DURECT Corporation Announces Fourth Quarter and Year End 2007 Financial Results

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CUPERTINO, Calif., Feb. 5 /PRNewswire-FirstCall/ — DURECT Corporation
(Nasdaq: DRRX) announced today financial results for the three months and year
ended December 31, 2007. Total revenues were $6.6 million for the three months
ended December 31, 2007, compared to $5.4 million for the same period in 2006.
Net loss for the three months ended December 31, 2007 was $7.2 million,
compared to a net loss of $9.8 million for the same period in 2006.

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For the fiscal year ended December 31, 2007, total revenues were
$30.7 million, compared to $21.9 million for the same period in 2006. Net
loss for the year ended December 31, 2007 was $24.3 million, compared to a net
loss of $33.3 million for the same period in 2006.

At December 31, 2007, DURECT had cash and investments of $62.0 million,
compared with cash and investments of $81.6 million at December 31, 2006;
these figures include restricted investments of $1.0 million at December 31,
2007 and $1.3 million at December 31, 2006. DURECT’s net decrease in cash
during 2007 was $19.6 million.

“DURECT’s pipeline advanced during 2007, reporting positive clinical trial
results for three programs in Phase III or II. We expect to continue this
progress in 2008 as we look forward to the filing of the first New Drug
Application (NDA) based on our ORADUR(TM) technology and further advancing our
late stage programs,” stated James E. Brown, D.V.M., President and CEO of
DURECT. “Remoxy(TM) met the primary endpoint in its pivotal Phase III study
conducted under a Special Protocol Assessment (SPA), POSIDUR(TM) reported
statistically significant improvements in pain control while reducing the use
of narcotics in a Phase IIb hernia study, and ELADUR(TM) showed improved pain
control versus placebo over the three day treatment period in a Phase IIa
study. Each of these programs addresses large market opportunities with
product features that offer clear advantages over existing therapeutics.”

Highlights for DURECT in Fiscal Year 2007 include:

— Remoxy. In December, our collaborators King Pharmaceuticals and Pain
Therapeutics announced that the pivotal Phase III trial for Remoxy
successfully met its primary endpoint (p<0.01) that was prospectively
defined by the U.S. Food and Drug Administration (FDA) during the SPA
process. In addition, the study achieved statistically significant
results in secondary endpoints such as Quality of Analgesia (p<0.01)
and Global Assessment (p<0.01). No drug related safety issues were
noted in the study.

Remoxy is an abuse-resistant, long-acting form of oxycodone based on
our ORADUR(TM) technology intended for the treatment of chronic pain.

— POSIDUR Post-Operative Pain Relief Depot. In July, we 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. These successful results triggered an $8 million
milestone payment by Nycomed to DURECT under the parties’ international
collaborative agreement. We have held an end-of-Phase II meeting with
the U.S. Food & Drug Administration (FDA) and are in dialogue with the
FDA regarding the Phase III program. Hospira, our manufacturer of
POSIDUR, has produced supplies for Phase III clinical trials.

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 Asia.

— ELADUR (TRANSDUR(TM)-Bupivacaine). In December, we announced positive
results from a 60 patient Phase IIa clinical trial. In this study of
patients suffering from post-herpetic neuralgia, ELADUR showed improved
pain control versus placebo during the 3-day continuous treatment
period. In addition, ELADUR appeared to be well tolerated overall, and
patients treated with ELADUR and placebo exhibited similar safety
profiles. We have in place a relationship with Corium International,
whereby Corium will be our worldwide supplier of ELADUR patches.

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

— TRANSDUR-Sufentanil. Endo Pharmaceuticals, our licensee for
commercialization in the US and Canada, has publicly disclosed that
they have commenced their Phase II program in June 2007.

TRANSDUR-Sufentanil is our proprietary transdermal patch intended to
provide sufentanil to chronic pain sufferers for a period of up to
seven days from a single application.

— Expansion of Patent Portfolio. In the fourth quarter of 2007, we
acquired from a third party a portfolio of worldwide patents relating
to drug delivery technologies. This portfolio consists of
approximately 22 issued and pending U.S. patents and patent
applications as well as their international counterparts. We believe
this portfolio will benefit our business by broadening our drug
delivery technology base and strengthening our intellectual property

— Reduction in Convertible Notes. We reduced the balance of our
outstanding convertible notes from $37.3 million at December 31, 2006
to $23.6 million as of December 31, 2007 by paying a small premium over
the future interest payments due on these notes in order to induce
early conversion. The outstanding convertible notes will mature on
June 15, 2008, if not converted earlier.

Financial Guidance for 2008 and Major Potential Milestones Over the Next
12-18 Months

— Financial Guidance. Our net cash consumption is heavily influenced by
the timing and structure of new corporate collaborations, as well as
the achievement of milestones under existing collaborations. While we
anticipate entering into new collaborations in 2008 and beyond,
assuming no new collaborations, no milestone payments and aggressive
funding of our R&D programs, many of which are in clinical development,
we anticipate our net cash consumption in 2008 will be approximately
$32-36 million.

— Business Development Activities. We have multiple late stage programs
that may potentially be partnered over the next 12-18 months. These
include ELADUR, TRANSDUR-Sufentanil for Europe and for Asia, POSIDUR
for Asia, as well as various internal programs which we have not
described publicly in detail.

