# EDGAR Filing Document

**Accession Number:** 0001082038
**File Stem:** 0000950170-25-108150
**Filing Date:** 2025-8
**Character Count:** 147396
**Document Hash:** aea66b206c18ac59ccaf877145a836c9
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-25-108150.hdr.sgml**: 20250813

**ACCESSION NUMBER**: 0000950170-25-108150

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 63

**CONFORMED PERIOD OF REPORT**: 20250630

**FILED AS OF DATE**: 20250813

**DATE AS OF CHANGE**: 20250813

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** DURECT CORP
- **CENTRAL INDEX KEY:** 0001082038
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 943297098
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-31615
- **FILM NUMBER:** 251212651

**BUSINESS ADDRESS:**
- **STREET 1:** 10240 BUBB ROAD
- **CITY:** CUPERTINO
- **STATE:** CA
- **ZIP:** 95014
- **BUSINESS PHONE:** 4087771417

**MAIL ADDRESS:**
- **STREET 1:** 10240 BUBB ROAD
- **CITY:** CUPERTINO
- **STATE:** CA
- **ZIP:** 95014

?xml version='1.0' encoding='ASCII'? 10-Q

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM** 10-Q

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☒ **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended** **June 30,** 2025

**OR**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from to** 

**Commission file number** 000-31615

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DURECT CORP**ORATION**

**(Exact name of registrant as specified in its charter)**

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---

| | |
|:---|:---|
| Delaware | 94-3297098 |
| **(State or other jurisdiction of**<br>**incorporation or organization)** | **(I.R.S. Employer**<br>**Identification No.)** |

---

10240 Bubb Road

Cupertino**,** California 95014

**(Address of principal executive offices, including zip code)**

**(**408**)** 777-1417

**(Registrant's telephone number, including area code)**

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Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| **Title of Each Class** | **Trading Symbol** | **Name of Each Exchange on Which Registered** |
| Common Stock $0.0001 par value per share<br>| DRRX | The NASDAQ Stock Market LLC<br>**(The Nasdaq Capital Market)** |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company  | ☐ |  |  |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 8, 2025, there were 31,054,187 shares of the registrant's common stock outstanding.

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**INDEX**

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| | | |
|:---|:---|:---|
|  |  | **Page** |
|  | [**<u>PART I. FINANCIAL INFORMATION</u>**](#part_i_financial_information) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 1. | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Financial Statements</u>](#item_1_financial_statements) | 5 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Condensed Unaudited Balance Sheets as of June 30, 2025 and December 31, 2024</u>](#condensed_balance_sheets) | 5 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Condensed Unaudited Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2025 and 2024</u>](#condensed_statements_comprehensive_loss) | 6 |
|  | [<u>Condensed Unaudited Statements of Stockholders' Equity for the three and six months ended June 30, 2025 and 2024</u>](#condensed_interim_statements_equity) | 7 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Condensed Unaudited Statements of Cash Flows for the six months ended June 30, 2025 and 2024</u>](#condensed_statements_cash_flows) | 8 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Notes to Condensed Unaudited Financial Statements</u>](#notes_to_unaudited_condensed_financial_s) | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 2. | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Management's Discussion and Analysis of Financial Condition and Results of Operations</u>](#item_2_managements_disscussion) | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 3. | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Quantitative and Qualitative Disclosures about Market Risk</u>](#item_3_quantitative_qualitative_disclosu) | 29 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 4. | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Controls and Procedures</u>](#item_4_controls_procedures) | 29 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;**PART II. OTHER INFORMATION** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 1. | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Legal Proceedings</u>](#item_1_legal_proceedings) | 30 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 1A. | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Risk Factors</u>](#item_1a_risk_factors) | 30 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 5. | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Other Information</u>](#item_5) | 32 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 6. | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Exhibits</u>](#item_6_exhibits) | 34 |
| &nbsp;&nbsp;&nbsp;&nbsp;[<u>Signatures</u>](#signatures) | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Signatures</u>](#signatures) | 35 |

---

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**Special Note Regarding Forward-Looking Statements**

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this Quarterly Report on Form 10-Q or elsewhere by management from time to time, the words "believe," "anticipate," "intend," "plan," "estimate," "expect," "may," "will," "could," "potentially," "possibility," and similar expressions are forward-looking statements. Such forward-looking statements contained herein are based on current expectations and beliefs. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors. Forward-looking statements made in this report include, but are not limited to, statements about*:*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the proposed acquisition of our company by Bausch Health Americas, Inc., a Delaware corporation ("Parent"), pursuant to an Agreement and Plan of Merger dated July 28, 2025 (the "Merger Agreement"), including the anticipated timeframe for completion of the transaction contemplated by the Merger Agreement

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•potential uses and benefits of larsucosterol to treat alcohol-associated hepatitis ("AH"), metabolic dysfunction-associated steatohepatitis ("MASH"), or other conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the potential benefits of Breakthrough Therapy Designation and Fast Track Designation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the results and timing of clinical trials, including clinical trial plans and timelines for larsucosterol;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the likelihood of future clinical trial results of larsucosterol being positive with statistical significance and/or similar to results from previous trials, the possible commencement of future clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our communications with the U.S. Food and Drug Administration ("FDA") regarding the trial design for a Phase 3 clinical trial for larsucosterol in AH and our ability to confirm the efficacy and safety of larsucosterol in AH patients to support a New Drug Application filing with the FDA;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our plans and ability to obtain sufficient capital resources to initiate a Phase 3 clinical trial of larsucosterol in AH and present topline results within two years of initiation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our intention to seek, and ability to enter into and maintain strategic alliances and collaborations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the potential benefits and uses of our products and product candidates, including larsucosterol;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the potential royalty payments we may receive from Orient Pharma Co., Ltd.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•market opportunities for product candidates in our product development pipeline;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•potential regulatory filings for or approval of larsucosterol;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the progress and results of our research and development programs and our evaluation of additional development programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•requirements for us to purchase pre-clinical, clinical trial and commercial supplies of product candidates and/or products, as well as raw materials or active pharmaceutical ingredients from third parties, and the ability of third parties to provide us with our requirements for such supplies and raw materials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•conditions for obtaining regulatory approval of our product candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•submission and timing of applications for regulatory approval and timing of responses to our regulatory submissions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the impact of FDA, European Medicines Agency and other government regulation on our business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to obtain, assert and protect patents and other intellectual property rights, including intellectual property licensed to our collaborators, as well as avoiding the intellectual property rights of others;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•products and companies that will compete with our products and the product candidates we develop and/or license to third-party collaborators;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our employees, including the number of employees and the continued services of key management, technical and scientific personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our future performance, including our anticipation that we will not derive meaningful revenues from our products and product candidates in development for at least the next twelve months, potential for future inventory write-offs and our expectations regarding our ability to achieve profitability;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•sufficiency of our cash resources, anticipated capital requirements and capital expenditures, our need or desire for additional financing, including potential sales under our shelf registration statement and our ability to continue to operate as a going concern;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our expectations regarding research and development expenses, and selling, general and administrative expenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the composition of future revenues; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•accounting policies and estimates.

*We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors. For a more detailed discussion of such forward looking statements and the potential risks and uncertainties that may impact upon their accuracy, see the "Overview" section of the Management's Discussion and Analysis of Financial Condition and Results of Operations herein and Part I, Item 1A., "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 27, 2025 and any additional risk factors that may be described in the "Risk Factors" section herein or in our subsequent reports filed with the SEC. These forward-looking statements reflect our view only as of the date of this report. We undertake no obligations to update any forward-looking statements. You should also carefully consider the factors set forth in other reports or documents that we file from time to time with the Securities and Exchange Commission.*

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**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**DURECT CORPORATION**

**CONDENSED BALANCE SHEETS** 

**(in thousands)**

**(unaudited)**

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **December 31,<br>2024** |
| **<u>A S S E T S</u>** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $6502 | $11011 |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term investments |  | 792 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | 511 | 453 |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventories, net | 291 | 106 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 468 | 813 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 7772 | 13175 |
| Property and equipment, net | 29 | 41 |
| Operating lease right-of-use assets | 1683 | 2135 |
| Goodwill | 2725 | 2725 |
| Long-term restricted investments | 150 | 150 |
| Other long-term assets | 123 | 123 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $12482 | $18349 |
| **<u>L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y</u>** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $393 | $309 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 4860 | 4771 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue, current portion | 320 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities, current portion | 1098 | 1082 |
| &nbsp;&nbsp;&nbsp;&nbsp;Warrant liabilities | 1222 | 1548 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 7893 | 7710 |
| Operating lease liabilities, non-current portion | 652 | 1124 |
| Other long-term liabilities | 454 | 384 |
| Commitments and contingencies |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Common stock | 23 | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 607288 | 606439 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (1) | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (603827) | (597330) |
| Stockholders' equity | 3483 | 9131 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $12482 | $18349 |

---

The accompanying notes are an integral part of these condensed financial statements.

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**DURECT CORPORATION**

**CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**

**(in thousands, except per share amounts)**

**(unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Collaborative research and development and other revenue | $428 | $606 | $749 | $1102 |
| Product revenue | 19 | 40 | 19 | 40 |
| Total revenues | 447 | 646 | 768 | 1142 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cost of product revenues | 7 | 27 | 7 | 29 |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 1176 | 2247 | 3059 | 6366 |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative | 2067 | 2566 | 4644 | 5246 |
| Total operating expenses | 3250 | 4840 | 7710 | 11641 |
| Loss from operations | (2803) | (4194) | (6942) | (10499) |
| Other income (expense): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest and other income | 93 | 227 | 188 | 548 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | 445 | (78) | 326 | (1796) |
| Other income (expense), net | 538 | 149 | 514 | (1248) |
| Loss from continuing operations | (2265) | (4045) | (6428) | (11747) |
| Income (loss) from discontinued operations |  | 345 | (69) | 404 |
| Net loss | (2265) | (3700) | (6497) | (11343) |
| Net change in unrealized loss on available-for-sale securities, net of reclassification adjustments and taxes |  | 3 |  | 7 |
| Total comprehensive loss | $(2265) | $(3697) | $(6497) | $(11336) |
| Net loss per share, basic |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss from continuing operations | $(0.07) | $(0.13) | $(0.21) | $(0.38) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income (loss) from discontinued operations | $— | $0.01 | $— | $0.01 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss per common share | $(0.07) | $(0.12) | $(0.21) | $(0.37) |
| Net loss per share, diluted |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss from continuing operations | $(0.07) | $(0.13) | $(0.21) | $(0.38) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income (loss) from discontinued operations | $— | $0.01 | $— | $0.01 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss per common share | $(0.07) | $(0.12) | $(0.21) | $(0.37) |
| Weighted-average shares used in computing net loss per share |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | 31042 | 31038 | 31042 | 30838 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | 31163 | 31038 | 31042 | 30838 |

---

The accompanying notes are an integral part of these condensed financial statements.

