DURECT Corporation Announces First Quarter 2005 Financial Results and Update on Its Development Programs

Download PDF:

CUPERTINO, Calif., May 3 /PRNewswire-FirstCall/ — DURECT Corporation
(Nasdaq: DRRX) announced today financial results for the three months ended
March 31, 2005.

DURECT’s net loss for the three months ended March 31, 2005 was $5.4
million or 10 cents per share, compared to a net loss of $6.0 million or 12
cents per share for the same period in 2004. DURECT’s results for the three
months ended March 31, 2005 included non-cash charges for the amortization of
intangible assets and stock-based compensation of $353,000, compared to
$370,000 for the same period in 2004. Cash used in operating activities was
$5.2 million for the three months ended March 31, 2005, compared to $4.7
million for the same period in 2004.

“The first quarter of 2005 was an outstanding quarter for DURECT. During
the quarter, we achieved all of the product development milestones we had
previously announced that we intended to achieve for the period, signed a
major development and commercialization agreement and strengthened our
financial position by managing our cash burn through collaborative funding and
milestones payments. At the beginning of 2005, we had anticipated that our net
decrease in cash and investment balance for 2005 would range from $26.0 to
$28.0 million. As a result of our agreement with Endo Pharmaceuticals relating
to our sufentanil patch, we anticipate that this range will now be between
$12.0 million to $14.0 million this year,” stated James E. Brown, DVM,
President and CEO of DURECT.

Dr. Brown continued, “With respect to our progress on our development
programs, today, we are pleased to announce that we have completed dosing of
the second cohort of our ongoing Phase II clinical study for our
post-operative pain relief depot. Additionally, as we previously announced,
during this quarter, enrollment was completed in the on-going Phase I clinical
study for our DURIN(TM)-based leuprolide product candidate for the treatment
of Alzheimer’s disease, in partnership with Voyager Pharmaceuticals.”

Dr. Brown added, “As a result of our rapid progress to date on our
sufentanil patch program, we established a strong commercialization
partnership with Endo Pharmaceuticals on this product candidate in March 2005
for the U.S. and Canadian markets. As part of the agreement, Endo paid us an
upfront fee of $10.0 million, with additional anticipated milestone payments
of approximately $35.0 million. Endo will be solely responsible for funding
the remaining development expenses for this product candidate for the U.S. and
Canadian markets. We are also excited to continue to advance our goal of
becoming a specialty pharmaceutical company through our right under this
agreement to co-promote this product in the chronic pain space alongside such
a strong marketing partner.”

Year to Date Updates on Development Programs

Post-Operative Pain Relief Depot Product Candidate (SABER-Bupivacaine)

— In May 2005, we completed dosing of the second cohort of the on-going
Phase II clinical study for our SABER-Bupivacaine product candidate. This
product candidate, based on our patented SABER delivery system, is intended to
be administered around a surgical site after surgery to provide 72 hours or
more of regional pain relief and is intended to reduce hospital stays and the
amount of traditional post-surgical pain medications needed by patients (and
therefore the side effects that result from the use of such medications).

— The Phase II trial is a dose escalation study, conducted in three
cohorts, for the treatment of pain in patients following repair of inguinal
hernia. Patients are administered SABER-Bupivacaine at the completion of
surgery, and the trial will be used to establish the dosing range and evaluate
the safety and efficacy of the therapy.

— The study end points include a pharmacokinetic evaluation of plasma
bupivacaine levels, time to first supplemental analgesic, total supplemental
analgesics, and analysis of the sum of pain intensity and total pain relief.

TRANSDUR(TM)-Sufentanil Pain Patch Product Candidate (Collaboration with
Endo Pharmaceuticals in the U.S. and Canada)

— In March 2005, we entered into an agreement with Endo Pharmaceuticals,
Inc. that grants to Endo the exclusive license to develop and commercialize
our seven-day TRANSDUR(TM)-Sufentanil patch product candidate in the U.S. and

— Our TRANSDUR(TM) sufentanil patch, a one-week treatment for chronic
pain, is currently in Phase II studies.

DURIN-based Leuprolide Alzheimer’s Disease Product Candidate
(Collaboration with Voyager Pharmaceutical Corporation)

— In January 2005, DURECT and Voyager Pharmaceutical announced the
completion of enrollment for the Phase I study of our DURIN(TM)-based
leuprolide acetate product candidate for Alzheimer’s disease currently under

— The trial consists of a pharmacokinetic study in normal, healthy
volunteers, the objectives of which are to determine the safety and
tolerability of the DURIN implant, as well as to evaluate the pharmacokinetic
profile of the active agent (leuprolide acetate) following administration of
the product candidate.

— As previously announced, Voyager completed dosing of a Phase II dose
ranging study of the active agent in women with Alzheimer’s disease.

Total revenues were $5.4 million for the three months ended March 31,
2005, compared to $3.4 million for the same period in 2004. Total
collaborative research and development and other revenues were $3.6 million
for the three months ended March 31, 2005, compared with $2.0 million for the
same period in 2004. The increase in total revenues was primarily attributable
to higher collaborative research and development revenue recognized from our
agreements with Pain Therapeutics, Inc., Voyager Pharmaceutical Corporation
and Endo Pharmaceuticals, Inc. (TRANSDUR-sufentanil) and higher product
revenues from our ALZET product lines.

Research and development expenses were $6.6 million for the three months
ended March 31, 2005, compared to $5.4 million for the same period in 2004.
The increase was primarily attributable to the higher development expenses for
SABER-Bupivacaine, TRANSDUR-Sufentanil and partnered product candidates.

