Accessibility StatementSkip Navigation The transaction adds larsucosterol, an FDA Breakthrough Therapy for alcohol-associated hepatitis with a registrational Phase 3 clinical trial in development, to Bausch Health's hepatology pipeline LAVAL, QC, and CUPERTINO, Calif., Sept. 11, 2025 /PRNewswire/ -- Bausch Health Companies Inc. (NYSE: BHC) (TSX: BHC) ("Bausch Health"), a global, diversified pharmaceutical company, today announced the successful completion of its previously announced tender offer to acquir ...

PART I. [FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) Provides the company's unaudited condensed financial statements and related notes for the specified reporting periods [Condensed Unaudited Balance Sheets](index=6&type=section&id=Condensed%20Unaudited%20Balance%20Sheets) Balance sheets show a decrease in total assets and stockholders' equity as of June 30, 2025, driven by reduced cash and short-term investments | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :--------------------------- | :------------------------------- | | Cash and cash equivalents | $6,502 | $11,011 | | Short-term investments | $— | $792 | | Total current assets | $7,772 | $13,175 | | Total assets | $12,482 | $18,349 | | Total current liabilities | $7,893 | $7,710 | | Stockholders' equity | $3,483 | $9,131 | | Total liabilities and stockholders' equity | $12,482 | $18,349 | [Condensed Unaudited Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Unaudited%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a reduced net loss for both the three and six months ended June 30, 2025, primarily due to lower operating expenses and favorable warrant liability fair value changes | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenues | $447 | $646 | $768 | $1,142 | | Total operating expenses | $3,250 | $4,840 | $7,710 | $11,641 | | Loss from operations | $(2,803) | $(4,194) | $(6,942) | $(10,499) | | Other income (expense), net | $538 | $149 | $514 | $(1,248) | | Net loss | $(2,265) | $(3,700) | $(6,497) | $(11,343) | | Net loss per common share (basic) | $(0.07) | $(0.12) | $(0.21) | $(0.37) | [Condensed Unaudited Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Unaudited%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased significantly from December 31, 2024, to June 30, 2025, primarily due to net loss, partially offset by stock-based compensation | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :----------------------------------- | :------------------------------- | :--------------------------- | | Total Stockholders' Equity | $9,131 | $3,483 | | Accumulated Deficit | $(597,330) | $(603,827) | | Stock-based compensation expense (6 months ended June 30) | $921 (2024) | $849 (2025) | [Condensed Unaudited Statements of Cash Flows](index=9&type=section&id=Condensed%20Unaudited%20Statements%20of%20Cash%20Flows) Cash used in operating activities decreased in H1 2025, with investing activities providing cash and no financing activities after the late 2024 term loan payoff | Cash Flow Activity | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash used in operating activities | $(5,305) | $(10,432) | | Net cash provided by investing activities | $796 | $1,313 | | Net cash used in financing activities | $— | $(3,635) | | Net decrease in cash, cash equivalents, and restricted cash | $(4,509) | $(12,754) | | Cash, cash equivalents, and restricted cash, end of period | $6,652 | $15,796 | [Notes to Condensed Unaudited Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Unaudited%20Financial%20Statements) Notes provide critical context to financial statements, detailing biopharmaceutical focus, accounting policies, going concern doubt, strategic agreements, and ALZET reclassification [Note 1. Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the company's epigenetic therapy focus, accumulated deficit, going concern doubt, and the sale and reclassification of the ALZET product line - DURECT Corporation is a biopharmaceutical company focused on developing epigenetic therapies, with larsucosterol as its lead candidate for alcohol-associated hepatitis (AH) and metabolic dysfunction-associated steatohepatitis (MASH). The company also manufactures and sells excipients[27](index=27&type=chunk)[106](index=106&type=chunk) - As of June 30, 2025, the company had an accumulated deficit of **$603.8 million** and negative cash flows from operating activities, indicating insufficient cash resources for the next twelve months and raising substantial doubt about its ability to continue as a **going concern**[30](index=30&type=chunk)[126](index=126&type=chunk) - The ALZET product line was sold in November 2024 for **$17.5 million**, and its operating results have been reclassified as discontinued operations for all periods presented[32](index=32&type=chunk)[57](index=57&type=chunk)[103](index=103&type=chunk) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss (in thousands) | $(2,265) | $(3,700) | $(6,497) | $(11,343) | | Weighted average shares outstanding - basic (in thousands) | 31,042 | 31,038 | 31,042 | 30,838 | | Net loss per share - basic | $(0.07) | $(0.12) | $(0.21) | $(0.37) | | Net loss per share - diluted | $(0.07) | $(0.12) | $(0.21) | $(0.37) | [Note 2. Strategic Agreements](index=16&type=section&id=Note%202.%20Strategic%20Agreements) Details collaborative revenue, the pending Bausch Health acquisition, termination of the POSIMIR license, and discontinuation of PERSERIS sales | Revenue Type | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Collaborative R&D and other revenue | $428 | $606 | $749 | $1,100 | - Bausch Health Companies Inc. announced a definitive agreement to indirectly acquire DURECT for **$1.75 per share** in cash, plus potential contingent value rights (CVRs) up to **$350 million** based on larsucosterol net sales. The transaction is expected to close in **Q3 2025**[61](index=61&type=chunk)[112](index=112&type=chunk)[115](index=115&type=chunk) - Innocoll Pharmaceuticals Limited terminated the exclusive license agreement for POSIMIR on May 6, 2025. DURECT is evaluating new partners for commercialization, with **no material financial impact expected**[62](index=62&type=chunk)[119](index=119&type=chunk) - Indivior announced the discontinuation of sales and marketing for PERSERIS in July 2024 due to market competition. DURECT does not expect a **material financial impact** from this discontinuation[63](index=63&type=chunk)[120](index=120&type=chunk) [Note 3. Financial Instruments](index=17&type=section&id=Note%203.%20Financial%20Instruments) Details fair value measurement of financial instruments, showing decreases in available-for-sale securities and warrant liabilities due to market changes - The company classifies its financial instruments using a fair value hierarchy, with money market funds as **Level 1** and certificates of deposit and commercial paper as **Level 2**[64](index=64&type=chunk)[66](index=66&type=chunk) | Available-for-Sale Securities | June 30, 2025 (Fair Value, in thousands) | December 31, 2024 (Fair Value, in thousands) | | :---------------------------- | :--------------------------------------- | :------------------------------------------ | | Money market funds | $552 | $688 | | Certificates of deposit | $150 | $150 | | Commercial paper | $4,735 | $8,913 | | **Total** | **$5,437** | **$9,751** | | Warrant Liabilities | June 30, 2025 (Fair Value, in thousands) | December 31, 2024 (Fair Value, in thousands) | | :-------------------------- | :--------------------------------------- | :------------------------------------------ | | February 2023 issuance | $396 | $414 | | July 2023 issuance | $826 | $1,134 | | **Total fair value** | **$1,222** | **$1,548** | - The fair value of common stock warrants decreased, resulting in non-cash gains of **$446k** for the three months and **$326k** for the six months ended June 30, 2025, compared to losses in the prior year[149](index=149&type=chunk)[17](index=17&type=chunk) [Note 4. Accrued Liabilities](index=20&type=section&id=Note%204.