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DURECT Corporation Reports Second Quarter 2001 Financial Results


CUPERTINO, Calif., July 30 /PRNewswire/ -- DURECT Corporation (Nasdaq: DRRX) announced today financial results for the three months ended June 30, 2001.

The company's net loss attributable to common stockholders for the three months ended June 30, 2001 was $7.0 million or 15 cents per share (excluding a one-time, non-cash charge) compared to $5.2 million, or 65 cents per share, for the three months ended June 30, 2000. DURECT incurred a one-time non-cash charge of $14.0 million for acquired in-process research and development associated with the acquisition of Southern BioSystems, Inc. that was completed during the quarter. Including the one-time non-cash charge for acquired in-process research and development, the company's net loss was $21.0 million. DURECT's results for the period also include non-cash charges for the amortization of intangible assets and stock-based compensation of $1.4 million compared to $1.6 million for the same period in 2000.

"We are pleased with the company's progress over the quarter. We have completed our Phase II clinical trial for Chronogesic(TM) and completed construction of our commercial manufacturing facility. Each of these accomplishments represents a significant step towards initiating our Phase III clinical trial, and towards bringing our products to market. In addition, we received clearance for a special 510(k) pre-market notification with the FDA for our next generation ear delivery catheter. The cleared catheter is used by the Naval Medical Center San Diego as part of a blinded, placebo controlled study evaluating the use of gentamicin for the treatment of Meniere's disease," stated James E. Brown, CEO of DURECT. "We also announced our acquisition of Southern BioSystems. With this acquisition, we have added three additional drug delivery platforms, the SABER(TM) delivery system, microspheres and drug-loaded implants, which will allow us to move additional products into development. These technology platforms, which enable delivery of drugs from days to months, are very complementary to our existing DUROS(R) business, which has a therapeutic delivery profile from months to a year."

The increase in net loss in the second quarter of 2001 compared to the same quarter in 2000, excluding the one-time charge for acquired in-process research and development, was primarily due to increased research and development activity and selling, general and administrative expenses. The increase in research and development expenses was primarily attributable to the company's Phase II clinical trial for its lead product, Chronogesic(TM). The increase in selling, general and administrative expenses was primarily due to an increase in general and administrative personnel and related expenses necessary to support DURECT's growth. The increase in operating expenses was partially offset by increased interest income resulting from higher average outstanding cash and investment balances.

At June 30, 2001, the company had cash and investments of $94.2 million compared to $106.1 million at December 31, 2000.

DURECT Corporation is pioneering the development and commercialization of pharmaceutical systems to deliver the right drug to the right site in the right amount at the right time. DURECT's pharmaceutical systems combine technology innovations from the medical device and drug delivery industries with proprietary pharmaceutical and biotechnology drug formulations. These capabilities can enable new drug therapies or optimize existing therapies based on a broad range of compounds, including small molecule pharmaceuticals as well as biotechnology molecules such as proteins, peptides and genes.

Chronogesic(TM) is a trademark of DURECT Corporation. IntraEAR(TM) is a registered trademark of DURECT Corporation. SABER(TM) is a trademark of Southern BioSystems, Inc., a subsidiary of DURECT Corporation. DUROS is a registered trademark of ALZA Corporation.

                              DURECT CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                (in thousands)
                                                  June 30,      December 31,
                                                     2001           2000 (1)
                                              (unaudited)

    Assets
    Current assets:
     Cash, cash equivalents and short-term
      investments                                  $68,715          $104,432
     Inventories and other current assets            5,794             4,881
    Total current assets                            74,509           109,313

    Property and equipment, net                     10,527             4,472
    Intangible assets, net                          11,186             5,175
    Long-term investments and other
     non- current assets                            25,476             1,652

    Total assets                                  $121,698          $120,612

    Liabilities and stockholders' equity
    Current liabilities:
     Accounts payable and accrued liabilities       $4,947            $3,846
     Other current liabilities                         667               407
    Total current liabilities                        5,614             4,253

    Other long term liabilities                      2,498             1,105

    Stockholders' equity                           113,586           115,254

    Total liabilities and stockholders'
     equity                                       $121,698          $120,612

(1) Derived from audited financial statements.

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

                                        Three months ended  Six months ended
                                            June 30,           June 30,
                                        2001       2000       2001       2000
                                  (unaudited)(unaudited)(unaudited)(unaudited)

    Revenue, net                       $1,687       $998     $3,086    $1,081

    Cost of goods sold (1)                974        575      1,585       611

    Gross profit                          713        423      1,501       470

    Operating expenses:
          Research and development      5,315      2,983      9,409     5,242
          Research and development to
           related party                   18        171         65       433
          Selling, general and
           administrative               2,157      1,003      4,035     1,973
          Amortization of intangible
           assets                         461        233        735       302
          Stock-based compensation (1)    919      1,367      1,854     2,499
          Acquired in-process research
           and development             14,030         --     14,030        --

    Total operating expenses           22,900      5,757     30,128    10,449

    Loss from operations              (22,187)    (5,334)   (28,627)   (9,979)

    Other income (expense):
          Interest income               1,281        540      2,864       828
          Interest expense                (84)       (33)      (145)      (55)
    Net other income                    1,197        507      2,719       773

    Net loss                          (20,990)    (4,827)   (25,908)   (9,206)

    Accretion of cumulative dividends on
     Series B convertible                  --        326         --       653
      preferred stock

    Net loss attributable to common
     stockholders                    $(20,990)   $(5,153)  $(25,908)  $(9,859)

    Net loss per common share, basic and
     diluted                           $(0.45)    $(0.65)    $(0.57)   $(1.35)

    Shares used in computing basic and
     diluted net loss per share        46,325      7,958     45,726     7,279

    Pro forma net loss attributable to
     common stockholders excluding
      acquired in-process research &
       development                    $(6,960)             $(11,878)

    Pro forma net loss per share, basic
     and diluted excluding
      acquired in-process research &
       development                     $(0.15)               $(0.26)

    Shares used in computing pro forma
     net loss per share                46,325                45,726



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

    Cost of goods sold                    $65        $21        $87       $21
    Research and development              613        960      1,294     1,665
    Selling, general and administrative   306        407        560       834

                                         $984     $1,388     $1,941    $2,520

The statements in this press release regarding DURECT's products in development, product development plans, or expected product benefits, are forward-looking statements involving risks and uncertainties that could 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 ability to develop, manufacture and commercialize its products, successfully complete clinical trials, obtain product and manufacturing approvals from regulatory agencies, and validate and qualify a manufacturing facility, as well as marketplace acceptance of DURECT's products. Further information regarding these and other risks is included in the company's S-1 registration statement, filed with the SEC on September 22, 2000, 424(b) prospectus filed with the SEC on September 28, 2000, Quarterly Report on Form 10-Q for the quarter ended April 30, 2001 filed with the SEC on May 11, 2001 and Annual Report on Form 10-K for the fiscal year ended December 31, 2000 filed with the SEC on March 30, 2001.

Contact: Schond L. Greenway, Director, Investor Relations of DURECT
Corporation, 408-777-1417, schond.greenway@durect.com.

SOURCE DURECT Corporation

CONTACT: Schond L. Greenway, Director, Investor Relations of DURECT Corporation, +1-408-777-1417, schond.greenway@durect.com./