— Remoxy. Our collaborator, Pain Therapeutics, has stated that they
expect to file the NDA for Remoxy in Q2 2008.

— POSIDUR. We are continuing our dialogue with the FDA regarding our
Phase III program, upon completion of which we plan to commence that

— ELADUR. We are conducting manufacturing scale-up and processing to
secure Phase III supplies, and are developing our clinical and
regulatory strategy.

— TRANSDUR-Sufentanil Patch. Endo Pharmaceuticals is continuing to
conduct Phase II studies with TRANSDUR-Sufentanil designed to evaluate
the conversion of patients on oral opioids to TRANSDUR-Sufentanil.

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 the anticipated filing of
an NDA for Remoxy, our anticipated commencement of the Phase III program for
POSIDUR, our possible entry into future collaborative agreements and our
projected financial results as well as other statements regarding DURECT’s
products in development, product development plans, anticipated regulatory,
clinical and development milestones and timing thereof, future clinical trial
results, our business development intentions and DURECT’s emergence as a
specialty pharmaceutical company 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 obtain approvals from
regulatory agencies with respect to its development activities and products,
design, enroll, conduct and complete clinical trials, complete the design,
development, and manufacturing process development of the referenced product
candidates, consummate collaborative agreements relating to our product
candidates and technologies, manufacture and commercialize the referenced
product candidates, obtain marketplace acceptance of the referenced product
candidates and manage and obtain capital to fund its growth, operations and
expenses. Further information regarding these and other risks is included in
DURECT’s Form 10-Q on November 8, 2007 under the heading “Risk Factors.”

                              DURECT CORPORATION
                   (in thousands, except per share amounts)

                                         Three months ended    Year Ended
                                            December 31,       December 31,
                                           2007     2006      2007      2006

    Collaborative research and
     development revenue                  $4,559   $3,522   $14,417   $13,786
    Milestone revenue                        -        -       8,000       -
    Product revenue, net                   2,026    1,919     8,258     8,108
        Total revenues                     6,585    5,441    30,675    21,894

    Operating expenses:
        Cost of revenues (1)                 807      983     3,225     3,248
        Research and development (1)       9,502   11,598    38,342    37,241
        Selling, general and
         administrative (1)                3,262    2,877    13,618    12,417
        Amortization of intangible
         assets                                8        8        31       424
        Total operating expenses          13,579   15,466    55,216    53,330

    Loss from operations                  (6,994) (10,025)  (24,541)  (31,436)

    Other income (expense):
        Interest and other income            753      991     3,545     3,832
        Interest expense                    (475)    (717)   (2,625)   (3,436)
        Debt conversion expense             (495)     -        (718)   (2,287)
    Net other income (expense)              (217)     274       202    (1,891)

    Net loss                             $(7,211) $(9,751) $(24,339) $(33,327)

    Net loss per share, basic and
     diluted                              $(0.10)  $(0.14)   $(0.35)   $(0.51)

    Shares used in computing basic and
     diluted net loss per share           73,641   68,980    70,483    65,961

    (1) Includes stock-based
     compensation related to the

    Cost of revenues                         $32      $28      $130       $75
    Research and development                 995      801     4,286     2,885
    Selling, general and administrative      553      420     2,273     1,431
        Total stock-based compensation    $1,580   $1,249    $6,689    $4,391

                              DURECT CORPORATION
                           Condensed Balance Sheet
                                (in thousands)
                                                     As of          As of
                                                  December 31,   December 31,
                                                     2007          2006 (1)
    Current assets:
      Cash and cash equivalents                     $37,589        $41,554
      Short-term investments                         19,710         28,297
      Accounts receivable                             3,622          2,152
      Inventories                                     1,963          2,052
      Prepaid expenses and other current assets       1,904          1,744
    Total current assets                             64,788         75,799

    Property and equipment, net                       7,658          7,451
    Goodwill                                          6,399          6,399
    Intangible assets, net                              180            111
    Long-term investments                             3,697         10,472
    Restricted Investments                            1,020          1,284
    Other non-current assets                            278            969
    Total assets                                    $84,020       $102,485

    Current liabilities:
      Accounts payable                               $1,834           $864
      Accrued liabilities                             5,499          4,522
      Contract research liability                     1,946          1,624
      Interest payable on convertible notes              61             97
      Deferred revenue, current portion               5,728          5,348
      Equipment financing obligations, current portion   38             34
      Bonds payable, current portion                    225            210
      Convertible subordinated notes due 2008        23,599            -
      Other short-term liabilities                      158            -
    Total current liabilities                        39,088         12,699

    Bond payable and equipment financing obligations,
     noncurrent portion                                 343            606
    Convertible subordinated notes due 2008             -           37,337
    Deferred revenue, noncurrent portion              9,268         14,507
    Other long-term liabilities                         740            304

    Stockholders' equity                             34,581         37,032
    Total liabilities and stockholders' equity      $84,020       $102,485

    (1) Derived from audited financial statements.

CONTACT: Matt Hogan, Chief Financial Officer of DURECT Corporation,
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Web site: http://www.www.durect.com

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