DURECT Corporation Announces Second Quarter 2005 Financial Results

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CUPERTINO, Calif., July 22 /PRNewswire-FirstCall/ — DURECT Corporation
(Nasdaq: DRRX) announced today financial results for the three months ended
June 30, 2005.

DURECT’s net loss for the three months ended June 30, 2005 was $3.6
million or 7 cents per share, compared to a net loss of $7.4 million or 14
cents per share for the same period in 2004. DURECT’s results for the three
months ended June 30, 2005 included non-cash charges of $646,000 for the
amortization of intangible assets and stock-based compensation, compared to
$443,000 for the same period in 2004. Cash provided by operating activities
was $4.8 million for the three months ended June 30, 2005, compared to $6.3
million cash used for the same period in 2004.

“We had a very positive second quarter and executed on our corporate
objectives. We announced exciting preliminary results from cohort 2 of the
Phase II study for our post-operative pain relief depot,
SABER(TM)-Bupivacaine. In addition, we advanced this program into the third
and last cohort of the Phase II study, which is anticipated to enroll 60
patients. Also, our partner Pain Therapeutics announced the completion of
enrollment of their first Phase III study using our ORADUR sustained release
oral gel-cap technology, and we look forward to the results from this study,”
stated James E. Brown, DVM, President and CEO of DURECT.

Dr. Brown added, “We continue to make significant progress on our other
development programs, including our collaborations with Voyager with respect
to Alzheimer’s disease and ENDO with respect to our seven-day sufentanil
patch. Today, we also announced that we have taken the opportunity to retire a
portion of our outstanding convertible notes in order to further strengthen
our financial position.”

Total revenues were $8.8 million for the three months ended June 30, 2005,
compared to $3.1 million for the same period in 2004. Total collaborative
research and development and other revenues were $6.9 million for the three
months ended June 30, 2005, compared with $1.3 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 Endo Pharmaceuticals, Inc. (TRANSDUR-sufentanil), Voyager Pharmaceutical
Corporation, and Pain Therapeutics, Inc. and higher product revenues from our
ALZET and polymer product lines.

Research and development expenses were $7.6 million for the three months
ended June 30, 2005, compared to $6.0 million for the same period in 2004.
The increase was primarily attributable to the higher development expenses for
SABER-Bupivacaine, TRANSDUR-Sufentanil, DURIN-Leuprolide and certain other
product candidates.

Selling, general and administrative expenses were $2.8 million for the
three months ended June 30, 2005, compared to $2.3 million for the same period
in 2004. The increase in the three months ended June 30, 2005 was primarily
due to higher employee related costs and other external costs to comply with
the Sarbanes-Oxley Act.

Interest and other income was $407,000 for the three months ended June 30,
2005, compared with $289,000 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 June 30, 2005 compared
with the same period in 2004. Interest expense was both $1.1 million for the
three months ended June 30, 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 June 30, 2005, DURECT had cash and investments of $60.5 million,
including $2.4 mil……..restricted investments, ……. with cash and
investments of $61.8 million at December 31, 2004. We anticipate that our
December 31, 2005 cash and investments balance to be in the range of $48.0
million to $50.0 million.

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, clinical trials 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 Quarterly Report on Form 10-Q for the period ended
March 31, 2005 filed with the SEC on May 6, 2005 under the heading “Factors
that may affect future results.”

                              DURECT CORPORATION
                   (in thousands, except per share amounts)

                                 Three months ended     Six months ended
                                     June 30,               June 30,
                                  2005        2004       2005       2004
                             (unaudited) (unaudited) (unaudited) (unaudited)

    Product revenue, net         $1,889      $1,760     $3,646    $3,125
    Collaborative research
     and development and
     other revenue                6,930       1,320     10,527     3,340
        Total revenues            8,819       3,080     14,173     6,465
    Operating expenses:
      Cost of revenues              689         867      1,360     1,432
      Research and
       development                7,613       6,040     14,231    11,449
      Selling, general
       and administrative         2,812       2,339      5,316     4,563
      Amortization of
       intangible assets            303         308        606       643
      Stock-based compensation(1)   343         135        393       170
        Total operating expenses 11,760       9,689     21,906    18,257
    Loss from operations         (2,941)     (6,609)    (7,733)  (11,792)
    Other income (expense):
      Interest and other income     407         289        892       593
      Interest expense           (1,114)     (1,113)    (2,234)   (2,224)
    Net other expense              (707)       (824)    (1,342)   (1,631)
    Net loss                    $(3,648)    $(7,433)   $(9,075) $(13,423)
    Net loss per common
     share, basic and
     diluted                    $ (0.07)     $(0.14)    $(0.17)   $(0.26)
    Shares used in computing
     basic and diluted net
     loss per share              52,047      51,396     51,967    51,260


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

    Cost of revenues                $--        $(2)        $--        $1
    Research and development         --         126         46       153
    Selling, general and
     administrative                 343          11        347        16
                                   $343        $135       $393      $170

                              DURECT CORPORATION
                                (in thousands)

                                                    June 30,   December 31,
                                                      2005         2004 (1)
    Current assets:
      Cash and cash equivalents                      $30,269        $20,032
      Short-term investments                          18,918         21,765
      Accounts receivable                              6,166          2,481
      Inventories                                      1,911          1,929
      Prepaid expenses and other current assets        1,139          1,364
    Total current assets                              58,403         47,571

    Property and equipment, net                        7,258          7,112
    Goodwill                                           6,399          6,399
    Intangible assets, net                             1,138          1,745
    Long-term investments                              8,926         17,218
    Restricted investments                             2,425          2,798
    Other non-current assets                           2,310          2,625
    Total assets                                     $86,859        $85,468

    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable, accrued liabilities
       and deferred revenue                      E.E...).612         $5,006
   =.2.-.1.term obligations, current portion             366            483
    Total current liabilities                          7,978          5,489

    Long-term obligations, noncurrent portion         68,647         61,589

    Stockholders' equity                              10,234         18,390

    Total liabilities and stockholders' equity       $86,859        $85,468

    (1) Derived from audited financial statements.



/CONTACT: Schond L. Greenway, Executive Director, Investor Relations and
Strategic Planning of DURECT Corporation, +1-408-777-1417/
/Web site: http://www.www.durect.com /

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