DURECT Corporation Announces Second Quarter 2003 Financial Results

Download PDF:

CUPERTINO, Calif., Jul 24, 2003 /PRNewswire-FirstCall via Comtex/ — DURECT Corporation
(Nasdaq: DRRX) announced today financial results for the three months ended
June 30, 2003.

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

DURECT’s net loss for the three months ended June 30, 2003 was $5.1
million or 10 cents per share, compared to $9.9 million or 21 cents per share
for the same period in 2002. DURECT’s results for the three months ended June
30, 2003 included non-cash charges for the amortization of intangible assets
and stock-based compensation of $470,000, compared to $820,000 for the same
period in 2002. Cash used in operating activities was $3.6 million for the
three months ended June 30, 2003, compared to $8.8 million for the same period
in 2002.

“During the course of this year, we have evaluated several product
iterations, in both in-vitro and animal studies, to evaluate the system design
enhancements we have implemented to our CHRONOGESIC(R) product. While we
continue to perform additional analyses and generate data around our revised
design, we are pleased to report that we have data from animal studies that
confirms that our CHRONOGESIC pump delivers for the full 90-day duration of
the product’s delivery period,” stated James E. Brown, President and Chief
Executive Officer of DURECT. “During the remainder of this year, we intend to
complete the validation package to enable terminal sterilization of our
CHRONOGESIC product, manufacture product to support clinical trials and begin
dosing in our clinical program.”

Dr. Brown added, “In June of this year, we commenced clinical testing for
our post-operative pain relief depot product, which is targeted to address the
pain management needs of more than 20 million patients recovering from
surgical procedures performed annually in the United States. One dose of our
post-operative pain relief product is intended to provide up to 3 days of
regional pain relief, which would be a substantial improvement in care for
patients when compared to conventional practices. We believe this innovative
product could potentially reduce the amount of drugs required and side effects
experienced by patients after surgery, as well as shorten hospital stays for
these patients. We are excited about the prospects for this product and are
continuing discussions with a select number of potential partners regarding a
commercialization agreement.”

“We received approximately $60 million through a private placement of
Convertible Notes. This financing gives us the flexibility and liquidity to
fund additional research and development and commercialize existing and future
products,” stated Thomas A. Schreck, Chief Financial Officer of DURECT. “Our
current cash position combined with potential collaborative funding provides
us with a solid financial foundation to reduce the risk profile of the company
and to broaden our product portfolio mix for successful commercialization of
our proprietary and partnered products.”

Total revenues were $3.2 million for the three months ended June 30, 2003,
compared to $1.8 million for the same period in 2002. The increase in total
revenues was primarily attributable to higher collaborative research and
development revenue recognized from DURECT’s agreements with Pain
Therapeutics, BioPartners, Voyager Pharmaceutical and other strategic partners
and higher product sales from DURECT’s product lines.

Research and development expenses were $5.3 million for the three months
ended June 30, 2003, compared to $8.2 million for the same period in 2002.
The decrease in the three months ended June 30, 2003 was primarily
attributable to the lower development costs related to DURECT’s lead product
CHRONOGESIC compared with higher development costs associated with 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 lower
personnel expenses in the second quarter of 2003 compared with the same period
in 2002.

Selling, general and administrative expenses were $2.2 million in the
three months ended June 30, 2003, compared to $2.4 million for the same period
in 2002. The decrease was primarily attributable to continued cost savings in
personnel, legal and facilities expenses due to a focus on tighter cost
controls in all areas of DURECT’s business.

At June 30, 2003, DURECT had cash and investments of $86.7 million,
including $3.3 million in restricted investments, compared with cash and
investments of $43.2 million at March 31, 2003. This increase was primarily
due to the net proceeds of approximately $47.2 million received in June 2003
from the sale of $50.0 million aggregate principal amount of Convertible Notes
due 2008. On July 14, 2003, the Company received approximately $9.5 million in
net proceeds from the sale of an additional $10.0 million of Convertible

These Convertible Notes will be convertible into DURECT common stock at a
conversion price of $3.15 per share and will bear interest at a rate of 6.25%
per annum. After giving effect to the sale of the additional $10.0 million
principal amount of the Convertible Notes, DURECT received net proceeds of
approximately of $56.7 million, after deducting underwriters’ discount and
other offering expenses, from the sale of $60.0 million aggregate principal
amount of Convertible Notes.

DURECT expects its net loss for the third 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 third 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, 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

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,
                                            2003     2002     2003     2002

    Product revenue, net                   $1,715   $1,677    $3,222   $3,290
    Collaborative research and development
     and other revenue                      1,485       95     2,559      106
        Total revenues                      3,200    1,772     5,781    3,396

    Operating expenses:

      Cost of revenues                        534      768     1,129    1,518
      Research and development              5,282    8,178    10,854   16,173
      Selling, general and administrative   2,219    2,441     4,462    4,764
      Amortization of intangible assets       335      335       670      670
      Stock-based compensation(1)             135      485       (19)   1,083
        Total operating expenses            8,505   12,207    17,096   24,208
    Loss from operations                   (5,305) (10,435)  (11,315) (20,812)

    Other income (expense):
      Interest income                         368      598       609    1,309
      Interest expense                       (179)     (78)     (303)    (161)
    Net other income                          189      520       306    1,148
    Net loss                              $(5,116) $(9,915) $(11,009)$(19,664)
    Net loss per share, basic and diluted  $(0.10)  $(0.21)   $(0.22)  $(0.41)
    Shares used in computing basic and
     diluted net loss per share            50,294   48,076    50,209   47,929

    (1) Stock-based compensation related
        to the following:
         Cost of revenues                      $3      $17       $11      $46
         Research and development             (23)     330      (259)     724
         Selling, general and administrative  155      138       229      313
                                             $135     $485      $(19)  $1,083

                              DURECT CORPORATION
                                (in thousands)

                                                     June 30,     December 31,
                                                       2003         2002 (1)

    Current assets:
      Cash, cash equivalents and short-term
       investments                                   $77,063        $42,800
      Inventories and other current assets             4,607          4,241
    Total current assets                              81,670         47,041

    Property and equipment, net                       10,259         11,625
    Goodwill                                           4,716          4,716
    Intangible assets, net                             3,451          4,121
    Long-term investments and other non-current
     assets                                           12,442          5,468

    Total assets                                    $112,538        $72,971

    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable and accrued liabilities        $4,637         $4,568
      Long-term obligations, current portion             453            617
    Total current liabilities                          5,090          5,185

    Long-term obligations, noncurrent portion         51,941          1,604

    Stockholders' equity                              55,507         66,182

    Total liabilities and stockholders' equity      $112,538        $72,971

    (1) Derived from audited financial statements.


Photo    : NewsCom:  http://www.newscom.com/cgi-bin/prnh/20020717/DRRXLOG
Schond L. Greenway, Senior Director, Investor Relations and
Strategic Planning of DURECT Corporation, +1-408-777-1417 or
Scroll to Top