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**DURECT CORPORATION**

**CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY**

**(in thousands, except per share amounts)**

**(unaudited)**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | **Additional<br>Paid-In** | **Accumulated<br>Other<br>Comprehensive** | **Accumulated** | **Total<br>Stockholders'** |
|  | **Shares** | **Amount** | **Capital** | **Loss** | **Deficit** | **Equity** |
| Balance at December 31, 2024 | 31042 | $23 | $606439 | $(1) | $(597330) | $9131 |
| Stock-based compensation expense from stock options and ESPP shares |  |  | 452 |  |  | 452 |
| Net loss |  |  |  |  | (4232) | (4232) |
| Balance at March 31, 2025 | 31042 | $23 | $606891 | $(1) | $(601562) | $5351 |
| Stock-based compensation expense from stock options and ESPP shares |  |  | 397 |  |  | 397 |
| Net loss |  |  |  |  | (2265) | (2265) |
| Balance at June 30, 2025 | 31042 | $23 | $607288 | $(1) | $(603827) | $3483 |
| Balance at December 31, 2023 | 30334 | $23 | $603780 | $(14) | $(589006) | $14783 |
| Issuance of common stock pursuant to the 2021 Sales Agreement, net of issuance costs of $13 | 702 |  | 647 |  |  | 647 |
| Stock-based compensation expense from stock options and ESPP shares |  |  | 509 |  |  | 509 |
| Net loss |  |  |  |  | (7643) | (7643) |
| Change in unrealized loss on available-for-sale securities, net of tax |  |  |  | 4 |  | 4 |
| Balance at March 31, 2024 | 31036 | $23 | $604936 | $(10) | $(596649) | $8300 |
| Issuance of common stock upon exercise of stock options and from the ESPP | 3 |  | 3 |  |  | 3 |
| Stock-based compensation expense from stock options and ESPP shares |  |  | 431 |  |  | 431 |
| Net loss |  |  |  |  | (3700) | (3700) |
| Change in unrealized loss on available-for-sale securities, net of tax |  |  |  | 3 |  | 3 |
| Balance at June 30, 2024 | 31039 | $23 | $605370 | $(7) | $(600349) | $5037 |

---

The accompanying notes are an integral part of these condensed financial statements

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**DURECT CORPORATION**

**CONDENSED STATEMENTS OF CASH FLOWS**

**(in thousands)**

**(unaudited)**

---

| | | |
|:---|:---|:---|
|  | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** |
| **Cash flows from operating activities** |  |  |
| Net loss | $(6497) | $(11343) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and accretion | 89 | 49 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 849 | 943 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | (326) | 1796 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | (15) | 150 |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (58) | 249 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (185) | (258) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | 345 | 693 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 84 | (1383) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 89 | (1328) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 320 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total adjustments | 1192 | 911 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (5305) | (10432) |
| **Cash flows from investing activities** |  |  |
| Purchases of property and equipment | (7) |  |
| Purchases of available-for-sale securities | (297) | (887) |
| Proceeds from maturities of short-term investments | 1100 | 2200 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by investing activities | 796 | 1313 |
| **Cash flows from financing activities** |  |  |
| Payments on term loan principal |  | (4286) |
| Net proceeds from issuances of common stock pursuant to the 2021 Sales Agreement |  | 648 |
| Net proceeds from issuance of common stock upon exercise of stock options and from the ESPP |  | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities |  | (3635) |
| Net decrease in cash, cash equivalents, and restricted cash | (4509) | (12754) |
| Cash, cash equivalents, and restricted cash, beginning of the period (1) | 11161 | 28550 |
| Cash, cash equivalents, and restricted cash, end of the period (1) | $6652 | $15796 |

---

(1) Includes restricted cash of $150,000 included in long term restricted investments on the condensed balance sheets at June 30, 2025 and December 31, 2024, respectively.

The accompanying notes are an integral part of these condensed financial statements.

------

**DURECT CORPORATION**

**NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS**

**Note 1. Summary of Significant Accounting Policies**

***Nature of Operations***

DURECT Corporation (the "Company") was incorporated in the state of Delaware on February 6, 1998. The Company is a biopharmaceutical company pioneering the development of epigenetic therapies that target dysregulated DNA methylation to transform the treatment of serious and life-threatening conditions, including acute organ injury. Larsucosterol is in clinical development for the potential treatment of alcohol-associated hepatitis ("AH"), for which FDA has granted Fast Track Designation and Breakthrough Therapy Designation; metabolic dysfunction-associated steatohepatitis ("MASH"), also known as non-alcoholic steatohepatitis or NASH is also being explored. The Company also manufactures and sells certain excipients for certain clients for use as raw materials in their products.

***Basis of Presentation***

These condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC"), and therefore do not include all the information and footnotes necessary for a complete presentation of the Company's results of operations, financial position and cash flows in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The unaudited condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position at June 30, 2025, the operating results and comprehensive loss, and stockholders' equity for the three and six months ended June 30, 2025 and 2024, and cash flows for the six months ended June 30, 2025 and 2024. The balance sheet as of December 31, 2024 has been derived from audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements and notes should be read in conjunction with the Company's audited financial statements and notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC.

The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

***Liquidity and Need to Raise Additional Capital***

As of June 30, 2025, the Company had an accumulated deficit of $603.8 million as well as negative cash flows from operating activities. Presently, the Company does not have sufficient cash resources to meet its plans for the next twelve months following the issuance of these financial statements. The Company will continue to require substantial funds to continue research and development, including clinical trials of its product candidates. These factors raise substantial doubt regarding the Company's ability to continue as a going concern for a period of one year from the issuance of these financial statements. Management's plans in order to meet its operating cash flow requirements include seeking additional collaborative agreements for certain of its programs as well as financing activities such as public offerings and private placements of its common stock, preferred stock offerings, issuances of debt and convertible debt instruments.

There are no assurances that such additional funding will be obtained and that the Company will succeed in its future operations. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and the Company may have to cease operations.

In November 2024, the Company completed the sale of its ALZET product line to Lafayette Instrument Co. ("LIC"), a portfolio company of Branford Castle Partners II, L.P., a North-American focused private equity firm. Under the terms of the agreement, LIC paid the Company $17.5 million in exchange for certain assets and liabilities associated with the ALZET product line. Simultaneous with this transaction, the Company paid off all remaining obligations under the term loan agreement with Oxford Finance LLC.

These financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event the Company can no longer continue as a going concern.

***Inventories, net***

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. The Company may be required to expense previously capitalized inventory costs upon a change in management's judgment due to new information that suggests that the inventory will not be saleable.

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The Company's inventories consisted of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **December 31,<br>2024** |
| Raw materials | $9 | $10 |
| WIP | 214 |  |
| Finished goods | 68 | 96 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total inventories | $291 | $106 |

---

***Leases***

ASC 842 requires the Company to recognize an operating lease right-of-use asset and corresponding operating lease liability for the Company's leased properties. The Company's operating lease right-of-use assets and liabilities are recognized under ASC 842 based on the present value of lease payments over the remaining lease term at the lease commencement date. In determining the net present value of lease payments, we estimate the incremental borrowing rate based on the information available, including remaining lease term. As of June 30, 2025, the weighted-average remaining lease term was 1.64 years for the Company's leased properties.

***Revenue Recognition***

*Product Revenue, Net*

The Company manufactures and sells certain excipients used by pharmaceutical companies as raw materials in certain of their products, including Methydur and a marketed animal health product. Prior to the sale of the ALZET product line in November 2024, the Company also manufactured and sold ALZET miniature osmotic pumps used in laboratory research.

Revenues from product sales are recognized when the customer obtains control of the Company's product, which occurs at a point in time, typically upon shipment to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that the Company would have recognized is one year or less.

Trade Discounts and Allowances: The Company provides certain customers with discounts that are explicitly stated in the Company's contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized.

Product Returns: The Company generally offers customers a limited right of return for products that have been purchased. The Company estimates the amount of its product sales that are probable of being returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities primarily using its historical sales information. The Company expects product returns to be minimal.

*Collaborative Research and Development and Other Revenue*

Royalties and Earn-outs: For the Company's arrangements that include sales-based royalties or earn-outs, including milestone payments based on first commercial sale or the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty or earn-out has been allocated has been satisfied (or partially satisfied).

Research and Development Services: Revenue from research and development services that are determined to represent a distinct performance obligation related to services performed under the collaborative arrangements with the Company's third-party collaborators is recognized over time as the related research and development services are performed. The Company evaluates the measure of progress each reporting period and recognizes revenue on a cumulative catch-up basis, as collaborative research and development revenue. The Company performs analytical services for counterparties and recognizes revenue upon completion of these services. Research and development expenses under the collaborative research and development agreements generally approximate or exceed the revenue recognized under such agreements over the term of the respective agreements. Deferred revenue may result when the Company does not expend the required level of effort during a specific period in comparison to funds received under the respective agreement.

The Company receives payments from its customers based on development cost schedules established in each contract. Up-front payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company's right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

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Total revenue by geographic region based on customers' locations for the three and six months ended June 30, 2025 and 2024 are as follows (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Europe | $324 | $512 | $496 | $934 |
| United States | 60 | 67 | 177 | 113 |
| Other | 63 | 67 | 95 | 95 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $447 | $646 | $768 | $1142 |

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***Prepaid and Accrued Clinical Costs***

The Company incurs significant costs associated with third party consultants and organizations for pre-clinical studies, clinical trials, contract research, regulatory advice and other research and development-related services. The Company is required to estimate periodically the cost of services rendered but unbilled based on management's estimates. Estimates are determined each reporting period by reviewing the terms and conditions of the underlying contracts, reviewing open purchase orders and by having detailed discussions with internal clinical personnel and third-party service providers as to the nature and status of the services performed in relation to amounts billed. The costs for unbilled services are estimated by applying the rates and fees applicable in the underlying contracts. If these good faith estimates are inaccurate, actual expenses incurred could materially differ from these estimates.

***Prepaid and Accrued Manufacturing Costs***

The Company incurs significant costs associated with third party consultants and organizations for manufacturing, validation, testing and other research and development-related services. The Company is required to estimate periodically the cost of services rendered but unbilled based on management's estimates. Estimates are determined each reporting period by reviewing the terms and conditions of the underlying contracts, reviewing open purchase orders and by having detailed discussions with internal personnel and third-party service providers as to the nature and status of the services performed in relation to amounts billed. The costs for unbilled services are estimated by applying the rates and fees applicable in the underlying contracts. If these good faith estimates are inaccurate, actual expenses incurred could materially differ from these estimates.

***Research and Development Expenses***

Research and development expenses are primarily comprised of salaries and benefits associated with research and development personnel, overhead and facility costs, preclinical and non-clinical development costs, clinical trial and related clinical manufacturing costs, contract services, and other outside costs. Research and development costs are expensed as incurred. Research and development costs paid to third parties under sponsored research agreements are recognized as the related services are performed. In addition, research and development expenses incurred that are reimbursed by the Company's partners are recorded as collaborative research and development revenue.

***Comprehensive Loss***

Components of other comprehensive loss are comprised entirely of unrealized gains and losses on the Company's available-for-sale securities for all periods presented. Total comprehensive loss has been disclosed in the Company's statements of operations and comprehensive loss.

***Segment Reporting***

The Company operates in one operating segment, which is the research, development and manufacturing of pharmaceutical products.

***Common Stock Warrants*** 

The Company accounts for its common stock warrants in accordance with ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). Based upon the provisions of ASC 480 and ASC 815, the Company accounts for common stock warrants as current liabilities if the warrant fails the equity classification criteria. Common stock warrants classified as liabilities are initially recorded at fair value on the grant date and remeasured at each balance sheet date with the offsetting adjustments recorded in change in fair value of warrant liabilities within the statements of operations.

The Company values its common stock warrants classified as liabilities using the Black-Scholes option pricing model or other acceptable valuation models, including the Monte-Carlo simulation model.

***Net Loss Per Share*** 

The Company calculates basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Certain warrants participate in distributions of the Company. The net loss

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attributable to common stockholders is not allocated to the warrant holders as the holders of warrants do not have a contractual obligation to share in losses. Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding and common stock equivalents (i.e., options and warrants to purchase common stock) outstanding during the period, if dilutive, using the treasury stock method for options.