%20Accrued%20Liabilities) Accrued liabilities slightly increased at June 30, 2025, driven by higher contract research and manufacturing costs, offset by decreased compensation | Accrued Liability Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :--------------------------- | :------------------------------- | | Accrued contract research and manufacturing costs | $2,966 | $2,841 | | Accrued compensation and benefits | $441 | $850 | | Accrued legal expenses | $585 | $522 | | Accrued clinical costs | $180 | $204 | | Other | $688 | $354 | | **Total** | **$4,860** | **$4,771** | [Note 5. Stock-Based Compensation](index=20&type=section&id=Note%205.%20Stock-Based%20Compensation) Stock-based compensation expense decreased for the six months ended June 30, 2025, with most allocated to selling, general, and administrative functions | Expense Category | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Research and development | $92 | $164 | $225 | $376 | | Selling, general and administrative | $305 | $260 | $624 | $545 | | **Total stock-based compensation** | **$397** | **$424** | **$849** | **$921** | [Note 6. Term Loan](index=20&type=section&id=Note%206.%20Term%20Loan) The company fully repaid its term loan agreement with Oxford Finance LLC in November 2024 - All remaining obligations under the term loan agreement with Oxford Finance LLC were **paid off in November 2024**[81](index=81&type=chunk) [Note 7. Commitments](index=21&type=section&id=Note%207.%20Commitments) Operating lease expenses decreased for the six months ended June 30, 2025, with future minimum payments primarily extending through 2026 | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :---------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Rent expenses | $284 | $345 | $568 | $805 | | Future Minimum Payments (in thousands) | Operating Leases | | :------------------------------------- | :--------------- | | Six months ending December 31, 2025 | $578 | | 2026 | $1,185 | | 2027 | $166 | | **Total** | **$1,929** | - The weighted-average remaining lease term for the company's leased properties was **1.64 years** as of June 30, 2025[83](index=83&type=chunk) [Note 8. Stockholders' Equity](index=21&type=section&id=Note%208.%20Stockholders'%20Equity) Details shelf registration statements, 2023 direct offerings, accounting for common stock warrants, and limited securities availability under SEC rules - The company filed a new shelf registration statement (Form S-3) in August 2024 for up to **$250.0 million** of securities. However, due to SEC 'baby shelf' rules, only approximately **$19.6 million** of securities are currently available for sale[85](index=85&type=chunk)[86](index=86&type=chunk)[100](index=100&type=chunk)[158](index=158&type=chunk) - In February 2023, the company issued common warrants to purchase **2,000,000 shares**, with **600,000 shares** outstanding at June 30, 2025, at an exercise price of **$0.51 per share**. These warrants are accounted for as current liabilities[87](index=87&type=chunk)[89](index=89&type=chunk)[72](index=72&type=chunk) - In July 2023, the company issued common warrants to purchase **2,991,027 shares**, all of which were outstanding at June 30, 2025, at an exercise price of **$4.89 per share**. These warrants are also accounted for as current liabilities[94](index=94&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk) - No sales of common stock occurred in the open market during the three and six months ended June 30, 2025. In the six months ended June 30, 2024, **$648,000** was raised from the sale of **702,090 shares**[99](index=99&type=chunk) [Note 9. Discontinued Operations](index=25&type=section&id=Note%209.%20Discontinued%20Operations) Details the sale of the ALZET product line for $17.5 million and its reclassification as discontinued operations, with no reported revenue in H1 2025 - The ALZET product line was sold to ALZET, LLC in November 2024 for **$17.5 million**, leading to the reclassification of its operating results as discontinued operations[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenues | $— | $1,525 | $— | $2,856 | | Income (loss) from discontinued operations | $— | $345 | $(69) | $404 | [Note 10. Segment Information](index=25&type=section&id=Note%2010.%20Segment%20Information) The company operates as a single reportable segment focused on pharmaceutical R&D and manufacturing, with the CEO as CODM - The company operates in **one reportable segment**: the research, development, and manufacturing of pharmaceutical products, primarily focusing on epigenetic therapies like larsucosterol[106](index=106&type=chunk)[107](index=107&type=chunk) - The Chief Executive Officer (CODM) assesses operating performance and makes resource allocation decisions based on net loss, cash on-hand, cash flows, product development timelines, and cash balances[108](index=108&type=chunk) [Note 11. Subsequent Events](index=27&type=section&id=Note%2011.%20Subsequent%20Events) Details the definitive merger agreement with Bausch Health, including the tender offer for DURECT's common stock and CVRs tied to larsucosterol sales milestones - On **July 28, 2025**, DURECT entered into a definitive merger agreement with Bausch Health Americas, Inc. (Parent) and BHC Lyon Merger Sub, Inc. (Merger Sub)[110](index=110&type=chunk) - Merger Sub commenced a tender offer on **August 12, 2025**, to acquire all outstanding DURECT common shares for **$1.75 per share** in cash, plus one non-tradeable Contingent Value Right (CVR)[112](index=112&type=chunk) - The CVRs represent the contractual right to receive pro rata portions of two potential net sales milestone payments totaling up to **$350 million**, contingent on larsucosterol achieving specific worldwide annual net sales targets before **December 31, 2045**, or the **10-year anniversary** of its first commercial sale in the US[112](index=112&type=chunk) - DURECT's Board of Directors unanimously approved the merger and recommended that stockholders accept the Offer. The transaction is expected to close in the **third quarter of 2025**, subject to customary closing conditions[114](index=114&type=chunk)[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion of financial condition and operations, covering biopharmaceutical focus, larsucosterol status, pending acquisition, revenue/expense trends, liquidity, and going concern uncertainty [Overview](index=29&type=section&id=Overview) DURECT is a late-stage biopharmaceutical company developing epigenetic therapies, with larsucosterol as its lead candidate, and has seen recent changes in license agreements and product sales - DURECT is a late-stage biopharmaceutical company