
PART I. FINANCIAL INFORMATION Financial Statements 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 - 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 months30 - 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 operations325697 - 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 202461 - 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 product60 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 - 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 days106 - 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 funding106 Results of Operations - 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 sales117118 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 costs127 Liquidity and Capital Resources - The company had cash, cash equivalents, and investments totaling $8.4 million at March 31, 2025, down from $12.0 million at December 31, 2024131141 - 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 months133142 - 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 capital139140 Quantitative and Qualitative Disclosures about Market Risk 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 2024148 Controls and Procedures 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 quarter149 - No significant changes were made to the company's internal control over financial reporting during the most recently completed fiscal quarter150 PART II. OTHER INFORMATION Legal Proceedings The company reports that it is not a party to any material legal proceedings - The company is not currently involved in any material legal proceedings152 Risk Factors 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 administration154 - These disruptions could slow the review and approval time for new drugs, potentially harming the company's business operations and prospects155156 Other Information 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 arrangement157 Exhibits 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 2002158