PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's total assets significantly increased to **$116.1 million** by March 2021 due to financing, while net loss remained comparable at **$10.1 million** for the quarter, with **$51.0 million** provided by financing activities [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $57,545 | $21,312 | | Short-term investments | $39,538 | $19,421 | | Total current assets | $104,811 | $63,061 | | Total assets | $116,055 | $75,641 | | **Liabilities & Equity** | | | | Total current liabilities | $11,704 | $10,703 | | Term loan, non-current portion, net | $18,062 | $19,936 | | Total liabilities | $34,332 | $35,526 | | Total stockholders' equity | $81,723 | $40,115 | | Total liabilities and stockholders' equity | $116,055 | $75,641 | [Condensed Statements of Comprehensive Loss](index=4&type=section&id=Condensed%20Statements%20of%20Comprehensive%20Loss) Condensed Statements of Comprehensive Loss Highlights (in thousands, except per share amounts) | Account | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Total revenues | $2,212 | $1,595 | | Research and development | $7,975 | $7,587 | | Selling, general and administrative | $3,531 | $3,431 | | Loss from operations | $(9,646) | $(9,819) | | Net loss | $(10,134) | $(9,948) | | Net loss per common share, basic and diluted | $(0.05) | $(0.05) | | Weighted-average shares outstanding | 217,537 | 195,745 | [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Condensed Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,709) | $(12,860) | | Net cash (used in) provided by investing activities | $(4,106) | $9,753 | | Net cash provided by financing activities | $51,048 | $760 | | Net increase (decrease) in cash | $36,233 | $(2,347) | [Notes to Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Notes detail the company's biopharmaceutical R&D focus, significant accumulated deficit, liquidity risks, and recent **$45.4 million** equity offering - The company's business is focused on two R&D categories: new chemical entities from its Epigenetics Regulator Program and Proprietary Pharmaceutical Programs improving existing drugs[24](index=24&type=chunk) - The company has an accumulated deficit of **$499.9 million** as of March 31, 2021, and expects to continue incurring negative cash flows, requiring substantial future funding for R&D and clinical trials[28](index=28&type=chunk) - In December 2020, the company sold its LACTEL Absorbable Polymer product line to Evonik for approximately **$15 million**. The results of the LACTEL line are presented as discontinued operations[26](index=26&type=chunk)[62](index=62&type=chunk) - In February 2021, the company completed an underwritten public offering, raising net proceeds of approximately **$45.4 million**. An additional **$2.4 million** was raised through its sales agreement with Cantor Fitzgerald[61](index=61&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the progress of lead candidate DUR-928 and FDA-approved POSIMIR, noting a **$10.1 million** net loss for Q1 2021 and a significant liquidity boost from a **$45.4 million** equity financing [Overview](index=18&type=section&id=Overview) DURECT, a biopharmaceutical company, focuses on lead candidate DUR-928 for AH and NASH, with recent FDA approval for POSIMIR and ongoing revenue from other programs - The lead candidate is DUR-928, an epigenetic regulator being evaluated in a Phase 2b trial (AHFIRM) for severe alcohol-associated hepatitis (AH)[69](index=69&type=chunk) - POSIMIR, a post-surgical pain product, was approved by the FDA in February 2021 for use in arthroscopic subacromial decompression[69](index=69&type=chunk) - The company receives single-digit earn-out payments from Indivior's U.S. net sales of PERSERIS and royalties from Orient Pharma's sales of Methydur in Taiwan[72](index=72&type=chunk) [Epigenetic Regulator Program (DUR-928)](index=19&type=section&id=Epigenetic%20Regulator%20Program%20(DUR-928)) The DUR-928 program is progressing with a Phase 2b trial for acute alcohol-associated hepatitis (AH) and a Phase 1b trial for chronic liver disease (NASH) showing promising results - DUR-928 is an endogenous sulfated oxysterol and an epigenetic regulator that inhibits DNA methyltransferases (DNMTs), which may lead to improved cell survival and reduced inflammation[74](index=74&type=chunk) [Acute Organ Injury Program (AH)](index=20&type=section&id=Acute%20Organ%20Injury%20Program%20(AH)) The AH program, targeting a high-mortality condition, showed promising Phase 2a results with **100%** patient survival and significant bilirubin reductions, leading to a Phase 2b trial initiation - In the Phase 2a trial for AH, all **19** patients treated with DUR-928 survived the 28-day follow-up period, with no drug-related serious adverse events[82](index=82&type=chunk) - Patients