pioneering epigenetic therapies, with larsucosterol as its lead candidate for alcohol-associated hepatitis (AH) and metabolic dysfunction-associated steatohepatitis (MASH)[118](index=118&type=chunk)[106](index=106&type=chunk) - Larsucosterol received Breakthrough Therapy Designation (BTD) from the FDA for AH. The Phase 2b AHFIRM trial showed a compelling efficacy signal in reducing 90-day mortality, particularly in U.S. patients (**57% reduction** in 30mg arm, **58%** in 90mg arm)[118](index=118&type=chunk) - The license agreement for POSIMIR was terminated by Innocoll Pharmaceuticals Limited on May 6, 2025, and Indivior UK Limited discontinued sales and marketing for PERSERIS in July 2024. Neither event is expected to have a material financial impact[119](index=119&type=chunk)[120](index=120&type=chunk) - Collaborative research and development revenue primarily comes from earn-out payments (e.g., from Indivior for PERSERIS) and royalty revenue (e.g., from Orient Pharma for Methydur). Product revenue is generated from the sale of excipients[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) [Operating Results](index=30&type=section&id=Operating%20Results) The company has a history of operating losses, with an accumulated deficit of $603.8 million, and expects continued losses, raising substantial doubt about its going concern ability - As of June 30, 2025, the company had an accumulated deficit of **$603.8 million**[126](index=126&type=chunk) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :---------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net loss | $(2,265) | $(3,700) | $(6,497) | $(11,343) | - The company expects to incur continuing losses and negative cash flows from operations for the foreseeable future, leading to substantial doubt about its ability to continue as a **going concern**[126](index=126&type=chunk) [Recent Developments](index=30&type=section&id=Recent%20Developments) DURECT entered a merger agreement with Bausch Health on July 28, 2025, with a tender offer commencing August 12, 2025, unanimously recommended by the Board and subject to customary closing conditions - On **July 28, 2025**, DURECT entered into a merger agreement with Bausch Health Americas, Inc. and its subsidiary, Merger Sub[127](index=127&type=chunk)[110](index=110&type=chunk) - Merger Sub commenced a tender offer on **August 12, 2025**, to acquire all outstanding DURECT common shares[128](index=128&type=chunk)[112](index=112&type=chunk) - DURECT's Board of Directors unanimously approved the merger and recommended that stockholders accept the offer and tender their shares[129](index=129&type=chunk)[114](index=114&type=chunk) - The offer is conditioned on a **majority of outstanding shares** being tendered and not withdrawn, along with other customary closing conditions, including no Company Material Adverse Effect and absence of prohibitive laws or legal proceedings[130](index=130&type=chunk)[131](index=131&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=Critical%20Accounting%20Estimates) Management identifies revenue recognition, prepaid/accrued clinical/manufacturing costs, and warrant liability valuation as significant accounting estimates - The most significant accounting estimates and assumptions relate to revenue recognition, prepaid and accrued clinical costs, prepaid and accrued manufacturing costs, and valuation of warrant liabilities[134](index=134&type=chunk) [Results of Operations (Comparison of three and six months ended June 30, 2025 and 2024)](index=32&type=section&id=Results%20of%20Operations%20(Comparison%20of%20three%20and%20six%20months%20ended%20June%2030,%202025%20and%202024)) Provides a detailed comparison of financial performance for the three and six months ended June 30, 2025, versus 2024, covering revenue, operating expenses, and other income/expense [Revenue](index=32&type=section&id=Revenue) Collaborative R&D revenue decreased due to lower Indivior earn-out, and product revenue declined after the ALZET product line sale | Revenue Type | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Collaborative R&D and other revenue | $428 | $606 | $749 | $1,100 | | Product revenue, net | $19 | $40 | $19 | $40 | - The decrease in collaborative research and development and other revenue was primarily due to lower earn-out revenue recognized from Indivior[137](index=137&type=chunk) - The decrease in product revenue was due to the sale of the ALZET product line in **November 2024**[138](index=138&type=chunk) [Operating Expenses](index=33&type=section&id=Operating%20Expenses) R&D and SG&A expenses decreased significantly in H1 2025, mainly due to lower employee-related costs and reduced larsucosterol development expenses | Expense Category | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Research and development | $1,176 | $2,247 | $3,059 | $6,366 | | Selling, general and administrative | $2,067 | $2,566 | $4,644 | $5,246 | - The decrease in R&D expenses was primarily due to lower contract manufacturing expenses and employee-related costs for larsucosterol. R&D employees decreased from **18 to 4** YoY[140](index=140&type=chunk)[142](index=142&type=chunk) - The decrease in SG&A expenses was primarily due to lower employee costs. SG&A employees decreased from **16 to 9** YoY[145](index=145&type=chunk)[146](index=146&type=chunk) [Other income (expense)](index=35&type=section&id=Other%20income%20(expense)) Other income increased for both periods ended June 30, 2025, driven by a non-cash gain from warrant liabilities, despite decreased interest income | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Other income (expense), net | $538 (income) | $149 (income) | $514 (income) | $(1,248) (expense) | | Interest and other income | $93 | $227 | $188 | $548 | | Change in fair value of warrant liabilities | $446 (gain) | $(78) (loss) | $326 (gain) | $(1,796) (loss) | - Interest income decreased due to lower balances in cash, cash equivalents, and investments[148](index=148&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Cash, cash equivalents, and investments decreased to $6.7 million at June 30, 2025, raising substantial doubt about going concern due to insufficient cash and expected losses - Cash, cash equivalents, and investments totaled **$6.7 million** at June 30, 2025, down from **$12.0 million** at December 31, 2024[150](index=150&type=chunk)[160](index=160&type=chunk) - Substantial doubt exists about the company's ability to continue as a **going concern** for the next **12 months** due to insufficient cash resources to fund planned operations and existing commitments, coupled with expected continuing losses[152](index=152&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) | Cash Flow Activity | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash used in operating activities | $(5,305) | $(10,432) | | Net cash provided by investing activities | $796 | $1,313 | | Net cash used in financing activities | $— | $(3,635) | - The company has up to **$19.6 million** of securities available for sale under its 2024 shelf registration statement, limited by SEC 'baby shelf' rules. However, sales are restricted while the merger is pending[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - As of **August 8, 2025**, the company had **13 employees**, with **4** in research and development and **9** in