Selling, general and administrative expenses were $2.5 million for the
three months ended March 31, 2005, compared to $2.2 million for the same
period in 2004. The increase in the three months ended March 31, 2005 was
primarily due to higher employee costs and external costs to comply with the
Sarbanes-Oxley Act.

Interest and other income was $485,000 for the three months ended March
31, 2005, compared with $304,000 for the same period in 2004. The increase in
interest income was primarily the result of higher yields on cash and
investment balances held during the three months ended March 31, 2005 compared
with the same period in 2004. Interest expense was both $1.1 million for the
three months ended March 31, 2005 and 2004. The interest expense was primarily
the result of the interest accrued on the $60.0 million convertible notes the
Company issued in June and July of 2003.

At March 31, 2005, DURECT had cash and investments of $55.8 million,
including $2.8 million in restricted investments, compared with cash and
investments of $61.8 million at December 31, 2004.

Revised Fiscal Year 2005 Financial Guidance

As a result of our collaboration with Endo Pharmaceuticals for our
TRANSDUR(TM) sufentanil patch product candidate in the U.S. and Canada, we
anticipate that our December 31, 2005 cash and investments balance to be in
the range of $48.0 million to $50.0 million, which includes a $10.0 million
up-front payment from Endo Pharmaceuticals.

About DURECT Corporation

DURECT Corporation is an emerging specialty pharmaceutical company focused
on the development of pharmaceutical systems based on its proprietary drug
delivery platform technologies that treat chronic debilitating diseases and
enable biotechnology products. These platform technologies include the
SABER(TM) Delivery System (a patented and versatile depot injectable useful
for protein and small molecule delivery), the ORADUR(TM) sustained release
oral gel-cap technology (an oral sustained release technology with several
potential abuse deterrent properties), the DURIN(TM) Biodegradable Implant
(drug-loaded implant system), the TRANSDUR(TM) transdermal technology and the
MICRODUR(TM) Biodegradable Microparticulates (microspheres injectable system).
DURECT also collaborates with pharmaceutical companies to develop and
commercialize proprietary and enhanced pharmaceutical products based on its
technologies. DURECT has five disclosed on-going development programs of which
four are in collaboration with pharmaceutical partners. Additional information
about DURECT is available at www.www.durect.com.

trademarks of DURECT Corporation. Other referenced trademarks belong to their
respective owners.

DURECT Forward-Looking Statement

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 (and that of its third party collaborators where applicable)
abilities to complete the design, development, and manufacturing process
development of the product candidate, obtain product and manufacturing
approvals from regulatory agencies and manufacture and commercialize the
product candidate, as well as marketplace acceptance of the product candidate.
Further information regarding these and other risks is included in DURECT’s
Annual Report on Form 10-K for the year ended December 31, 2004 filed with the
SEC on March 14, 2005 under the heading “Factors that may affect future

                              DURECT CORPORATION

                   (in thousands, except per share amounts)

                                                        Three months ended
                                                            March 31,
                                                      2005           2004
                                                  (unaudited)    (unaudited)

    Product revenue, net                              $1,757         $1,365
    Collaborative research and
     development and other revenue                     3,597          2,020
    Total revenues                                     5,354          3,385

    Operating expenses:
     Cost of revenues                                    671            565
     Research and development                          6,618          5,409
     Selling, general and
      administrative                                   2,504          2,224
     Amortization of intangible assets                   303            335
     Stock-based compensation(1)                          50             35

         Total operating expenses                     10,146          8,568

    Loss from operations                             (4,792)        (5,183)

    Other income (expense):
     Interest and other income                           485            304
     Interest expense                                (1,120)        (1,111)

    Net other loss                                     (635)          (807)

    Net loss                                        $(5,427)       $(5,990)

    Net loss per share,
     basic and diluted                               $(0.10)        $(0.12)

    Shares used in computing
     basic and diluted net loss per share             51,887         51,124

    (1) Stock-based compensation related
        to the following:
    Cost of revenues                                     $--             $3
    Research and development                              46             27
    Selling, general and administrative                    4              5
                                                         $50            $35

                                DURECT CORPORATION
                                  (in thousands)
                                                    March 31,  December 31,
                                                     2005          2004 (1)

    Current assets:
     Cash and cash equivalents                       $18,472        $20,032
     Short-term investments                           20,065         21,765
     Accounts Receivable                              13,958          2,481
     Inventories                                       1,906          1,929
     Prepaid expenses and other current assets         1,417          1,364
    Total current assets                              55,818         47,571

    Property and equipment, net                        7,213          7,112
    Goodwill                                           6,399          6,399
    Intangible assets, net                             1,441          1,745
    Long-term investments                             14,454         17,218
    Restricted investments                             2,808          2,798
    Other non-current assets                           2,469          2,625
    Total assets                                     $90,602        $85,468

    Liabilities and stockholders' equity
    Current liabilities:
     Accounts payable, accrued liabilities
      and deferred revenue                            $8,398         $5,006
     Long-term obligations, current portion              435            483
    Total current liabilities                          8,833          5,489

    Long-term obligations, noncurrent portion         68,773         61,589

    Stockholders' equity                              12,996         18,390

    Total liabilities and stockholders' equity       $90,602        $85,468

    (1) Derived from audited financial statements.



CONTACT: Schond L. Greenway,
Executive Director, Investor Relations and
Strategic Planning of DURECT Corporation, 408-777-1417

Scroll to Top