Durect Corporation (NASDAQ:DRRX)
In our last weekly review, we covered the Shelf Registration statement filed by DRRX on December 20th. Since DRRX is awaiting a PDUFA decision from the FDA regarding their post-surgical pain therapy, Posidur, the market naturally took the S-3 with it's attendant At-the-market financing facility (ATM) as a potentially negative sign.
As we outlined in our weekly review, the lock-up provisions from Durect's November 13th financing precluded the company from raising additional capital at least until February 11th, just one day before the PDUFA date. At publication time for our weekly review, we had reached out to DRRX CFO Matt Hogan to confirm our reading of the details of the most recent S-3.
Here is Matt's Response to our inquiry:
We will not use the ATM or otherwise raise any equity before Feb 6 (actually we wouldn't do anything anyway before the PDUFA date of Feb 12 regardless of the lockup). I'd view this as general housekeeping. We thought we'd refresh our shelf, which was about half used up and would expire in 1.5 years. As long as we were doing that, we figured we'd put an ATM in place at the same time. I don't know if we'll ever use the ATM, but the administrative cost of setting it up is modest and it's nice to have the flexibility. These ATMs have become rather common and in the right circumstances they can entail a lower cost of raising capital that an underwritten deal. Just like having as many tools at our disposal. I'm out of the office till Friday, but if you'd like to discuss this in more depth, I'm happy to chat then. [emphasis added]
This is a clear and unequivocal statement regarding the company's intentions regarding the ATM facility. As we suggested in our weekly-review, the facility is in place for future planning beyond the Feb. 12th PDUFA date. (Note the Feb 6th date mentioned in the email was in reference to a specific question we asked about the 11/8 offering announcement + 90 days. After we contacted Matt we realized that the closing date for the offering was actually 11/13.)
Investors who had a knee-jerk reaction to the S-3 and ATM facility, assuming it meant the company had bad news from the FDA already were clearly jumping the gun. While approval of the Posidur NDA is not guaranteed, the recent S-3 is about year-end housekeeping rather than a reflection on approval prospects for Posidur.
We are long DRRX.
