Zacks_Analysts' Blog : Hospira and Durect Ink Deal - Analyst Blog

Recently, Hospira (HSP) and Durect Corp. (DRRX) entered into a licensing agreement to develop and market the latter’s Posidur. The drug, a long-acting version of the anesthetic bupivacaine, is currently in a phase III clinical trial. In addition to co-developing Posidur, Hospira will have exclusive marketing rights in the US and Canada on approval.

Hospira will make an upfront payment of $27.5 million, with the potential for another $185 million in the form of milestone payments. Additionally, Durect will receive royalty on product sales.

The phase III trial of Posidur is expected to be completed in 2011. The drug has been developed to provide up to 72 hours of anesthetic directly at the site of a surgical wound. The drug also has some more advantages such as reduction of post-surgical pain, better patient mobility which results in earlier hospital discharge.

We believe the agreement with Durect complements Hospira’s existing product pipeline. Besides, the existing sales force at Hospira for marketing its proprietary sedation agent, Precedex will be able to market Posidur as well.

In order to strengthen its pipeline, Hospira has been trying several deals, the latest being the proposed acquisition of Javelin Pharmaceuticals (JAV). However, the deal seems to be in trouble with the date for tender offer of shares being delayed twice.

The potential acquisition of Javelin is quite significant for Hospira as it will gain access to Dyloject, a post-operative pain management drug. Although the drug is marketed in the UK and Scotland, it is yet to receive approval from the US Food and Drug Administration (FDA). A final decision is expected by October 3, 2010.

Hospira will gain global rights to Dyloject except in Europe, where rights are licensed to a third party. The company plans to market the product in the US, Canada, Latin America and the Asia-Pacific region, where it also markets Precedex. Since both Precedex and Dyloject are marketed to anesthesiologists, Hospira will be able to leverage its Precedex sales force to promote Dyloject.

We are currently Neutral on Hospira.