treated with DUR-928 showed statistically significant reductions from baseline in bilirubin at day 7 and 28, and in MELD score at day 28[82](index=82&type=chunk) Lille Score Responder Rate (Lille < 0.45) in Phase 2a AH Trial | AH Patient Category | n | Responders (Lille<0.45) | | :--- | :-: | :--- | | All Patients | 18 | 89% | | 30 or 90 mg DUR-928 | 14 | 100% | | Severe AH (DF ≥ 32) | 15 | 87% | | Severe AH (MELD 21-30) | 12 | 83% | - A Phase 2b study (AHFIRM) was initiated in January 2021 to evaluate DUR-928 in approximately **300** patients with severe AH, with the primary outcome being 90-day survival rate[98](index=98&type=chunk) [Chronic Liver Disease Program (NASH)](index=24&type=section&id=Chronic%20Liver%20Disease%20Program%20(NASH)) The NASH program's Phase 1b study demonstrated DUR-928's tolerability and significant reductions in liver enzymes, stiffness, and lipids, with **43%** of patients showing reduced liver fat - In a Phase 1b NASH study, DUR-928 was well tolerated with no serious adverse events or discontinuations[106](index=106&type=chunk) Topline Efficacy Signals from Phase 1b NASH Trial (Day 28 vs Baseline) | Metric | 50 mg QD | 150 mg QD | 300 mg BID | | :--- | :--- | :--- | :--- | | Serum ALT | -16%* | -10% | -17%*** | | Liver Stiffness (FibroScan) | -10%** | -9% | -1% | | Serum Triglycerides | -13%* | -3% | -2% | | LDL-C | -6% | -11%* | -7% | *p < 0.05, **p < 0.01, ***p < 0.001 - **43%** of patients across all dose groups showed a ≥10% reduction in liver fat as measured by MRI-PDFF at day 28[105](index=105&type=chunk) [Results of Operation](index=30&type=section&id=Results%20of%20Operation) Q1 2021 total revenues increased to **$2.2 million**, while net loss was **$10.1 million**, with R&D expenses rising to **$8.0 million** due to the DUR-928 program Revenue Breakdown (in thousands) | Revenue Source | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Collaborative R&D and other revenue | $574 | $(30) | | Product revenue, net | $1,638 | $1,625 | | **Total revenues** | **$2,212** | **$1,595** | - Collaborative R&D revenue was **$574,000** in Q1 2021, compared to a negative revenue of **$(30,000)** in Q1 2020, which included a revenue reversal related to the terminated Gilead agreement[128](index=128&type=chunk) Research & Development Expenses by Program (in thousands) | Program | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | DUR-928 | $5,516 | $4,991 | | POSIMIR | $1,674 | $1,691 | | Depot injectable programs | $262 | $177 | | Gilead | $65 | $447 | | Others | $458 | $281 | | **Total R&D Expenses** | **$7,975** | **$7,587** | - The increase in R&D expenses was primarily driven by higher costs for the DUR-928 program, which rose to **$5.5 million** in Q1 2021 from **$5.0 million** in Q1 2020[132](index=132&type=chunk)[134](index=134&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly improved with cash and investments reaching **$97.2 million** by March 2021, driven by **$51.0 million** in financing, including a **$45.4 million** public offering - Cash, cash equivalents, and investments increased to **$97.2 million** at March 31, 2021, from **$56.9 million** at December 31, 2020[141](index=141&type=chunk) - Financing activities provided **$51.0 million** in cash during Q1 2021, mainly from an underwritten public offering that raised approximately **$45.4 million** in net proceeds[142](index=142&type=chunk)[143](index=143&type=chunk) - Management believes existing cash and investments are sufficient to fund planned operations for at least the next **12 months** from the filing date[144](index=144&type=chunk) - The COVID-19 pandemic may cause delays in patient enrollment for the DUR-928 Phase 2b trial and disruptions in supplies, which could increase overall development costs[144](index=144&type=chunk) [Item 3. 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 there have been no significant changes in its market risks since the disclosures made in its Annual Report on Form 10-K for the year ended December 31, 2020 - There were no significant changes in market risks during the three months ended March 31, 2021, as compared to the disclosures in the 2020 Form 10-K[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of March 31, 2021, the company's principal executive and financial officers concluded that disclosure controls and procedures were effective. There were no significant changes in internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[148](index=148&type=chunk) - No significant changes were made to the company's internal control over financial reporting during the most recently completed fiscal quarter[148](index=148&type=chunk) PART II. OTHER INFORMATION [Item 1. 