury in a Phase 1 human study. A larger 28 day, Phase 1b study is currrently ongoing, and it will assess safety, pharmacokinetics and some efficacy parameters, while laying the groundwork for a future Phase 2b study. The US NASH market is expected to exceed $10 billion annually, and, in my opinion, the most advanced drugs will represent "first generation" treatments, much like PEG-Intron for Hepatitis C.

DUR-928 is also being studied in a topical formulation for mild to moderate psoriasis. A multi-center Phase 2a trial is slated to have topline data by year end.

Over the next year, DURECT will be advancing DUR-928 in AH, NASH and psoriasis. Data on AH will be provided at November's AASLD, and topline data on NASH and psoriasis will follow soon thereafter. DUR-928 acts via several mechanisms to regulate inflammation, improve cell survival, improve insulin sensitivity, decrease lipid biosynthesis and reduce fibrosis. There is no approved drug for AH, and this market should exceed $1 billion in the US. Although several drugs should be on the market to treat NASH over the next three years, none seem likely to serve the majority of patients as monotherapy. It needs to be understood that NASH progresses from fibrosis stage one to four over a period exceeding a decade, and patients with stage one and two are more likely to die of cardiovascular disease, given the association with hypertension, obesity and Type 2 diabetes. Ultimately, the NASH drug market will be extremely large, with a combination of therapies directed at weight loss, insulin sensitivity and fibrosis required.

As I look at DURECT's stock, I find it similar to other small caps that I have designated as being priced for "non-success". Its lead drug is being advanced in three indications, and it has recently formed a partnership with a leading biopharmaceutical company relating to its legacy drug delivery technology that has brought in $35 million and could bring in additional milestone payments and royalties. Furthermore, the unique characteristics of DUR-928 make it a very attractive candidate for the indications being pursued.

This article was written by

Leonard Yaffe profile picture
2.29K Followers
I am an MD by background who runs a healthcare hedge fund. I worked as a sell-side medical analyst for 20 years, covering pharmaceuticals, medical devices, PBMs and drug distributors.

Disclosure: I am/we are long DRRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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