DURECT CORP (DRRX)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue of $0.321M and diluted EPS (continuing ops) of -$0.13; revenue modestly beat consensus while EPS modestly missed, reflecting continued R&D and SG&A spending amid minimal revenue generation . Q4 2024 revenue was $0.453M and diluted EPS (continuing ops) -$0.06; Q3 2024 revenue was $1.927M and diluted EPS -$0.14 .
• Management reiterated intent to initiate a U.S.-only registrational Phase 3 trial in severe alcohol-associated hepatitis (AH) in 2025 (primary endpoint: 90-day survival), subject to funding; topline results expected within ~2 years from trial start .
• Cash, cash equivalents and investments declined to $8.4M as of March 31, 2025 (from $12.0M at year-end 2024), underscoring funding urgency; company is actively exploring BD and financing options .
• POSIMIR licensing agreement was terminated; data and know‑how transferred to DURECT on May 6, 2025. The company is evaluating partnering options for commercialization .

What Went Well and What Went Wrong

What Went Well

• NEJM Evidence publication of Phase 2b AHFIRM results in January 2025 provides third‑party validation and informs Phase 3 design; management highlighted subgroup analyses and importance of timely dosing .
• Clear Phase 3 path in AH with FDA Breakthrough Therapy Designation; design incorporates FDA feedback and learnings from AHFIRM, with 90‑day survival as the primary endpoint .
• Revenue exceeded Wall Street consensus in Q1 (actual $0.321M vs consensus $0.292M), despite minimal operating revenues, indicating better‑than‑expected collaboration/other revenue mix .

Quote: “Our primary focus continues to be initiating the Phase 3 trial of larsucosterol for severe AH, contingent on securing sufficient funding.” — James E. Brown, President & CEO .

What Went Wrong

• EPS was slightly worse than consensus (-$0.13 vs -$0.12), reflecting limited revenue and ongoing OpEx to advance larsucosterol .
• Cash and investments decreased to $8.4M from $12.0M QoQ, tightening runway; management continues to seek funding to start Phase 3 .
• Revenue declined QoQ and YoY (Q1: $0.321M vs Q4: $0.453M; vs Q1 2024: $0.496M), underscoring the transition post‑ALZET sale and absence of product revenue in Q1 .

Financial Results

Revenue and EPS (actuals)

Q1 2025 vs Wall Street Consensus (S&P Global)

*Values retrieved from S&P Global.

Margins (derived from reported operating results)

Notes: EBIT = Loss from operations; margins reflect small revenue base post‑ALZET sale .

Revenue Composition

Note: No product revenue line item reported in Q1 2025; total revenue reflects collaborative/other only .

KPIs and Operating Metrics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our primary focus continues to be initiating the Phase 3 trial of larsucosterol for severe AH, contingent on securing sufficient funding.” — James E. Brown, President & CEO .
• “We believe our cash on hand is sufficient to fund operations through the third quarter of 2025.” — Tim Papp, CFO (Q4 call) .
• Phase 3 budget/timing: “Right now, we're estimating it would be about $20 million… And 2 years to data…” — James E. Brown (Q4 call Q&A) .
• Time‑to‑dose importance: “There clearly appears to be an effect of early dosing… within the first, in this case, 9 days.” — Norman Sussman (Q4 call Q&A), with Brown/Lin detailing U.S. trial dosing controls .
• POSIMIR update: data and know‑how transferred upon license termination; evaluating next steps to find a new commercialization partner .

Q&A Highlights

• Phase 3 economics and timing: Estimated ~$20M cost; ~2 years to topline once initiated .
• Trial operations: Emphasis on early dosing (≤9–10 days), U.S.-only conduct, site‑level randomization to minimize regional bias and strengthen signal .
• Funding pathways: Active BD and financing discussions; management optimistic despite challenging capital markets .
• Study strategy: Preference to proceed directly to Phase 3 rather than additional Phase 2b, given prior data and FDA stance .
• Regional opportunities: Openness to ex‑U.S. regional partnerships or studies in future, though current focus is AH and U.S. Phase 3 .

Estimates Context

• Q1 2025 revenue modest beat vs consensus ($0.321M actual vs $0.292M consensus); EPS modest miss (-$0.13 actual vs -$0.12 consensus); both based on three estimates for each metric*. The beat/miss magnitude aligns with minimal revenue base and ongoing OpEx .*
• Implication: Street may adjust near‑term EPS slightly, but the narrative remains funding/Phase 3 timing‑driven rather than near‑term P&L performance.

*Values retrieved from S&P Global.

Key Takeaways for Investors

• The quarter was operationally aligned to the Phase 3 AH strategy: regulatory validation (NEJM Evidence), refined U.S.-only design with dosing controls, and continued funding efforts; near‑term stock catalysts hinge on BD/financing announcements enabling trial start in 2025 .
• Revenue beat and EPS miss were small in absolute terms given sub‑$1M revenue; valuation drivers remain clinical/regulatory milestones rather than quarterly financials .*
• Cash and investments declined to $8.4M; runway commentary (through Q3’25) coupled with Phase 3 budget (~$20M) underscores urgency for capital pathway and potential strategic transactions .
• POSIMIR transition (data/know‑how transferred) creates optionality for a partner‑led commercialization path, but focus and resources remain on larsucosterol .
• Watch for: funding announcement, Phase 3 site activation, trial initiation, and any incremental subgroup/real‑world insights on time‑to‑dose that could strengthen the survival signal .
• Risk flags: going‑concern language and Nasdaq listing risk cited; operational pace is gated by financing; execution risk around Phase 3 enrollment and dosing timelines remains .
• Trading lens: Near‑term moves likely on funding/BizDev headlines; medium‑term thesis is binary/clinical, with a registrational U.S. study targeting a high‑mortality disease and FDA BTD support .

*Values retrieved from S&P Global.