The numerators and denominators in the calculation of basic and diluted net loss per share were as follows (in thousands, except per share amounts):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Basic loss per share computation: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | $(2265) | $(3700) | $(6497) | $(11343) |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average number of shares outstanding - basic | 31042 | 31038 | 31042 | 30838 |
| Net loss per share - basic | $(0.07) | $(0.12) | $(0.21) | $(0.37) |
| Diluted loss per share computation: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | $(2265) | $(3700) | $(6497) | $(11343) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of common warrant liabilities | (42) |  |  |  |
| Net loss adjusted for change in fair value of warrant liabilities | $(2307) | $(3700) | $(6497) | $(11343) |
| Weighted average shares used to compute basic net loss per share | 31042 | 31038 | 31042 | 30838 |
| &nbsp;&nbsp;&nbsp;&nbsp;Dilutive effect of common warrants | 121 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average shares used to compute diluted net loss per share | 31163 | 31038 | 31042 | 30838 |
| Net loss per share - diluted | $(0.07) | $(0.12) | $(0.21) | $(0.37) |

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Options to purchase approximately 3.9 million and 4.2 million shares of common stock were excluded from the denominator in the calculation of diluted net loss share for the three and six months ended June 30, 2025, respectively, as the effect would be anti-dilutive. Options to purchase approximately 3.8 million and 3.9 million shares of common stock were excluded from the denominator in the calculation of diluted net loss per share for the three and six months ended June 30, 2024, respectively, as the effect would be anti-dilutive.

The common warrants to purchase shares of common stock entitle the holders thereof to participate in dividends and other distributions of assets by the Company to its holders of common shares, but are not required to absorb losses incurred. As a result, the common warrants were excluded from basic net loss per share calculations for the three and six months ended June 30, 2025 and 2024, respectively. For diluted net loss per share purposes, the common warrants are included in the number of shares outstanding if the effect is dilutive. The dilutive effect of common warrants was 121,000 shares for the three months ended June 30, 2025. Additional common warrants to purchase 3.6 million shares were excluded from the denominator in the calculation of diluted net loss share for both the three and six months ended June 30, 2025 and 2024, respectively, as the effect would be anti-dilutive.

***Discontinued Operations***

In accordance with ASC 205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component/s of an entity meets the criteria in paragraph 205-20-45-10. At the same time, the results of all discontinued operations, less applicable income taxes, shall be reported as components of net loss separate from the net loss of continuing operations.

The Company disposed of its ALZET product line, a component of its business, in November 2024 and met the definition of a discontinued operation as of December 31, 2024. Accordingly, the Company has classified the results of the ALZET product line as discontinued operations in its statements of operations and comprehensive loss for all periods presented. All amounts included in the notes to the financial statements relate to continuing operations unless otherwise noted. For additional information, see Note 11, "Discontinued Operations" to the financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

***Recent Accounting Pronouncements***

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be adopted on a prospective or retrospective

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basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its financial statements and related disclosures.

**Note 2. Strategic Agreements**

The collaborative research and development and other revenues associated with the Company's collaborators or counterparties were $428,000 and $749,000 for the three and six months ended June 30, 2025, respectively, compared with $606,000 and $1.1 million for the corresponding periods in 2024. The collaborative research and development and other revenue included (a) amounts related to earn-out revenue from Indivior UK Limited ("Indivior") with respect to PERSERIS net sales, (b) research and development activities funded by our collaborators or counterparties and (c) royalty revenue from Orient Pharma Co., Ltd. ("Orient Pharma") with respect to Methydur net sales.

***Pending Acquisition by Bausch Health Companies Inc.***

On July 29, 2025, Bausch Health Companies Inc. and DURECT announced a definitive agreement under which Bausch Health will indirectly acquire DURECT. Under the terms of the definitive agreement, a wholly owned subsidiary of Bausch Health is conducting a tender offer to acquire all outstanding shares of DURECT. Under the terms of the definitive agreement, Bausch Health will pay $1.75 per share in an all-cash transaction for an upfront consideration of approximately $63 million at closing, with the potential for two additional net sales milestone payments of up to $350 million in the aggregate (subject to certain adjustments in respect of a retention plan) if the milestones are achieved before the earlier of the 10 year anniversary of the first commercial sale of larsucosterol in the United States and December 31, 2045. The transaction is conditioned on a majority of the outstanding shares of DURECT's common stock being tendered into the tender offer and not withdrawn, as well as other customary closing conditions. The transaction is expected to close in the third quarter of 2025. Assuming the closing of the tender offer, Bausch Health will acquire any shares of DURECT not tendered into the tender offer through a merger of a wholly owned subsidiary with and into DURECT for the same per share consideration payable in the tender offer. For additional information, see Note 11, "Subsequent Events" to the financial statements in this Quarterly Report on Form 10-Q.

***Agreement with Innocoll***

On December 21, 2021, the Company entered into a license agreement (as amended, the "Innocoll Agreement") with Innocoll Pharmaceuticals Limited ("Innocoll"). Pursuant to the Innocoll Agreement, the Company granted Innocoll an exclusive, royalty-bearing, sublicensable right and license to develop, manufacture and commercialize in the United States, POSIMIR<sup>®</sup>, the Company's FDA-approved post-surgical pain product, with respect to all uses and applications in humans. None of the additional milestones under the agreement have been met. On May 6, 2025, Innocoll terminated the Innocoll Agreement and transferred all data and know-how related to POSIMIR to the Company. The Company is evaluating next steps with respect to finding a new partner to commercialize POSIMIR. The Company does not expect that this termination will have a material impact on its financial statements.

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***Patent Purchase Agreement with Indivior***

In September 2017, the Company entered into an agreement with Indivior (the "Indivior Agreement"), under which the Company assigned to Indivior certain patents that may provide further intellectual property protection for PERSERIS, Indivior's extended-release injectable suspension for the treatment of schizophrenia in adults. In consideration for such assignment, Indivior made non-refundable upfront and milestone payments to DURECT totaling $17.5 million. Additionally, under the terms of the agreement with Indivior, the Company receives quarterly earn-out payments into 2026 that are based on a single digit percentage of U.S. net sales of PERSERIS. Indivior commercially launched PERSERIS in the U.S. in February 2019. The Indivior Agreement contains customary representations, warranties and indemnities of the parties. Amounts recognized during the three and six months ended June 30, 2025 related to earn-out revenues from PERSERIS were $324,000 and $496,000, respectively, compared with $512,000 and $934,000 for the corresponding periods in 2024, and were included in collaborative research and development and other revenue. In July 2024, Indivior announced discontinuation of sales and marketing for PERSERIS due to the highly competitive market and impending changes that are expected to intensify payor management in the treatment category in which PERSERIS participates. The Company does not expect that this discontinuation will have a material impact on its financial statements.

**Note 3. Financial Instruments**

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company's valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company follows a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. These levels of inputs are the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 1—Quoted prices in active markets for identical assets or liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company's financial instruments are valued using quoted prices in active markets or based upon other observable inputs. Money market funds are classified as Level 1 financial assets. Certificates of deposit and commercial paper are classified as Level 2 financial assets. The fair value of the Level 2 assets is estimated using pricing models using current observable market information for similar securities. The Company's Level 2 investments may include U.S. government-backed securities and corporate securities that are valued based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. The fair value of commercial paper is based upon the time to maturity and discounted using the three-month treasury bill rate. The average remaining maturity of the Company's Level 2 investments as of June 30, 2025 is less than twelve months and these investments are rated by S&P and Moody's at AAA or AA- for securities and A1, A2, P1 or P2 for commercial paper.

The following is a summary of available-for-sale securities as of June 30, 2025 and December 31, 2024 (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **June 30,<br>2025** | **June 30,<br>2025** | **June 30,<br>2025** | **June 30,<br>2025** |
|  | **Amortized<br>Cost** | **Unrealized<br>Gain** | **Unrealized<br>Loss** | **Estimated<br>Fair<br>Value** |
| &nbsp;&nbsp;&nbsp;&nbsp;Money market funds | $552 | $— | $— | $552 |
| &nbsp;&nbsp;&nbsp;&nbsp;Certificates of deposit | 150 |  |  | 150 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial paper | 4736 |  | (1) | 4735 |
|  | $5438 | $— | $(1) | $5437 |
| Reported as: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $5288 | $— | $(1) | $5287 |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term investments |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term restricted investments | 150 |  |  | 150 |
|  | $5438 | $— | $(1) | $5437 |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
|  | **Amortized<br>Cost** | **Unrealized<br>Gain** | **Unrealized<br>Loss** | **Estimated<br>Fair<br>Value** |
| &nbsp;&nbsp;&nbsp;&nbsp;Money market funds | $688 | $— | $— | $688 |
| &nbsp;&nbsp;&nbsp;&nbsp;Certificates of deposit | 150 |  |  | 150 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial paper | 8914 |  | (1) | 8913 |
|  | $9752 | $— | $(1) | $9751 |
| Reported as: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $8810 | $— | $(1) | $8809 |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term investments | 792 |  |  | 792 |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term restricted investments | 150 |  |  | 150 |
|  | $9752 | $— | $(1) | $9751 |

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The following is a summary of the cost and estimated fair value of available-for-sale securities at June 30, 2025, by contractual maturity (in thousands):

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| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **June 30,<br>2025** |
|  | **Amortized<br>Cost** | **Estimated<br>Fair<br>Value** |
| Mature in one year or less | $4736 | $4735 |
| Mature after one year through five years | 150 | 150 |
|  | $4886 | $4885 |

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There were no securities that have had an unrealized loss for more than 12 months as of June 30, 2025.

As of June 30, 2025, unrealized losses on available-for-sale investments are not attributed to credit risk and are considered to be temporary. The Company believes that it is more-likely-than-not that investments in an unrealized loss position will be held until maturity or the recovery of the cost basis of the investment. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.

***Warrant Liabilities***

The following table summarizes the activity of the Company's Level 3 warrant liabilities during the three and six months ended June 30, 2025 and 2024 (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Fair value at beginning of period - February 2023 issuance (Common warrants) | $438 | $672 | $414 | $312 |
| Change in fair value during the period | (42) | 42 | (18) | 402 |
| &nbsp;&nbsp;&nbsp;&nbsp;Fair value at end of period - February 2023 issuance (Common warrants) | $396 | $714 | $396 | $714 |
| Fair value at beginning of period - July 2023 issuance (Common warrants) | $1230 | $2270 | $1134 | $912 |
| Change in fair value during the period | (404) | 36 | (308) | 1394 |
| &nbsp;&nbsp;&nbsp;&nbsp;Fair value at end of period - July 2023 issuance | $826 | $2306 | $826 | $2306 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total fair value at end of period | $1222 | $3020 | $1222 | $3020 |

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*Common Warrants*

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*February 2023 Warrants*

In February 2023, the Company issued common warrants to purchase an aggregate of 2,000,000 shares of common stock in a registered direct offering.

The common warrants are accounted for as current liabilities on the balance sheets and are adjusted to estimated fair value at period end through "other income (expense)" on the statements of operations. The estimated fair value of the outstanding common warrants was $10.3 million, $414,000 and $396,000 as of February 8, 2023 (i.e., the issuance date), December 31, 2024 and June 30, 2025, respectively. In September 2023, 1,400,000 shares of the common warrants were exercised through the alternative cashless exercise provision in accordance with the financing agreement, resulting in a net issuance of 924,000 shares to the holder. The aggregate number of shares of our common stock issuable in such alternative cashless exercise equals the product of (x) the aggregate number of shares of our common stock that would be issuable upon exercise of the common warrant in accordance with the terms of such common warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 0.66. The Company calculated the estimated fair value of the common warrants using a Monte-Carlo simulation model with the following key assumptions. The Company took the likelihood of achieving certain events and related impact on the Company's common stock price into account, as appropriate.

