DURECT (DRRX) 10-Q 1 Nov 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 25, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Trading Symbol	DRRX
Entity Registrant Name	DURECT CORP
Entity Central Index Key	1,082,038
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		138,581,556

Condensed Balance Sheets

Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 5,363	$ 3,583
Short-term investments	22,403	25,457
Short-term restricted investments	100
Accounts receivable (net of allowances of $162 at September 30, 2016 and $161 at December 31, 2015)	1,249	2,222
Inventories	3,641	3,917
Prepaid expenses and other current assets	1,744	3,142
Total current assets	34,500	38,321
Property and equipment (net of accumulated depreciation of $21,273 and $20,971 at September 30, 2016 and December 31, 2015, respectively)	1,290	1,566
Goodwill	6,399	6,399
Long-term investments	1,000
Long-term restricted investments	150	250
Other long-term assets	236	236
Total assets	43,575	46,772
Current liabilities:
Accounts payable	1,494	1,286
Accrued liabilities	4,092	4,970
Contract research liabilities	555	575
Deferred revenue, current portion	989	616
Total current liabilities	7,130	7,447
Deferred revenue, non-current portion	1,988	2,269
Long-term debt, net	19,838	19,684
Other long-term liabilities	1,676	2,489
Commitments and contingencies
Stockholders' equity:
Common stock	14	12
Additional paid-in capital	444,189	420,453
Accumulated other comprehensive income (loss)	6	(14)
Accumulated deficit	(431,266)	(405,568)
Stockholders' equity	12,943	14,883
Total liabilities and stockholders' equity	$ 43,575	$ 46,772

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Allowances for accounts receivable	$ 162	$ 161
Accumulated depreciation on property and equipment	$ 21,273	$ 20,971

Condensed Statements of Compreh

Condensed Statements of Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income Statement [Abstract]
Collaborative research and development and other revenue (see Note 2)	$ 352	$ 2,052	$ 1,142	$ 5,568
Product revenue, net	3,391	2,691	9,366	8,389
Total revenues	3,743	4,743	10,508	13,957
Operating expenses:
Cost of product revenues	2,180	884	4,335	2,912
Research and development	6,805	6,654	21,282	17,659
Selling, general and administrative	3,043	3,177	8,993	8,721
Total operating expenses	12,028	10,715	34,610	29,292
Loss from operations	(8,285)	(5,972)	(24,102)	(15,335)
Other income (expense):
Interest and other income	45	43	112	194
Interest and other expense	(592)	(558)	(1,708)	(1,677)
Net other expense	(547)	(515)	(1,596)	(1,483)
Net loss	(8,832)	(6,487)	(25,698)	(16,818)
Net change in unrealized gain (loss) on available-for-sale securities, net of reclassification adjustments and taxes	(4)	6	20	(83)
Total comprehensive loss	$ (8,836)	$ (6,481)	$ (25,678)	$ (16,901)
Net loss per share
Basic	$ (0.06)	$ (0.05)	$ (0.20)	$ (0.14)
Diluted	$ (0.06)	$ (0.05)	$ (0.20)	$ (0.14)
Weighted-average shares used in computing net loss per share
Basic	137,933	120,483	130,990	117,718
Diluted	137,933	120,483	130,990	117,718

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities
Net loss	$ (25,698)	$ (16,818)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	309	342
Stock-based compensation	2,023	1,966
Inventory write-off	642	180
Amortization of debt issuance costs	89	66
Realized gain from sale of marketable equity security, net of tax		(117)
Loss on debt extinguishment	9
Net amortization/accretion on investment	(172)	(210)
Changes in assets and liabilities:
Accounts receivable	973	(147)
Inventories	(366)	(510)
Prepaid expenses and other assets	1,398	(305)
Accounts payable	208	(223)
Accrued and other liabilities	583	1,003
Contract research liabilities	(20)	272
Deferred revenue	92	(326)
Total adjustments	5,768	1,991
Net cash used in operating activities	(19,930)	(14,827)
Cash flows from investing activities
Purchases of property and equipment	(33)	(194)
Purchases of available-for-sale securities	(24,488)	(24,529)
Proceeds from maturities of available-for-sale securities	26,734	29,710
Proceeds from sale of marketable equity security		178
Net cash provided by investing activities	2,213	5,165
Cash flows from financing activities
Payments on equipment financing obligations	(16)	(15)
Payment of additional issuance cost for long-term debt	(173)	(240)
Payment of accrued final payment for long-term debt	(886)
Net proceeds from issuances of common stock	20,572	12,626
Net cash provided by financing activities	19,497	12,371
Net increase in cash and cash equivalents	1,780	2,709
Cash and cash equivalents, beginning of the period	3,583	2,680
Cash and cash equivalents, end of the period	$ 5,363	$ 5,389