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 a party to any material legal proceedings[151](index=151&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including dependency on DUR-928's success, COVID-19 impacts on trials, need for additional capital, reliance on third-party collaborators, challenges in commercializing POSIMIR, and substantial debt - The company is highly dependent on the success of DUR-928, which may never receive regulatory approval or be successfully commercialized[153](index=153&type=chunk)[157](index=157&type=chunk) - The COVID-19 pandemic has adversely impacted and will continue to pose challenges to the business, particularly in conducting clinical trials[153](index=153&type=chunk)[159](index=159&type=chunk) - The company is in discussions with potential licensees for POSIMIR but may be unable to enter into a commercialization agreement[153](index=153&type=chunk)[163](index=163&type=chunk) - The company has a significant amount of debt, and failure to comply with covenants could lead to acceleration of repayment obligations[153](index=153&type=chunk)[168](index=168&type=chunk) - Additional capital will be required in the future, and the company may have difficulty raising it[153](index=153&type=chunk)[169](index=169&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and Inline XBRL data files - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act[209](index=209&type=chunk)

Financial Data and Key Metrics Changes - Total revenue in Q4 2020 was $2.2 million, down from $9 million in Q4 2019, primarily due to the recognition of $6.1 million in deferred revenue in the previous year [7] - Product revenue from ALZET pumps was $1.9 million in Q4 2020, compared to $1.7 million in Q4 2019, with a gross margin of 78% [7] - R&D expenses decreased to $6.7 million in Q4 2020 from $9.3 million in Q4 2019, while SG&A expenses were $3.4 million, down from $3.7 million [8] - Cash, cash in escrow, and investments totaled $56.9 million as of December 31, 2020, compared to $64.8 million a year earlier [9] Business Line Data and Key Metrics Changes - The sale of the LACTEL product line to Evonik for $15 million resulted in a gain of approximately $12.8 million, reflected in net income for Q4 2020 [5][6] - Product revenue continues to be strong and cash flow positive, indicating a stable performance in the ALZET pumps segment [7] Market Data and Key Metrics Changes - The FDA granted fast track designation for DUR-928 for the treatment of alcohol-associated hepatitis (AH), indicating a favorable regulatory environment for the product [11][28] - The incidence of AH has reportedly increased during the pandemic, with a noted rise in younger patients [18][76] Company Strategy and Development Direction - The company is focusing on the AHFIRM trial for DUR-928, a Phase 2b study aimed at demonstrating survival benefits in severe AH patients, with a potential NDA filing if successful [54][56] - POSIMIR, a non-opioid analgesic, received FDA approval for post-surgical analgesia, and the company is exploring commercial partnerships to maximize its market potential [39][52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the AHFIRM trial, citing the lack of approved therapies for AH and the potential for DUR-928 to fill this gap [15][54] - There is a growing awareness of alcohol-related liver disease, which may lead to increased hospitalizations and a larger patient population for DUR-928 [76][81] Other Important Information - The company appointed two experienced biopharmaceutical executives to its board, enhancing its leadership team [53] - The discontinuation of the COVID-19 trial allows the company to redirect resources to the AHFIRM trial, which is expected to have a more significant impact [29][90] Q&A Session Summary Question: Update on DUR-928 manuscript publication and mechanism of action - Management is close to finalizing the manuscript, which will clarify the mechanism of action of DUR-928, involving multiple signaling pathways [60][61] Question: Comparison of AHFIRM trial timeline with Gilead's trial - The current environment is expected to facilitate faster enrollment compared to Gilead's trial, which faced more stringent patient eligibility criteria [63][67] Question: Market size for subacromial decompression surgeries - There are over 600,000 subacromial decompression surgeries performed annually in the U.S., presenting a significant market opportunity for POSIMIR [68][69] Question: Long-term outlook for alcohol-related hospitalizations post-pandemic - There is uncertainty, but increased awareness and prior trends suggest that the need for treatment may persist beyond the pandemic [76][81] Question: Opportunities for DUR-928 beyond AH - The company is exploring other indications for DUR-928, including acute organ injury, while currently prioritizing AH due to its significant societal impact [88][90] Question: Enrollment mix for AHFIRM trial - The company anticipates approximately 30 sites in the U.S. and 20 in Europe and Australia for the AHFIRM trial, aiming for a balanced enrollment strategy [92]

