DURECT Corporation Announces Third Quarter 2008 Financial Results

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CUPERTINO, Calif., Nov. 3 /PRNewswire-FirstCall/ — DURECT Corporation
(Nasdaq: DRRX) announced today financial results for the three months ended
September 30, 2008. Total revenues were $6.6 million for the three months
ended September 30, 2008, compared to $4.9 million for the same period in
2007. Net loss for the three months ended September 30, 2008 was
$9.2 million, compared to a net loss of $7.9 million for the same period in

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

At September 30, 2008, we had cash and investments of $38.9 million,
compared to cash and investments of $62.0 million at December 31, 2007; these
figures include restricted investments of $1.0 million at September 30, 2008
and at December 31, 2007.

Based on our financial results in the first three quarters of 2008, the
receipt of a $20 million upfront license fee from Alpharma in the fourth
quarter of 2008 and a review of projections for the remainder of 2008, we are
now revising our financial guidance for cash burn in 2008 from $32-36 million
to approximately $10-12 million. Assuming that none of the other business
development opportunities that we are currently pursuing close this year, we
anticipate ending 2008 with more than $50 million in cash and investments.

“The first major event for us since the end of the second quarter was the
granting of Priority Review status by the FDA of the New Drug Application
(NDA) for REMOXY(R), which represents the first NDA filing for a product
candidate based on one of DURECT’s platform technologies,” stated James E.
Brown, D.V.M., President and CEO of DURECT. “The second major event for us
was the establishment of a collaboration with Alpharma to develop and
commercialize our ELADUR(TM) bupivacaine pain patch. We believe that
licensing of this program to Alpharma, a company with proven development and
commercialization capabilities, will benefit the program, and has also enabled
us to substantially lower our cash burn rate for 2008 and strengthen our
financial resources.”

Recent Highlights:

— REMOXY and other Abuse-Resistant Opioids. On June 10, 2008, an NDA for
REMOXY (ORADUR(R)-based oxycodone) was submitted to the U.S. Food and Drug
Administration (FDA). In August, this NDA filing was accepted and granted
Priority Review by the FDA. The FDA typically grants Priority Review to drug
candidates that have the potential to demonstrate significant improvements
compared to marketed products. The FDA goal for completing review of a drug
with Priority Review is six months from the date the application was submitted
(i.e., December 10, 2008). REMOXY will be the subject of an FDA public
advisory committee meeting scheduled for November 13, 2008.

REMOXY, an investigational drug, is a long acting oral formulation of
oxycodone intended to treat moderate to severe pain. Based on DURECT’s
ORADUR(R) technology, which is covered by issued and pending patents owned by
us, REMOXY is designed to resist common methods of prescription drug misuse
and abuse.

In addition to REMOXY, there are three other ORADUR-based abuse-resistant
opioids covered in our collaboration with Pain Therapeutics. Pain
Therapeutics has previously announced positive results from a Phase I clinical
trial with one of these drug candidates, and has stated that it commenced a
Phase I clinical study with a third abuse-resistant opioid drug candidate in
August 2008.

— POSIDUR(TM) (SABER(TM)-Bupivacaine) Post-Operative Pain Relief Depot.
We continue to be in dialogue with the FDA regarding the Phase III program and
believe we are making progress in defining that program. In parallel with
these discussions, we and our European collaborator, Nycomed, continue to
advance development of this drug candidate. As one element in advancing the
program, because an orthopedic surgical model will be part of our proposed
studies for regulatory approval, we are commencing a 60-patient Phase IIb
study in Australia using a 5 mL dose in shoulder surgery intended to allow us
to confirm aspects of our clinical study design and conduct. Additionally,
Nycomed is commencing Phase IIb studies in surgical models in Europe. These
studies will contribute to the total number of patient exposures that will
ultimately be required by the FDA and the European Medicines Agency (EMEA) as
part of the product approval process in the U.S. and Europe.

POSIDUR is our post-operative pain relief depot that utilizes our patented
SABER 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 we have retained commercialization
rights in the US, Canada and Asia.

— ELADUR (TRANSDUR(TM)-Bupivacaine). In September 2008, we entered into
a development and license agreement with Alpharma Ireland Ltd., an affiliate
of Alpharma, Inc., granting such party the exclusive worldwide rights to
develop and commercialize ELADUR. Alpharma, Inc. is a global specialty
pharmaceutical company with a growing branded franchise in the U.S. pain

This Agreement became effective in October 2008 after passing clearance
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Under this
agreement, Alpharma paid us an upfront license fee of $20 million in the
fourth quarter of 2008, with possible additional payments of up to $93 million
upon the achievement of predefined development and regulatory milestones
spread over multiple clinical indications and geographical territories as well
as possible additional payments of up to $150 million in sales based
milestones. If ELADUR is commercialized, DURECT would also receive royalties
on product sales. Alpharma will control and fund the further development of
the program.

ELADUR is our proprietary transdermal patch intended to deliver
bupivacaine for a period of up to three days from a single application.