The exercise price for the outstanding common warrants was adjusted down from $5.00 per share to $0.51 per share as of December 31, 2023 as a result of an anti-dilution provision in the common warrants issued in the February 2023 financing that was triggered by the sale of our common stock in the open market in November 2023. There were 600,000 shares of outstanding common warrants as of June 30, 2025.

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| | | | |
|:---|:---|:---|:---|
|  | **February 8, 2023 (issuance)** | **December 31, 2024** | **June 30, 2025** |
| Common stock price | $5.81 | $0.75 | $0.64 |
| Exercise price per share | $5.00 | $0.51 | $0.51 |
| Expected volatility | 87% | 132% | 134% |
| Risk-free interest rate | 3.8% | 4.3% | 3.7% |
| Contractual term (in years) | 5.0 | 3.0 | 2.5 |
| Expected dividend yield | —% | —% | —% |

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*July 2023 warrants*

In July 2023, the Company issued common warrants to purchase an aggregate of 2,991,027 shares of common stock in a registered direct offering.

The common warrants are accounted for as current liabilities on the balance sheets and are adjusted to estimated fair value at period end through "other income (expense)" on the statements of operations. The estimated fair value of the outstanding common warrants was $5.8 million, $1.1 million and $826,000 as of July 21, 2023 (i.e., the issuance date), December 31, 2024 and June 30, 2025, respectively. The Company calculated the estimated fair value of the common warrants using a Black-Scholes option pricing model with the following key assumptions:

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| | | | |
|:---|:---|:---|:---|
|  | **July 21, 2023 (issuance)** | **December 31, 2024** | **June 30, 2025** |
| Common stock price | $3.05 | $0.75 | $0.64 |
| Exercise price per share | $4.89 | $4.89 | $4.89 |
| Expected volatility | 89% | 124% | 128% |
| Risk-free interest rate | 4.2% | 4.3% | 3.7% |
| Contractual term (in years) | 5.0 | 3.5 | 3.0 |
| Expected dividend yield | —% | —% | —% |

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There were no exercises of the common warrants issued in the July 2023 registered direct offering.

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**Note 4. Accrued Liabilities**

Accrued liabilities as of June 30, 2025 and December 31, 2024 were comprised as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **December 31,<br>2024** |
| Accrued contract research and manufacturing costs | $2966 | $2841 |
| Accrued compensation and benefits | 441 | 850 |
| Accrued legal expenses | 585 | 522 |
| Accrued clinical costs | 180 | 204 |
| Other | 688 | 354 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $4860 | $4771 |

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**Note 5. Stock-Based Compensation**

As of June 30, 2025, the Company has two stock-based compensation plans. The stock-based compensation cost that has been included in the statements of operations and comprehensive loss is shown as below (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Research and development | $92 | $164 | $225 | $376 |
| Selling, general and administrative | 305 | 260 | 624 | 545 |
| Total stock-based compensation | $397 | $424 | $849 | $921 |

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The Company uses the Black-Scholes option pricing model to value its stock options. The expected life computation is based on historical exercise patterns and post-vesting termination behavior. The Company considered its historical volatility in developing its estimate of expected volatility.

The Company used the following assumptions to estimate the fair value of shares purchased under its employee stock purchase plan for the three and six months ended June 30, 2025 and 2024. There were no stock options granted for the three and six months ended June 30, 2024.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| **Stock Options** |  |  |  |  |
| Risk-free rate | 3.98% |  | 3.98% |  |
| Expected dividend yield |  |  |  |  |
| Expected life (in years) | 7.0 |  | 7.0 |  |
| Volatility | 106% |  | 106% |  |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| **Employee Stock Purchase Plan** |  |  |  |  |
| Risk-free rate | 4.22% | 5.43% | 4.22 - 4.42% | 5.43 - 5.50% |
| Expected dividend yield |  |  |  |  |
| Expected life (in years) | 0.5 | 0.5 | 0.5 | 0.5 |
| Volatility | 78% | 246% | 78 - 95% | 246% |

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**Note 6. Term Loan** 

In July 2016, the Company entered into a Loan and Security Agreement (as amended, the "Loan Agreement") with Oxford Finance LLC. In November 2024, the Company paid off all remaining obligations under the Loan Agreement with Oxford Finance LLC.

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**Note 7. Commitments**

***Operating Leases*** 

The Company has lease arrangements for its facilities in California as follows.

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| | | | |
|:---|:---|:---|:---|
| **Location** | **Approximate**<br>**Square Feet**  | **Operation** | **Expiration** |
| Cupertino, CA | 30,149 sq. ft. | Office, Laboratory and Manufacturing | Lease expires 2027 (with an option to renew for an additional five years) |

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Under its lease, the Company is required to pay certain maintenance expenses in addition to monthly rent. Rent expense is recognized on a straight-line basis over the lease term for leases that have scheduled rental payment increases. Rent expenses under all operating leases were $284,000 and $568,000 for the three and six months ended June 30, 2025, compared with $345,000 and $805,000 for the corresponding periods in 2024, respectively. In determining the net present value of lease payments, the Company used its incremental borrowing rate of 11.5% based on the information available, including the remaining lease term, at the adoption date of ASC 842. As of June 30, 2025 and December 31, 2024, the weighted-average remaining lease term was 1.64 years and 2.14 years, respectively, for the Company's leased properties.

Future minimum payments under this noncancelable lease is as follows (in thousands):

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| | |
|:---|:---|
|  | **Operating<br>Leases** |
| Six months ending December 31, 2025 | $578 |
| 2026 | 1185 |
| 2027 | 166 |
|  | $1929 |

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**Note 8. Stockholders' Equity**

On August 14, 2024, the Company filed a shelf registration statement on Form S-3 with the SEC (the "2024 Registration Statement") (File No. 333-281550), which upon being declared effective on August 23, 2024, allowed the Company to offer up to $250.0 million of securities from time to time in one or more public offerings. The 2024 Registration Statement replaced the Company's prior shelf registration statement on Form S-3 (the "2021 Registration Statement"), which had allowed the Company to offer up to $250.0 million of securities including up to $75.0 million of shares of the Company's common stock pursuant to an "at-the-market" sales agreement dated July 30, 2021 with Cantor Fitzgerald & Co. (the "2021 Sales Agreement").

Due to the SEC's "baby shelf" rules, which prohibit companies with a public float of less than $75 million from issuing securities under a shelf registration statement in excess of one-third of such company's public float in a 12-month period, the Company is currently only able to issue a limited number of shares under our 2024 Registration Statement that aggregate to no more than one-third of the Company's public float.

*February 2023 Registered Direct Offering*

On February 3, 2023, the Company entered into a securities purchase agreement relating in part to the purchase and sale of an aggregate of 1,700,000 shares of its common stock and common warrants to purchase an aggregate of 2,000,000 shares of its common stock, in a registered direct offering (the "February Offering"). The common warrants were immediately exercisable and currently have a $0.51 exercise price. A holder (together with its affiliates) may not exercise any portion of a common warrant to the extent that the holder would own more than 4.99% (or, at the election of the holder 9.99%) of the Company's outstanding common stock immediately after exercise.

The Company accounts for the common warrants as current liabilities based upon the guidance of ASC 480 and ASC 815. Estimating fair values of liability-classified financial instruments requires the development of estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of the Company's common stock. Because liability-classified financial instruments are initially and subsequently carried at fair value, the Company's financial results will reflect the volatility in these estimate and assumption changes. Changes in estimated fair value are recognized as a component of other income (expense) in the statements of operations.

At the date of issuance, the Company valued the common warrants at an estimated fair value of $10.3 million using a Monte-Carlo valuation model due to the presence of an alternative cashless settlement feature in the financing agreement. As of June 30, 2025 and December 31, 2024, common warrants to purchase 600,000 shares of the Company's common stock were outstanding.

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At June 30, 2025, the Company updated the estimated fair value of the outstanding common warrants using a Monte-Carlo valuation model resulting in an estimated fair value of $396,000, a decrease of $18,000 for these common warrants as compared to at December 31, 2024.

The gain of $42,000 and $18,000 in common warrants resulting from the change in the estimated fair value of the liabilities for such warrants was recorded as a change in the estimated fair value of warrant liabilities in the accompanying statements of operations and comprehensive loss for the three and six months ended June 30, 2025, respectively.

The loss of $42,000 and $402,000 in common warrants resulting from the change in the estimated fair value of the liabilities for such warrants was recorded as a change in the estimated fair value of warrant liabilities in the accompanying statements of operations and comprehensive loss for the three and six months ended June 30, 2024, respectively.

The common warrant liability will be adjusted to estimated fair value at each balance sheet date until the warrants are settled. Changes in the estimated fair value of the warrant liabilities are recognized as a component of other income (expense), net in the statements of operations and comprehensive loss.

*July 2023 Registered Direct Offering*

On July 21, 2023, the Company issued to several institutional investors (i) 2,991,027 shares of its common stock, par value $0.0001 per share, and (ii) accompanying common warrants to purchase an aggregate of 2,991,027 shares of common stock, in a registered direct offering (the "July Offering").

The common warrants were immediately exercisable and have a five-year term with a combined offering price of $5.015 per share and accompanying common warrant. A holder (together with its affiliates) may not exercise any portion of the common warrants to the extent that the holder would own more than 4.99% (or, at the election of the holder 9.99%) of the Company's outstanding common stock immediately after exercise.

The Company accounts for the common warrants issued in the July Offering as current liabilities based upon the guidance of ASC 815. Estimating fair values of liability-classified financial instruments requires the development of estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of the Company's common stock. Because liability-classified financial instruments are initially and subsequently carried at fair value, the Company's financial results will reflect the volatility in these estimate and assumption changes. Changes in estimated fair value are recognized as a component of other income (expense) in the statements of operations.

The Company valued the common warrants issued in the July Offering using the Black-Scholes option valuation model. As of the issuance date of July 21, 2023, December 31, 2024 and as of June 30, 2025, the common warrants were valued at $5.8 million, $1.1 million and $826,000, respectively. The gain of $404,000 and $308,000 resulting from the change in the fair value of the liability for these warrants was recorded as a change in estimated fair value of warrant liabilities in the accompanying statements of operations for the three and six months ended June 30, 2025, respectively. The loss of $36,000 and $1.4 million resulting from the change in the fair value of the liability for these warrants was recorded as a change in estimated fair value of warrant liabilities in the accompanying statements of operations for the three and six months ended June 30, 2024, respectively

The common warrant liability will be adjusted to estimated fair value at each balance sheet date until the warrants are settled. Changes in the estimated fair value of the warrant liabilities are recognized as a component of other income (expense), net in the statements of operations and comprehensive loss.

As of June 30, 2025, none of the warrants issued in the July Offering have been exercised. Common warrants to purchase 2,991,027 shares of the Company's common stock were outstanding with an exercise price of $4.89 per share.

*ATM Financings*

During the three and six months ended June 30, 2025, there were no sales of the Company's common stock in the open market. During the three months ended June 30, 2024, there were no sales of the Company's common stock in the open market. During the six months ended June 30, 2024, the Company raised net proceeds (net of commissions) of approximately $648,000 from the sale of 702,090 shares of the Company's common stock in the open market at a weighted average price of $0.94 per share pursuant to the 2021 Registration Statement and the 2021 Sales Agreement.

As of August 8, 2025, the Company had up to $250.0 million of the Company's securities available for sale under the 2024 Registration Statement. However, due to the SEC's "baby shelf" rules discussed above, only up to approximately $19.6 million of our securities are available for sale under the 2024 Registration Statement.