[PART I](index=3&type=section&id=PART%20I) [Business](index=3&type=section&id=Item%201.%20Business) DURECT Corporation is a biopharmaceutical company focused on its Epigenetic Regulator Program, with lead candidate DUR-928, and also manages an FDA-approved product, POSIMIR®, alongside other revenue streams [Overview](index=3&type=section&id=Overview) DURECT's core focus is advancing DUR-928 for AH and NASH, complemented by its FDA-approved POSIMIR® and diverse revenue from partnerships and product sales - DURECT's primary focus is advancing investigational therapies from its Epigenetic Regulator Program, with the lead candidate being **DUR-928**[7](index=7&type=chunk) - **DUR-928** is in a Phase 2b clinical trial (AHFIRM) for severe Alcohol-associated Hepatitis (AH) and is also being investigated for Nonalcoholic Steatohepatitis (NASH)[7](index=7&type=chunk) - The company's product **POSIMIR®**, a non-opioid local analgesic, received FDA approval in **February 2021** for post-surgical pain in a specific shoulder surgery procedure[8](index=8&type=chunk) - DURECT generates revenue from earn-out payments on Indivior's **PERSERIS™** sales, royalties from Orient Pharma's **Methydur** sales in Taiwan, and sales of its **ALZET®** osmotic pumps[9](index=9&type=chunk) [Epigenetic Regulator Program and New Chemical Entities](index=4&type=section&id=Epigenetic%20Regulator%20Program%20and%20New%20Chemical%20Entities) This section details DUR-928, an epigenetic regulator, in Phase 2b for Alcohol-associated Hepatitis and Phase 1b for Nonalcoholic Steatohepatitis, with promising clinical results - The lead compound, **DUR-928**, is an endogenous, orally bioavailable small molecule that modulates gene expression related to lipid homeostasis, inflammation, and cell survival, with exclusive worldwide rights held by the company through a license with VCU[13](index=13&type=chunk) - Injectable **DUR-928** is being developed for acute organ injuries, primarily Alcohol-associated Hepatitis (AH), with a Phase 2a trial showing **100% survival at 28 days** for all 19 treated patients, and a larger Phase 2b trial (AHFIRM) initiated in **January 2021** to evaluate 90-day survival in approximately 300 patients[16](index=16&type=chunk)[20](index=20&type=chunk)[40](index=40&type=chunk) - Orally administered **DUR-928** is being developed for chronic liver diseases like NASH, with a Phase 1b study in 65 NASH patients showing statistically significant reductions in liver enzymes (ALT, AST), liver stiffness, and serum lipids after 28 days of treatment[46](index=46&type=chunk)[47](index=47&type=chunk)[51](index=51&type=chunk) [Approved and Commercial Pharmaceutical Products](index=14&type=section&id=Approved%20and%20Commercial%20Pharmaceutical%20Products) This section covers the FDA-approved POSIMIR® seeking a commercial partner, along with revenue from PERSERIS™ earn-outs and Methydur royalties - **POSIMIR®** (bupivacaine solution) was approved by the FDA in **February 2021** for post-surgical analgesia for up to 72 hours following arthroscopic subacromial decompression, with the company holding worldwide rights and discussing with potential licensees for commercialization[65](index=65&type=chunk)[66](index=66&type=chunk) - DURECT receives quarterly single-digit earn-out payments on U.S. net sales of Indivior's **PERSERIS™** (risperidone) for schizophrenia, launched in **February 2019**, with patent rights extending into at least **2026**[70](index=70&type=chunk) - The company's licensee, Orient Pharma, launched **Methydur Sustained Release Capsules** for ADHD in Taiwan in **September 2020**, from which DURECT receives a single-digit royalty on sales[72](index=72&type=chunk) [Drug Delivery Technologies and Programs](index=16&type=section&id=Drug%20Delivery%20Technologies%20and%20Programs) The company utilizes proprietary drug delivery platforms like SABER®, CLOUD™, and ORADUR™ for controlled, sustained drug release, exemplified by POSIMIR® and Methydur - The company has several drug delivery technology platforms, including **SABER®**, **CLOUD™**, and **ORADUR™**, designed to provide controlled, sustained release of drugs[74](index=74&type=chunk)[76](index=76&type=chunk) - The **SABER®** technology, a bioerodible injectable depot system, is the basis for the FDA-approved products **POSIMIR®** and **SucroMate™ Equine**[77](index=77&type=chunk) - The **ORADUR™** sustained release gel-cap technology is the basis for the ORADUR-Methylphenidate ER program (**Methydur**) and is designed to have abuse-deterrent properties[78](index=78&type=chunk)[79](index=79&type=chunk) [DURECT Strategy](index=17&type=section&id=DURECT%20Strategy) DURECT's strategy centers on developing its