CUPERTINO, Calif., July 27 /PRNewswire-FirstCall/ -- DURECT Corporation (Nasdaq: DRRX) announced today financial results for the three months ended June 30, 2006.
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DURECT's net loss for the three months ended June 30, 2006 was $8.7 million or 14 cents per share, compared to a net loss of $3.6 million or 7 cents per share for the same period in 2005. DURECT's results for the three months ended June 30, 2006 included non-cash charges for the amortization of intangible assets and stock-based compensation of $1.1 million, compared to $646,000 for the same period in 2005. Cash used in operating activities was $10.2 million for the three months ended June 30, 2006, compared to $4.8 million of cash provided by operating activities for the same period in 2005, which included a $10.0 million payment from Endo Pharmaceuticals in connection with our license agreement for the TRANSDUR(TM)-Sufentanil product for the U.S. and Canadian markets.
"We continued to drive forward our development programs and build value for our shareholders in the first half of 2006. During the second quarter, we expanded the development of our POSIDUR(TM) product (formerly referred to as SABER(TM)-Bupivacaine), into five on-going Phase II clinical trials. We are conducting these studies in the U.S. and other countries in a variety of soft- tissue and orthopedic surgery models for the purpose of selecting the optimal dosing and the pain models to be used for our pivotal Phase III trials," said James E. Brown, D.V.M., President and CEO of DURECT.
Dr. Brown continued, "We are also pleased with development progress of Remoxy, an abuse-resistant, long-acting, oral pain medication, which is currently undergoing a Special Protocol Assessment approved Phase III study. We are currently working with King Pharmaceuticals and Pain Therapeutics to advance the 2nd ORADUR(TM) abuse-resistant opioid product into the clinic later this year.
We are excited about the accelerated pace of our TRANSDUR(TM)-Sufentanil development program. Our partner, Endo Pharmaceuticals, intends to conduct a Phase II program with multiple studies in parallel in 2006. We are currently supplying additional Phase II clinical product for this program and Endo has secured the Phase III clinical and commercial manufacturing capacity necessary for this product.
Our partner, Voyager Pharmaceuticals, recently announced positive data from a Phase II clinical study in men and presented a poster at the 10th International Conference on Alzheimer's Disease and Related Disorders. Voyager also completed enrollment for the first 550-patient clinical study for its ongoing Phase III program and enrollment for the second 550-patient clinical study is currently underway. Going forward, we will continue to provide clinical product and support the on-going Phase III clinical program.
During the second quarter, we reduced our long-term debt by approximately 35% by converting $20 million of our outstanding convertible notes on favorable terms, which strengthened our financial position."
Total revenues were $6.1 million for the three months ended June 30, 2006, compared to $8.8 million for the same period in 2005. Total collaborative research and development and other revenues were $4.0 million for the three months ended June 30, 2006, compared with $6.9 million for the same period in 2005. The decrease in total revenues is primarily attributable to lower collaborative research and development revenue recognized from our agreements with Voyager Pharmaceutical Corporation and Endo Pharmaceuticals, Inc., with the advancement of these programs into later stage development, offset by higher research and development revenue from Pain Therapeutics, Inc. due to the increased development activities for Remoxy and the second ORADUR opioid product, and higher product revenues from our ALZET product lines.
Research and development expenses were $8.5 million for the three months ended June 30, 2006, compared to $7.6 million for the same period in 2005. The increase was primarily attributable to higher employee cost related to R&D personnel and the stock-based compensation expense of $697,000 related to research and development personnel recognized under SFAS 123(R) (Share-based Payments) in the second quarter of 2006.
Selling, general and administrative expenses were $3.2 million for the three months ended on both June 30, 2006 and 2005. Selling, general and administrative expenses included $323,000 in stock-based compensation expense recognized under SFAS 123(R) for the three months ended June 30, 2006. We continued to maintain existing corporate infrastructure to support the growth in all areas of DURECT's business.
Interest and other income was $978,000 for the three months ended June 30, 2006, compared with $407,000 for the same period in 2005. The increase in interest income was primarily the result of higher yields as well as higher average cash and investment balances during the three months ended June 30, 2006 compared with the same period in 2005. Interest expense was $359,000 for the three months ended June 30, 2006, compared with $1.1 million for the same period in 2005. The decrease in interest expense in the second quarter of 2006 was primarily due to lower balance on our convertible notes resulting from the conversion of $20 million in principal amount of the notes.