**Note 9. Discontinued Operations** 

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On November 22, 2024 (the "Closing Date"), the Company entered into an Asset Purchase Agreement (the "APA") with ALZET, LLC, a subsidiary of Lafayette Instrument Co. (the "Purchaser"). Under the terms of the APA, the Company agreed to sell to the Purchaser substantially all the assets, and certain specified liabilities, related to the ALZET product line (the "Sale"). The APA provided for, subject to certain terms and conditions, the entry into a Transition Services Agreement, pursuant to which the Company agrees to perform certain transition services related to the purchased assets for up to six months after the Closing Date, subject to potential extensions.

On the Closing Date, the Company completed the transaction contemplated by the APA. Pursuant to the terms of the APA, the Purchaser paid the Company $17.5 million subject to certain adjustments, including for net working capital, and also agreed to assume certain liabilities with respect to the transferred assets.

As a result of the sale of the ALZET product line, the operating results from the Company's ALZET product line have been excluded from continuing operations and presented as discontinued operations in the accompanying Statements of Operations and Comprehensive Loss for all periods presented. The results of operations and gain from discontinued operations presented below include certain allocations that management believes fairly reflect the utilization of services provided to the ALZET product line. The allocations do include interest expense of the Oxford term loan as the loan was required to pay off at the close of sale of ALZET product line for all periods presented. The allocations do not include amounts related to general corporate administrative expenses. Therefore, these results of operations do not necessarily reflect what the results of operations would have been had the ALZET product line operated as a stand-alone entity.

The components of income from discontinued operations as reported in the Company's statements of operations were as follows (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended June 30,** | **Three months ended June 30,** | **Six months ended June 30,** | **Six months ended June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Total revenues | $— | $1525 | $— | $2856 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cost of product revenues |  | 329 |  | 617 |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative |  | 406 |  | 861 |
| Total operating expenses |  | 735 |  | 1478 |
| Other expense: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest and other expenses |  | 445 | 69 | 974 |
| Total costs and expenses |  | 1180 | 69 | 2452 |
| Income (loss) from discontinued operations |  | 345 | (69) | 404 |
| Net income (loss) per share |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $— | $0.01 | $— | $0.01 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | $— | $0.01 | $— | $0.01 |
| Weighted-average shares used in computing net (loss) income per share |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | 31042 | 31038 | 31042 | 30838 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | 31163 | 31038 | 31042 | 30838 |

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The following table presents certain non-cash items related to discontinued operations, which are included in the Company's statements of cash flows (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended June 30,** | **Three months ended June 30,** | **Six months ended June 30,** | **Six months ended June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Depreciation | $— | $2 | $— | $4 |
| Stock-based compensation expense |  | 10 |  | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash items, net | $— | $12 | $— | $26 |

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**Note** 10. Segment Information

The Company is committed to transforming the treatment of acute organ injury and chronic liver diseases by advancing novel and potentially lifesaving therapies based on its endogenous epigenetic regulator program. Larsucosterol, the Company's lead drug candidate, binds to and inhibits the activity of DNMTs, epigenetic enzymes which are elevated and associated with hypermethylation found in alcohol-AH patients. Larsucosterol is in clinical development for the potential treatment of AH, for which FDA has granted a Fast Track Designation; MASH, also known as non-alcoholic steatohepatitis or NASH is also being explored. The Company also manufactures and sells certain excipients for certain clients for use as raw materials in their products.

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The Company's long-lived assets recognized on the balance sheets primarily consisted of property and equipment, net and operating lease right-of-use assets, which are located within the U.S.

The Company manages the business activities on a consolidated basis and operates in one reportable segment.

The Company's Chief Executive Officer is the Chief Operating Decision Maker ("CODM"). The CODM assesses operating performance and makes resource allocation decisions primarily based on net loss, cash on-hand and cash flows utilizing the Company's product development timelines and cash balances as key inputs to resource allocation.

Significant expenses within loss from continuing operations, as well as within net loss, include research and development, and selling, general and administrative expenses, which are each separately presented on the Company's statement of operations and comprehensive loss.

**Note 11. Subsequent Events**

On July 28, 2025, the Company entered into an Agreement and Plan of Merger with Bausch Health Americas, Inc., a Delaware corporation ("Parent"), BHC Lyon Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub"), and solely for purposes of Section 6.10 thereof, Bausch Health Companies Inc., a corporation continued under the laws of the Province of British Columbia (the "Merger Agreement").

On August 8, 2025, the Company, Parent and Merger Sub entered into an Amendment No. 1 (the "Amendment") to the Merger Agreement pursuant to which the Company, Parent and Merger Sub agreed to extend the date by which Merger Sub is obligated to commence a tender offer (the "Offer") to acquire all of the Company's outstanding shares of common stock, par value $0.0001 per share (the "Company Shares") from August 11, 2025 to August 12, 2025.

Pursuant to the terms and conditions of the Merger Agreement and the Amendment, on August 12, 2025, Merger Sub commenced the Offer to acquire all of the Company Shares, for (i) $1.75 per Company Share, to the holder of such Company Shares in cash, without interest thereon and less any applicable withholding tax (the "Cash Amount"), plus (ii) one non-tradeable contingent value right per Company Share (each, a "CVR"), which will represent the contractual right to receive the pro rata portion of two potential additional net sales milestone payments of up to $350 million in the aggregate (minus any amount assigned to option holders under a retention plan), if the milestones are achieved before the earlier of the 10 year anniversary of the first commercial sale of larsucosterol in the United States and December 31, 2045, in accordance with the terms and subject to the conditions of a contingent value rights agreement (the "CVR Agreement") to be entered into with a rights agent (the "Rights Agent" the Cash Amount plus one CVR, collectively, the "Offer Consideration").

As soon as practicable following the consummation of the Offer and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent, pursuant to Section 251(h) of the General Corporation Law of the State of Delaware (the "DGCL"), without a vote of the Company's stockholders (the "Merger"). Immediately prior to the effective time of the Merger (the "Effective Time"), and without any action on the part of the holders of any Company Shares, each Company Share (other than any Company Shares (i) owned at the commencement of the Offer and immediately prior to the Effective Time by Parent, Merger Sub or their subsidiaries, or the Company (or held in the Company's treasury), (ii) irrevocably accepted for purchase pursuant to the Offer, or (iii) owned by Company stockholders who are entitled to demand and have properly and validly exercised and perfected their statutory rights to demand appraisal under the laws of the State of Delaware) will be automatically converted into the right to receive the Offer Consideration, without interest thereon and less any applicable withholding tax.

The Company's Board of Directors unanimously (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, for the Company to enter into the Merger Agreement and consummate the transactions contemplated thereby, (ii) approved the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its covenants and agreements contained in the Merger Agreement and the consummation of the transaction contemplated thereby upon the terms and subject to the conditions contained in the Merger Agreement, and (iii) resolved, subject to the terms and conditions set forth in the Merger Agreement, to recommend that the holders of Company Shares accept the Offer and tender their Company Shares to Merger Sub pursuant to the Offer.

The transaction is conditioned on a majority of the outstanding shares of the Company's common stock being tendered into the Offer and not withdrawn, as well as other customary closing conditions. The transaction is expected to close in the third quarter of 2025.

Additional information about the Merger Agreement, the Offer, and the Merger is set forth in the Company's Solicitation/Recommendation Statement on Schedule 14D-9, filed with the SEC on August 12, 2025, together with the exhibits and annexes thereto and as amended or supplemented from time to time.

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**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations**

*This Management's Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended June 30, 2025 should be read in conjunction with (i) our unaudited condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission ("SEC") on March 27, 2025 as well as Part I, Item 1A., "Risk Factors" section included therein and any additional risk factors that may be described in the "Risk Factors" section herein or in our subsequent reports filed with the SEC. References to the "Company," "DURECT," "we," "us" and "our" refer to DURECT Corporation.*

**Overview** 

We are a late-stage biopharmaceutical company pioneering the development of epigenetic therapies that target dysregulated DNA methylation to transform the treatment of serious and life-threatening conditions, including acute organ injury. Larsucosterol, a new chemical entity in clinical development, is the lead candidate in our Epigenetic Regulator Program. An endogenous, orally bioavailable small molecule, larsucosterol has been shown in both *in vitro* and *in vivo* studies to play an important regulatory role in lipid metabolism, stress and inflammatory responses, and cell death and survival. We are developing larsucosterol for alcohol-associated hepatitis ("AH"), a life-threatening acute liver condition with no approved therapeutics and 28-Day and 90-Day historical mortality rates of 20%-26% and 29%-31%, respectively. After completing a Phase 2a trial in which 100% of AH patients treated with larsucosterol survived the 28-Day study period, we conducted a double-blind, placebo-controlled Phase 2b clinical trial called AHFIRM (trial in AH to evaluate saFety and effIcacy of laRsucosterol treatMent). Through our AHFIRM trial, we evaluated larsucosterol's potential to reduce mortality or liver transplantation compared to a placebo with or without steroids at the investigators' discretion. In total, we enrolled 307 patients at leading hospitals in the U.S., Australia, E.U. and U.K. In November 2023, we announced topline data from the AHFIRM trial that showed a compelling efficacy signal in favor of larsucosterol in the key secondary endpoint of mortality at 90 days. Both the 30 mg and 90 mg larsucosterol doses demonstrated clinically meaningful trends in reduction of mortality at 90 days with mortality reductions of 41% (p=0.068) in the 30 mg arm and 35% (p=0.124) in the 90 mg arm compared with placebo. The numerical improvement in the primary endpoint of mortality or liver transplant at 90 days did not achieve statistical significance for either dose of larsucosterol. Both doses of larsucosterol in AHFIRM showed a more pronounced reduction in mortality in patients enrolled in the U.S., representing 76% of patients enrolled in the trial. The reductions in mortality at 90 days were 57% (p=0.014) in the 30 mg arm and 58% (p=0.008) in the 90 mg arm compared with placebo in the U.S. Larsucosterol was safe and well tolerated. There were fewer treatment-emergent adverse events ("TEAEs") in the larsucosterol arms compared with placebo. In May 2024, we announced that the FDA granted Breakthrough Therapy Designation ("BTD") to larsucosterol for the treatment of AH. In July 2024, we held a Type B meeting with the FDA to discuss the design of our planned Phase 3 clinical trial of larsucosterol in AH that, if successful, could support a potential New Drug Application filing. We have also investigated larsucosterol in patients with metabolic dysfunction-associated steatohepatitis ("MASH"), previously known as non-alcoholic steatohepatitis or NASH with encouraging results in a Phase 1b clinical trial and may consider further development of larsucosterol for this and other indications.

In addition to our Epigenetic Regulator Program, we developed a novel and proprietary post-surgical pain product called POSIMIR<sup>®</sup>that utilizes our innovative SABER<sup>®</sup>platform technology to enable continuous sustained delivery of bupivacaine, a non-opioid local analgesic, over three days in adults. In February 2021, POSIMIR received FDA approval for post-surgical pain reduction for up to 72 hours following arthroscopic subacromial decompression. In December 2021, we entered into a license agreement (as amended, the "Innocoll Agreement") with Innocoll Pharmaceuticals Limited ("Innocoll"), pursuant to which we granted to Innocoll an exclusive, royalty-bearing, sublicensable right and license to develop, manufacture and commercialize POSIMIR in the United States. On May 6, 2025, Innocoll terminated the Innocoll Agreement and transferred all data and know-how related to POSIMIR to us. We do not expect that this termination will have a material impact on our financial statements.

As a result of the assignment of certain patent rights, we have in the past received single digit sales-based earn-out payments from U.S. net sales of Indivior UK Limited ("Indivior")'s PERSERIS<sup>®</sup>(risperidone) drug for schizophrenia and single-digit royalties from net sales of Orient Pharma Co., Ltd. ("Orient Pharma")'s Methydur Sustained Release Capsules ("Methydur") for the treatment of attention deficit hyperactivity disorder ("ADHD") in Taiwan. In July 2024, Indivior announced discontinuation of sales and marketing for PERSERIS due to the highly competitive market and impending changes that are expected to intensify payor management in the treatment category in which PERSERIS participates. We do not expect that this discontinuation will have a material impact on our financial statements.