Epigenetic Regulator Program, diversifying risk through multiple indications and collaborations, and potentially building its own commercial team - Focus on developing pharmaceuticals from the **Epigenetic Regulator Program (DUR-928)** for acute organ injuries and metabolic diseases[82](index=82&type=chunk) - Diversify risk by pursuing multiple indications with **DUR-928** and collaborating with partners on early-stage programs[84](index=84&type=chunk) - Utilize strategic collaborations to enhance product development, mitigate risk, and manage operating costs, while retaining significant economic rights[85](index=85&type=chunk) - May elect to build its own commercial, sales, and marketing organization in the future to capture more economic value from its products[86](index=86&type=chunk) [Patents and Proprietary Rights](index=20&type=section&id=Patents%20and%20Proprietary%20Rights) The company holds extensive patent protection for its Epigenetic Regulator Program, including DUR-928, and its FDA-approved product POSIMIR®, with numerous granted and pending patents - As of **March 1, 2021**, the company owned or exclusively in-licensed over **35 unexpired U.S. patents** and over **145 unexpired foreign patents**, with numerous pending applications[100](index=100&type=chunk) - The **Epigenetic Regulator Program** (including **DUR-928**) is covered by thirteen patent families, with granted patents providing protection until **2026, 2032, and 2034**, and pending applications potentially extending to **2041**[101](index=101&type=chunk) - **POSIMIR** is covered by U.S. patents that could provide protection until **2025**, with pending applications potentially extending to **2042**, and European patents expiring in **2025** and **2026**[101](index=101&type=chunk) [Human Capital Resources](index=27&type=section&id=Human%20Capital%20Resources) The company's human capital comprises 81 employees, with a significant portion in R&D and a diverse gender representation Employee Statistics as of March 1, 2021 | Category | Number/Percentage | | :--- | :--- | | Total Employees (as of Mar 1, 2021) | 81 | | Research and Development | 46 | | Manufacturing | 10 | | Selling, General & Administrative | 25 | | Employees with Advanced Degrees | 41 | | Gender Diversity | 40% male, 60% female | [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks, primarily its dependence on the successful development and commercialization of its lead candidate, DUR-928, alongside potential clinical trial delays, COVID-19 impacts, commercialization challenges for POSIMIR, and the need for additional capital - The company's business is substantially dependent on the successful development, regulatory approval, and commercialization of **DUR-928**, where failure to demonstrate safety or efficacy would materially harm the business[153](index=153&type=chunk) - The **COVID-19 pandemic** has disrupted operations, delayed the initiation and enrollment of clinical trials like AHFIRM, and may impact supply chains and capital markets, posing a significant risk to the business[159](index=159&type=chunk) - The company has a significant amount of debt under a loan agreement with Oxford Finance, with covenants that may be difficult to comply with, where a default could lead to acceleration of repayment obligations[172](index=172&type=chunk)[174](index=174&type=chunk) - The company will require additional capital to fund its research, development, and clinical testing, and difficulty in raising needed funds may force delays or elimination of programs[176](index=176&type=chunk) - The company is in discussions for a commercialization partner for **POSIMIR** and may be unable to enter an agreement on acceptable terms, if at all, which could harm financial prospects[165](index=165&type=chunk) [Properties](index=60&type=section&id=Item%202.%20Properties) The company leases three facilities: two in Cupertino, CA for office, laboratory, and manufacturing purposes, and one in Vacaville, CA for manufacturing, with all leases expiring between 2023 and 2024 with renewal options Leased Facilities Overview | Location | Size (sq. ft.) | Use | Lease Expiration | | :--- | :--- | :--- | :--- | | Cupertino, CA | 30,149 | Office, Lab, Manufacturing | 2024 | | Cupertino, CA | 20,100 | Office and Laboratory | 2024 | | Vacaville, CA | 24,634 | Manufacturing | 2023 | [Legal Proceedings](index=60&type=section&id=Item%203.