Why DURECT Corporation Shares Were Walloped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of DURECT , a specialty pharmaceutical company that develops proprietary anti-abuse drug technology platforms, sank as much as 32% after it received a complete response letter from the Food and Drug Administration for Posidur after the closing bell last night.

So what: According to the press release from DURECT, Posidur, a direct-injection medication into surgical sites that acts as a painkiller, cannot be approved in its present form because "the [new drug application] does not contain sufficient information to demonstrate that Posidur is safe when used in the manner described in the proposed label." Furthermore, the press release states that additional safety studies would need to be conducted. As is common in CRL rejections, DURECT notes its intent to work with the FDA to find the quickest resolution to its concerns.

Now what: On one hand, the anti-abuse technology that DURECT is attempting to develop could have a gigantic market. Just this past weekend I looked at the nation's fastest growing drug problem and discovered it was actually controlled prescription drugs -- specifically opioid-based painkillers. In other words, the demand for this technology is very high. On the flipside, though, DURECT's drug approval success rate has been poor, and it's now staring down the needle to run more costly clinical studies if it hopes to get Posidur approved by the FDA. Until we see DURECT's losses shrink significantly or the company gains another FDA approval your smartest bet might be to watch this stock from the sidelines.

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The article Why DURECT Corporation Shares Were Walloped originally appeared on Fool.com.

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