selling, general and administrative[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's exposure to market risk has not materially changed since December 31, 2024 - The company's exposure to market risk has **not materially changed** since December 31, 2024[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2025, with no significant changes in internal control over financial reporting during the quarter - The company's principal executive and financial officers concluded that disclosure controls and procedures were **effective** as of June 30, 2025[167](index=167&type=chunk) - There were **no significant changes** in the company's internal control over financial reporting during the most recently completed fiscal quarter[168](index=168&type=chunk) PART II. [OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is **not a party to any material legal proceedings**[170](index=170&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, focusing on uncertainties and adverse impacts related to the pending Bausch Health merger, including conditions, termination fees, business disruptions, CVRs, and FDA disruptions - The consummation of the merger is subject to various conditions, including the tender of over **50% of outstanding shares**, absence of a Company Material Adverse Effect, and regulatory approvals. Failure to meet these conditions could delay or prevent the merger[172](index=172&type=chunk)[173](index=173&type=chunk) - If the merger is not completed, DURECT could be required to pay a **$3.5 million termination fee**, incur significant transaction costs, and face adverse effects on its business, financial results, and stock price due to ongoing uncertainties and contractual restrictions[174](index=174&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Stockholders may not receive any payment on the contingent value rights (CVRs) if larsucosterol does not achieve the specified worldwide annual net sales milestones (**$500 million** and **$1 billion**) within the defined timeframe (earlier of **10 years** from first commercial sale in US or **December 31, 2045**)[183](index=183&type=chunk)[185](index=185&type=chunk) - Disruptions at the FDA, potentially caused by funding shortages or policy changes from a new administration, could hinder timely reviews and approvals of new products, negatively impacting the company's business[186](index=186&type=chunk)[187](index=187&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This section reports no insider trading arrangements during the quarter and confirms that the company has regained compliance with Nasdaq's minimum bid price requirement [Insider Adoption or Termination of Trading Arrangements](index=44&type=section&id=Insider%20Adoption%20or%20Termination%20of%20Trading%20Arrangements) No directors or officers reported adopting or terminating Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or officers informed the company of the adoption or termination of a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the fiscal quarter ended June 30, 2025[188](index=188&type=chunk) [Nasdaq Minimum Bid Price Requirement](index=44&type=section&id=Nasdaq%20Minimum%20Bid%20Price%20Requirement) The company regained compliance with Nasdaq Listing Rule 5550(a)(2) on August 12, 2025, after its common stock maintained a closing bid price of $1.00 or greater for at least 10 consecutive business days - DURECT regained compliance with Nasdaq Listing Rule 5550(a)(2) (Minimum Closing Bid Price Requirement) on **August 12, 2025**, after its common stock traded at or above **$1.00 per share** for at least **10 consecutive business days**[190](index=190&type=chunk)[191](index=191&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including the Merger Agreement, its amendment, CEO/CFO certifications, and Inline XBRL financial statements - Key exhibits include the Agreement and Plan of Merger (Exhibit 2.1), Amendment No. 1 to the Merger Agreement (Exhibit 2.2), CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2), and Inline XBRL financial statements (Exhibits 101, 104)[192](index=192&type=chunk)[194](index=194&type=chunk) [Signatures](index=48&type=section&id=Signatures) The report is duly signed by the Chief Executive Officer, James E. Brown, and the Chief Financial Officer, Timothy M. Papp, on August 13, 2025 - The report was signed by James E. Brown, Chief Executive Officer, and Timothy M. Papp, Chief Financial Officer, on **August 13, 2025**[197](index=197&type=chunk)

Company Performance - Durect (DRRX) reported a quarterly loss of $0.07 per share, better than the Zacks Consensus Estimate of a loss of $0.13, representing an earnings surprise of +46.15% [1] - The company posted revenues of $0.45 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 39.69%, although this is a decline from year-ago revenues of $2.17 million [2] - Over the last four quarters, Durect has surpassed consensus EPS estimates two times and topped consensus revenue estimates once [2] Stock Performance - Durect shares have increased approximately 149.3% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.4% [3] - The current Zacks Rank for Durect is 3 (Hold), indicating that shares are expected to perform in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.18 on $0.3 million in revenues, and for the current fiscal year, it is -$0.66 on $1.19 million in revenues [7] - The outlook for the Medical - Drugs industry, where Durect operates, is currently in the top 35% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

[Executive Summary & Corporate Update](index=1&type=section&id=Executive%20Summary%20%26%20Corporate%20Update) [Second Quarter 2025 Financial Results Overview](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results%20Overview) DURECT Corporation reported its financial results for Q2 2025, showing a decrease in total revenues and a reduced net loss compared to Q2 2024, with cash and investments also declining from year-end 2024 Financial Highlights for Three Months Ended June 30: | Metric | Q2 2025 | Q2 2024 | | :---------------------------------- | :------ | :------ | | Total revenues | $447,000 | $646,000 | | Net loss | $2.3 million | $3.7 million | Cash, Cash Equivalents and Investments: | Date | Amount | | :---------------------------------- | :------ | | June 30, 2025 | $6.7 million | | December 31, 2024 | $12.0 million | [Proposed Acquisition by Bausch Health](index=1&type=section&id=Proposed%20Acquisition%20by%20Bausch%20Health) DURECT announced an agreement to be acquired by Bausch Health, with the transaction expected to close in Q3 2025, including an upfront cash payment per share and potential future sales milestones - DURECT Corporation announced its acquisition by **Bausch Health Companies Inc.