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*NOTE: POSIMIR*<sup>®</sup>*, SABER*<sup>®</sup>*, and ORADUR*<sup>™</sup> *are trademarks of DURECT Corporation. Other trademarks referred to belong to their respective owners. Full prescribing information for PERSERIS, including BOXED WARNING and Medication Guide can be found at www.perseris.com.*

***Collaborative Research and Development and Other Revenue***

Collaborative research and development and other revenue consists of four broad categories: (a) the recognition of upfront license payments over the period of our continuing involvement with third parties, (b) the reimbursement of qualified research expenses by third parties, (c) milestone payments in connection with our collaborative agreements and (d) royalties and earn-out payments from our agreements with third parties.

Our collaborative research and development and other revenue primarily included (a) amounts related to earn-out revenue from Indivior with respect to PERSERIS net sales, (b) research and development activities funded by our collaborators or counterparties and (c) royalty revenue from Orient Pharma with respect to Methydur net sales.

***Product Revenue***

We currently generate product revenue from the sale of certain key excipients used by pharmaceutical companies as raw materials in certain of their products, including Methydur and a marketed animal health product.

Because we consider our core business to be developing and commercializing pharmaceuticals, we do not intend to significantly increase our investments in or efforts to sell or market any of our existing product lines. However, we expect that we will continue to make efforts to increase our revenues related to collaborative research and development by entering into new collaborations.

***Operating Results***

Since our inception in 1998, we have generally had a history of operating losses. At June 30, 2025, we had an accumulated deficit of $603.8 million. Our net losses were $2.3 million and $6.5 million for the three and six months ended June 30, 2025, respectively, compared with $3.7 million and $11.3 million for the corresponding periods in 2024. These losses have resulted primarily from costs incurred to research and develop our product candidates and from selling, general and administrative costs associated with our operations and product sales. We expect our research and development expenses and our selling, general and administrative expenses in the near future to be comparable to the second quarter of 2025. We expect to incur continuing losses and negative cash flows from operations for the foreseeable future. As disclosed in the "Liquidity and Capital Resources" section, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least 12 months from the date of issuance of these financial statements.

**Recent Developments**

On July 28, 2025, we entered into an Agreement and Plan of Merger with Bausch Health Americas, Inc., a Delaware corporation ("Parent"), BHC Lyon Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub"), and solely for purposes of Section 6.10 thereof, Bausch Health Companies Inc., a corporation continued under the laws of the Province of British Columbia (the "Merger Agreement"). On August 8, 2025, we entered into an Amendment No. 1 (the "Amendment") to the Merger Agreement with Parent and Merger Sub, pursuant to which the parties agreed to extend the date by which Merger Sub is obligated to commence a tender offer (the "Offer") to acquire all of the Company's outstanding shares of common stock (the "Company Shares") from August 11, 2025 to August 12, 2025.

Pursuant to the terms and conditions of the Merger Agreement and the Amendment, on August 12, 2025, Merger Sub commenced the Offer to acquire all of the Company Shares. As soon as practicable following the consummation of the Offer and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent, pursuant to Section 251(h) of the General Corporation Law of the State of Delaware, without a vote of the Company's stockholders.

The Company's Board of Directors unanimously (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, for the Company to enter into the Merger Agreement and consummate the transactions contemplated thereby, (ii) approved the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its covenants and agreements contained in the Merger Agreement and the consummation of the transaction contemplated thereby upon the terms and subject to the conditions contained in the Merger Agreement, and (iii) resolved, subject to the terms and conditions set forth in the Merger Agreement, to recommend that the holders of Company Shares accept the Offer and tender their Company Shares to Merger Sub pursuant to the Offer.

Parent and Merger Sub's obligation to accept for payment and purchase any Company Shares validly tendered pursuant to the Offer is subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, including, as of immediately prior to the expiration time of the Offer (the "Expiration Time"): (i) that there be validly tendered and not withdrawn in accordance with the terms of the Offer, and "received" by the "depository" for the Offer (as such terms are defined in Section 251(h) of the

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DGCL), a number of Company Shares that, together with the Company Shares then owned by Parent, Merger Sub and their affiliates, represents at least one Company Share more than 50% of the then-outstanding Company Shares; (ii) no Company Material Adverse Effect (as defined in the Merger Agreement) has occurred since the date of the Merger Agreement; (iii) the absence of any law or order enacted, issued or promulgated by any governmental authority of competent and applicable jurisdiction that would make illegal, prohibit or otherwise prevent the consummation of the Offer, the acquisition of Company Shares by Parent or Merger Sub, or the Merger; (iv) the absence of any pending or threatened in writing legal proceeding under any antitrust laws brought by any applicable governmental authority of competent and applicable jurisdiction that challenges or seeks to make illegal, prohibit or otherwise prevent the consummation of the Offer, the acquisition of Company Shares by Parent or Merger Sub or the Merger; (v) the accuracy of the representations and warranties of the Company contained in the Merger Agreement (subject to certain materiality exceptions); (vi) the Company's compliance or performance in all material respects with its covenants and agreements contained in the Merger Agreement prior to the Expiration Time; and (vii) other customary conditions. Consummation of the Offer is not subject to a financing condition.

The Merger Agreement contains customary representations, warranties and covenants, including covenants obligating the Company to continue to conduct its business in the ordinary course, to cooperate in seeking regulatory approvals, and not to engage in certain specified transactions or activities without Parent's prior consent. In addition, subject to certain exceptions, the Company has agreed not to solicit, initiate, knowingly encourage, or knowingly facilitate or assist, any inquiry, proposal or offer, or the making, submission or announcement of any inquiry, proposal or offer, that constitutes or would reasonably be expected to lead to an Acquisition Proposal (as defined in the Merger Agreement), or take certain other restricted actions in connection therewith. Notwithstanding the foregoing, if the Company receives a written, bona fide Acquisition Proposal, made after the date of the Merger Agreement, that did not result from a breach of the non-solicitation provisions of the Merger Agreement, and the Company's Board of Directors determines in good faith, after consultation with its financial advisor(s) and outside legal counsel, that such Acquisition Proposal, among other things, constitutes or is reasonably likely to lead to a Superior Proposal (as defined in the Merger Agreement) and that the failure to take such action would be inconsistent with its fiduciary duties under applicable law, the Company may take certain actions, subject to certain terms and conditions as more fully described in the Merger Agreement, including (i) participating in discussions and negotiations and furnishing information with respect to such Acquisition Proposal, after providing written notice to Parent of such determination, (ii) changing the Company Board's recommendation that the stockholders accept the Offer and tender their Company Shares to Merger Sub pursuant to the Offer (the "Company Board Recommendation") after observing certain requirements including providing Parent with an opportunity to propose an amendment so as to obviate the basis for the change to the Company Board Recommendation, or (iii) entering into a definitive agreement with respect to a Superior Proposal after observing the requirements referenced in clause (ii).

The description of the Merger Agreement herein does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which was filed as Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on July 29, 2025. For additional information about the Merger Agreement and the Offer, refer to our Solicitation/Recommendation Statement on Schedule 14D-9, filed with the SEC on August 12, 2025, together with the exhibits and annexes thereto and as amended or supplemented from time to time. Please also see "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q.

**Critical Accounting Estimates**

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We believe that the most significant accounting estimates and assumptions relate to revenue recognition, prepaid and accrued clinical costs, prepaid and accrued manufacturing costs and valuation of warrant liabilities. Actual amounts could differ significantly from these estimates. There have been no material changes to our other critical accounting estimates as compared to the disclosures in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

**Results of Operations**

*Comparison of three and six months ended June 30, 2025 and 2024*

**Revenue**

*Collaborative research and development and other revenue*

We recognize revenue from collaborative research and development activities and service contracts. We expect our collaborative research and development and other revenue to fluctuate in future periods pending our efforts to enter into potential new collaborations and any royalty or earn-out revenue recognized from collaborators or counterparties.

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The collaborative research and development and other revenue associated with our major collaborators or counterparties were $428,000 and $749,000 for the three and six months ended June 30, 2025, respectively, compared with $606,000 and $1.1 million for the corresponding periods in 2024. The collaborative research and development and other revenue included (a) amounts related to earn-out revenue from Indivior with respect to PERSERIS net sales, (b) research and development activities funded by our collaborators or counterparties and (c) royalty revenue from Orient Pharma with respect to Methydur net sales.

The decrease in collaborative research and development and other revenue in the three and six months ended June 30, 2025 compared with the corresponding periods in 2024 was primarily due to lower earn-out revenue recognized from Indivior.

*Product revenue, net* 

A portion of our revenues is derived from product sales, which include certain excipients that are included in Methydur. Net product revenues were $19,000 for the three and six months ended June 30, 2025, respectively, compared with $40,000 for the corresponding periods in 2024. As previously announced, in November 2024, we completed the sale of our ALZET product line to Lafayette Instruments Co. Revenue recognized from the ALZET product line, related cost of product revenues, associated selling, general and administrative expenses have been reclassified to discontinued operations for the three and six months ended June 30, 2024.

**Operating Expenses**

*Research and development*

Research and development expenses are primarily comprised of salaries, benefits, stock-based compensation and other compensation costs associated with research and development personnel, overhead and facility costs, preclinical and non-clinical development costs, clinical trial and related clinical manufacturing costs, contract services, and other outside costs.

Research and development expenses were $1.2 million and $3.1 million for the three and six months ended June 30, 2025, respectively, compared to $2.2 million and $6.4 million for the corresponding periods in 2024. These decreases were primarily due to our incurring lower research and development costs associated with larsucosterol in the three and six months ended June 30, 2025 compared to the corresponding periods in 2024, as more fully discussed below. Stock-based compensation expense recognized related to research and development personnel was $92,000 and $225,000 for the three and six months ended June 30, 2025, respectively, compared to $164,000 and $376,000 for the corresponding periods in 2024. As of June 30, 2025, we had four research and development employees compared with 18 as of June 30, 2024. We expect the number of employees involved in research and development will remain consistent in the near future and that research and development expenses in the near future will be comparable with the second quarter of 2025.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Six months ended<br>June 30,** | **Six months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Larsucosterol | $1132 | $2221 | $2935 | $6266 |
| Others | 44 | 26 | 124 | 100 |
| Total research and development expenses | $1176 | $2247 | $3059 | $6366 |

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*Larsucosterol* 

Our research and development expenses for larsucosterol were $1.1 million and $2.9 million in the three and six months ended June 30, 2025, respectively, compared to $2.2 million and $6.3 million for the corresponding periods in 2024. The decrease in the three and six months ended June 30, 2025 was primarily due to lower contract manufacturing expenses and lower employee-related costs for this drug candidate compared with the corresponding periods in 2024.

*Other DURECT programs*

Our research and development expenses for all other programs were $44,000 and $124,000 in the three and six months ended June 30, 2025, respectively, compared to $26,000 and $98,000 for the corresponding periods in 2024. We do not expect to meaningfully increase research and development for other programs at the present time.

*Selling, general and administrative* 

Selling, general and administrative expenses are primarily comprised of salaries, benefits, stock-based compensation and other costs associated with finance, accounting, legal, business development, sales and marketing and other administrative personnel, overhead and facility costs, and other general and administrative costs.

Selling, general and administrative expenses were $2.1 million and $4.6 million in the three and six months ended June 30, 2025, respectively, compared to $2.6 million and $5.2 million for the corresponding periods in 2024. The decrease in the three and six months ended June 30, 2025 was primarily due to lower employee costs compared to the corresponding periods in 2024. Stock-based

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compensation expense recognized related to selling, general and administrative personnel was $305,000 and $624,000 for the three and six months ended June 30, 2024, respectively, compared to $260,000 and $545,000 for the corresponding periods in 2024.

