DURECT Corporation Reports Third Quarter 2000 Financial Results

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CUPERTINO, Calif., Nov. 13 /PRNewswire/ — DURECT Corporation
(Nasdaq: DRRX) today announced financial results for the three months ended
September 30, 2000.

DURECT’s net loss attributable to common stockholders for its third
quarter ended September 30, 2000 was $6.0 million dollars, or $0.62 cents per
diluted share, compared to a net loss of $2.4 million dollars, or $0.43 cents
per diluted share, for the same period last year. On a pro forma basis,
DURECT’s net loss for its third quarter ended September 30, 2000 was
$5.7 million dollars, or $0.16 cents per diluted share, compared to a net loss
of $2.1 million dollars, or $0.08 cents per diluted share, for the same period
last year. Pro forma calculations assume the conversion of all preferred
stock, at the date of issuance, into common stock. DURECT’s pro forma net
loss excluding the effects of certain non-cash and stock-related charges was
$4.1 million, or $0.11 per diluted share, compared with $2.0 million, or
$0.07 per diluted share during the third quarter of 1999. DURECT’s results
include non-cash charges for the amortization of intangibles and stock-based
compensation of $1.7 million for the third quarter ended September 30, 2000.

The increase in net loss for the three months ended September 30, 2000
compared to the same period in 1999 were due primarily to increases in
research and development expenses, selling, general and administrative
expenses and non-cash items including amortization and stock-based
compensation. The increase in research and development expenses was
attributable to increases in contract research and development services,
research and development personnel and related payroll, and activity related
to the preparation for DURECT’s Phase II clinical trials for DUROS sufentanil,
including the manufacturing of product to be used in the trial. 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. Non-cash charges, including stock-based
compensation expenses and amortization expenses related to DURECT’s
acquisition of the ALZET and IntraEAR businesses also contributed to losses
this quarter.

At the end of the third quarter, the Company had cash and cash
equivalents, including short-term investments, that totaled $23.7 million
dollars, compared to $16.6 million dollars as of December 31st, 1999. This
increase was primarily due to the proceeds from the sale of preferred stock.
DURECT also recorded a receivable of $78.1 million for the proceeds from its
initial public offering, which closed on October 3rd, 2000.

Commenting on third quarter results, James E. Brown, D.V.M., President and
Chief Executive Officer, stated, “We are pleased to report progress with
respect to our business, particularly with respect to our product development
efforts. We have completed the development of a prototype clinical system for
our second product in development, a DUROS-based pharmaceutical system for the
delivery of hydromorphone to the spine for the treatment of terminal cancer
pain. We are also continuing to make progress towards beginning our Phase II
clinical trials for our DUROS sufentanil product.”

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.
DURECT’s initial portfolio of products combine the DUROS technology, a proven
and patented drug delivery platform licensed for specified fields of use from
ALZA Corporation, with drugs for which medical data on efficacy and safety are
available. Founded in 1998, the Company is headquartered in Cupertino, CA.
The Company’s World Wide Web site can be accessed at http://www.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.www.durect.com
DUROS is a registered trademark of ALZA Corporation.

The statements in this press release regarding DURECT’s products in
development, product development plans, clinical trials, and 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, complete successful clinical trials, obtain product approvals
from regulatory agencies, build a manufacturing facility, marketplace
acceptance of DURECT’s products and DURECT’s ability to manage its growth and
costs. 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
and its 424(b) prospectus filed with the SEC on September 28, 2000.

                             DURECT CORPORATION
                        (a development stage company)

                  (in thousands, except per share amounts)

                                   Three months ended       Nine Months ended
                                         Sept. 30,              Sept. 30,
                                     2000       1999        2000         1999

    Revenues, net                  $1,101        $--       $2,182         $--
    Cost of goods sold                777         --        1,417          --
    Gross margin                      324         --          765          --

    Operating expenses:
     Research and development       3,400      1,371        8,648       3,112
     Research and development
      to related party                193        166          626         861
     Selling, general and
      administrative                1,472        644        3,710       1,465
     Stock-based compensation       1,432        125        3,932         351

    Total operating expenses        6,497      2,306       16,916       5,789

    Loss from operations          (6,173)    (2,306)     (16,151)     (5,789)

    Other income (expense):
     Interest income                  495        234        1,322         375
     Interest expense                (34)       (10)         (88)        (20)

    Net other income                  461        224        1,234         355

    Net Loss                      (5,712)    (2,082)     (14,917)     (5,434)

    Accretion of cumulative
     dividends on Series B
     convertible preferred stock      319        271          972         271

    Net loss attributable
     to common stockholders      $(6,031)   $(2,353)    $(15,889)    $(5,705)

    Net loss per common share,
     basic and diluted            $(0.62)    $(0.43)      $(1.96)     $(1.13)

    Shares used in computing
     basic and diluted
     net loss per share             9,803      5,522        8,118       5,054

    Pro forma net loss
     per share,
     basic and diluted(1)         $(0.16)    $(0.08)      $(0.44)     $(0.25)

    Shares used in computing
     pro forma net loss
     per share(1)                  36,408     27,194       34,170      21,719

(1) Pro forma calculations assume the conversion of all preferred stock,

         at the date of issuance, into common stock.

                             DURECT CORPORATION
                        (a development stage company)

                          CONDENSED BALANCE SHEETS
                   (in thousands, except per share amounts)

                                                      Sept. 30,      Dec. 31,
                                                          2000          1999
    Current assets:
     Cash and cash equivalents                          $19,320        $3,863
     Short-term investments                               4,372        12,735
     IPO proceeds receivable                             78,120            --
     Accounts receivable, net                               851            97
     Inventories                                          3,096           188
     Prepaid expenses and other current assets            1,015           584

    Total current assets                                106,774        17,467

    Property and equipment, net                           2,272         1,271
    Intangible assets, net                                5,449         1,390
    Long-term investments                                 1,642         2,335
    Total assets                                       $116,137       $22,463

    Liabilities and stockholders' equity
    Current liabilities:
     Accounts payable                                      $347          $483
     Accrued liabilities                                    905           429
     Accrued liabilities to related party                 1,050           321
     Accrued stock issuance cost                            575            --
     Contract research liability                            406           180
    Equipment financing obligations, current portion        326           133
    Total current liabilities                             3,609         1,546

    Equipment financing obligations,
     noncurrent portion                                     923           189

    Commitments and contingencies

    Stockholders' equity:
     Preferred stock                                         --             2
     Common stock                                             4             1
     Additional paid-in capital                         158,145        34,642
     Notes receivable from stockholders                   (652)          (33)
     Accumulated other comprehensive income (loss)          (2)            --
     Deferred compensation                              (5,889)       (3,252)
     Deferred royalties and commercial rights          (13,480)            --
     Deficit accumulated during the
      development stage                                (26,521)      (10,632)
    Stockholders' equity                                111,605        20,728

    Total liabilities and stockholders' equity         $116,137       $22,463

CONTACT: For further information please contact:
DURECT Corporation
Schond L. Greenway
Director, Investor Relations
Phone: 408-777-1417
             Noonan/Russo Communications
             Tom Baker
             Media Relations
             Phone: 415-677-4455, ext. 370


CONTACT: Schond L. Greenway, Director, Investor Relations, DURECT
Corporation, 408-777-1417, Schond.Greenway@Durect.com; Media – Tom Baker of
Noonan-Russo Communications, 415-677-4455, ext. 370, T.Baker@NoonanRusso.com,
for DURECT Corporation/

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