**[2](index=2&type=chunk) - The transaction is expected to be completed in the **third quarter of 2025**[1](index=1&type=chunk)[3](index=3&type=chunk) [Merger Agreement Details](index=1&type=section&id=Merger%20Agreement%20Details) The merger agreement outlines Bausch Health's payment of $1.75 per share in cash, totaling approximately $63 million upfront, with potential for up to $350 million in aggregate net sales milestone payments for larsucosterol Merger Payment Structure: | Component | Amount | | :---------------------------------- | :------ | | Per share payment | $1.75 per share | | Upfront consideration (all-cash) | Approximately $63 million | | Potential net sales milestone payments | Up to $350 million (aggregate) | - Milestone payments are contingent on larsucosterol sales, to be achieved before the earlier of the **10-year anniversary** of first commercial sale in the U.S. or **December 31, 2045**[3](index=3&type=chunk) [Tender Offer and SEC Filings](index=1&type=section&id=Tender%20Offer%20and%20SEC%20Filings) A tender offer for DURECT's common stock commenced on August 12, 2025, by Bausch Health's subsidiary, with investors advised to review SEC filings for important information - A tender offer to acquire all of DURECT's outstanding common stock commenced on **August 12, 2025**[3](index=3&type=chunk) - Bausch Health and Merger Sub filed a Tender Offer Statement on Schedule TO, and DURECT filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC on **August 12, 2025**[4](index=4&type=chunk) - Investors and security holders are advised to read these documents carefully and in their entirety prior to making any decisions regarding the tender offer[4](index=4&type=chunk)[5](index=5&type=chunk)[6](index=6&type=chunk) [Company Profile](index=2&type=section&id=Company%20Profile) [About DURECT Corporation](index=2&type=section&id=About%20DURECT%20Corporation) DURECT Corporation is a late-stage biopharmaceutical company focused on epigenetic therapies, with its lead drug candidate, larsucosterol, in clinical development for alcohol-associated hepatitis (AH) and holding FDA Fast Track and Breakthrough Therapy designations - DURECT is a **late-stage biopharmaceutical company** developing epigenetic therapies targeting dysregulated DNA methylation for serious and life-threatening conditions, including acute organ injury[6](index=6&type=chunk) - Larsucosterol, DURECT's lead drug candidate, is in clinical development for alcohol-associated hepatitis (AH) and has received **FDA Fast Track and Breakthrough Therapy designations**[6](index=6&type=chunk) - Larsucosterol is an investigational drug candidate and has not been approved for commercialization by the U.S. Food and Drug Administration or other health authorities[9](index=9&type=chunk) [Forward-Looking Statements and Risk Factors](index=2&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) This section contains forward-looking statements regarding the acquisition and future performance, cautioning that actual results may differ due to various risks, including uncertainties in timing, completion, competing offers, closing conditions, and milestone achievement - The press release contains forward-looking statements regarding the potential benefits and timing of the acquisition, and the prospective performance of the surviving company[7](index=7&type=chunk) - Actual results may differ materially due to risks such as uncertainties in the timing and completion of the Offer and Merger, the percentage of stockholders tendering shares, competing offers, failure to satisfy closing conditions, and the risk that Milestone Payments are not achieved[7](index=7&type=chunk) - Undue reliance should not be placed on these statements, and the Company undertakes no obligation to revise or update them, except as required by law[8](index=8&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Condensed Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The condensed statements of operations show a decrease in total revenues and a reduced net loss for both the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to lower research and development costs Three Months Ended June 30 (in thousands): | Metric | 2025 | 2024 | YoY Change | | :---------------------------------- | :--- | :--- | :--------- | | Collaborative R&D and other revenue | $428 | $606 | -29.4% | | Product revenue | $19 | $40 | -52.5% | | **Total revenues** | **$447** | **$646** | **-30.8%** | | Research and development | $1,176 | $2,247 | -47.7% | | Selling, general and administrative | $2,067 | $2,566 | -19.4% | | **Net loss** | **$(2,265)** | **$(3,700)** | **-38.7%** | | Net loss per common share (basic) | $(0.07) | $(0.12) | -41.7% | Six Months Ended June 30 (in thousands): | Metric | 2025 | 2024 | YoY Change | | :---------------------------------- | :--- | :--- | :--------- | | Collaborative R&D and other revenue | $749 | $1,102 | -32.0% | | Product revenue | $19 | $40 | -52.5% | | **Total revenues** | **$768** | **$1,142** | **-32.8%** | | Research and development | $3,059 | $6,366 | -51.9% | | Selling, general and administrative | $4,644 | $5,246 | -11.5% | | **Net loss** | **$(6,497)** | **$(11,343)** | **-42.7%** | | Net loss per common share (basic) | $(0.21) | $(0.37) | -43.2% | [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2025, DURECT's total assets decreased significantly compared to December 31, 2024, primarily driven by a reduction in cash and cash equivalents and short-term investments, while total liabilities remained relatively stable and stockholders' equity decreased Condensed Balance Sheet Highlights (in thousands): | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $6,502 | $11,011 | $(4,509) | | Short-term Investments | $0 | $792 | $(792) | | Total current assets | $7,772 | $13,175 | $(5,403) | | Total assets | $12,482 | $18,349 | $(5,867) | | Total current liabilities | $7,893 | $7,710 | $183 | | Stockholders' equity | $3,483 | $9,131 | $(5,648) | [Contact Information](index=5&type=section&id=Contact%20Information) [Investor Relations Contact](index=5&type=section&id=Investor%20Relations%20Contact) This section provides contact details for DURECT Corporation's investor relations and media inquiries, handled by LifeSci Advisors and LifeSci Communications, respectively - Investor Relations contact: **Sandya von der Weid at LifeSci Advisors** (svonderweid@lifesciadvisors.com)[13](index=13&type=chunk) - Media Contact (DURECT): **Michael Fitzhugh at LifeSci Communications** (mfitzhugh@lifescicomms.com)[13](index=13&type=chunk)

Core Viewpoint - DURECT Corporation has entered into a merger agreement with Bausch Health, where Bausch Health will acquire DURECT for $1.75 per share, with potential additional milestone payments totaling up to $350 million, expected to close in Q3 2025 [1][2]. Financial Highlights - For the second quarter ended June 30, 2025, DURECT reported total revenues of $447,000, a decrease from $646,000 in the same period of 2024. The net loss for the quarter was $2.3 million, compared to a net loss of $3.7 million in Q2 2024 [5][11]. - As of June 30, 2025, DURECT had cash, cash equivalents, and investments totaling $6.7 million, down from $12.0 million at the end of 2024 [5][12]. Merger Agreement Details - The merger agreement stipulates an upfront cash payment of approximately $63 million at closing, with additional milestone payments contingent on the commercial success of DURECT's lead drug candidate, larsucosterol, before December 31, 2045 [2][3]. - The tender offer for DURECT's outstanding shares commenced on August 12, 2025, and the merger is anticipated to be completed in the third quarter of 2025 [2][3]. Product Development - DURECT is focused on developing epigenetic therapies, particularly larsucosterol, which is in clinical development for treating alcohol-associated hepatitis (AH) and has received Fast Track and Breakthrough Therapy designations from the FDA [5][6].