Summary of Significant Accounti

Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	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 with research and development programs broadly falling into two categories: (i) new chemical entities derived from our Epigenetics Regulator Program, in which we attempt to discover and develop molecules which have not previously been approved and marketed as therapeutics, and (ii) Drug Delivery Programs, in which we apply our formulation expertise and technologies largely to active pharmaceutical ingredients whose safety and efficacy have previously been established but which we aim to improve in some manner through a new formulation. The Company has several products under development by itself and with third party collaborators. The Company also manufactures and sells osmotic pumps used in laboratory research, and designs, develops and manufactures a wide range of standard and custom biodegradable polymers and excipients for pharmaceutical and medical device clients for use as raw materials in their products. In addition, the Company conducts research and development of pharmaceutical products in collaboration with third party pharmaceutical and biotechnology companies. Basis of Presentation The accompanying unaudited financial statements include the accounts of the Company. These financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (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 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 September 30, 2016, the operating results and comprehensive loss for the three and nine months ended September 30, 2016 and 2015, and cash flows for the nine months ended September 30, 2016 and 2015. The balance sheet as of December 31, 2015 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, 2015 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. Inventories Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventories, in part, include certain excipients that are sold to a customer and included in products awaiting regulatory approval. These inventories are capitalized based on management’s judgment of probable sale prior to their expiration date which in turn is primarily based on non-binding forecasts from our customers as well as management’s internal estimates. The valuation of inventory requires management to estimate the value of inventory that may become expired prior to use. The Company may be required to expense previously capitalized inventory costs upon a change in management’s judgment, due to, among other potential factors, a denial or delay of approval of a customer’s product by the necessary regulatory bodies, or new information that suggests that the inventory will not be saleable. In addition, these circumstances may cause the Company to record a liability related to minimum purchase agreements that the Company has in place for raw materials. In September 2016, our licensee, Pain Therapeutics received a Complete Response Letter from the U.S. Food and Drug Administration for Pain Therapeutics’ New Drug Application for REMOXY® ER (oxycodone) extended-release capsules CII. As a result, the Company wrote down certain lots of inventory which are no longer considered to be probable for use prior to expiration and prepaid inventory related to a minimum purchase agreement for an excipient. In the three and nine months ended September 30, 2016, the Company recorded charges to cost of goods sold of approximately $926,000, of which approximately $426,000 related to the write-down of the cost basis of inventory and approximately $500,000 related to the prepaid inventory for the minimum purchase commitment for an excipient. As of September 30, 2016, the remaining carrying value of the excipients in the Company’s inventory was $629,000. In addition, the Company has remaining unrecorded future purchase commitments totaling $1.5 million through 2018. In the event that management determines that the Company will not utilize all of these materials, there could be a potential write-off related to this inventory and a reserve for future purchase commitments. The Company’s inventories consisted of the following (in thousands): September 30, 2016 December 31, 2015 (unaudited) Raw materials $ 675 $ 1,168 Work in process 1,460 1,412 Finished goods 1,506 1,337 Total inventories $ 3,641 $ 3,917 Revenue Recognition Revenue from the sale of products is recognized when there is persuasive evidence that an arrangement exists, the product is shipped and title transfers to customers, provided no continuing obligation on the Company’s part exists, the price is fixed or determinable and the collectability of the amounts owed is reasonably assured. The Company enters into license and collaboration agreements under which it may receive upfront license fees, research funding and contingent milestone payments and royalties. The Company’s deliverables under these arrangements typically consist of granting licenses to intellectual property rights and providing research and development services. The accounting standards contain a presumption that separate contracts entered into at or near the same time with the same entity or related parties were negotiated as a package and should be evaluated as a single agreement. Comprehensive Income (Loss) Components of other comprehensive income (loss) are comprised entirely of unrealized gains and losses on the Company’s available-for-sale securities and marketable equity security for all periods presented. Total comprehensive loss has been disclosed in the Company’s Condensed Statements of Comprehensive Loss. Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding. Diluted net loss per share is computed using the weighted-average number of common shares outstanding and common stock equivalents (i.e., options to purchase common stock) outstanding during the period, if dilutive, using the treasury stock method for options. Options to purchase approximately 16.9 million and 18.8 million shares of common stock were excluded from the denominator in the calculation of diluted net loss per share for the three and nine months ended September 30, 2016, respectively, as the effect would be anti-dilutive. Options to purchase approximately 11.7 million and 16.5 million shares of common stock were excluded from the denominator in the calculation of diluted net loss per share for the three and nine months ended September 30, 2015, respectively, as the effect would be anti-dilutive. Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as equity or liabilities, an option to recognize gross share compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. Some of the areas of simplification apply only to nonpublic entities. For public business entities, the amendments in ASU 2016-09 are effective for annual periods beginning after 15 December 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after 15 December 2017, and interim periods within annual periods beginning after 15 December 2018. Early adoption is permitted for any entity in any interim or annual period for which financial statements haven’t been issued or made available for issuance. If an entity early adopts the amendments in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the impact that ASU 2016-09 will have on its financial statements. In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-02, Leases fiscal year 2019 and early adoption is permitted. This ASU is required to be applied with a modified retrospective approach and requires application of the new standard at the beginning of the earliest comparative period presented. The Company is currently evaluating the impact that ASU 2016-02 will have on its financial statements. In May 2014, the FASB issued guidance codified in ASC 606, Revenue Recognition—Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The guidance provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). The standard was to have been effective for public entities for annual and interim periods beginning after December 15, 2016. In July 2015, the FASB voted to delay the effective date for this guidance. This guidance will be effective for the Company in the first quarter of 2018. The Company is currently evaluating the impact of the provisions of ASC 606. In November 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15). This update is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments: (1) provide a definition of the term substantial doubt; (2) require an evaluation every reporting period including interim periods; (3) provide principles for considering the mitigating effect of management’s plans; (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans; (5) require an express statement and other disclosures when substantial doubt is not alleviated; and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 will be effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. ASU 2014-15 will be effective for the Company beginning with its annual report for fiscal 2016 and interim periods thereafter. The Company is currently evaluating the impact that ASU 2014-15 will have on its financial statements. In November 2015, the FASB issued Accounting Standards Update 2015-17(ASU 2015-17), Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The new guidance will be effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those years (i.e., in the first quarter of 2017 for calendar year-end companies). Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative balance sheet). The Company early adopted ASU 2015-17, on a prospective basis, for the year ended December 31, 2015.

