DURECT Corporation Announces First Quarter 2003 Financial Results

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CUPERTINO, Calif., April 28 /PRNewswire-FirstCall/ —
DURECT Corporation (Nasdaq: DRRX) announced today financial results for the
three months ended March 31, 2003.

DURECT’s net loss for the three months ended March 31, 2003 was $5.9
million or 12 cents per share, compared to $9.7 million or 20 cents per share
for the same period in 2002. DURECT’s results for the three months ended March
31, 2003 included non-cash charges for the amortization of intangible assets
and stock-based compensation of $181,000, compared to $933,000 for the same
period in 2002.

“For the first quarter 2003, we have made significant technical progress
on the enhancements to our CHRONOGESIC(R) product and we anticipate that we
will move this program back into the clinic in the second half of 2003.
Additionally we continued to make progress in our research and development
programs, while maintaining our focus on controlling the cash burn and
advancing the development programs with the highest potential to create value
for our shareholders as well as patients with chronic debilitating diseases,”
stated James E. Brown, President and CEO of DURECT. “To date, our signed
collaborative agreements have the potential to provide up to an estimated $135
million in R&D funding and milestone payments. These potential funding
sources, in conjunction with $43 million in cash and investments reported on
our balance sheet for the quarter ended March 31, 2003, provide DURECT with a
solid financial foundation to continue to advance our product development
activities and operations.”

Total revenues were $2.6 million for the three months ended March 31,
2003, compared to $1.6 million for the same period in 2002. The increase in
total revenues was primarily attributable to higher collaborative research and
development revenue recognized from the strategic collaborative agreements the
company signed with Pain Therapeutics, Inc., BioPartners, GmbH, Voyager
Pharmaceutical Corporation and other partners in 2002.

Research and development expenses were $5.6 million for the three months
ended March 31, 2003, compared to $8.0 million for the same period in 2002.
The decrease in the three months ended March 31, 2003 was primarily
attributable to the lower development cost related to our lead product
CHRONOGESIC compared with higher costs associated with the preparation for the
Phase III trial for CHRONOGESIC in the same period in 2002. In addition, the
decrease in the research and development expenses was also the result of cost
savings due to the reduction in force in the fourth quarter of 2002.

Selling, general and administrative expenses were $2.2 million in the
three months ended March 31, 2003, compared to $2.3 million for the same
period in 2002. The slight decrease was primarily attributable to additional
cost savings in personnel and other corporate infrastructure expenses as we
continue to focus on tighter cost controls in all areas of our business.

At March 31, 2003, DURECT had cash and investments of $43.2 million,
including $3.8 million in restricted investments, compared with cash and
investments of $48.3 million at December 31, 2002.

DURECT expects its net loss for the second quarter of 2003 will range from
$7.0 million to $7.5 million or 14 to 15 cents per share. DURECT’s estimates
include non-cash charges for the amortization of intangible assets, stock-
based compensation and depreciation of approximately $1.3 million to 1.4
million for the second quarter of 2003.

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. In addition to its rights to the CHRONOGESIC
product, 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).


DURECT Corporation. Other trademarks referred to belong to their respective

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 ability to complete the design, development, and manufacturing
process development of its products, achieve milestones that will trigger
payments from third parties pursuant to collaboration agreements, manufacture
and commercialize its products, obtain product and manufacturing approvals
from regulatory agencies, manage its growth and expenses, manage relationships
with third parties, 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, 2002 filed with the SEC on March 14, 2003
and other periodic reports filed with the SEC under the heading “Factors that
may affect future results.”

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.


                   (in thousands, except per share amounts)

                                                        Three months ended
                                                             March 31,
                                                         2003         2002
                                                      (unaudited)  (unaudited)

    Product revenue, net                                 $1,507 $1,613
    Collaborative research and development and other
     revenue                                              1,074           11
    Total revenues                                        2,581        1,624

    Operating expenses:
      Cost of revenues                                      595          750
      Research and development                            5,572        7,995
      Selling, general and administrative                 2,243        2,323
      Amortization of intangible assets                     335          335
      Stock-based compensation(1)                          (154)         598

        Total operating expenses                          8,591       12,001

    Loss from operations                                 (6,010)     (10,377)

    Other income (expense):
      Interest income                                       241          711
      Interest expense                                     (124)         (83)

    Net other income                                        117          628

    Net loss                                            $(5,893)     $(9,749)

    Net loss per share, basic and diluted                $(0.12)      $(0.20)

    Shares used in computing basic and diluted net loss
     per share                                           50,123       47,782

    (1) Stock-based compensation related to the following:
        Cost of revenues                                     $8 $29
        Research and development                           (236)        394
        Selling, general and administrative                  74         175
                                                          $(154)       $598 DURECT CORPORATION

                   (in thousands, except per share amounts)

                                                       March 31,  December 31,
                                                         2003        2002
                           A S S E T S
    Current assets:
      Cash, cash equivalents and short-term
       investments                                      $37,260 $42,800
      Inventories and other current assets                4,689       4,241
    Total current assets                                 41,949      47,041

    Property and equipment, net                          10,869      11,625
    Goodwill                                              4,716       4,716
    Intangible assets, net                                3,786       4,121
    Long-term investments and other non-current assets    5,909       5,468
      Total assets                                      $67,229 $72,971

      L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
    Current liabilities:
      Accounts payable and accrued liabilities           $4,620 $4,568
      Long-term obligations, current portion                453         617
        Total current liabilities                         5,073       5,185

    Long-term obligations, noncurrent portion             2,002       1,604

    Stockholders' equity                                 60,154      66,182
        Total liabilities and stockholders' equity      $67,229 $72,971


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

/Web site: http://www.www.durect.com /

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