NEW YORK, July 31, 2025 (GLOBE NEWSWIRE) -- Class Action Attorney Juan Monteverde with Monteverde & Associates PC (the “M&A Class Action Firm”), has recovered millions of dollars for shareholders and is recognized as a Top 50 Firm in the 2024 ISS Securities Class Action Services Report. The firm is headquartered at the Empire State Building in New York City and is investigating DURECT Corporation (NASDAQ: DRRX) related to its sale to Bausch Health Companies Inc. for $1.75 per share in cash. Is it a fair de ...

Core Viewpoint - Bausch Health Companies Inc. has agreed to acquire DURECT Corp, focusing on the development of larsucosterol, a novel therapeutic molecule for alcoholic hepatitis, which currently lacks FDA or EMA approved treatments [1][2][3]. Group 1: Acquisition Details - Bausch Health will pay $1.75 per share in an all-cash transaction, totaling approximately $63 million, with potential milestone payments of up to $350 million [3]. - The acquisition is expected to close in the third quarter of 2025 [6]. Group 2: Clinical Development - A registrational Phase 3 program is planned to evaluate the safety and efficacy of larsucosterol for severe alcoholic hepatitis, with a primary endpoint of 90-day survival [3][4]. - The trial will be randomized, double-blind, placebo-controlled, and will incorporate feedback from the FDA [4]. Group 3: Complementary Programs - The acquisition complements Bausch Health's ongoing RED-C clinical program, which assesses rifaximin SSD for delaying the onset of hepatic encephalopathy hospitalization and all-cause mortality [5]. - Patient enrollment in two global Phase 3 studies for the RED-C program is complete, with results expected in early 2026 [5]. Group 4: Financial Context - Bausch Health is addressing its $21 billion debt, with a third due by 2027, and previously considered selling Bausch + Lomb Corp as part of this strategy [6]. - At the time of publication, Bausch Health's stock was down 0.36% at $6.87, while DURECT's stock rose 238.34% to $1.87 [6].

PART I. FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed financial statements for Q1 2025, showing a reduced net loss and decreased total assets, with notes highlighting a significant **going concern** issue Condensed Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $7,963 | $11,011 | ($3,048) | | Total current assets | $9,412 | $13,175 | ($3,763) | | Total assets | $14,360 | $18,349 | ($3,989) | | **Liabilities & Equity** | | | | | Total current liabilities | $7,673 | $7,710 | ($37) | | Total liabilities | $9,009 | $9,218 | ($209) | | Stockholders' equity | $5,351 | $9,131 | ($3,780) | Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $321 | $496 | -35.3% | | Research and development | $1,883 | $4,119 | -54.3% | | Selling, general and administrative | $2,577 | $2,681 | -3.9% | | Loss from operations | ($4,139) | ($6,304) | Improvement | | Net loss | ($4,232) | ($7,643) | Improvement | | Net loss per common share | ($0.13) | ($0.25) | Improvement | Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,544) | ($6,766) | | Net cash provided by (used in) investing activities | $496 | ($887) | | Net cash used in financing activities | $0 | ($1,495) | | **Net decrease in cash** | **($3,048)** | **($9,148)** | [Notes to Condensed Unaudited Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Unaudited%20Financial%20Statements) - The company's financial statements raise substantial doubt about its ability to continue as a **going concern** for one year, as it does not have sufficient cash to meet its plans for the next twelve months[30](index=30&type=chunk) - In November 2024, the company sold its ALZET product line for $17.5 million and paid off all remaining obligations under its term loan with Oxford Finance LLC. The results of the ALZET line are now reported as discontinued operations[32](index=32&type=chunk)[56](index=56&type=chunk)[97](index=97&type=chunk) - Earn-out revenues from Indivior's PERSERIS sales decreased to $172,000 in Q1 2025 from $422,000 in Q1 2024. Indivior announced the discontinuation of sales and marketing for PERSERIS in July 2024[61](index=61&type=chunk) - On May 6, 2025, Innocoll terminated its license agreement for POSIMIR, returning all data and know-how to the company. DURECT is now evaluating next steps for commercializing the product[60](index=60&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses larsucosterol's development and **Breakthrough Therapy Designation**, noting decreased R&D expenses, but emphasizes critical liquidity issues and capital raising constraints due to **going concern** doubts and SEC 'baby shelf' rules [Overview](index=25&type=section&id=Overview) - The company's lead candidate, larsucosterol, is being developed for alcohol-associated hepatitis (AH). The Phase 2b AHFIRM trial showed clinically meaningful trends in mortality reduction at 90 days[106](index=106&type=chunk) - The FDA granted **Breakthrough Therapy Designation (BTD)** to larsucosterol for AH in May 2024. The company plans to initiate a Phase 3 trial in 2025, subject to obtaining sufficient funding[106](index=106&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) - Collaborative research and development revenue decreased to $321,000 in Q1 2025 from $496,000 in Q1 2024, primarily due to lower earn-out revenue from Indivior's PERSERIS sales[117](index=117&type=chunk)[118](index=118&type=chunk) Research and Development Expenses by Program (in thousands) | Program | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Larsucosterol | $1,803 | $4,045 | ($2,242) | | Others | $80 | $74 | $6 | | **Total R&D Expenses** | **$1,883** | **$4,119** | **($2,236)** | - Selling, general and administrative expenses decreased slightly to $2.6 million in Q1 2025 from $2.7 million in Q1 2024, mainly due to lower employee costs[127](index=127&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) - The company had cash, cash equivalents, and investments totaling **$8.4 million** at March 31, 2025, down from **$12.0 million** at December 31, 2024[131](index=131&type=chunk)[141](index=141&type=chunk) - Management has concluded that substantial doubt exists about the company's ability to continue as a **going concern**, as current cash is insufficient to fund operations for the next 12 months[133](index=133&type=chunk)[142](index=142&type=chunk) - Due to SEC 'baby shelf' rules, the company can only issue securities up to approximately **$8.8 million** under its current **$250.0 million** shelf registration statement, significantly limiting its ability to raise capital[139](index=139&type=chunk)[140](index=140&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that its exposure to market risk has not materially changed since December 31, 2024 - As of March 31, 2025, the company's exposure to market risk has not changed materially from the end of the fiscal year 2024[148](index=148&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were deemed effective as of March 31, 2025, with no significant changes in internal control over financial reporting during the quarter - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of the end of the quarter[149](index=149&type=chunk) - No significant changes were made to the company's internal control over financial reporting during the most recently completed fiscal quarter[150](index=150&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not a party