Strategic Agreements

Strategic Agreements	9 Months Ended
	Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Strategic Agreements	Note 2. Strategic Agreements The collaborative research and development and other revenues associated with the Company’s major third-party collaborators are as follows (in thousands): Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Collaborator Zogenix, Inc. (Zogenix) (1) $ 63 $ 1,494 $ 503 $ 3,772 Santen Pharmaceutical Co. Ltd. (Santen) (2) 110 93 420 641 Pain Therapeutics, Inc. (Pain Therapeutics) 153 346 163 509 Others 26 119 56 646 Total collaborative research and development and other revenue $ 352 $ 2,052 $ 1,142 $ 5,568 (1) Amounts related to ratable recognition of upfront fees were $52,000 and $156,000 for the three and nine months ended September 30, 2016 respectively, compared to $64,000 and $191,000 for the corresponding periods in 2015. (2) Amounts related to ratable recognition of upfront fees were $57,000 and $171,000 for the three and nine months ended September 30, 2016 respectively, compared to $71,000 and $213,000 for the corresponding periods in 2015. Agreement with Pain Therapeutics, Inc. In December 2002, the Company entered into an exclusive agreement with Pain Therapeutics, Inc. (Pain Therapeutics) to develop and commercialize on a worldwide basis REMOXY® ER and other oral sustained release, abuse deterrent opioid products incorporating four specified opioid drugs, using the ORADUR technology. Total collaborative research and development revenue recognized under the agreements with Pain Therapeutics was $153,000 and $163,000 for the three and nine months ended September 30, 2016, respectively compared with $346,000 and $509,000 for the corresponding periods in 2015. In May 2015, Pain Therapeutics sent a letter to the Company that provided the Company with formal written notice that Pain Therapeutics was deleting, effective as of January 12, 2015, the opioid drug hydrocodone (and only hydrocodone) as a licensed product under the agreement. The letter did not alter the terms of the agreement regarding the remaining three licensed products (REMOXY ER, hydromorphone or oxymorphone) or otherwise amend the agreement. Under the agreement with Pain Therapeutics, subject to and upon the achievement of predetermined development and regulatory milestones for the three drug candidates, the Company is entitled to receive milestone payments of up to $7.2 million in the aggregate. The cumulative aggregate payments received by the Company from Pain Therapeutics as of September 30, 2016 were $39.8 million under this agreement. Under the terms of this agreement, Pain Therapeutics paid the Company an upfront license fee of $1.0 million, with the potential for an additional $7.2 million in performance milestone payments based on the successful development and approval of the three ORADUR-based opioids. Of these potential milestones, all $7.2 million are development-based milestones. There are no sales-based milestones under the agreement. As of September 30, 2016, the Company had received $1.7 million in cumulative milestone payments. In March 2009, King Pharmaceuticals (King) assumed the responsibility for further development of REMOXY ER from Pain Therapeutics, and in February 2011, Pfizer acquired King and thereby assumed the rights and obligations of King with respect to REMOXY ER. In October 2014, Pfizer notified Pain Therapeutics that Pfizer had decided to discontinue development of REMOXY ER, and that Pfizer would return all rights, including responsibility for regulatory activities, to Pain Therapeutics and that Pfizer would continue ongoing activities under the agreement until the scheduled termination date in April 2015. The cumulative aggregate payments received by the Company from Pfizer and King as of September 30, 2016 were $7.1 million under this agreement. In July 2015, Pain Therapeutics stated that it had substantially completed the transition of REMOXY ER from Pfizer. In March 2016, Pain Therapeutics resubmitted the New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA), and in September 2016, Pain Therapeutics received a Complete Response Letter from the FDA for REMOXY ER. Based on its review, the FDA has determined that the NDA cannot be approved in its present form and specifies additional actions and data that are needed for drug approval. Total collaborative research and development revenue recognized for REMOXY ER-related work performed by the Company for Pain Therapeutics was $153,000 and $163,000 for the three and nine months ended September 30, 2016, compared with $346,000 and $397,000 for the corresponding periods in 2015. Prior to March 2009 and after November 2014, the Company recognized collaborative research and development revenue for REMOXY ER-related work for Pain Therapeutics. The cumulative aggregate payments received by the Company from Pain Therapeutics as of September 30, 2016 were $39.8 million under this agreement. Long Term Supply Agreement with King (Pfizer) In November 2009, the Company signed an exclusive long term excipient supply agreement with respect to REMOXY ER with King. In February 2011, Pfizer acquired King and thereby assumed the rights and obligations of King with respect to this long term supply agreement. This agreement stipulated the terms and conditions under which the Company would supply to King, based on the Company’s manufacturing cost plus a specified percentage mark-up, two key excipients used in the manufacture of REMOXY ER. The term of the agreement commenced in November 2009 and continued in effect until April 2015, when the related development and license agreement between Pain Therapeutics and King terminated. Total revenues recognized related to these excipients was $374,000 and $653,000 for the three and nine months ended September 30, 2016 compared to zero and $96,000 for the corresponding periods in 2015. The associated cost of goods sold was $92,000 and $216,000 for the three and nine months ended September 30, 2016, compared with zero and $51,000 for the corresponding periods in 2015. Recent orders for these excipients from Pain Therapeutics have been processed through mutually agreeable purchase orders, in the absence of an existing long-term contract. Pursuant to the Company’s 2002 agreement with Pain Therapeutics, the Company is to be the exclusive supplier of certain defined excipients for products in the collaboration. Agreement with Zogenix, Inc. On July 11, 2011, the Company and Zogenix, Inc., (Zogenix), entered into a Development and License Agreement (the Zogenix Agreement). The Company and Zogenix had previously been working together under a feasibility agreement pursuant to which the Company’s research and development costs were reimbursed by Zogenix. Under the Zogenix Agreement, Zogenix will be responsible for the clinical development and commercialization of a proprietary, long-acting injectable formulation of risperidone using the Company’s SABER controlled-release formulation technology in combination with Zogenix’s DosePro® needle-free, subcutaneous drug delivery system. DURECT will be responsible for non-clinical, formulation and CMC development activities. The Company will be reimbursed by Zogenix for its research and development efforts on the product. Zogenix paid a non-refundable upfront fee to the Company of $2.25 million in July 2011. The Company’s research and development services are considered integral to utilizing the licensed intellectual property and, accordingly, the deliverables are accounted for as a single unit of accounting. The $2.25 million upfront fee is being recognized as collaborative research and development revenue ratably over the term of the Company’s continuing research and development involvement with Zogenix with respect to this product candidate. Zogenix is obligated to pay the Company up to $103 million in total future milestone payments with respect to the product subject to and upon the achievement of various developments, regulatory and sales milestones. Of these potential milestones, $28 million are development-based milestones (none of which has been achieved as of September 30, 2016), and $75 million are sales-based milestones (none of which had been achieved as of September 30, 2016). Zogenix is also required to pay a mid single-digit to low double-digit percentage patent royalty on annual net sales of the product determined on a jurisdiction-by-jurisdiction basis. The patent royalty term is equal to the later of the expiration of all DURECT technology patents or joint patent rights in a particular jurisdiction, the expiration of marketing exclusivity rights in such jurisdiction, or 15 years from first commercial sale in such jurisdiction. After the patent royalty term, Zogenix will continue to pay royalties on annual net sales of the product at a reduced rate for so long as Zogenix continues to sell the product in the jurisdiction. Zogenix is also required to pay to the Company a tiered percentage of fees received in connection with any sublicense of the licensed rights. The Company granted to Zogenix an exclusive worldwide license, with sub-license rights, to the Company’s intellectual property rights related to the Company’s proprietary polymeric and non-polymeric controlled-release formulation technology to make and have made, use, offer for sale, sell and import risperidone products, where risperidone is the sole active agent, for administration by injection in the treatment of schizophrenia, bipolar disorder or other psychiatric related disorders in humans. The Company retains the right to supply Zogenix’s Phase III clinical trial and commercial product requirements on the terms set forth in the Zogenix Agreement. Zogenix may terminate the Zogenix Agreement without cause at any time upon prior written notice, and either party may terminate the Zogenix Agreement upon certain circumstances including written notice of a material uncured breach. The following table provides a summary of collaborative research and development revenue recognized under the agreements with Zogenix (in thousands). The cumulative aggregate payments received by the Company as of September 30, 2016 were $20.1 million under these agreements. Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Ratable recognition of upfront payment $ 52 $ 64 $ 156 $ 191 Research and development expenses reimbursable by Zogenix 11 1,430 347 3,581 Total collaborative research and development revenue $ 63 $ 1,494 $ 503 $ 3,772 Agreement with Santen Pharmaceutical Co., Ltd. On December 11, 2014, the Company and Santen Pharmaceutical Co., Ltd. (Santen) entered into a definitive agreement (the Santen Agreement). Pursuant to the Santen Agreement, the Company granted Santen an exclusive worldwide license to the Company’s proprietary SABER formulation platform and other intellectual property to develop and commercialize a sustained release product utilizing the Company’s SABER technology to deliver an ophthalmology drug. Santen will control and fund the development and commercialization program, and the parties have established a joint management committee to oversee, review and coordinate the development activities of the parties under the Santen Agreement. In connection with the Santen agreement, Santen agreed to pay the Company an upfront fee of $2.0 million in cash and to make contingent cash payments to the Company of up to $76.0 million upon the achievement of certain milestones, of which $13.0 million are development-based milestones and $63.0 million are commercialization-based milestones including milestones requiring the achievement of certain product sales targets (none of which has been achieved as of September 30, 2016). Santen will also pay for certain Company costs incurred in the development of the licensed product. If the product is commercialized, the Company would also receive a tiered royalty on annual net product sales ranging from single-digit to the low double digits, determined on a country-by-country basis. Santen may terminate the Santen Agreement without cause at any time upon prior written notice, and either party may terminate the Santen Agreement upon certain circumstances including written notice of a material uncured breach. As of September 30, 2016, the cumulative aggregate payments received by the Company under this agreement were $3.3 million. The following table provides a summary of collaborative research and development revenue recognized under the Santen Agreement (in thousands). Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Ratable recognition of upfront payment $ 57 $ 71 $ 171 $ 213 Research and development expenses reimbursable by Santen 53 22 249 428 Total collaborative research and development revenue $ 110 $ 93 $ 420 $ 641