We had nine selling, general and administrative employees as of June 30, 2025 compared with 16 as of June 30, 2024. We expect selling, general and administrative expenses in the near future to decrease compared to the second quarter of 2025.

*Other income (expense).* Other income was $538,000 and $514,000 in the three and six months ended June 30, 2025, respectively, compared to other income of $149,000 and other expense of $1.2 million in the three and six months ended June 30, 2024.

*Interest and other income*

Interest income was $93,000 and $188,000 in the three and six months ended June 30, 2025, respectively, compared to $227,000 and $548,000 for the corresponding periods in 2024. The decrease in the three and six months ended June 30, 2025 was primarily due to lower balances in our cash, cash equivalents and investments compared with the corresponding periods in 2024.

*Change in fair value of warrant liabilities*

The change in fair value of warrant liabilities during the three months ended June 30, 2025 was comprised of a non-cash gain of $42,000 for the common warrants issued in February 2023 and a non-cash gain of $404,000 for the common warrants issued in July 2023. The change in fair value of warrant liabilities during the six months ended June 30, 2025 was comprised of a non-cash gain of $18,000 for the common warrants issued in February 2023 and a non-cash gain of $308,000 for the common warrants issued in July 2023.

**Liquidity and Capital Resources**

We had cash, cash equivalents and investments totaling $6.7 million at June 30, 2025 compared to cash, cash equivalents, and investments of $12.0 million at December 31, 2024. These balances include $150,000 of interest-bearing marketable securities classified as restricted investments on our balance sheets as of June 30, 2025 and December 31, 2024. The decrease in cash, cash equivalents and investments was primarily due to cash used in ongoing operating activities, partially offset by payments received from collaboration partners and customers.

Our cash and investments policy emphasizes liquidity and preservation of principal over other portfolio considerations. We select investments that maximize interest income to the extent possible given these two constraints. We satisfy liquidity requirements by investing excess cash in securities with different maturities to match projected cash needs and limit concentration of credit risk by diversifying our investments among a variety of high credit-quality issuers.

As discussed below, we do not have sufficient cash resources to fund our planned operations and existing contractual commitments for the next 12 months. Our auditors have issued a going concern opinion as of, and for the fiscal year ended, December 31, 2024. Unless we secure funding from collaborations, additional equity or debt financing, of which there can be no assurance, we may not be able to continue operations.

*Cash Flows*

We used $5.3 million of cash in operating activities for the six months ended June 30, 2025 compared to $10.4 million for the corresponding period in 2024. The cash used in operations was primarily to fund operations as well as our working capital requirements. We anticipate that cash used in <u>our core</u> operating activities in the near future will decrease compared to the second quarter of 2025 due to expected decreases in operating expenses. However, we have and continue to expect to incur significant transaction expenses in connection with our pending Merger. *See* Note 11, Subsequent Events and Risk Factors in Item 1A below.

We received $796,000 of cash provided by investing activities for the six months ended June 30, 2025 compared to $1.3 million for the corresponding period in 2024. The decrease in cash provided by investing activities was primarily due to a decrease in net proceeds from maturities of available-for-sale securities for the six months ended June 30, 2025 compared with the corresponding period in 2024.

We had no financing activities for the six months ended June 30, 2025 compared to $3.6 million of cash used in financing activities for the six months ended June 30, 2024. The decrease in cash used in financing activities was primarily due to no principal payments on the term loan with Oxford Finance LLC ("Oxford Finance") during the six months ended June 30, 2025 as we paid off the term loan in full in November 2024; the $3.6 million used in financing activities for the six months ended June 30, 2024 was a result of our making principal payments on the term loan with Oxford Finance partially offset by the sale of our common stock in the open market pursuant to a sales agreement dated July 30, 2021 with Cantor Fitzgerald & Co. (the "2021 Sales Agreement") for the six months ended June 30, 2024.

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*Shelf Registration Statement*

In the first quarter of 2024, we raised net proceeds (net of commissions) of approximately $648,000 from the sale of our common stock in the open market under the 2021 Sales Agreement.

On August 14, 2024, we filed a shelf registration statement on Form S-3 with the SEC (the "2024 Registration Statement") (File No. 333-281550), which upon being declared effective on August 23, 2024, allowed us to offer up to $250.0 million of securities from time to time in one or more public offerings. Due to the SEC's "baby shelf" rules, which prohibit companies with a public float of less than $75 million from issuing securities under a shelf registration statement in excess of one-third of such company's public float in a 12-month period, we are currently only able to issue a limited number of shares under our 2024 Registration Statement, which aggregate to no more than one-third of our public float.

As of August 8, 2025, we had up to $250.0 million of our securities available for sale under the 2024 Registration Statement. However, due to the SEC's "baby shelf" rules discussed above, only up to approximately $19.6 million of our securities are currently available for sale under the 2024 Registration Statement.

Any material sales in the public market of our common stock, under the 2024 Registration Statement, could adversely affect prevailing market prices for our common stock. While the Merger is pending, we have agreed not to sell our common stock in the public markets, subject to certain limited exceptions.

*Going Concern*

As of June 30, 2025, we had cash, cash equivalents and investments totaling $6.7 million compared to cash, cash equivalents, and investments of $12.0 million at December 31, 2024.

In accordance with ASU No. 2014-15 Presentation of Financial Statements – Going Concern (subtopic 205-40), our management evaluates whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. Based on our evaluation, substantial doubt exists regarding our ability to continue as a going concern for a period of one year from the issuance of our financial statements. As a result, our independent registered public accounting firm included an explanatory paragraph regarding our ability to continue as a going concern in its report on our financial statements as of, and for the year ended, December 31, 2024.

Presently, we do not have sufficient cash resources to fund our planned operations, existing debt and contractual commitments and planned capital expenditures through at least the next 12 months from issuance of these financial statements. We may consume available resources more rapidly than currently anticipated, resulting in the need for additional funding. We expect to incur continuing losses and negative cash flows from operations for the foreseeable future.

We may decide to raise additional capital through a variety of sources in the short-term and in the long-term, including but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the public equity markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•private equity financings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collaborative arrangements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•asset sales; and/or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•public or private debt.

There can be no assurance that we will enter into additional collaborative agreements or maintain existing collaborative agreements, will earn collaborative revenues or that additional capital will be available on favorable terms to the Company, if at all. If adequate funds are not available, we may be required to significantly reduce or re-focus our operations or to obtain funds through arrangements that may require us to relinquish rights to certain of our products, technologies or potential markets, either of which could have a material adverse effect on our business, financial condition and results of operations. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in ownership dilution to our existing stockholders (assuming convertible debt securities were converted into shares). These factors raise substantial doubt regarding our ability to continue as a going concern. Our inability to obtain required funding in the near future or our inability to obtain funding on favorable terms will have a material adverse effect on our operations and strategic development plan for future growth. If we cannot successfully raise additional capital and implement our strategic development plan, our liquidity, financial condition and business prospects will be materially and adversely affected, and we may have to cease operations.

During the six months ended June 30, 2025, there were no significant changes in our commercial commitments and contractual obligations as compared with the information presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 27, 2025.

*Human Capital*

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As of August 8, 2025, we had 13 employees, including four in research and development and nine in selling, general and administrative.

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**Item 3. Quantitative and Qualitative Disclosures about Market Risk**

As of June 30, 2025, our exposure to market risk has not changed materially since December 31, 2024. For more information on financial market risks related to changes in interest rates, reference is made to Part II, Item 7A., "Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 27, 2025.

**Item 4. Controls and Procedures**

*Evaluation of Disclosure Controls and Procedures:* The Company's principal executive and principal financial officers reviewed and evaluated the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company's principal executive and principal financial officers concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q the Company's disclosure controls and procedures are effective at ensuring that information required to be disclosed by the Company in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including the Company's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

*Changes in Internal Control Over Financial Reporting:* There were no significant changes in the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the Company's most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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**PART II – OTHER INFORMATION**

**Item 1. Legal Proceedings**

We are not a party to any material legal proceedings.

**Item 1A. Risk Factors.**

You should carefully consider the factors discussed in Part I, Item 1A., "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 27, 2025, which could materially affect our business, financial position, or future results of operations. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. The risk factor set forth below supplements and updates the risk factors previously disclosed and should be read together with the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and with any risk factors we may include in subsequent periodic filings with the SEC.

***The consummation of the Merger is subject to a number of conditions, many of which are largely outside of the parties' control, and, if these conditions are not satisfied or waived on a timely basis, the Merger Agreement may be terminated, and the Merger may not be completed.***

Parent and Merger Sub's obligation to accept for payment and purchase any Company Shares validly tendered pursuant to the Offer is subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, including, as of immediately prior to the expiration time of the Offer: (i) that there be validly tendered and not withdrawn in accordance with the terms of the Offer, and "received" by the "depository" for the Offer (as such terms are defined in Section 251(h) of the DGCL), a number of Company Shares that, together with the Company Shares then owned by Parent, Merger Sub and their affiliates, represents at least one Company Share more than 50% of the then-outstanding Company Shares; (ii) no Company Material Adverse Effect (as defined in the Merger Agreement) has occurred since the date of the Merger Agreement; (iii) the absence of any law or order enacted, issued or promulgated by any governmental authority of competent and applicable jurisdiction that would make illegal, prohibit or otherwise prevent the consummation of the Offer, the acquisition of Company Shares by Parent or Merger Sub, or the Merger; (iv) the absence of any pending or threatened in writing legal proceeding under any antitrust laws brought by any applicable governmental authority of competent and applicable jurisdiction that challenges or seeks to make illegal, prohibit or otherwise prevent the consummation of the Offer, the acquisition of Company Shares by Parent or Merger Sub or the Merger; (v) the accuracy of the representations and warranties of the Company contained in the Merger Agreement (subject to certain materiality exceptions); (vi) the Company's compliance or performance in all material respects with its covenants and agreements contained in the Merger Agreement prior to the Expiration Time; and (vii) other customary conditions.

The failure to satisfy all of the required conditions could delay the completion of the Merger by a significant period of time or prevent it from occurring. Any delay in completing the Merger could cause the parties to not realize some or all of the benefits that are expected to be achieved if the Merger is successfully completed within the expected timeframe. There can be no assurance that the conditions to closing of the Merger will be satisfied or waived or that the Merger will be completed within the expected timeframe or at all.

***Failure to complete the Merger within the timeframe we anticipate or at all, could adversely affect the stock price and future business and financial results of the Company.***

There can be no assurance that the conditions to the closing of the Merger will be satisfied or waived or that the Merger will be completed. If the Merger is not completed within the expected timeframe or at all, the ongoing business of the Company could be adversely affected and the Company will be subject to a variety of risks and possible consequences associated with the failure to complete the Merger, including the following: (i) upon termination of the Merger Agreement under specified circumstances, including due to a change in the Company Board Recommendation, the entry by the Company into a definitive agreement with respect to a Superior Proposal, or certain other triggering events, the Company may be required to pay Parent a termination fee of $3.5 million; (ii) the Company will incur certain transaction costs, including legal, accounting, financial advisor, filing, printing and mailing fees, regardless of whether the Merger is consummated; (iii) under the Merger Agreement, the Company is subject to certain restrictions on the conduct of its business prior to the consummation of the Merger, which may adversely affect its ability to execute certain of its business strategies; and (iv) the proposed Merger, whether or not it closes, will divert the attention of certain management and other key employees of the Company from ongoing business activities, including the pursuit of other opportunities that could be beneficial to the Company as an independent company.

