DURECT Corporation Announces Second Quarter 2007 Financial Results

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CUPERTINO, Calif., Aug 07, 2007 /PRNewswire-FirstCall via COMTEX News Network/ — DURECT Corporation
(Nasdaq: DRRX) announced today financial results for the three months ended
June 30, 2007. Total revenues were $13.4 million for the three months ended
June 30, 2007, compared to $6.1 million for the same period in 2006; revenues
in the second quarter of 2007 include the earning of an $8.0 million milestone
payment under our Nycomed collaboration related to the clinical development of
POSIDUR(TM). Net loss for the three months ended June 30, 2007 was $479,000,
compared to a net loss of $8.7 million for the same period in 2006. Cash used
in operating activities was $6.1 million for the three months ended June 30,
2007, compared to $10.2 million in the three months ended June 30, 2006. At
June 30, 2007, we had cash and investments of $65.8 million, including $1.3
million in restricted investments, compared with cash and investments of $81.6
million at December 31, 2006. Cash flow in the second quarter of 2007 and the
reported cash and investments balance at June 30, 2007 do not reflect the $8.0
million milestone payment that had been earned but not received as of June 30,
2007; this payment was received on August 1, 2007.

Based on our financial results in the first half of 2007, the receipt of
an $8.0 million milestone payment from Nycomed and a reexamination of
anticipated financial results in the second half of 2007, we are now providing
revised financial guidance for cash burn in 2007 of approximately $25-27
million as compared to prior guidance of $32-36 million. This reforecast
continues to assume no major new collaborations during 2007, although we are
pursuing potential collaborations on multiple fronts including ELADUR,
TRANSDUR-Sufentanil for Europe and Asia, POSIDUR for Asia, as well as various
other programs.

“Our development programs continued to progress in the second quarter of
this year, as evidenced by positive results from our POSIDUR Phase IIb hernia
study, completion of enrollment in the Remoxy(TM) pivotal Phase III trial and
the initiation by Endo of their Phase II program with our TRANSDUR(TM)-
Sufentanil patch,” stated James E. Brown, D.V.M., President and CEO of DURECT.
“We expect further clinical developments in the second half of 2007 with
respect to POSIDUR, Remoxy and ELADUR.”

Recent Company Highlights:

  • POSIDUR. We recently announced positive results from a 122 patient
    Phase IIb clinical trial in which POSIDUR at a dose of 5 mL
    demonstrated statistically significant reductions in post-operative
    pain (by approximately 30% versus placebo) and in total consumption of
    supplemental opioid analgesic medications (approximately 3x less
    versus placebo) in patients undergoing inguinal hernia repair. This
    Phase IIb trial was designed to be the study upon which we and our
    collaborator Nycomed would base our decision for advancing POSIDUR
    into Phase III clinical trials. These successful results triggered an

    $8 million milestone payment by Nycomed to DURECT under the parties’
    collaborative agreement. We have scheduled an end-of-Phase II meeting
    with the U.S. Food & Drug Administration (FDA).

    POSIDUR is our post-operative pain relief depot that utilizes our
    patented SABER(TM) technology to deliver bupivacaine to provide up to
    three days of pain relief after surgery. POSIDUR is licensed to
    Nycomed for commercialization in Europe and select other countries,
    and DURECT has retained commercialization rights in the US, Canada and

  • Remoxy. According to Pain Therapeutics and King Pharmaceuticals, the
    Remoxy Phase III pivotal study is now fully enrolled and top-line
    results of this study are expected in the fourth quarter of 2007.

    Remoxy, an abuse-resistant long-acting form of oxycodone based on our
    ORADUR(TM) technology intended for the treatment of chronic pain, is
    currently in a pivotal Phase III trial in accordance with a Special
    Protocol Assessment (SPA) with the FDA. Remoxy is licensed to Pain
    Therapeutics, which has in turn sublicensed commercialization rights
    to King Pharmaceuticals.

  • TRANSDUR(TM)-Sufentanil. According to its public disclosures, Endo
    Pharmaceuticals commenced its Phase II program in June 2007.

    TRANSDUR-Sufentanil is our proprietary transdermal patch intended to
    provide sufentanil for a period of up to seven days from a single
    application for chronic pain sufferers. TRANSDUR-Sufentanil is
    licensed to Endo for commercialization in the US and Canada, and
    DURECT has retained commercialization rights for the rest of the

  • ELADUR(TM) (TRANSDUR-Bupivacaine). We are enrolling patients and
    expect to report data in 2007 from a Phase IIa trial designed to
    assess safety as well as the magnitude, duration and characteristics
    of analgesic activity of ELADUR in approximately 50 patients with
    Post-Herpetic Neuralgia (PHN).