Financial Instruments

Financial Instruments	9 Months Ended
	Sep. 30, 2016
Fair Value Disclosures [Abstract]
Financial Instruments	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: • Level 1—Quoted prices in active markets for identical assets or liabilities. • 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. • 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, commercial paper, corporate debt securities, and U.S. Government agency securities 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 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 September 30, 2016 is less than twelve months and these investments are rated by S&P and Moody’s at AAA or AA- for securities and A1 or P1 for commercial paper. The following is a summary of available-for-sale securities as of September 30, 2016 and December 31, 2015 (in thousands): September 30, 2016 Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Money market funds $ 558 $ — $ — $ 558 Certificates of deposit 250 — — 250 Commercial paper 6,391 — — 6,391 Corporate debt 2,659 — (3 ) 2,656 U.S. Government agencies 17,746 9 — 17,755 $ 27,604 $ 9 $ (3 ) $ 27,610 Reported as: Cash and cash equivalents $ 3,957 $ — $ — $ 3,957 Short-term investments 22,397 9 (3 ) 22,403 Short-term restricted investments 100 — — 100 Long-term investments 1,000 — — 1,000 Long-term restricted investments 150 — — 150 $ 27,604 $ 9 $ (3 ) $ 27,610 December 31, 2015 Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Money market funds $ 81 $ — $ — $ 81 Certificates of deposit 250 — — 250 Commercial paper 898 — — 898 Corporate debt 5,215 1 (5 ) 5,211 U.S. Government agencies 19,558 1 (11 ) 19,548 $ 26,002 $ 2 $ (16 ) $ 25,988 Reported as: Cash and cash equivalents $ 281 $ — $ — $ 281 Short-term investments 25,471 2 (16 ) 25,457 Long-term restricted investments 250 — — 250 $ 26,002 $ 2 $ (16 ) $ 25,988 The following is a summary of the cost and estimated fair value of available-for-sale securities at September 30, 2016, by contractual maturity (in thousands): September 30, 2016 Amortized Cost Estimated Fair Value Mature in one year or less $ 26,046 $ 26,052 Mature after one year through two years 1,000 1,000 $ 27,046 $ 27,052 There were no securities that have had an unrealized loss for more than 12 months as of September 30, 2016. As of September 30, 2016, 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.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation	Note 4. Stock-Based Compensation As of September 30, 2016, the Company has three stock-based compensation plans. The stock-based compensation cost that has been included in the statements of comprehensive loss is shown as below (in thousands): Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Cost of product revenues $ 27 $ 25 $ 80 $ 81 Research and development 362 359 1,072 1,042 Selling, general and administrative 227 308 871 843 Total stock-based compensation $ 616 $ 692 $ 2,023 $ 1,966 As of September 30, 2016 and December 31, 2015, $14,000 and $13,000 of stock-based compensation cost was capitalized in inventory on the Company’s balance sheets, respectively. 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 stock options granted (including fully vested options issued in January 2016 and 2015) and shares purchased under its employee stock purchase plan for the three and nine months ended September 30, 2016 and 2015: Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Stock options Risk-free rate 1.4-1.6 % 1.9-2.4 % 1.3-1.9 % 1.0-2.4 % Expected dividend yield — — — — Expected life of option (in years) 7.0-10.0 7.0-10.0 6.5-10.0 6.5-10.0 Volatility 76-82 % 78-84 % 76-83 % 78-85 % Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Employee Stock Purchase Plan Risk-free rate 0.4 % 0.1 % 0.3-0.4 % 0.1 % Expected dividend yield — — — — Expected life of option (in years) 0.5 0.5 0.5 0.5 Volatility 66 % 76 % 66-68 % 76-95 %

Long-Term Debt

Long-Term Debt	9 Months Ended
	Sep. 30, 2016
Debt Disclosure [Abstract]
Long-Term Debt	Note 5. Long-Term Debt On June 26, 2014, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford Finance”), pursuant to which Oxford Finance provided a $20 million secured single-draw term loan to the Company with a maturity date of July 1, 2018. The term loan was fully drawn at close and the proceeds were to be used for working capital and general business requirements. In July 2015, the Company and Oxford Finance entered into the First Amendment of the Loan Agreement and modified the terms of the Loan Agreement to change the maturity date from July 1, 2018 to July 1, 2019 and to change the first principal payment date from February 1, 2016 to February 1, 2017. The interest rate remained unchanged, the Company paid a loan modification fee of $240,000 and the additional payment originally equal to 8% of the principal amount of the term loan, which was due when the term loan becomes due or upon the prepayment of the facility, was increased to 10%. Consistent with the accounting treatment noted above for the final payment, the loan modification fee has been recorded on the balance sheet as a debt discount and was being amortized to interest expense over the remaining life of the term loan using the effective interest method. In July 2016, the Company renegotiated the terms of its $20.0 million secured single-draw term loan with Oxford Finance with such renegotiated terms being formalized in a new Loan and Security Agreement (the “2016 Loan Agreement”). The 2016 Loan Agreement provides for interest only payments for the first 18 months, followed by consecutive monthly payments of principal and interest in arrears starting on March 1, 2018 and continuing through the maturity date of the term loan of August 1, 2020. The 2016 Loan Agreement also provides for a floating interest rate (7.95% initially) based on an index rate plus a spread, a $150,000 facility fee that was paid at closing and an additional payment equal to 9.25% of the principal amount of the term loan, which is due when the term loan becomes due or upon the prepayment of the facility. If the Company elects to prepay the loan, there is also a prepayment fee between 1% and 3% of the principal amount of the term loan depending on the timing of prepayment. The facility fee and other debt offering/issuance costs have been recorded as debt discount on the Company’s balance sheet and together with the final $1.9 million payment and interest rate payments will be amortized to interest expense throughout the life of the term loan using the effective interest rate method. In connection with this renegotiation, the Company also paid Oxford Finance $886,000, which represented a portion of the final payment which would have been payable to Oxford Finance when the loan became due. The term loan is secured by substantially all of the assets of the Company, except that the collateral does not include any intellectual property (including licensing, collaboration and similar agreements relating thereto), and certain other excluded assets. The 2016 Loan Agreement contains customary representations, warranties and covenants by the Company, which covenants limit the Company’s ability to convey, sell, lease, transfer, assign or otherwise dispose of certain assets of the Company; engage in any business other than the businesses currently engaged in by the Company or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; and make payments on any subordinated debt. The 2016 Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, the Company’s failure to fulfill certain obligations of the Company under the 2016 Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in the Company’s business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral. In the event of default by the Company under the 2016 Loan Agreement, the lender would be entitled to exercise its remedies thereunder, including the right to accelerate the debt, upon which the Company may be required to repay all amounts then outstanding under the 2016 Loan Agreement, which could harm the Company’s financial condition. As of September 30, 2016, the Company was in compliance with all material covenants under the Loan Agreement and there had been no material adverse change. As of September 30, 2016, the carrying value of the term loan approximated its fair value based on Level 3 unobservable inputs involving discounted cash flows and the estimated market rate of borrowing that could be obtained by companies with credit risk similar to the Company’s credit risk. Future maturities and interest payments under the term loan as of September 30, 2016, were as follows (in thousands): Three months ended December 31, 2016 $ 406 2017 1,612 2018 8,698 2019 8,724 2020 6,642 Total minimum payments 26,082 Less amount representing interest (6,082 ) Gross balance of long-term debt 20,000 Less unamortized debt discount (162 ) Carrying value of long-term debt 19,838 Less current portion of long-term debt — Long-term debt, less current portion and unamortized debt discount $ 19,838 Interest expense, including amortization of the debt discount, related to the long-term debt was $583,000 and $1.7 million for the three and nine months ended September 30, 2016, respectively, compared to $557,000 and $1.7 million for the corresponding periods in 2015. Upon the repayment of the existing loan agreement in July 2016, the Company recognized a loss on debt extinguishment of approximately $9,000 in the three and nine months ended September 30, 2016 within other income (expense) in the Condensed Statements of Comprehensive Loss.