%20Legal%20Proceedings) The company is not a party to any material legal proceedings - The company reports no material legal proceedings[279](index=279&type=chunk) [PART II](index=61&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=61&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NASDAQ Capital Market under the symbol "DRRX", with approximately 101 holders of record as of March 1, 2021, and no cash dividends paid or anticipated in the foreseeable future - Common stock is traded on the NASDAQ Capital Market under the symbol "**DRRX**"[282](index=282&type=chunk) - The company has never paid cash dividends and does not intend to in the foreseeable future[283](index=283&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2020, total revenues increased to **$30.1 million**, net loss significantly narrowed to **$0.6 million** due to a **$13.8 million** gain from discontinued operations, and the company ended the year with **$56.9 million** in cash, sufficient for the next 12 months [Operating Results](index=66&type=section&id=Operating%20Results) In 2020, total revenues increased to **$30.1 million**, driven by Gilead agreement revenue, while R&D expenses slightly decreased, and net loss significantly narrowed Key Financial Metrics (in millions USD) | Metric | 2020 (Millions USD) | 2019 (Millions USD) | 2018 (Millions USD) | | :--- | :--- | :--- | :--- | | Total Revenues | $30.1M | $25.1M | $15.3M | | R&D Expenses | $27.7M | $29.6M | $25.0M | | SG&A Expenses | $13.6M | $14.1M | $12.3M | | Loss from Continuing Operations | ($14.3M) | ($21.4M) | ($25.3M) | | Income from Discontinued Operations | $13.8M | $0.8M | $0.02M | | **Net Loss** | **($0.6M)** | **($20.6M)** | **($25.3M)** | Collaborative R&D Revenue by Partner (in millions USD) | Collaborator/Counterparty | 2020 Revenue (Millions USD) | 2019 Revenue (Millions USD) | 2018 Revenue (Millions USD) | | :--- | :--- | :--- | :--- | | Gilead | $22.9M | $17.1M | $2.5M | | Other | $1.1M | $1.0M | $5.7M | | **Total** | **$23.9M** | **$18.1M** | **$8.2M** | - The increase in collaborative R&D revenue in **2020** was primarily due to recognizing all remaining deferred revenue from the **Gilead agreement** upon its termination in **June 2020**[330](index=330&type=chunk)[331](index=331&type=chunk) R&D Expenses by Program (in millions USD) | Program | 2020 R&D Expense (Millions USD) | 2019 R&D Expense (Millions USD) | 2018 R&D Expense (Millions USD) | | :--- | :--- | :--- | :--- | | DUR-928 | $21.3M | $20.1M | $14.8M | | POSIMIR | $3.7M | $4.6M | $6.6M | | Gilead program | $1.0M | $3.8M | $2.2M | | Other Programs | $1.7M | $1.1M | $1.3M | | **Total** | **$27.7M** | **$29.6M** | **$25.0M** | - Product revenues decreased to **$6.2 million** in **2020** from **$6.9 million** in **2019**, primarily due to lower sales of the **ALZET osmotic pump** line, impacted by COVID-19 affecting customer research activities[338](index=338&type=chunk)[339](index=339&type=chunk) [Liquidity and Capital Resources](index=74&type=section&id=Liquidity%20and%20Capital%20Resources) The company held **$56.9 million** in cash and investments at year-end 2020, raised an additional **$47.8 million** in early 2021, and believes existing capital is sufficient for the next 12 months - The company had cash, cash equivalents, and investments totaling **$56.9 million** at **December 31, 2020**, compared to **$64.8 million** at year-end **2019**[369](index=369&type=chunk) - In **February 2021**, the company raised net proceeds of **$47.8 million** from an underwritten public offering and other equity sales[369](index=369&type=chunk) - The company has a **$20.0 million** term loan with Oxford Finance, with interest-only payments until **December 1, 2021**, and a final maturity date of **May 1, 2024**[377](index=377&type=chunk) - Management believes that existing cash, including proceeds from the **February 2021** offering, is sufficient to fund planned operations for at least the next **12 months**[383](index=383&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is to changes in interest rates, affecting its investment portfolio and floating-rate term loan, with the investment portfolio focused on principal preservation and the term loan carrying a floating interest rate - The company's main market risk is interest rate risk, affecting its investment portfolio and its floating-rate term loan[395](index=395&type=chunk) - The investment policy prioritizes principal preservation and liquidity, with investments in money market funds, commercial paper, and government securities, and as of **December 31, 2020**, **97.5%** of the portfolio had original maturities of one year or less[396](index=396&type=chunk) - The term loan has a floating interest rate (**7.95%** as of **December 31, 2020**), exposing the company to increased interest expense if rates rise[401](index=401&type=chunk) [Financial Statements and Supplementary Data](index=80&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited financial statements for the fiscal years ended December 31, 2020, 2019, and 2018, including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statement of Stockholders' Equity, and Statements of Cash Flows, along with accompanying notes and an unqualified audit opinion from Ernst & Young LLP [Report of Independent Registered Public Accounting Firm](index=81&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued an unqualified audit opinion on the financial statements, identifying 'Prepaid and accrued contract research expenses' as a critical audit matter - Ernst & Young LLP issued an unqualified audit opinion, stating the financial statements present fairly, in all material respects, the financial position of the company[407](index=407&type=chunk) - The audit identified '**Prepaid and accrued contract research expenses**' as a critical audit matter due to the challenging and subjective judgments required to estimate the progress and stage of completion of R&D activities[411](index=411&type=chunk)[412](index=412&type=chunk) [Financial Statements](index=84&type=section&id=Financial%20Statements) This section presents the company's audited balance sheets, statements of operations, stockholders' equity, and cash flows for 2018-2020, along with related notes Consolidated Balance Sheets (in thousands USD) | Balance Sheet | Dec 31, 2020 (Thousands USD) | Dec 31, 2019 (Thousands USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash, cash equivalents & investments | $56,890 | $64,824 | | Total Current Assets | $63,061 | $71,829 | | Total Assets | $75,641 | $86,020 | | **Liabilities & Equity** | | | | Total Current Liabilities | $10,703 | $36,768 | | Term Loan, non-current | $19,936 | $20,262 | | Total Liabilities | $34,926 | $63,160 | | Total Stockholders' Equity | $40,115 | $22,860 | Consolidated Statements of Operations (in thousands USD) | Statement of Operations | 2020 (Thousands USD) | 2019 (Thousands USD) | 2018 (Thousands USD) | | :--- | :--- | :--- | :--- | | Total Revenues | $30,111 | $25,074 | $15,275 | | Total Operating Expenses | $42,726 | $45,018 | $38,915 | | Loss from Continuing Operations | $(14,335) | $(21,371) | $(25,343) | | Income from Discontinued Operations | $13,753 | $793 | $21 | | **Net Loss** | **$(582)** | **$(20,578)** | **$(25,322)** | - In **December 2020**, the company sold its **LACTEL Absorbable Polymers** product line to Evonik for approximately **$15 million**, resulting in a **$12.8 million** gain and reporting the business as a discontinued operation[574](index=574&type=chunk)[575](index=575&type=chunk) [Controls and Procedures](index=115&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020, with no material changes identified during the last fiscal quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of **December 31, 2020**[584](index=584&type=chunk) - Management concluded that internal control over financial reporting was effective as of **December 31, 2020**[586](index=586&type=chunk) [PART III](index=116&type=section&id=PART%20III) [Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees](index=116&type=section&id=Item%2010,%2011,%2012,%2013,%2014) Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, certain relationships, related transactions, director independence, and principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its 2020 annual meeting of stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's forthcoming Proxy Statement[592](index=592&type=chunk)[593](index=593&type=chunk)[594](index=594&type=chunk) [PART IV](index=117&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=117&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report, including various agreements, corporate governance documents, and SEC-required certifications - This section contains the list of all financial statements, schedules, and exhibits filed with the 10-K, including key agreements such as the Asset Purchase Agreement with Evonik and the Loan and Security Agreement with Oxford Finance[597](index=597&type=chunk)[598](index=598&type=chunk) [Form 10-K Summary](index=123&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has elected not to include a summary for its Form 10-K - The company has elected not to provide a Form 10-K summary[619](index=619&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-31615 DURECT CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-3297098 (State or other jurisdiction of inc ...

DURECT Corporation (NASDAQ:DRRX) Q3 2020 Earnings Conference Call November 2, 2020 4:30 PM ET Company Participants Mike Arenberg - Chief Financial Officer Jim Brown - President & Chief Executive Officer WeiQi Lin - Executive Vice President, Research & Development & Principal Scientist Conference Call Participants Kristen Kluska - Cantor Fitzgerald Francois Brisebois - Oppenheimer Mayank Mamtani - B. Riley Michael Morabito - Chardan Capital Markets Thomas Yip - H.C. Wainwright Elemer Piros - ROTH Capital Par ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-31615 DURECT CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-3297098 (State or other jurisdiction of incorpor ...

