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Here's Why DURECT Jumped Higher Today

By Brian Orelli, PhD – Dec 31, 2019 at 12:37PM

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Investors jump in ahead of a binary event.

What happened

Shares of DURECT (DRRX 2.86%) are up 8% at 11:54 a.m. EST, having increased as much as 12% today, as investors jump in ahead of a Food and Drug Administration advisory committee meeting to review its pain drug Posimir scheduled for release Jan. 16.

So what

The original marketing application for Posimir was rejected in 2014, with the FDA requesting that DURECT conduct additional clinical safety studies. The company responded to the requests in June 2019, which resulted in a six-month review period that was supposed to be completed by Dec. 27.

Unfortunately, the agency decided it needed advice from its outside experts and scheduled an advisory committee meeting for next month. An approval decision should come a few weeks to months after the advisory committee meeting, although the agency hasn't set a formal date.

Stock market chart with various chart lines

Image source: Getty Images.

Investors should be cautious jumping in at inflated prices. All of the information about the initial rejection of Posimir and DURECT's response comes from the company because the FDA doesn't publicly comment on drug rejections. While the FDA might have convened the advisory committee meeting out of undue caution, it seems just as likely that the agency is still concerned about the safety issue that originally caused the rejection.

Now what

While the committee's vote on Jan. 16 will be important, it's only a recommendation, and the FDA has the final say. To get a better idea of what the agency's reviewers think of DURECT's response, biotech investors should check out the package of information that the agency sends to the committee members, which should be posted on the FDA's website two days before the meeting.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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