Stockholders' Equity

Stockholders' Equity	9 Months Ended
	Sep. 30, 2016
Equity [Abstract]
Stockholders' Equity	Note 6. Stockholders’ Equity During the third quarter of 2016, the Company raised net proceeds (net of commission) of approximately $1.9 million from the sale of 1,042,603 shares of its common stock at a weighted average price of $1.86 per share in the open market through its Controlled Equity Offering SM

Summary of Significant Accoun12

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Nature of Operations	Nature of Operations DURECT Corporation (the Company) was incorporated in the state of Delaware on February 6, 1998. The Company is a biopharmaceutical company with research and development programs broadly falling into two categories: (i) new chemical entities derived from our Epigenetics Regulator Program, in which we attempt to discover and develop molecules which have not previously been approved and marketed as therapeutics, and (ii) Drug Delivery Programs, in which we apply our formulation expertise and technologies largely to active pharmaceutical ingredients whose safety and efficacy have previously been established but which we aim to improve in some manner through a new formulation. The Company has several products under development by itself and with third party collaborators. The Company also manufactures and sells osmotic pumps used in laboratory research, and designs, develops and manufactures a wide range of standard and custom biodegradable polymers and excipients for pharmaceutical and medical device clients for use as raw materials in their products. In addition, the Company conducts research and development of pharmaceutical products in collaboration with third party pharmaceutical and biotechnology companies.
Basis of Presentation	Basis of Presentation The accompanying unaudited financial statements include the accounts of the Company. These financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (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 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 September 30, 2016, the operating results and comprehensive loss for the three and nine months ended September 30, 2016 and 2015, and cash flows for the nine months ended September 30, 2016 and 2015. The balance sheet as of December 31, 2015 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, 2015 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.
Inventories	Inventories Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventories, in part, include certain excipients that are sold to a customer and included in products awaiting regulatory approval. These inventories are capitalized based on management’s judgment of probable sale prior to their expiration date which in turn is primarily based on non-binding forecasts from our customers as well as management’s internal estimates. The valuation of inventory requires management to estimate the value of inventory that may become expired prior to use. The Company may be required to expense previously capitalized inventory costs upon a change in management’s judgment, due to, among other potential factors, a denial or delay of approval of a customer’s product by the necessary regulatory bodies, or new information that suggests that the inventory will not be saleable. In addition, these circumstances may cause the Company to record a liability related to minimum purchase agreements that the Company has in place for raw materials. In September 2016, our licensee, Pain Therapeutics received a Complete Response Letter from the U.S. Food and Drug Administration for Pain Therapeutics’ New Drug Application for REMOXY® ER (oxycodone) extended-release capsules CII. As a result, the Company wrote down certain lots of inventory which are no longer considered to be probable for use prior to expiration and prepaid inventory related to a minimum purchase agreement for an excipient. In the three and nine months ended September 30, 2016, the Company recorded charges to cost of goods sold of approximately $926,000, of which approximately $426,000 related to the write-down of the cost basis of inventory and approximately $500,000 related to the prepaid inventory for the minimum purchase commitment for an excipient. As of September 30, 2016, the remaining carrying value of the excipients in the Company’s inventory was $629,000. In addition, the Company has remaining unrecorded future purchase commitments totaling $1.5 million through 2018. In the event that management determines that the Company will not utilize all of these materials, there could be a potential write-off related to this inventory and a reserve for future purchase commitments. The Company’s inventories consisted of the following (in thousands): September 30, 2016 December 31, 2015 (unaudited) Raw materials $ 675 $ 1,168 Work in process 1,460 1,412 Finished goods 1,506 1,337 Total inventories $ 3,641 $ 3,917
Revenue Recognition	Revenue Recognition Revenue from the sale of products is recognized when there is persuasive evidence that an arrangement exists, the product is shipped and title transfers to customers, provided no continuing obligation on the Company’s part exists, the price is fixed or determinable and the collectability of the amounts owed is reasonably assured. The Company enters into license and collaboration agreements under which it may receive upfront license fees, research funding and contingent milestone payments and royalties. The Company’s deliverables under these arrangements typically consist of granting licenses to intellectual property rights and providing research and development services. The accounting standards contain a presumption that separate contracts entered into at or near the same time with the same entity or related parties were negotiated as a package and should be evaluated as a single agreement.
Comprehensive Income (Loss)	Comprehensive Income (Loss) Components of other comprehensive income (loss) are comprised entirely of unrealized gains and losses on the Company’s available-for-sale securities and marketable equity security for all periods presented. Total comprehensive loss has been disclosed in the Company’s Condensed Statements of Comprehensive Loss.
Net Loss Per Share	Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding. Diluted net loss per share is computed using the weighted-average number of common shares outstanding and common stock equivalents (i.e., options to purchase common stock) outstanding during the period, if dilutive, using the treasury stock method for options. Options to purchase approximately 16.9 million and 18.8 million shares of common stock were excluded from the denominator in the calculation of diluted net loss per share for the three and nine months ended September 30, 2016, respectively, as the effect would be anti-dilutive. Options to purchase approximately 11.7 million and 16.5 million shares of common stock were excluded from the denominator in the calculation of diluted net loss per share for the three and nine months ended September 30, 2015, respectively, as the effect would be anti-dilutive.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as equity or liabilities, an option to recognize gross share compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. Some of the areas of simplification apply only to nonpublic entities. For public business entities, the amendments in ASU 2016-09 are effective for annual periods beginning after 15 December 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after 15 December 2017, and interim periods within annual periods beginning after 15 December 2018. Early adoption is permitted for any entity in any interim or annual period for which financial statements haven’t been issued or made available for issuance. If an entity early adopts the amendments in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the impact that ASU 2016-09 will have on its financial statements. In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-02, Leases fiscal year 2019 and early adoption is permitted. This ASU is required to be applied with a modified retrospective approach and requires application of the new standard at the beginning of the earliest comparative period presented. The Company is currently evaluating the impact that ASU 2016-02 will have on its financial statements. In May 2014, the FASB issued guidance codified in ASC 606, Revenue Recognition—Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The guidance provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). The standard was to have been effective for public entities for annual and interim periods beginning after December 15, 2016. In July 2015, the FASB voted to delay the effective date for this guidance. This guidance will be effective for the Company in the first quarter of 2018. The Company is currently evaluating the impact of the provisions of ASC 606. In November 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15). This update is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments: (1) provide a definition of the term substantial doubt; (2) require an evaluation every reporting period including interim periods; (3) provide principles for considering the mitigating effect of management’s plans; (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans; (5) require an express statement and other disclosures when substantial doubt is not alleviated; and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 will be effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. ASU 2014-15 will be effective for the Company beginning with its annual report for fiscal 2016 and interim periods thereafter. The Company is currently evaluating the impact that ASU 2014-15 will have on its financial statements. In November 2015, the FASB issued Accounting Standards Update 2015-17(ASU 2015-17), Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The new guidance will be effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those years (i.e., in the first quarter of 2017 for calendar year-end companies). Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative balance sheet). The Company early adopted ASU 2015-17, on a prospective basis, for the year ended December 31, 2015.

