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DURECT Corporation Reports Third Quarter 2001 Financial Results


CUPERTINO, Calif., Oct. 31 /PRNewswire/ -- DURECT Corporation (Nasdaq: DRRX) announced today financial results for the three months ended September 30, 2001.

The company's net loss attributable to common stockholders for the three months ended September 30, 2001 was $8.9 million or 19 cents per share compared to $6.0 million, or 62 cents per share, for the three months ended September 30, 2000. DURECT's results for the period also include non-cash charges for the amortization of intangible assets and stock-based compensation of $1.3 million compared to $1.7 million for the same period in 2000.

"We are delighted with the company's progress over the quarter," stated James E. Brown, CEO of DURECT. "During this quarter, we announced positive Phase II results from our lead product in development, Chronogesic(TM), a 3-month continuous infusion subcutaneous implant for the treatment of chronic pain. The results of the Phase II study exceeded our expectations. Patients in the study reported that Chronogesic(TM) provided better pain control and fewer side effects, resulting in a strong preference by patients for Chronogesic(TM) versus other medicines used prior to the study. These positive results support our belief that Chronogesic(TM) offers patients a better quality-of-life alternative to currently available therapies for the long-term treatment of stable and opioid responsive chronic pain."

The increase in net loss in the third quarter of 2001 compared to the same quarter in 2000 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 September 30, 2001, the company had cash and investments of $88.2 million compared to $106.1 million at December 31, 2000.

DURECT Corporation is pioneering the development and commercialization of pharmaceutical systems for the treatment of chronic debilitating diseases and enabling biotechnology-based pharmaceutical products. DURECT's goal is 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. DURECT focuses on the treatment of chronic diseases including pain, CNS disorders, cardiovascular disease and cancer. DURECT holds an exclusive license from ALZA Corporation (NYSE: AZA) to develop and commercialize products in selected fields based on the DUROS(R) implant technology. Chronogesic(TM), a 3-month continuous infusion subcutaneous implant for the treatment of chronic pain, is the first product in this series and completed phase II testing in June, 2001. DURECT also owns three proprietary erodible implant platform technologies, including SABER(TM) (a patented and versatile depot injectable useful for protein delivery), microspheres and drug-loaded implants. DURECT also commercializes IntraEAR(R) catheters which have been used by physicians to treat inner ear disorders. Founded in 1998, DURECT is headquartered in Cupertino, CA. The company's World Wide Web site can be accessed at http://www.durect.com . To join DURECT's email alert service, please register by selecting "Email Alerts" on the main Investor Relations web page at http://www.durect.com . Chronogesic(TM), SABER(TM) and IntraEAR(R) are trademarks of DURECT Corporation. DUROS(R) is a trademark of ALZA Corporation.

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

                                     Three months ended   Nine months ended
                                        September 30,       September 30,
                                       2001      2000       2001     2000

    Revenue, net                      $1,841    $1,101     $4,928   $2,182

    Cost of goods sold (A)               963       645      2,548    1,256

    Gross profit                         878       456      2,380      926

    Operating expenses:
      Research and development         7,181     3,400     16,590    8,648
      Research and development
       to related party                   25       193         90      626
      Selling, general and
       administrative                  2,305     1,398      6,339    3,363
      Amortization of intangible
       assets                            555       206      1,290      508
      Stock-based compensation (A)       750     1,432      2,605    3,932
      Acquired in-process research
       and development                    --        --     14,030       --

    Total operating expenses          10,816     6,629     40,944   17,077

    Loss from operations             (9,938)   (6,173)   (38,564) (16,151)

    Other income (expense):
      Interest income                  1,096       495      3,960    1,322
      Interest expense                  (92)      (34)      (238)     (88)
    Net other income                   1,004       461      3,722    1,234

    Net loss                         (8,934)   (5,712)   (34,842) (14,917)

    Accretion of cumulative
     dividends on Series B
     convertible preferred stock          --       319         --      972

    Net loss attributable
     to common stockholders         $(8,934)  $(6,031)  $(34,842) $(15,889)

    Net loss per common share,
     basic and diluted               $(0.19)   $(0.62)    $(0.76)  $(1.96)

    Shares used in computing basic
     and diluted net loss per share   46,906     9,802     46,120    8,118

    Pro forma net loss attributable
     to common stockholders excluding
     acquired in-process
     research & development                             $(20,811)

    Pro forma net loss per share,
     basic and diluted excluding
     acquired in-process
     research & development                               $(0.45)

    Shares used in computing
     pro forma net loss
     per share                                             46,120


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

    Cost of goods sold                   $31       $22       $118      $43
    Research and development             503     1,020      1,798    2,685
    Selling, general and administrative  247       412        807    1,247

                                        $781    $1,454     $2,723   $3,975


                              DURECT CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                (in thousands)

                                                 September 30,  December 31,
                                                      2001        2000 (A)
    Assets                                        (unaudited)
    Current assets:
      Cash, cash equivalents and
       short-term investments                        $69,397       $104,432
      Accounts receivable, net                         1,054          1,261
      Inventories                                      2,052          2,682
      Other current assets                             1,848            938
    Total current assets                              74,351        109,313

    Property and equipment, net                       11,456          4,472
    Intangible assets, net                            10,631          5,175
    Long-term investments and other                   18,839          1,652
    Total assets                                    $115,277       $120,612

    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable and accrued expenses           $6,079         $3,846
      Other current liabilities                          678            407
    Total current liabilities                          6,757          4,253

    Other long-term liabilities                        2,405          1,105

    Stockholders' equity                             106,115        115,254

    Total liabilities and stockholders' equity      $115,277       $120,612

(A) Derived from audited financial statements.

The statements in this press release regarding DURECT's products in development, product development plans, expected product benefits or potential product markets 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 successfully complete clinical trials, develop, manufacture and commercialize its products, obtain product and manufacturing approvals from regulatory agencies, validate and qualify a manufacturing facility and manage its growth and expenses, as well as marketplace acceptance of DURECT's products. Further information regarding these and other risks is included in DURECT's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 filed with the SEC on August 14, 2001, and Annual Report on Form 10-K for the fiscal year ended December 31, 2000 filed with the SEC on March 30, 2001, under the heading "Factors that may effect future results."

SOURCE DURECT Corporation

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