Durect Pharma a Buy to $7

Durect Corp. (DRRX - Snapshot Report) currently has three products in phase II development. We are optimistic about the developing pipeline, and are pleased to see that the company filed a new drug application (NDA) for its first candidate, pain drug Remoxy, on schedule. The Food and Drug Administration (FDA) granted priority review which means a response should be out by December 10.

We also expect the company to enter into a partnership deal for Eladur shortly. This year should be catalyst-filled for Durect. In our opinion, the current share price represents an attractive entry point. We thus rate the shares a Buy with a price target of $7 and revenue forecast of $26 million.

Durect’s phase II products are all addressing large market opportunities primarily in the pain management field. Potential milestones in 2008 include the initiation of phase III trials for pain relief anesthetic Posidur. The company already has agreements in place for the development of Transdur-Sufentanil, Remoxy, Posidur and Memryte.

Additional partnership opportunities exist for Eladur, TRANSDUR-Sufentanil (ex-U.S. and Canada), and Posidur (for Japan / Asia). The company reported that several companies have expressed an interest in Eladur. The company is also engaged in discussions with potential partners for TRANSDUR-Sufentanil and Posidur.

Partnership announcements for these candidates would be a major boost. There could be significant upside to our estimates as our model does not include any potential milestone or upfront payments related to the signing of agreements or achievement of development milestones.

Arpita Dutt, CA, contributed to the report.

Read the full analyst report on DRRX

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