Summary of Significant Accoun13

Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Summary of Components of Inventories	The Company’s inventories consisted of the following (in thousands): September 30, 2016 December 31, 2015 (unaudited) Raw materials $ 675 $ 1,168 Work in process 1,460 1,412 Finished goods 1,506 1,337 Total inventories $ 3,641 $ 3,917

Strategic Agreements (Tables)

Strategic Agreements (Tables)	9 Months Ended
	Sep. 30, 2016
Summary of Collaborative Research and Development and Other Revenues Associated with Company's Major Third-Party Collaborators	The collaborative research and development and other revenues associated with the Company’s major third-party collaborators are as follows (in thousands): Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Collaborator Zogenix, Inc. (Zogenix) (1) $ 63 $ 1,494 $ 503 $ 3,772 Santen Pharmaceutical Co. Ltd. (Santen) (2) 110 93 420 641 Pain Therapeutics, Inc. (Pain Therapeutics) 153 346 163 509 Others 26 119 56 646 Total collaborative research and development and other revenue $ 352 $ 2,052 $ 1,142 $ 5,568 (1) Amounts related to ratable recognition of upfront fees were $52,000 and $156,000 for the three and nine months ended September 30, 2016 respectively, compared to $64,000 and $191,000 for the corresponding periods in 2015. (2) Amounts related to ratable recognition of upfront fees were $57,000 and $171,000 for the three and nine months ended September 30, 2016 respectively, compared to $71,000 and $213,000 for the corresponding periods in 2015.
Agreement with Zogenix, Inc. [Member]
Summary of Collaborative Research and Development Revenue Recognized	The following table provides a summary of collaborative research and development revenue recognized under the agreements with Zogenix (in thousands). The cumulative aggregate payments received by the Company as of September 30, 2016 were $20.1 million under these agreements. Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Ratable recognition of upfront payment $ 52 $ 64 $ 156 $ 191 Research and development expenses reimbursable by Zogenix 11 1,430 347 3,581 Total collaborative research and development revenue $ 63 $ 1,494 $ 503 $ 3,772
Agreement with Santen Pharmaceutical Co., Ltd. [Member]
Summary of Collaborative Research and Development Revenue Recognized	The following table provides a summary of collaborative research and development revenue recognized under the Santen Agreement (in thousands). Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Ratable recognition of upfront payment $ 57 $ 71 $ 171 $ 213 Research and development expenses reimbursable by Santen 53 22 249 428 Total collaborative research and development revenue $ 110 $ 93 $ 420 $ 641

Financial Instruments (Tables)

Financial Instruments (Tables)	9 Months Ended
	Sep. 30, 2016
Fair Value Disclosures [Abstract]
Summary of Money Market Funds and Available-for-Sale Securities	The following is a summary of available-for-sale securities as of September 30, 2016 and December 31, 2015 (in thousands): September 30, 2016 Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Money market funds $ 558 $ — $ — $ 558 Certificates of deposit 250 — — 250 Commercial paper 6,391 — — 6,391 Corporate debt 2,659 — (3 ) 2,656 U.S. Government agencies 17,746 9 — 17,755 $ 27,604 $ 9 $ (3 ) $ 27,610 Reported as: Cash and cash equivalents $ 3,957 $ — $ — $ 3,957 Short-term investments 22,397 9 (3 ) 22,403 Short-term restricted investments 100 — — 100 Long-term investments 1,000 — — 1,000 Long-term restricted investments 150 — — 150 $ 27,604 $ 9 $ (3 ) $ 27,610 December 31, 2015 Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Money market funds $ 81 $ — $ — $ 81 Certificates of deposit 250 — — 250 Commercial paper 898 — — 898 Corporate debt 5,215 1 (5 ) 5,211 U.S. Government agencies 19,558 1 (11 ) 19,548 $ 26,002 $ 2 $ (16 ) $ 25,988 Reported as: Cash and cash equivalents $ 281 $ — $ — $ 281 Short-term investments 25,471 2 (16 ) 25,457 Long-term restricted investments 250 — — 250 $ 26,002 $ 2 $ (16 ) $ 25,988
Summary of Cost and Estimated Fair Value of Available-for-Sale Securities by Contractual Maturity	The following is a summary of the cost and estimated fair value of available-for-sale securities at September 30, 2016, by contractual maturity (in thousands): September 30, 2016 Amortized Cost Estimated Fair Value Mature in one year or less $ 26,046 $ 26,052 Mature after one year through two years 1,000 1,000 $ 27,046 $ 27,052

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	9 Months Ended
	Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Summary of Stock-Based Compensation Cost that has been Included in Statements of Comprehensive Loss	As of September 30, 2016, the Company has three stock-based compensation plans. The stock-based compensation cost that has been included in the statements of comprehensive loss is shown as below (in thousands): Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Cost of product revenues $ 27 $ 25 $ 80 $ 81 Research and development 362 359 1,072 1,042 Selling, general and administrative 227 308 871 843 Total stock-based compensation $ 616 $ 692 $ 2,023 $ 1,966
Summary of Assumptions Used to Estimate Fair Value of Options Granted and Shares Purchased	The Company used the following assumptions to estimate the fair value of stock options granted (including fully vested options issued in January 2016 and 2015) and shares purchased under its employee stock purchase plan for the three and nine months ended September 30, 2016 and 2015: Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Stock options Risk-free rate 1.4-1.6 % 1.9-2.4 % 1.3-1.9 % 1.0-2.4 % Expected dividend yield — — — — Expected life of option (in years) 7.0-10.0 7.0-10.0 6.5-10.0 6.5-10.0 Volatility 76-82 % 78-84 % 76-83 % 78-85 % Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Employee Stock Purchase Plan Risk-free rate 0.4 % 0.1 % 0.3-0.4 % 0.1 % Expected dividend yield — — — — Expected life of option (in years) 0.5 0.5 0.5 0.5 Volatility 66 % 76 % 66-68 % 76-95 %

