Shares of Durect Corp. rose nearly 50 percent in after-close trading Wednesday based on a $202 million marketing deal between the Cupertino, Calif.-based company and Roskilde, Denmark-based Nycomed A/S.
After finishing at $3.80 on Wednesday, Durect's stock (NASDAQ:DRRX) opened at $5.40 Thursday and traded nearly 9 million shares to close at $4.68.
The deal centers on Posidur (Saber-bupivacaine), a long-acting local anesthetic developed by Durect for the treatment of postsurgical pain. Nycomed will pay Durect $14 million up front and up to $188 million in development, regulatory and sales milestones as well as a hefty 15 percent to 40 percent royalty on sales. In return, Nycomed gets exclusive commercialization rights in Western and Eastern Europe, Russia, Israel, Turkey, Australia, New Zealand, South Africa, Brazil, Argentina, Chile and Mexico.
Durect retains marketing rights in the U.S., Canada, Asia and all other countries. The companies will split future development costs of the product, which is in Phase II trials.
Durect President and CEO James Brown called the deal a "great opportunity for both parties." In exchange for a relatively low up-front payment, Nycomed gets another pain product for its established hospital-based sales force in Europe, which already markets drugs such as Xefo Rapid, a fast-acting lornoxicam for acute pain, and Matrifen, a transdermal formulation of the opioid fentanyl for severe chronic pain.
Nycomed will assign a dedicated sales force to Posidur, and although Brown said its size has not been made public, he pointed to Nycomed's pending acquisition of Altana Pharma AG as a move that will expand the existing sales force significantly.
Durect, on the other hand, gets a strong royalty stream and a partner to cover half the costs of the product's development, which Brown anticipates will reduce the burn rate going forward. Durect also retains the right to partner the drug in the remaining territories and is "in discussions" with potential partners in Asia, Brown said.
But U.S. marketing rights are not up for grabs - Brown said Durect can "effectively cover" the potential U.S. market with a 100- to 150-person sales force. The company estimates there are more than 30 million surgical procedures performed annually in the U.S. for which the product would be appropriate, but target physicians could be reached through a hospital-based surgical suite sales force.
Posidur is based on Durect's Saber drug delivery technology, a biodegradable gel that can be formulated for various routes of controlled-release administration. In the case of Posidur, the gel is combined with bupivacaine, a local anesthetic commonly used to numb patients prior to surgery. Yet while immediate-release bupivacaine only lasts four to six hours, Brown said, Posidur lasts several days, potentially alleviating the need for narcotic painkillers following surgery.
A Phase II trial conducted in 81 patients following hernia surgery met its endpoints, and Durect now is conducting an extended Phase II study following hernia surgery, rotator cuff surgery, hysterectomy and appendectomy.
"A number of times small companies will rush from Phase II into Phase III and then stumble, but we want to understand how this product really performs," Brown said.
"We feel like we've got the right dose, and now we're teasing out which pain models will demonstrate the best performance." He added that he expects Phase II data and a Phase III trial initiation in one orthopedic and one soft-tissue indication in 2007.
Posidur is not the only drug in Durect's pipeline. Thursday the company announced positive Phase I data with an abuse-resistant opioid pain drug candidate based on Durect's Oradur drug delivery technology.
The drug is being developed by King Pharmaceuticals Inc. under a collaboration with Pain Therapeutics Inc., which licensed several Oradur products from Durect. King and Pain Therapeutics also are developing an Oradur-based oxycodone called Remoxy, which is in Phase III trials with results expected next year.
In total, Durect has six pain products in the clinic, but all are under development by partners with the exception of Posidur, and Nycomed now will fund half of that development. That leaves plenty of cash for Durect to play with: The company had $74 million on the books as of Sept. 30 and gets about $8 million in annual revenues from two small commercialized product lines, not to mention payments from partners such as the one just received from Nycomed.
"The money will help pay for the other half of [Posidur's] development, and we'll bring other projects forward," Brown said, adding that the company has a host of earlier-stage programs, including an undisclosed compound that is nearing the clinic, as well as feasibility programs with many pharmaceutical and biotech companies. "I don't think we'll ever run out of projects."