to any material legal proceedings - The company is not currently involved in any material legal proceedings[152](index=152&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section adds a new risk factor concerning potential FDA disruptions due to funding shortages and political uncertainty, which could hinder timely product review and approval - A new risk factor was added regarding potential disruptions at the FDA caused by funding shortages and political uncertainty from the second Trump administration[154](index=154&type=chunk) - These disruptions could slow the review and approval time for new drugs, potentially harming the company's business operations and prospects[155](index=155&type=chunk)[156](index=156&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) The company states that none of its directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025 - During the fiscal quarter ended March 31, 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement[157](index=157&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, which include certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and financial statements formatted in Inline XBRL - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[158](index=158&type=chunk)

[Business Update and Highlights](index=1&type=section&id=DURECT%20Corporation%20Reports%20First%20Quarter%202025%20Financial%20Results%20and%20Provides%20Business%20Update) DURECT focuses on larsucosterol's Phase 3 trial, actively seeking funding, and reported Q1 2025 financial results [Management's Statement](index=1&type=section&id=Management%27s%20Statement) DURECT prioritizes larsucosterol's Phase 3 trial for severe AH, contingent on funding, with AHFIRM results validating the design - The company's main priority is to start the Phase 3 trial for larsucosterol, but this depends on obtaining adequate funding[2](index=2&type=chunk) - DURECT is engaged in active discussions for potential business development and financing transactions to fund the continued development of larsucosterol[2](index=2&type=chunk) - The publication of the AHFIRM trial results in NEJM Evidence is considered an important validation of larsucosterol's potential and supports the design of the upcoming Phase 3 trial[2](index=2&type=chunk) [Key Developments in Q1 2025](index=1&type=section&id=Key%20Developments%20in%20Q1%202025) Q1 2025 highlights include larsucosterol Phase 3 planning, AHFIRM results, POSIMIR rights regained, and improved financials - The company is planning a registrational Phase 3 trial for larsucosterol in severe AH, with the primary endpoint being 90-day survival. The trial is targeted to begin in 2025, subject to funding, with topline results expected within two years of initiation[5](index=5&type=chunk) - On May 6, 2025, DURECT regained all data and know-how for POSIMIR following the termination of its licensing agreement with Innocoll Pharmaceuticals, and is now seeking a new commercialization partner[5](index=5&type=chunk) Q1 2025 vs Q1 2024 Financial Performance | Financial Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $0.3 million | $0.5 million | | Net Loss | ($4.2 million) | ($7.6 million) | Cash and Investments | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents and investments | $8.4 million | $12.0 million | [Clinical Program: Larsucosterol for Alcohol-associated Hepatitis (AH)](index=1&type=section&id=Clinical%20Program%3A%20Larsucosterol%20for%20Alcohol-associated%20Hepatitis%20%28AH%29) This section details larsucosterol's mechanism, AHFIRM trial, and the significant unmet medical need in AH [Larsucosterol Overview](index=3&type=section&id=Larsucosterol%20Overview) Larsucosterol, an epigenetic modulator, inhibits DNMTs to regulate gene expression for cell survival and inflammation - Larsucosterol is an epigenetic modulator that inhibits DNA methyltransferases (DNMT1, DNMT3a, and 3b), which may lead to improved cell survival, reduced inflammation, and decreased lipotoxicity[8](index=8&type=chunk) - The FDA has granted larsucosterol both Fast Track and Breakthrough Therapy designations for the treatment of AH[6](index=6&type=chunk)[9](index=9&type=chunk) [AHFIRM Phase 2b Trial](index=1&type=section&id=About%20the%20AHFIRM%20Trial) The AHFIRM trial was a Phase 2b study of larsucosterol in 307 severe AH patients, assessing 90-day mortality or liver transplantation - The AHFIRM trial was a randomized, double-blind, placebo-controlled Phase 2b study that enrolled 307 patients with severe AH across three arms: Placebo, larsucosterol (30 mg), and larsucosterol (90 mg)[4](index=4&type=chunk) - The primary outcome measure was the 90-day incidence of mortality or liver transplantation for patients treated with larsucosterol compared to placebo[4](index=4&type=chunk) [Market Context: Alcohol-associated Hepatitis (AH)](index=3&type=section&id=About%20Alcohol-associated%20Hepatitis%20%28AH%29) AH is a severe liver disease with high mortality and no FDA-approved therapies, representing a significant unmet medical need - AH is an acute form of alcohol-associated liver disease characterized by severe inflammation and liver cell damage, with no currently FDA-approved therapies[7](index=7&type=chunk) - A retrospective analysis of 77 studies showed the overall mortality from AH was **29% at 90 days** and **44% at 180 days**, indicating a high unmet medical need[7](index=7&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) This section presents DURECT's condensed statements of operations and balance sheets for Q1 2025 and comparative periods [Condensed Statements of Operations](index=7&type=section&id=CONDENSED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) Q1 2025 saw DURECT's revenues decrease to **$0.321 million**, while reduced operating expenses led to a lower net loss of **$4.2 million** Condensed Statements of Operations and Comprehensive Loss (in thousands) | Metric (in thousands, except per share) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $321 | $496 | | Research and development | $1,883 | $4,119 | | Selling, general and administrative | $2,577 | $2,681 | | Loss from operations | ($4,139) | ($6,304) | | Net loss | ($4,232) | ($7,643) | | Net loss per common share | ($0.13) | ($0.25) | [Condensed Balance Sheets](index=8&type=section&id=CONDENSED%20BALANCE%20SHEETS) As of March 31, 2025, DURECT's total assets were **$14.4 million**, with cash at **$8.0 million**, and stockholders' equity at **$5.4 million** Condensed Balance Sheets (in thousands) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,963 | $11,011 | | Total current assets | $9,412 | $13,175 | | Total assets | $14,360 | $18,349 | | Total current liabilities | $7,673 | $7,710 | | Total liabilities | $9,009 | $9,218 | | Stockholders' equity | $5,351 | $9,131 | [Corporate Information and Disclosures](index=3&type=section&id=Corporate%20Information%20and%20Disclosures) This section provides an overview of DURECT Corporation and outlines key forward-looking statements and associated risks [About DURECT Corporation](index=3&type=section&id=About%20DURECT%20Corporation) DURECT is a late-stage biopharmaceutical company developing epigenetic therapies, with larsucosterol as its lead candidate for AH - DURECT is a late-stage biopharmaceutical company that pioneers the development of epigenetic therapies targeting dysregulated DNA methylation[9](index=9&type=chunk) - The company's lead drug candidate is larsucosterol, which is being developed for the treatment of acute organ injury, with a primary focus on AH[9](index=9&type=chunk) [Forward-Looking Statements](index=3&type=section&id=DURECT%20Forward-Looking%20Statements) Forward-looking statements highlight risks including funding for Phase 3, trial outcomes, FDA approval, and the company's going concern status - Key risks include the ability to secure sufficient funding for the Phase 3 trial, the possibility that future trials do not confirm earlier results, and potential FDA delays or requirements for additional trials[10](index=10&type=chunk)[11](index=11&type=chunk) - The company notes risks related to the sufficiency of its cash resources, its ability to meet Nasdaq listing requirements, and its ability to continue as a going concern[11](index=11&type=chunk)