Long-Term Debt (Tables)

Long-Term Debt (Tables)	9 Months Ended
	Sep. 30, 2016
Debt Disclosure [Abstract]
Schedule of Future Maturities and Interest Payments under Term Loan	Future maturities and interest payments under the term loan as of September 30, 2016, were as follows (in thousands): Three months ended December 31, 2016 $ 406 2017 1,612 2018 8,698 2019 8,724 2020 6,642 Total minimum payments 26,082 Less amount representing interest (6,082 ) Gross balance of long-term debt 20,000 Less unamortized debt discount (162 ) Carrying value of long-term debt 19,838 Less current portion of long-term debt — Long-term debt, less current portion and unamortized debt discount $ 19,838

Summary of Significant Accoun18

Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Summary Of Significant Accounting Policies [Line Items]
State of incorporation			Delaware
Date of incorporation			Feb. 6, 1998
Cost of goods sold	$ 2,180,000	$ 884,000	$ 4,335,000	$ 2,912,000
Write-down of the cost basis of inventory			642,000	$ 180,000
Inventories	$ 3,641,000		$ 3,641,000		$ 3,917,000
Options to purchase common stock excluded from computation of diluted net loss per share	16.9	11.7	18.8	16.5
Agreement with Pain Therapeutics, Inc. [Member]
Summary Of Significant Accounting Policies [Line Items]
Cost of goods sold	$ 926,000		$ 926,000
Write-down of the cost basis of inventory	426,000		426,000
Minimum purchase commitment	500,000		500,000
Inventories	629,000		629,000
Remaining unrecorded future purchase commitments	$ 1,500,000		$ 1,500,000

Summary of Significant Accoun19

Summary of Significant Accounting Policies - Summary of Components of Inventories (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Inventory, Net [Abstract]
Raw materials	$ 675	$ 1,168
Work in process	1,460	1,412
Finished goods	1,506	1,337
Total inventories	$ 3,641	$ 3,917

Strategic Agreements - Summary

Strategic Agreements - Summary of Collaborative Research and Development and Other Revenues Associated with Company's Major Third-Party Collaborators (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Total collaborative research and development and other revenue	$ 352	$ 2,052	$ 1,142	$ 5,568
Agreement with Zogenix, Inc. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Total collaborative research and development and other revenue	63	1,494	503	3,772
Agreement with Santen Pharmaceutical Co., Ltd. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Total collaborative research and development and other revenue	110	93	420	641
Agreement with Pain Therapeutics, Inc. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Total collaborative research and development and other revenue	153	346	163	509
Agreements With Other Third Party Collaborators [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Total collaborative research and development and other revenue	$ 26	$ 119	$ 56	$ 646

Strategic Agreements - Summar21

Strategic Agreements - Summary of Collaborative Research and Development and Other Revenues Associated with Company's Major Third-Party Collaborators (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Agreement with Zogenix, Inc. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Amounts related to the ratable recognition of upfront fees	$ 52	$ 64	$ 156	$ 191
Agreement with Santen Pharmaceutical Co., Ltd. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Amounts related to the ratable recognition of upfront fees	$ 57	$ 71	$ 171	$ 213

Strategic Agreements - Agreemen

Strategic Agreements - Agreement with Pain Therapeutics, Inc. - Additional Information (Detail)	1 Months Ended	3 Months Ended		9 Months Ended
	Dec. 31, 2002Drug	Sep. 30, 2016USD ($)Drug	Sep. 30, 2015USD ($)	Sep. 30, 2016USD ($)	Sep. 30, 2015USD ($)License
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Total collaborative research and development and other revenue		$ 352,000	$ 2,052,000	$ 1,142,000	$ 5,568,000
Product revenue, net		3,391,000	2,691,000	9,366,000	8,389,000
Cost of goods sold		$ 2,180,000	884,000	4,335,000	2,912,000
Agreement with Pain Therapeutics, Inc. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Number of specified opioid drugs | Drug	4	3
Total collaborative research and development and other revenue		$ 153,000	346,000	163,000	$ 509,000
Number of remaining licensed products | License					3
Performance milestone payments based on successful development		7,200,000	7,200,000	7,200,000	$ 7,200,000
Cumulative aggregate payments received by the Company				39,800,000	39,800,000
Upfront license fee				1,000,000
Cost of goods sold		926,000		926,000
Agreement with Pain Therapeutics, Inc. [Member] | Development-Based Milestones [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Performance milestone payments based on successful development		7,200,000		7,200,000
Revenue recognition milestone achieved				1,700,000
Agreement with Pain Therapeutics, Inc. [Member] | Sales-Based Milestones [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Performance milestone payments based on successful development		0		0
Agreement with Pfizer [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Cumulative aggregate payments received by the Company				7,100,000
Product revenue, net		374,000	0	653,000	96,000
Cost of goods sold		$ 92,000	$ 0	$ 216,000	$ 51,000

Strategic Agreements - Agreem23

Strategic Agreements - Agreement with Zogenix, Inc. - Additional Information (Detail) - Agreement with Zogenix, Inc. [Member] - USD ($)	1 Months Ended	9 Months Ended
	Jul. 31, 2011	Sep. 30, 2016
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Future milestone payments		$ 103,000,000
Patent royalty term		15 years
Cumulative aggregate payments received by the Company		$ 20,100,000
Development-Based Milestones [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Future milestone payments		28,000,000
Revenue recognition milestone achieved		0
Sales-Based Milestones [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Future milestone payments		75,000,000
Revenue recognition milestone achieved		0
Up-front Payment Arrangement [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Non-refundable upfront fee	$ 2,250,000	$ 2,250,000

Strategic Agreements - Summar24

Strategic Agreements - Summary of Collaborative Research and Development Revenue Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Total collaborative research and development revenue	$ 352	$ 2,052	$ 1,142	$ 5,568
Agreement with Zogenix, Inc. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Ratable recognition of upfront payment	52	64	156	191
Research and development expenses reimbursable by the Company	11	1,430	347	3,581
Total collaborative research and development revenue	63	1,494	503	3,772
Agreement with Santen Pharmaceutical Co., Ltd. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Ratable recognition of upfront payment	57	71	171	213
Research and development expenses reimbursable by the Company	53	22	249	428
Total collaborative research and development revenue	$ 110	$ 93	$ 420	$ 641

