DURECT Corporation (NASDAQ: DRRX) is flying early on in the trading session, trading on gains of more than 17%. The gains come after the company announced that it has entered into an agreement with Gilead Sciences, Inc. (NASDAQ: GILD). Here’s what’s going on:
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DRRX Stock Flies On Agreement With GILD
In a press release issued early this morning, DURECT Corporation said that it entered into an agreement with Gilead Sciences. Under the terms of the agreement, the company granted Gilead the exclusive worldwide rights to develop and commercialize its long-acting injectable HIV product using SABER technology.
In the release, DRRX said that GILD also received exclusive access to the SABER platform for both HIV and Hepatitis B Virus (HBV). Moreover, Gilead Sciences received an exclusive option to license additional SABER-based products directed to HIV and HBV.
According to the terms of the agreement, DRRX will receive an upfront payment of $25 million from GILD. Moreover, the comapny has the potential to generate an additional $75 million in development and regulatory milestones.
An additional $70 million is up for grabs surrounding sales-based milestones. Not to mention, the company will be entitled to royalties on product sales.
Moreover, in relation to the option to license additional SABER-based products directed to HIV and HBV, should GILD take advantage of this option, it will pay an additional $150 million per product in upfront, development, regulatory and sales-based milestones DURECT also said that it will receive tiered royalties on all licensed product sales.
Finally, the two companies will collaborate on specified development activities. Gilead Sciences has agreed to control and fund these development programs. In a statement, James E. Brown, President and CEO at DRRX, had the following to offer:
We’re pleased to be working on this program with Gilead given their expertise and global leadership in the HIV and HBV fields. We’ve been working together on this program as a feasibility project, and are now delighted that Gilead has chosen to advance this effort into a formal development program.
This News Is Significant
Gilead Sciences is one of the biggest players in the biotech space. As such, a partnership with them is a very big deal for DURECT. However, simply partnering with a big name isn’t the only reason for all of the excitement today.
The agreement provides several benefits to DRRX and its investors. First and foremost, the upfront funding that will be provided as part of this agreement is substantial. After all, the payment represented more than 20% of the company’s pre-run market cap.
Moreover, this agreement has the potential to generate $150 million plus royalties. As such, this one agreement could generate more money than the market sees the company as being worht at present levels.
Also, Gilead Sciences has proven its commercialization abilities. As a result, once the product reaches commercialization, the company will benefit from royalties on likely strong sales generated by its partner.
Finally, should all go well with the first licensed asset, Gilead Sciences is likely to be hungry for more. So, DRRX may benefit from expansion of this agreement moving forward.
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