Up, Down, Up

Written by GSCR Staff   
Wednesday, 20 February 2013 12:13

Do you like rollercoasters? Then hop on board.

We believe DURECT Corporation (NASDAQ – DRRX - $1.19) is an undervalued stock in the familiar biopharmaceutical space.  After reaching a high of $1.66 in October the stock plummeted to $0.86 in December and has been on a comeback ever since.  On November 1, Pfizer (NYSE – PFE - $27.71) announced it wanted more tests of the drug, Remoxy, which incorporates DURECT’s ORADUR technology.  This was the catalyst for the dramatic dip.

So, why do we like this one?  The main reasons revolve around the company’s pipeline and imminent events related to its offerings.  It focuses on the development of products for the treatment of various chronic and episodic disease areas, such as pain, central nervous system disorders, cardiovascular disease, and other chronic diseases.  As mentioned above, Remoxy is one of the drugs that use the ORADUR technology in a partnership with Pain Therapeutics, Inc. (NASDAQ – PTIE - $2.97) has passed through Phase I, II, and III of FDA approval and is responding to the rejection of the NDA from the FDA.  Both Pfizer and Pain Therapeutics are aiding in getting this approved for 2013.  POSIDUR, a post-operative pain relief pill, has passed Phase I through III, and the company estimates NDA submittal in 1Q13.  Finally, TRANSDUR and ELADUR have both passed Phase II with the next submission set for possibly later this year.

The charts indicate a very bullish trend in the short term as the stock looks like it is under some accumulation.  The 4Q12 results also indicated a very efficient use of capital with no debt and $0.55 cash per share after last round of financing.  We see the stock climbing to the $2.50 range.

Have a great day.

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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