Strategic Agreements - Agreem25

Strategic Agreements - Agreement with Santen Pharmaceutical Co., Ltd. - Additional Information (Detail) - Agreement with Santen Pharmaceutical Co., Ltd. [Member] - USD ($)	Dec. 11, 2014	Sep. 30, 2016
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upfront license fee	$ 2,000,000
Future milestone payments	76,000,000
Cumulative aggregate payments received by the Company		$ 3,300,000
Development-Based Milestones [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Future milestone payments	13,000,000
Commercialization-Based Milestones [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Future milestone payments	$ 63,000,000
Revenue recognition milestone achieved		$ 0

Financial Instruments - Summary

Financial Instruments - Summary of Money Market Funds and Available-for-Sale Securities (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 27,604	$ 26,002
Unrealized Gain	9	2
Unrealized Loss	(3)	(16)
Estimated Fair Value	27,610	25,988
Money market funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	558	81
Estimated Fair Value	558	81
Certificates of deposit [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	250	250
Estimated Fair Value	250	250
Commercial paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	6,391	898
Estimated Fair Value	6,391	898
Corporate debt [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,659	5,215
Unrealized Gain		1
Unrealized Loss	(3)	(5)
Estimated Fair Value	2,656	5,211
U.S. Government agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	17,746	19,558
Unrealized Gain	9	1
Unrealized Loss		(11)
Estimated Fair Value	17,755	19,548
Cash and cash equivalents [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,957	281
Estimated Fair Value	3,957	281
Short-term investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	22,397	25,471
Unrealized Gain	9	2
Unrealized Loss	(3)	(16)
Estimated Fair Value	22,403	25,457
Short-term restricted investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	100
Estimated Fair Value	100
Long-term restricted investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	150	250
Estimated Fair Value	150	$ 250
Long-term investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,000
Estimated Fair Value	$ 1,000

Financial Instruments - Summa27

Financial Instruments - Summary of Cost and Estimated Fair Value of Available-for-Sale Securities by Contractual Maturity (Detail) $ in Thousands	Sep. 30, 2016USD ($)
Investments, Debt and Equity Securities [Abstract]
Mature in one year or less, Amortized Cost	$ 26,046
Mature after one year through two years, Amortized Cost	1,000
Amortized Cost	27,046
Mature in one year or less, Estimated Fair Value	26,052
Mature after one year through two years, Estimated Fair Value	1,000
Estimated Fair Value	$ 27,052

Financial Instruments - Additio

Financial Instruments - Additional Information (Detail)	Sep. 30, 2016USD ($)
Investments, Debt and Equity Securities [Abstract]
Unrealized loss of securities	$ 0

Stock-Based Compensation - Summ

Stock-Based Compensation - Summary of Stock-Based Compensation Cost that has been Included in Statements of Comprehensive Loss (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total employee stock-based compensation cost	$ 616	$ 692	$ 2,023	$ 1,966
Cost of product revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total employee stock-based compensation cost	27	25	80	81
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total employee stock-based compensation cost	362	359	1,072	1,042
Selling, general and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total employee stock-based compensation cost	$ 227	$ 308	$ 871	$ 843

Stock-Based Compensation - Addi

Stock-Based Compensation - Additional Information (Detail) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation cost capitalized in inventory	$ 14,000	$ 13,000

Stock-Based Compensation - Su31

Stock-Based Compensation - Summary of Assumptions Used to Estimate Fair Value of Options Granted and Shares Purchased (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Employees Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free rate	0.40%	0.10%		0.10%
Risk-free rate, minimum			30.00%
Risk-free rate, maximum			0.40%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Expected life of option (in years)	6 months	6 months	6 months	6 months
Volatility	66.00%	76.00%
Volatility, minimum			66.00%	76.00%
Volatility, maximum			68.00%	95.00%
Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free rate, minimum	1.40%	1.90%	1.30%	1.00%
Risk-free rate, maximum	1.60%	2.40%	1.90%	2.40%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Volatility, minimum	76.00%	78.00%	76.00%	78.00%
Volatility, maximum	82.00%	84.00%	83.00%	85.00%
Stock Option Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life of option (in years)	7 years	7 years	6 years 6 months	6 years 6 months
Stock Option Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life of option (in years)	10 years	10 years	10 years	10 years

Long-Term Debt - Additional Inf

Long-Term Debt - Additional Information (Detail) - USD ($)	Jul. 31, 2016	Jul. 31, 2016	Jul. 31, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Jun. 26, 2014
Debt Instrument [Line Items]
Loan modification fee			$ 240,000
Loss on debt extinguishment						$ 9,000
Other Income (Expense) [Member]
Debt Instrument [Line Items]
Loss on debt extinguishment				$ 9,000,000		$ 9,000,000
Oxford Finance LLC Term Loan [Member]
Debt Instrument [Line Items]
Secured term loan								$ 20,000,000
Term loan, maturity date			Jul. 1, 2019			Jul. 1, 2018
First principal payment date			Feb. 1, 2017			Feb. 1, 2016
Percentage of an additional payment equal to principal amount			10.00%			8.00%
Debt instrument, covenants in compliance						The Company was in compliance with all material covenants under the Loan Agreement and there had been no material adverse change.
Interest expense				$ 583,000	$ 557,000	$ 1,700,000	$ 1,700,000
Oxford Finance 2016 Term Loan [Member]
Debt Instrument [Line Items]
Secured term loan	$ 20,000,000	$ 20,000,000
Term loan, maturity date						Aug. 1, 2020
Percentage of an additional payment equal to principal amount	9.25%
Interest rate on term loan	7.95%	7.95%
Facility fee paid at final payment	$ 150,000	$ 150,000
Term loan repayment description						The 2016 Loan Agreement provides for interest only payments for the first 18 months, followed by consecutive monthly payments of principal and interest in arrears starting on March 1, 2018
Accrued amount of final payment		886,000
Debt offering/issuance costs		$ 1,900,000
Oxford Finance 2016 Term Loan [Member] | Minimum [Member]
Debt Instrument [Line Items]
Percentage of prepayment fee	1.00%
Oxford Finance 2016 Term Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Percentage of prepayment fee	3.00%

Long-Term Debt - Schedule of Fu

Long-Term Debt - Schedule of Future Maturities and Interest Payments under Term Loan (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Future maturities and interest payments under the term loan:
Three months ended December 31, 2016	$ 406
2,017	1,612
2,018	8,698
2,019	8,724
2,020	6,642
Total minimum payments	26,082
Total minimum payments	26,082
Less amount representing interest	(6,082)
Gross balance of long-term debt	20,000
Gross balance of long-term debt	20,000
Less unamortized debt discount	(162)
Carrying value of long-term debt	19,838
Carrying value of long-term debt:
Carrying value of long-term debt	19,838
Less current portion of long-term debt	0
Long-term debt, less current portion and unamortized debt discount	$ 19,838	$ 19,684

Stockholders' Equity - Addition

Stockholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Oct. 25, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from sale of common stock, net of commission	$ 1,900	$ 20,572	$ 12,626
Sale of common stock during period	1,042,603
Common stock weighted average price	$ 1.86	$ 1.86
Subsequent event [Member] | Cantor Fitzgerald Co [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock available for sale under Controlled Equity Offering program				$ 33,800