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Biopharma's New License Agreement with Gilead 'Brings Strong Validation and Economics'

Streetwise Reports, Streetwise Reports
0 Comments| July 24, 2019

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The specifics and benefits of the deal are discussed in an H.C. Wainwright & Co. report.

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In a July 22 research note, H.C. Wainwright & Co. analyst Ed Arce reported that DURECT Corp. (DRRX:NASDAQ) entered an agreement concerning its SABER technology and SABER-based products with Gilead Sciences.

DURECT gave Gilead the exclusive global rights to use DURECT's SABER technology, which affords sustained release for long-acting injectable products, to develop and commercialize such a product for the human immunodeficiency virus (HIV). DURECT also granted Gilead the exclusive option to license additional SABER-based products targeted at HIV and the hepatitis B virus (HBV). The two California-based firms will collaborate on specific related programs; Gilead will control and fund their development.

"Given Gilead's longstanding expertise and global leadership in both the HIV and HBV therapeutic areas, we believe this collaboration provides substantial validation to the SABER platform, especially given that the core technology has been around for over a decade," commented Arce. (The first SABER-based product received U.S. Food and Drug Administration approval in 2011.)

Arce pointed out the benefits of the deal. For one, the "substantial economics" of it afford DURECT with "cash runway and flexibility." For the lead HIV asset only, Gilead is to pay DURECT up to $170 million, comprised of a $25 million upfront payment, up to $75 million in potential development and regulatory milestones and up to $70 million in potential sales-based milestones. This is in addition to single-digit, tiered royalties on product sales.

Plus, for every additional SABER-based, HIV or HBV-directed product that Gilead may decide to license, it must pay DURECT up to $150 million in upfront, development, regulatory and sales-based milestones as well as single-digit, tiered royalties on sales.

Arce reported that DURECT had $28.8 million in cash as of March 31, 2019. Adding the $15 million in net proceeds from the recent registered direct offering and the $25 million upfront payment from Gilead takes the pro forma total to $68.8 million, enough cash runway for 2.5 years, according to management.

Another positive of the Gilead deal is that "other SABER deals could come," Arce purported. Management indicated that much like the one with Gilead, other undisclosed preclinical feasibility programs are in progress. "As such," added Arce, "we believe it possible that one or more license agreements could result from these programs."

Arce highlighted that despite the latest development concerning SABER, DURECT's primary focus still remains on its lead candidate DUR-928, and the three data readouts expected in H2/19 "should, in our view, lead to significant share price appreciation, if positive."

They are final data from a Phase 2a study of intravenously administered DUR-928 in patients with alcoholic hepatitis; data, including biomarkers and MRI-PDFF results, from the Phase 1b, 28-day study of oral DUR-928 in NASH patients with F1–F3; and data from the Phase 2 study of once-daily topical DUR-928 in patients with mild to moderate plaque psoriasis.

H.C. Wainwright has a Buy rating and a $3.50 per share price target on DURECT, whose current share price is around $0.96.



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