During the second quarter of 2006, we converted $20.0 million in principal amount of our 6.25% Convertible Subordinated Notes into an aggregate of 6,349,206 shares of our common stock. In connection with this transaction, we recorded debt conversion expense of approximately $2.9 million in the three months ended June 30, 2006. As of June 30, 2006, the remaining principal balance of our 6.25% Convertible Subordinated Notes due 2008 was $37.3 million.
At June 30, 2006, DURECT had cash and investments of $77.7 million, including $1.5 million in restricted investments, compared with cash and investments of $91.0 million at December 31, 2005.
About DURECT Corporation
DURECT Corporation is an emerging specialty pharmaceutical company focused on the development of pharmaceutical systems based on its proprietary drug delivery platform technologies. The company is developing pharmaceutical systems to deliver the right drug to the right place in the right amount at the right time to treat chronic and episodic diseases and conditions.
NOTE: POSIDUR(TM), SABER(TM), ORADUR(TM), DURIN(TM), TRANSDUR(TM) and MICRODUR(TM) are trademarks of DURECT Corporation. Other referenced trademarks belong to their respective owners.
DURECT Forward-Looking Statement
The statements in this press release regarding DURECT's products in development, product development plans and projected financial results are forward-looking statements involving risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, DURECT's (and that of its third party collaborators where applicable) abilities to design, enroll, conduct and complete clinical trials, complete the design, development, and manufacturing process development of the product candidate, obtain product and manufacturing approvals from regulatory agencies and manufacture and commercialize the product candidate, as well as marketplace acceptance of the product candidate. Further information regarding these and other risks is included in DURECT's Annual Report on Form 10-K for
the year ended December 31, 2005 filed with the SEC on March 16, 2006 under the heading "Risk Factors."
DURECT CORPORATION CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three months ended Six months ended June 30, June 30, 2006 2005 2006 2005 (unaudited) (unaudited)(unaudited)(unaudited) Collaborative research and development and other revenue $4,048 $6,930 $7,106 $10,527 Product revenue, net 2,060 1,889 4,213 3,646 Total revenues 6,108 8,819 11,319 14,173 Operating expenses: Cost of revenues 770 689 1,599 1,360 Research and development 8,549 7,613 15,713 14,277 Selling, general and administrative 3,189 3,155 6,194 5,663 Amortization of intangible assets 94 303 394 606 Total operating expenses 12,602 11,760 23,900 21,906 Loss from operations (6,494) (2,941) (12,581) (7,733) Other income (expense): Interest and other income 978 407 1,884 892 Interest expense (359) (1,114) (1,436) (2,234) Debt conversion expense (2,860) -- (2,860) -- Net other expense (2,241) (707) (2,412) (1,342) Net loss $(8,735) $(3,648) $ (14,993) $(9,075) Net loss per share, basic and diluted $(0.14) $(0.07) $(0.24) $(0.17) Shares used in computing basic and diluted net loss per share 64,207 52,047 63,040 51,967 (1) Stock-based compensation related to the following: Cost of revenues $18 $-- $26 $-- Research and development 697 -- 1,311 46 Selling, general and administrative 323 343 644 347 $1,038 $343 $1,981 $393 DURECT CORPORATION CONDENSED BALANCE SHEETS (in thousands) June 30, December 31, 2006 2005 (1) Assets Current assets: Cash and cash equivalents $41,252 $65,542 Short-term investments 24,622 18,022 Restricted investments -- 321 Accounts Receivable 4,012 4,488 Inventories 2,104 2,047 Prepaid expenses and other current assets 3,171 3,659 Total current assets 75,161 94,079 Property and equipment, net 7,434 7,304 Goodwill 6,399 6,399 Intangible assets, net 141 536 Long-term investments 10,355 5,459 Restricted investments 1,507 1,653 Other non-current assets 1,183 1,984 Total assets $102,180 $117,414 Liabilities and stockholders' equity Current liabilities: Accounts payable, accrued liabilities and deferred revenue $7,464 $9,643 Long-term obligations, current portion 232 234 Total current liabilities 7,696 9,877 Long-term obligations, noncurrent portion 43,322 64,185 Stockholders' equity 51,162 43,352 Total liabilities and stockholders' equity $102,180 $117,414 (1) Derived from audited financial statements.
SOURCE DURECT Corporation
CONTACT: Schond L. Greenway, Vice President, Investor Relations and Strategic Planning of DURECT Corporation, +1-408-777-1417
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