Clinical Trials and Efficacy - DURECT Corporation's lead candidate, larsucosterol, demonstrated a 41% reduction in mortality at 90 days (p=0.068) for the 30 mg dose and a 35% reduction (p=0.124) for the 90 mg dose compared to placebo in the AHFIRM trial[29]. - The AHFIRM trial enrolled 307 patients with severe alcohol-associated hepatitis (AH), with 76% of patients from the U.S., showing a 57% reduction (p=0.014) in mortality for the 30 mg dose and 58% reduction (p=0.008) for the 90 mg dose in U.S. patients[29]. - The primary endpoint of mortality or liver transplantation at 90 days did not achieve statistical significance for either larsucosterol dose compared to placebo, although numerical improvements were observed[30]. - Larsucosterol 30 mg and 90 mg doses showed 90-day mortality reductions of approximately 41% and 35% compared to placebo, although not statistically significant[33]. - In U.S. patients, 90-day mortality reductions were 57% for the 30 mg group (p=0.014) and 58% for the 90 mg group (p=0.008) compared to placebo[35]. - The Phase 2a clinical trial included 19 patients, with all surviving the 28-day follow-up period and no drug-related serious adverse events reported[43]. - Future clinical trials are required to establish clinically and statistically significant proof of efficacy and safety for larsucosterol[159]. Regulatory Designations and Trials - The FDA granted Breakthrough Therapy Designation to larsucosterol for the treatment of AH in May 2024, with a planned Phase 3 trial to evaluate its safety and efficacy[1]. - The Phase 3 trial is expected to enroll approximately 200 patients in a 1:1 ratio for larsucosterol (30 mg) versus placebo, with a primary outcome measure of 90-day survival[1]. - The planned Phase 3 clinical trial will enroll approximately 200 patients, randomized 1:1 to larsucosterol (30 mg) or placebo, with a primary outcome measure of 90-day survival[46]. - The FDA granted Fast Track Designation for larsucosterol in December 2020 and Breakthrough Therapy Designation in May 2024 for the treatment of alcoholic hepatitis (AH)[45]. - The FDA or other regulatory agencies may require additional information or clinical studies, potentially delaying or preventing regulatory approval for larsucosterol[163]. - The FDA has granted Fast Track and Breakthrough Therapy Designations for larsucosterol, but these designations do not guarantee faster development or approval[175][176]. Financial and Market Considerations - The healthcare costs for hospitalized AH patients are significant, with average charges exceeding $147,000 for patients who died during hospitalization and $53,000 for those discharged[26]. - The average charges for a liver transplant exceed $875,000, with patients requiring lifelong immunosuppressive therapy[27]. - The company is currently facing significant challenges in raising capital to continue operations, with recurring losses and negative cash flows raising doubts about its ability to operate as a going concern[155]. - The company does not have sufficient cash resources to meet its plans for the next twelve months, necessitating additional financing to fund operations[155]. - The company may seek additional funding through equity or debt financings, which could be dilutive to existing stockholders[158]. - The company does not anticipate meaningful revenues from the commercialization of its products and product candidates in the near future, and does not expect revenues to exceed operating expenses[204]. - Indivior accounted for 78% of the company's total revenue in 2024, highlighting the significant reliance on this partnership[76]. - The company sold the ALZET product line for $17.5 million, which may impact future revenue streams[74]. Manufacturing and Supply Chain Risks - The company relies on third-party manufacturers for larsucosterol, increasing the risk of delays in regulatory submissions and commercialization efforts[152]. - The company relies on a limited number of suppliers for key components, which could lead to supply shortages or increased costs[184]. - The company has not established long-term supply agreements for all components, increasing the risk of supply interruptions[186]. - The company anticipates that reliance on third-party contractors for clinical trials and manufacturing may lead to delays and increased expenses if these contractors fail to meet obligations[197]. - Manufacturing delays or issues with third-party contractors could adversely affect the commercialization of larsucosterol[169]. Compliance and Regulatory Challenges - The company faces significant risks related to compliance with FDA regulations, which could delay or preclude the development and marketing of its products[201]. - The FDA's drug development process requires substantial time and financial resources, with no guarantee of timely approval[89]. - Drug manufacturers must adhere to Good Manufacturing Practices (GMP), with risks of non-compliance affecting product availability[104]. - The company may incur significant costs to comply with environmental and health regulations in the future, which could adversely affect its financial condition[209]. - The company may face significant costs and resource diversion due to litigation related to patent rights[84]. Employee and Operational Considerations - As of March 25, 2025, the company had 21 employees, with 43% male and 57% female representation, and 13 employees holding advanced degrees[147]. - The company has reduced its headcount from 58 as of March 26, 2024, to 21 as of March 25, 2025, through targeted reductions and the sale of the ALZET product line[206]. - The company must obtain marketing authorization from foreign regulatory authorities, which varies widely by country[127]. Competitive Landscape - The company faces significant competition from entities with greater resources and capabilities in the pharmaceutical and biotechnology sectors[138]. - The company may experience difficulties in enrolling patients for clinical trials, impacting the timelines for product development[191]. Legislative and Economic Factors - Legislative changes, such as the Affordable Care Act, impose additional fees and rebates on pharmaceutical manufacturers, impacting financial performance[119]. - Future healthcare reforms may impose downward pressure on prices for approved products, potentially harming future revenues[126]. - Macroeconomic uncertainties, including inflation and supply chain disruptions, have adversely impacted the company's operations and may continue to do so[189].