DURECT Corporation Reports Second Quarter 2002 Financial Results

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CUPERTINO, Calif., Jul 29, 2002 /PRNewswire-FirstCall via COMTEX/ — DURECT
Corporation (Nasdaq: DRRX) announced today financial results for the three
months ended June 30, 2002.

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

DURECT’s net loss for the three months ended June 30, 2002 was $9.9 million or
21 cents per share, compared to $21.0 million or 45 cents per share for the same
period in 2001. DURECT’s results for the three months ended June 30, 2002
included other non-cash charges for the amortization of intangible assets and
stock-based compensation of $820,000, compared to $1.4 million for the same
period in 2001. The Company’s net loss for the three months ended June 30, 2001
included a one-time, non-cash charge of $14.0 million for acquired in-process
research and development associated with the acquisition of Southern BioSystems,

“We are pleased with the steady progress in our business. The recent
announcement of the initiation of our pivotal Phase III program for our lead
product in development, the CHRONOGESIC (sufentanil) Pain Therapy System is an
exciting and important milestone for DURECT. We believe the CHRONOGESIC therapy,
once approved, will be a significant improvement over currently available
long-term pain therapies on the market today,” stated Dr. Jim Brown, President
and Chief Executive Officer of DURECT. “We also continue to make progress on our
other internal development programs and we are happy to report that we have
initiated enrollment of patients in a Phase I clinical study to investigate the
delivery of cromolyn sodium for the treatment of asthma and allergic rhinitis
using one of our proprietary biodegradable drug delivery platforms.”

“We also continue to look for opportunities to collaborate with other biotech
and pharmaceutical companies to develop and commercialize innovative
pharmaceutical systems products utilizing our platform drug delivery
technologies in the areas of chronic diseases,” stated Dr. Felix Theeuwes,
Chairman and Chief Scientific Officer of DURECT. “Earlier today we announced
that we have entered into an agreement with Voyager Pharmaceutical Corporation
for the development and commercialization of a Voyager patented product for the
treatment of Alzheimer’s disease. We are excited that Voyager has selected our
DURIN technology for use in its proprietary treatment.”

Research and development expenses were $8.2 million in the three months ended
June 30, 2002, compared to $5.3 million for the same period in 2001. The
increase was primarily attributable to expanded research and development
activities, especially related to continued preparation for the company’s
pivotal Phase III clinical trials for its lead product, CHRONOGESIC, which
commenced at the end of second quarter of 2002. The increase was also
attributable to continued investments in the research and development of other
pharmaceutical systems based on SABER and DURIN technologies and the hiring of
additional research and development personnel.

Selling, general and administrative expenses were $2.4 million in the three
months ended June 30, 2002, compared to $2.2 million for the same period in
2001. The increase was primarily due to the modest expansion of corporate
infrastructure to support the growth in all areas of DURECT’s business.

At June 30, 2002, DURECT had cash, cash equivalents and investments of $58.4
million, including $2.9 million in restricted investments.

DURECT expects its net loss for the third quarter of 2002 to be in the range of
$11.0 million to $11.5 million or 23 to 24 cents per share. DURECT’s estimates
include non-cash charges for the amortization of intangible assets and
stock-based compensation of approximately $800,000 for the third quarter of

DURECT Corporation (www.www.durect.com) 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 lead product in development, the CHRONOGESIC(TM)
(sufentanil) Pain Therapy System is a 3-month product for the treatment of
chronic pain. DURECT owns three proprietary drug delivery platform technologies,
including the SABER(TM) Delivery System (a patented and versatile depot
injectable useful for protein delivery), the MICRODUR(TM) Biodegradable
Microparticulates (microspheres injectable system) and the DURIN(TM)
Biodegradable Implant (drug-loaded implant system).

NOTE: CHRONOGESIC(TM) is a trademark of DURECT Corporation. SABER(TM),
MICRODUR(TM) and DURIN(TM) are trademarks of Southern BioSystems, Inc., a wholly
owned subsidiary of DURECT Corporation. Other trademarks referred to belong to
their respective owners.

The statements in this press release regarding DURECT’s products in development,
expected product benefits, product development and clinical trials plans and
projected future 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 ability to research, develop,
manufacture and commercialize its products, obtain product and manufacturing
approvals from regulatory agencies, timely enroll patients and clinical sites in
connection with its clinical studies, effectively administer its clinical
trials, manage its growth and expenses, finance its activities and operations,
as well as marketplace acceptance of DURECT’s products. Further information
regarding these and other risks is included in DURECT’s Annual Report on Form
10-K for the fiscal year ended December 31, 2001 filed with the SEC on March 28,
2002, under the heading “Factors that may affect future results,” and other
periodic reports filed with the SEC.

CHRONOGESIC is under development by DURECT and has not been submitted or
approved for commercialization by the US Food and Drug Administration or other
health authorities.

                                DURECT CORPORATION
                     (in thousands, except per share amounts)

                                 Three months ended      Six months ended
                                       June 30,               June 30,
                                   2002       2001       2002        2001
                              (unaudited) (unaudited) (unaudited) (unaudited)

    Revenue, net                  $1,772    $1,687      $3,396      $3,086

    Cost of goods sold (1)           785       974       1,564       1,585

    Gross profit                     987       713       1,832       1,501

    Operating expenses:
          Research and development 8,178     5,333      16,173       9,474
          Selling, general and
           administrative          2,441     2,157       4,764       4,035
          Amortization of
           intangible assets         335       461         670         735
           compensation (1)          468       919       1,037       1,854
          Acquired in-process
           and development            --    14,030          --      14,030

    Total operating expenses      11,422    22,900      22,644      30,128

    Loss from operations         (10,435)  (22,187)    (20,812)    (28,627)

    Other income (expense):
          Interest income            598     1,281       1,309       2,864
          Interest expense           (78)      (84)       (161)       (145)
    Net other income                 520     1,197       1,148       2,719

    Net loss                     $(9,915) $(20,990)   $(19,664)   $(25,908)

    Net loss per share, basic and
     diluted                      $(0.21)   $(0.45)     $(0.41)     $(0.57)

    Shares used in computing
     basic and diluted net
     loss per share               48,076    46,325      47,929      45,726

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

    Cost of goods sold               $17       $65         $46         $87
    Research and development         330       613         724       1,294
    Selling, general and
     administrative                  138       306         313         560
    Total stock-based
     compensation                   $485      $984      $1,083      $1,941

                                DURECT CORPORATION
                                  (in thousands)

                                                  June 30,        December 31,
                                                    2002            2001 (1)

    Current assets:
    Cash, cash equivalents and short-term
     investments                                   $52,939            $55,204
    Inventories and other current assets             4,389              5,007
    Total current assets                            57,328             60,211

    Property and equipment, net                     12,886             13,136
    Intangible assets, net                           9,507             10,178
    Long-term investments and other non-
     current assets                                  5,497             21,418

    Total assets                                   $85,218           $104,943

    Liabilities and stockholders' equity
    Current liabilities:
    Accounts payable and accrued
     liabilities                                    $4,140             $5,065
    Long-term obligations, current
     portion                                           665                683
    Total current liabilities                        4,805              5,748

    Long-term obligations, noncurrent
     portion                                         1,932              2,147

    Stockholders' equity                            78,481             97,048

    Total liabilities and stockholders'
     equity                                        $85,218           $104,943

    (1) Derived from audited financial statements.



Schond L. Greenway, Senior Director, Investor Relations and
Strategic Planning of DURECT Corporation, +1-408-777-1417, or
/Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20020717/DRRXLOGO
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PRN Photo Desk, +1-888-776-6555 or +1-212-782-2840


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