If the Merger is not completed, these risks could materially affect the business and financial results of the Company and its stock price, including to the extent that the current market price of the Company Shares is positively affected by a market assumption that the Merger will be completed.

***While the Merger is pending, the Company will be subject to business uncertainties and certain contractual restrictions that could adversely affect the business and operations of the Company.***

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In connection with the pending Merger, some vendors or other third parties of the Company may react unfavorably, including by delaying or deferring decisions concerning their business relationships or transactions with the Company, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of the Company, regardless of whether the Merger is completed. In addition, due to certain restrictions in the Merger Agreement on the conduct of business prior to completing the Merger, the Company may be unable (without Parent's prior written consent), during the pendency of the Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial and may cause the Company to forego certain opportunities it might otherwise pursue. In addition, the pendency of the Merger may make it more difficult for the Company to effectively retain and incentivize key personnel and may cause distractions from the Company's strategy and day-to-day operations for its current employees and management.

***The Company will incur substantial transaction fees and costs in connection with the Merger that could adversely affect the business and operations of the Company if the Merger is not completed.***

The Company expects to incur non-recurring transaction fees, which include legal and advisory fees and substantial costs associated with completing the Merger, and which could adversely affect the business operations of the Company if the Merger is not completed.

***The termination fee and restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire the Company.***

The Merger Agreement prohibits the Company (subject to certain exceptions) from soliciting, initiating, knowingly encouraging or knowingly facilitating or assisting any inquiry, proposal or offer, or making, submitting or announcing any inquiry, proposal or offer, that constitutes or would reasonably be expected to lead to an Acquisition Proposal. The Merger Agreement also contains certain termination rights, including, but not limited to, the Company's right to terminate the Merger Agreement to accept a Superior Proposal, subject to and in accordance with the terms and conditions of the Merger Agreement. The Merger Agreement further provides that, upon termination of the Merger Agreement by the Company under specified circumstances, including due to a change in the Company Board Recommendation, the entry by the Company into a definitive agreement with respect to a Superior Proposal, or certain other triggering events, the Company may be required to pay Parent a termination fee of $3.5 million. The termination fee and restrictions could discourage other companies from trying to acquire the Company even though those other companies might be willing to offer greater value to the Company's stockholders than the Merger.

***Litigation against the Company, Parent, or the members of their respective boards, could prevent or delay the completion of the Merger or result in the payment of damages following completion of the Merger.***

It is possible that lawsuits may be filed by the Company's stockholders challenging the Merger. The outcome of such lawsuits cannot be assured, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the Merger, such injunction may delay the consummation of the Merger in the expected timeframe, or may prevent the Merger from being consummated at all. Whether or not any plaintiff's claim is successful, this type of litigation can result in significant costs and divert management's attention and resources from the closing of the Merger and ongoing business activities, which could adversely affect the operations of the Company.

***Uncertainty about the Merger may adversely affect the relationships between the Company and its customers, vendors and employees, whether or not the Merger is completed.***

In response to the announcement of the Merger, existing or prospective customers, vendors and other third-party relationships of the Company may delay, defer or cease providing goods or services, delay or defer other decisions concerning the Company, refuse to extend credit to the Company, or otherwise seek to change the terms on which they do business with the Company. Any such delays or changes to terms could materially harm the Company's business.

In addition, as a result of the Merger, current and prospective employees could experience uncertainty about their future with the Company. These uncertainties may impair the Company's ability to retain, recruit or motivate key personnel.

***Our stockholders potentially may not receive any payment on the contingent value rights and the contingent value rights may otherwise expire valueless.***

The Merger Agreement contemplates that Parent will enter into the CVR Agreement with the Rights Agent pursuant to which each stockholder who tenders its Company Shares will receive one CVR for each outstanding Company Share held by such stockholder on such date. Each CVR will represent a non-tradeable contractual contingent right to receive the pro rata portion of the following two milestone payments of up to $350 million in the aggregate, less amounts paid under a retention plan, in each case, in cash, without interest thereon and less any applicable withholding tax if the following net sales milestones are achieved prior to the earlier of the 10 year anniversary of the first commercial sale of larsucosterol in the United States and December 31, 2045:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)$100,000,000 in the aggregate, minus any amount assigned to option holders under the retention plan, payable upon the achievement of aggregate worldwide annual net sales of larsucosterol of at least $500 million in any one calendar year; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)$250,000,000 in the aggregate, minus any amount assigned to option holders under the retention plan payable upon the achievement of aggregate worldwide annual net sales of larsucosterol of at least $1 billion in any one calendar year.

The right of our stockholders to derive any value from the CVRs will be contingent solely upon the achievement of these milestones. We may not be able to achieve the milestones as described above. If either or both milestones are not achieved for any reason within the time periods specified in the CVR Agreement, the corresponding payments will not be made under the CVRs, and if neither milestone is achieved, then the CVRs will expire valueless.

***Disruptions at the FDA caused by funding shortages and uncertainty regarding the second Trump administration's initiatives and how these might impact the FDA, its implementation of laws, regulations, policies and guidance, and its personnel, could hinder government agencies' ability to hire and retain key leadership and other personnel or otherwise prevent the FDA from performing normal business functions on which our business operations rely, including timely reviews, which could negatively impact our business.***

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes that may otherwise affect the FDA's ability to perform routine functions. Disruptions at the FDA, including substantial leadership, personnel, and policy changes, may also slow the time necessary for new drugs to be reviewed and/or approved, which would harm our business. Changes in FDA staffing could result in delays in the FDA's responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all. Similar consequences would also result in the event of another significant shutdown of the federal government. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, or if geopolitical or global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could materially adversely affect our business, financial condition, results of operations and prospects.

With the second Trump administration, there is substantial uncertainty as to whether and how the Trump administration will seek to modify or revise the requirements and policies of the FDA and other regulatory agencies with jurisdiction over our product candidates. This uncertainty could present new challenges and/or opportunities as we navigate development of our product candidates. Some of these efforts have manifested to date in the form of personnel measures that could impact the FDA's ability to hire and/or retain key personnel, which could result in delays or limitations on our ability to obtain guidance from the FDA on our product candidates in development and obtain the requisite regulatory approvals in the future. Moreover, the Trump administration has proposed action to freeze or reduce the budget of the National Institutes of Health ("NIH"), as related to its funding for medical research, which could decrease the ability of facilities that rely on NIH funding to enroll and conduct clinical trials or increase the costs to us of conducting clinical trials. There remains general uncertainty regarding future activities. The Trump administration could issue or promulgate executive orders, regulations, policies or guidance that adversely affect us or create a more challenging or costly environment to pursue the development of new therapeutic products. Alternatively, state governments may attempt to address or react to changes at the federal level with changes to their own regulatory frameworks in a manner that is adverse to our operations. If we become negatively impacted by future governmental orders, regulations, policies or guidance as a result of the Trump administration, there could be a material adverse effect on us and our business.

**Item 5. Other Information**

**Insider Adoption or Termination of Trading Arrangements**

During the fiscal quarter ended June 30, 2025, none of our directors or officers informed us of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Regulation S-K, Item 408.

**Nasdaq Minimum Bid Price Requirement**

As previously reported on a Current Report on Form 8-K filed with the SEC, on January 10, 2025, we received a letter, dated

January 9, 2025, from The Nasdaq Stock Market LLC ("Nasdaq") informing us that because the closing bid price of our common

stock was below $1.00 for 30 consecutive business days (the "Minimum Closing Bid Price Requirement"), our shares no longer

complied with the Minimum Closing Bid Price Requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing

Rule 5550(a)(2). The notification stated that the Company had 180 days, or until July 8, 2025, to demonstrate its compliance with the

Minimum Bid Price Requirement. On July 9, 2025, we received approval from the Listing Qualifications Department of Nasdaq (the

"Staff") for an additional 180-day grace period, or until January 5, 2026, to regain compliance with the Minimum Bid Price

Requirement.

On August 12, 2025, we received a letter from the Staff informing us that the Staff had determined that the closing bid price of

our common stock had been at $1.00 per share or greater for at least 10 consecutive business days. Accordingly, the Company has

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regained compliance with Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market and the matter is now closed.

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**Item 6. Exhibits**

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| | |
|:---|:---|
| **<u>Exhibit</u>** <br>**<u>Number</u>** | &nbsp;&nbsp;**<u>Exhibit Name</u>** |
| &nbsp;&nbsp;&nbsp;&nbsp;2.1^<br>| [<u>Agreement and Plan of Merger by and among Bausch Health Americas, Inc., BHC Lyon Merger Sub, Inc., DURECT Corporation, and solely for purposes of Section 6.10, Bausch Health Companies Inc. (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K, as filed with the SEC on July 29, 2025).</u>](https://www.sec.gov/Archives/edgar/data/1082038/000119312525167173/d50216dex21.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;2.2<br>| [<u>Amendment No. 1 to the Agreement and Plan of Merger by and among DURECT Corporation, Bausch Health Americas, Inc., and BHC Lyon Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K, as filed with the SEC on August 8, 2025).</u>](https://www.sec.gov/Archives/edgar/data/1082038/000119312525177114/d92539dex21.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;31.1\*<br>| [<u>Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](drrx-ex31_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;31.2\*<br>| [<u>Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](drrx-ex31_2.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;32.1\*\*<br>| [<u>Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</u>](drrx-ex32_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;32.2\*\*<br>| [<u>Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</u>](drrx-ex32_2.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;101 | The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline XBRL: (i) Condensed Balance Sheets, (ii) Condensed Statements of Operations, (iii) Condensed Statements of Comprehensive Income, (iv) Condensed Statements of Changes in Stockholders' Equity, (v) Condensed Statements of Cash Flows and (vi) Notes to Condensed Financial Statements, tagged as blocks of text and including detailed tags. |
| &nbsp;&nbsp;&nbsp;&nbsp;104 | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, formatted in Inline XBRL (included as Exhibit 101). |

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<u>^ Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted exhibits and schedules upon request by the SEC</u>

\* Filed herewith.

\*\* Furnished, not filed.

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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| | | |
|:---|:---|:---|
|  | DURECT CORPORATION | DURECT CORPORATION |
|  | By: | /S/ JAMES E. BROWN |
|  |  | **James E. Brown**<br>**Chief Executive Officer** |
| Date: August 13, 2025 |  |  |
|  | By: | /S/ TIMOTHY M. PAPP |
|  |  | **Timothy M. Papp**<br>**Chief Financial Officer** <br>**(Principal Accounting Officer)** |
| Date: August 13, 2025 |  |  |

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## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

**PURSUANT TO**

**RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, James E. Brown, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DURECT Corporation for the quarter ended June 30, 2025;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 13, 2025

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| |
|:---|
| /S/ JAMES E. BROWN |
| **James E. Brown** |
| **Chief Executive Officer** |

---

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## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION OF CHIEF FINANCIAL OFFICER**

**PURSUANT TO**

**RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Timothy M. Papp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DURECT Corporation for the quarter ended June 30, 2025;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 13, 2025

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| |
|:---|
| /S/ TIMOTHY M. PAPP |
| Timothy M. Papp |
| **Chief Financial Officer**<br> **(Principal Accounting Officer)** |

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## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of DURECT Corporation (the "Company") on Form 10-Q for the period ending June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James E. Brown, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 13, 2025

---

| |
|:---|
| /S/ JAMES E. BROWN |
| **James E. Brown** |
| **Chief Executive Officer** |

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## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of DURECT Corporation (the "Company") on Form 10-Q for the period ending June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Timothy M. Papp, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 13, 2025

---

| |
|:---|
| /S/ TIMOTHY M. PAPP |
| **Timothy M. Papp** |
| **Chief Financial Officer**<br>**(Principal Accounting Officer)**<br>|

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