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DURECT Corporation Announces Third Quarter 2006 Financial Results


CUPERTINO, Calif., Nov. 3 /PRNewswire-FirstCall/ -- DURECT Corporation (Nasdaq: DRRX) announced today financial results for the three months ended September 30, 2006. Total revenues were $5.1 million for the three months ended September 30, 2006, compared to $8.6 million for the same period in 2005. Net loss for the three months ended September 30, 2006 was $8.6 million, compared to a net loss of $3.0 million for the same period in 2005. Cash used in operating activities was $3.1 million for the three months ended September 30, 2006, compared to $1.1 million of cash used in operating activities for the same period in 2005.

(Logo: http://www.newscom.com/cgi-bin/prnh/20020717/DRRXLOGO )

At September 30, 2006, DURECT had cash and investments of $74.3 million, including $1.5 million in restricted investments, compared with cash and investments of $77.7 million at June 30, 2006 and $91.0 million at December 31, 2005.

"DURECT continued to make solid progress in advancing our pipeline in the third quarter, including entering one new product into Phase I clinical trials," stated James E. Brown, D.V.M., President and CEO of DURECT.

Recent Corporate Highlights

  • POSIDUR(TM) Post-Operative Pain Relief Depot. During the third quarter of 2006, we continued to conduct multiple on-going Phase II clinical trials in a variety of soft-tissue and orthopedic surgeries for the purpose of selecting the optimal dose and the surgical procedures for pivotal Phase III trials. Pending the successful completion of these Phase II trials and approval of regulatory authorities, we will continue into the Phase III program, which we anticipate will occur in 2007.
  • Remoxy. Phase III clinical trials, conducted according to a Special Protocol Assessment, remain on-going for this abuse-resistant, long- acting, oral pain medication. According to a recent press release by Pain Therapeutics, they believe that they remain on track to announce results of a Phase III trial with Remoxy in the first half of 2007, followed by an NDA filing for this drug candidate three quarters after data release.
  • 2nd ORADUR-based Opioid. In August, our collaborators, Pain Therapeutics and King Pharmaceuticals, announced the initiation of a Phase I clinical trial for a new ORADUR-based opioid drug candidate. This new drug candidate is the second ORADUR-based opioid drug to undergo clinical testing. King Pharmaceuticals is the company that will be commercializing the drug candidate, if approved. Pain Therapeutics, our licensee, has sublicensed rights to the drug candidate and other ORADUR-based products incorporating oxycodone and three other opioid compounds to King Pharmaceuticals. The active pharmaceutical ingredient in the new ORADUR-based opioid drug candidate has not been disclosed.
  • TRANSDUR Sufentanil Patch. During the third quarter, our main activity under this program involved supply of product for on-going clinical and non-clinical studies conducted by Endo Pharmaceuticals. In addition, we continued our technology transfer to Endo's contract transdermal patch manufacturer in order to produce additional Phase II supplies, Phase III supplies and then commercial supplies.
  • Memryte(TM) Program. Our collaborator, Voyager Pharmaceutical, recently informed DURECT that Voyager is ending its Phase III clinical trials for Memryte(TM) for the treatment of Alzheimer's Disease in order to get an early look at potential efficacy.
  • Management Addition. Matthew J. Hogan has joined us as Chief Financial Officer, bringing with him over 10 years of in-depth knowledge regarding corporate financial transactions as a former investment banker for Merrill Lynch and over 10 years of experience as a chief financial officer of several publicly traded companies, including experience managing commercial product sales.
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. For more information, please visit www.durect.com .

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 Form 10-Q on November 3, 2006 under the heading "Risk Factors."


                              DURECT CORPORATION
                      CONDENSED STATEMENTS OF OPERATIONS
                   (in thousands, except per share amounts)

                                 Three months ended       Nine months ended
                                   September 30,            September 30,
                                  2006        2005        2006        2005
                              (unaudited) (unaudited)  (unaudited) (unaudited)
    Collaborative research
     and development and
     other revenue               $3,158    $5,369       $10,264      $15,896
    Product revenue, net          1,976     1,653         6,189        5,299
    Revenue from sale of
     intellectual property
     rights                          --     1,600            --        1,600
        Total revenues            5,134     8,622        16,453       22,795
    Operating expenses:
      Cost of revenues (1)          666       573         2,265        1,933
      Research and
       development (1)            9,930     7,024        25,643       21,301
      Selling, general and
       administrative (1)         3,346     2,699        9,540         8,362
      Amortization of
       intangible assets             22       303          416           909
        Total operating
         expenses                13,964    10,599       37,864        32,505
    Loss from operations         (8,830)   (1,977)     (21,411)       (9,710)
    Other income (expense):
      Interest and other income     957       467        2,841         1,359
      Interest expense             (710)   (1,095)      (2,719)       (3,329)
      Debt conversion expense        --      (403)      (2,287)         (403)
    Net other income (expense)      247    (1,031)      (2,165)       (2,373)
    Loss before income taxes     (8,583)   (3,008)     (23,576)      (12,083)
    Income tax provision             --         4           --             4
    Net loss                    $(8,583)  $(3,012)    $(23,576)     $(12,087)
    Net loss per share,
     basic and diluted           $(0.12)   $(0.06)      $(0.36)       $(0.23)
    Shares used in computing
     basic and diluted net
     loss per share              68,688    52,786       64,943        52,240

    (1) Stock-based compensation related to the following:

    Cost of revenues                $20       $--          $47           $--
    Research and development        774        60        2,084           106
    Selling, general and
     administrative                 368        --        1,011           347
                                 $1,162       $60       $3,142          $453


                              DURECT CORPORATION
                           CONDENSED BALANCE SHEETS
                                (in thousands)

                                                  September 30,   December 31,
                                                      2006          2005 (1)
                                                   (unaudited)
    ASSETS
    Current assets:
      Cash and cash equivalents                      $37,717        $65,542
      Short-term investments                          25,099         18,022
      Restricted investments                              --            321
      Accounts receivable                              3,471          4,488
      Inventories                                      2,205          2,047
      Prepaid expenses and other current assets        1,611          3,659
        Total current assets                          70,103         94,079

    Property and equipment, net                        7,447          7,304
    Goodwill                                           6,399          6,399
    Intangible assets, net                               119            536
    Long-term investments                              9,955          5,459
    Restricted investments                             1,508          1,653
    Other long-term assets                             1,073          1,984
        Total assets                                 $96,604       $117,414

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                               $ 1,121         $1,835
      Accrued liabilities                              4,042          3,874
      Contract research liabilities                      871          1,418
      Interest payable on convertible notes              681            149
      Deferred revenue, current portion                2,412          2,367
      Equipment financing obligations and
       term loan, current portion                         32             34
      Bonds payable, current portion                     200            200
        Total current liabilities                      9,359          9,877

      Bonds payable, equipment financing
       obligations and term loan,
       noncurrent portion                                825            702
      Convertible subordinated notes                  37,337         57,337
      Deferred revenue, noncurrent portion             4,375          6,016
      Other long-term liabilities                        279            130

    Stockholders' equity                              44,429         43,352

        Total liabilities and stockholders' equity   $96,604       $117,414

    (1) Derived from audited financial statements.

SOURCE DURECT Corporation
11/03/2006
CONTACT: Schond L. Greenway, Vice President, Investor Relations and Strategic Planning, DURECT Corporation, +1-408-777-1417
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Web site: http://www.durect.com
(DRRX)