    ELADUR is our proprietary transdermal patch intended to provide
    bupivacaine for a period of up to three days from a single
    application. DURECT retains full commercial rights to this drug

Earnings Conference Call

A live audio webcast of a conference call to discuss second quarter 2007
results will be broadcast live over the internet at 4:30 p.m. Eastern Time and
is available by accessing DURECT’s homepage at www.www.durect.com and clicking
“Investor Relations.” If you are unable to participate during the live
webcast, the call will be archived on DURECT’s website under Audio Archive in
the “Investor Relations” section.

About DURECT Corporation

DURECT Corporation is an emerging specialty pharmaceutical company
developing pharmaceutical systems based on its proprietary drug delivery
platform technologies. The Company currently has a number of late-stage
pharmaceutical products in development addressing large markets in pain
management, with a number of research programs underway targeting chronic
disease and other therapeutic areas. For more information, please visit

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

DURECT Forward-Looking Statement

The statements in this press release regarding our products in
development, product development plans, our intended end-of-Phase II meeting
with the FDA and other anticipated regulatory, clinical and development
milestones and timing thereof, future clinical trial results, our intended
emergence as a specialty pharmaceutical company and anticipated 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, our (and that of our third party collaborators where applicable)
abilities to design, enroll, conduct and complete clinical trials, complete
the design, development, and manufacturing process development of the product
candidate, obtain product and manufacturing approvals from regulatory
agencies, manufacture and commercialize the product candidate and manage and
obtain capital to fund our growth, operations and expenses. Further
information regarding these and other risks is included in our Form 10-Q filed
on May 9, 2007 under the heading “Risk Factors.”

                                DURECT CORPORATION
                     (in thousands, except per share amounts)

                                     Three months ended   Six months ended
                                          June 30,            June 30,
                                      2007        2006      2007      2006

    Collaborative research and
     development revenue            $3,408      $4,048    $6,866    $7,106
    Milestone revenue                8,000          --     8,000        --
    Product revenue, net             2,024       2,060     4,292     4,213
     Total revenues                 13,432       6,108    19,158    11,319

    Operating expenses:
     Cost of revenues (1)              778         770     1,638     1,599
     Research and development (1)    9,630       8,549    19,982    15,713
     Selling, general and
      administrative (1)             3,683       3,189     7,221     6,194
     Amortization of intangible
      assets                             8          94        15       394
     Total operating expenses       14,099      12,602    28,856    23,900

    Loss from operations              (667)     (6,494)   (9,698)  (12,581)

    Other income (expense):
     Interest and other income         908         978     1,886     1,884
     Interest expense                 (720)       (932)   (1,434)   (2,009)
     Debt conversion expense            --      (2,287)       --    (2,287)
     Net other income (expense)        188      (2,241)      452    (2,412)

    Net loss                         $(479)    $(8,735)  $(9,246) $(14,993)

    Net loss per share,
     basic and diluted              $(0.01)     $(0.14)   $(0.13)   $(0.24)

    Shares used in computing
     basic and diluted net loss
     per share                      69,364      64,207    69,298    63,040

     (1)  Includes stock-based compensation related to the following:

    Cost of revenues                    33         $18       $67       $26
    Research and development         1,097         697     2,253     1,311
    Selling, general and
     administrative                    555         323     1,223       644
     Total stock-based
      compensation                  $1,685      $1,038    $3,543    $1,981

                                DURECT CORPORATION
                             CONDENSED BALANCE SHEETS
                                  (in thousands)

                                            As of               As of
                                        June 30, 2007  December 31, 2006 (1)
    Current assets:
     Cash and cash equivalents             $32,231             $41,554
     Short-term investments                 29,342              28,297
     Accounts receivable                    11,658               2,152
     Inventories                             2,039               2,052
     Prepaid expenses and other
      current assets                         2,054               1,744
    Total current assets                    77,324              75,799

    Property and equipment, net              7,769               7,451
    Goodwill                                 6,399               6,399
    Intangible assets, net                      96                 111
    Long-term investments                    2,947              10,472
    Restricted Investments                   1,284               1,284
    Other non-current assets                   740                 969
    Total assets                           $96,559            $102,485

    Current liabilities:
     Accounts payable                       $1,123                $864
     Accrued liabilities                     5,210               4,522
     Contract research liability             2,168               1,624
     Interest payable on convertible notes      97                  97
     Deferred revenue, current portion       5,324               5,348
     Equipment financing obligations,
      current portion                           36                  34
     Bonds payable, current portion            210                 210
     Other short-term liabilities              141                  --
    Total current liabilities               14,309              12,699

    Bond payable and equipment
     financing obligations,
     noncurrent portion                        587                 606
    Convertible subordinated notes
     due 2008                               37,337              37,337
    Deferred revenue, noncurrent portion    11,887              14,507
    Other long-term liabilities                498                 304

    Stockholders' equity                    31,941              37,032
    Total liabilities and
     stockholders' equity                  $96,559            $102,485

     (1)  Derived from audited financial statements.


Matthew J. Hogan,
Chief Financial Officer
of DURECT Corporation,
Jeremiah Hall,
Senior Vice President of Feinstein Kean Healthcare,
for DURECT Corporation


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