Financial Data and Key Metrics Changes - Total revenue in Q2 2020 was $25.8 million, compared to $4 million in Q2 2019, primarily due to the recognition of $23.1 million in deferred revenue from the Gilead agreement [5] - Excluding deferred revenue, collaborative R&D and other revenue for Q2 2020 decreased by $1.4 million compared to Q2 2019, mainly due to reduced development work on the Gilead project [6] - Product revenue from ALZET pumps and LACTEL polymers was $2.5 million in Q2 2020, up from $2.3 million in Q2 2019 [6] - Gross margin for combined product lines was 61% in Q2 2020 [7] - R&D expenses were $6.7 million in Q2 2020, slightly up from $6.6 million in Q2 2019 [8] - SG&A expenses were $3.4 million in Q2 2020, compared to $3.3 million in Q2 2019 [8] - Cash and investments at June 30, 2020, were $51.3 million, down from $64.8 million at December 31, 2019 [9] Business Line Data and Key Metrics Changes - ALZET revenue saw a drop in April and May due to COVID-19 impacts, but June returned to normal levels [7] - DUR-928 program is advancing with a Phase IIb trial planned for alcoholic hepatitis [12][28] - Positive topline data reported from a 65 patient NASH study with DUR-928 [12][36] Market Data and Key Metrics Changes - There are 117,000 hospitalizations per year in the U.S. for alcoholic hepatitis, with no approved therapies available [14] - Hospitalization costs for alcoholic hepatitis exceed $50,000 per patient in the first year [23] Company Strategy and Development Direction - The company is focused on advancing DUR-928 for severe alcoholic hepatitis and COVID-19 related organ injuries [44][45] - Plans to initiate a Phase IIb trial for DUR-928 in severe alcoholic hepatitis patients in the second half of the year [44] - The company is also working on the POSIMIR NDA and expects to license it to a partner for commercialization [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential of DUR-928 in treating severe conditions like alcoholic hepatitis and COVID-19 [47] - The company is preparing for potential challenges in enrollment due to the ongoing COVID-19 pandemic but believes it may enhance enrollment due to increased alcohol consumption [90] - Management is committed to advancing the NASH program while prioritizing immediate opportunities in ICU settings [101] Other Important Information - DUR-928 has shown a wide safety margin and significant improvements in liver fat and stiffness in NASH patients [39][46] - The company continues to respond to FDA inquiries regarding the POSIMIR NDA [47] Q&A Session Summary Question: Timing for COVID-19 study data readouts and NASH next steps - Management is setting up sites for the COVID-19 study and expects data over the next year, depending on infection rates [50][54] - For NASH, management is discussing next steps with KOLs and will design the next study based on comprehensive data analysis [72] Question: Nature of FDA information requests for POSIMIR - Management stated that the FDA is asking standard review questions and emphasized the importance of patience during the review process [61] Question: Dose selection for COVID-19 patients - The 150 mg dose was selected based on safety data from the AH trial and the need to target multiple organs in COVID-19 patients [66] Question: Enrollment challenges in the current environment - Management believes that increased alcohol consumption during the pandemic may lead to higher enrollment rates for the AH trial [90] Question: Rehospitalization rates for AH patients - Management noted that the rehospitalization rate for AH is about 23%, which could positively impact reimbursement levels [98] Question: Future of the NASH program - Management confirmed that the NASH program is not being shelved and will continue to be evaluated alongside other urgent opportunities [101]

DURECT Corp (NASDAQ:DRRX) Q1 2020 Earnings Conference Call May 11, 2020 4:30 PM ET Company Participants Michael Arenberg - CFO & Secretary James Brown - Co-Founder, CEO, President & Director WeiQi Lin - EVP, Research & Development & Principal Scientist Conference Call Participants Antonio Arce - H.C. Wainwright & Co. François Brisebois - Craig-Hallum Len Yaffe - Stoc*Doc Partners Mayank Mamtani - B. Riley FBR, Inc. Operator Greetings, and welcome to the DURECT Corporation First Quarter 2020 Results Conferen ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-31615 DURECT CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-3297098 (State or other jurisdiction of incorpo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 000-31615 DURECT CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-3297098 (State or other jurisdiction of ...