— TRANSDUR-Sufentanil. Endo Pharmaceuticals, our licensee for
commercialization of TRANSDUR-Sufentanil in the US and Canada, has stated that
they expect to have data from a Phase II study by the end of 2008 and expect
to hold an End-of-Phase II meeting with the FDA in early 2009.

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

— Business Development Activities. We continue to be active in business
development and have multiple programs that are the subject of partnering
discussions with third parties.

Earnings Conference Call

A live audio webcast of a conference call to discuss third quarter 2008
results will be broadcast live over the internet at 4:30 p.m. Eastern Time on
November 3 and is available by accessing DURECT’s homepage at
http://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 is an emerging specialty pharmaceutical company developing
innovative drugs for pain and other chronic diseases, with late-stage
development programs including REMOXY(R), POSIDUR(TM), ELADUR(TM), and
TRANSDUR(TM)-Sufentanil. DURECT’s proprietary oral, transdermal and
injectable depot delivery technologies enable new indications and superior
clinical/commercial attributes such as abuse deterrence, improved convenience,
compliance, efficacy and safety for small molecule and biologic drugs. For
more information, please visit http://www.www.durect.com.

trademarks of DURECT Corporation. Other referenced trademarks belong to their
respective owners. REMOXY, POSIDUR, ELADUR and TRANSDUR-Sufentanil are drug
candidates under development and have not been approved for commercialization
by the US Food and Drug Administration or other health authorities.

DURECT Forward-Looking Statement

The statements in this press release regarding DURECT’s future cash
balances and other financial results, the potential FDA approval or benefits
of REMOXY, the planned and potential Phase IIb and Phase III trials of
POSIDUR, anticipated trials and other requirements for regulatory approval of
POSIDUR, potential payments from Alpharma for development and
commercialization of ELADUR, the anticipated Phase II trial data and
End-of-Phase II meeting for TRANSDUR-Sufentanil, our possible entry into
future collaborative agreements as well as other statements regarding DURECT’s
products in development, product development plans, product designs and
benefits, 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, avoid infringing patents held
by other parties and securing and defending patents of our own, 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 August 8, 2008 under the heading “Risk Factors.”

                              DURECT CORPORATION

                   (in thousands, except per share amounts)

                                        Three months ended  Nine months ended
                                           September 30,      September 30,
                                           2008     2007      2008      2007

Collaborative research and

development and other revenue $4,341 $2,992 $12,477 $17,858

    Product revenue, net                   2,293    1,940     6,898     6,232
        Total revenues                     6,634    4,932    19,375    24,090

    Operating expenses:
        Cost of revenues (1)                 870      780     2,674     2,418
        Research and development (1)      11,423    8,858    30,955    28,840
        Selling, general and
         administrative (1)                3,825    3,135    11,778    10,356
        Amortization of intangible
         assets                               12        8        35        23
        Total operating expenses          16,130   12,781    45,442    41,637

    Loss from operations                  (9,496)  (7,849)  (26,067)  (17,547)

Other income (expense):

        Interest and other income            349      906     1,285     2,792
        Interest and other expense           (14)    (716)     (773)   (2,150)
        Debt conversion expense              -       (223)      -        (223)
    Net other income (expense)               335      (33)      512       419

    Net loss                             $(9,161) $(7,882) $(25,555) $(17,128)

Net loss per share, basic and

     diluted                              $(0.11)  $(0.11)   $(0.33)   $(0.25)

Shares used in computing basic and

     diluted net loss per share           81,779   69,655    77,124    69,414

(1) Includes stock-based

compensation related to the


    Cost of revenues                         $44      $31      $110       $98
    Research and development               1,300    1,038     4,267     3,291

Selling, general and administrative 619 497 2,068 1,720

        Total stock-based compensation    $1,963   $1,566    $6,445    $5,109

                              DURECT CORPORATION
                   (in thousands, except per share amounts)

                                             As of          As of
                                   September 30, 2008 December 31, 2007 (1)

Current assets:

      Cash and cash equivalents             $23,085        $37,589
      Short-term investments                 13,452         19,710
      Accounts receivable (net of
       allowances of $120 and $49,
       respectively)                          3,773          3,622
      Inventories                             2,830          1,963
      Prepaid expenses and other
       current assets                         1,380          1,904
    Total current assets                     44,520         64,788

    Property and equipment, net               6,484          7,658
    Goodwill                                  6,399          6,399
    Intangible assets, net                      170            180
    Long-term investments                     1,334          3,697
    Restricted Investments                    1,046          1,020
    Other long-term assets                      278            278
    Total assets                            $60,231        $84,020


Current liabilities:

      Accounts payable                         $754         $1,834
      Accrued liabilities                     6,226          5,499
      Contract research liability               871          1,946
      Deferred revenue, current portion       6,034          5,728
      Convertible subordinated notes              -         23,599
      Other short-term liabilities              425            482
    Total current liabilities                14,310         39,088

Deferred revenue, non-current portion 5,339 9,268

    Other long-term liabilities                 934          1,083

    Stockholders' equity                     39,648         34,581

Total liabilities and stockholders’

     equity                                 $60,231        $84,020

(1) Derived from audited financial statements.

CONTACT: Matthew J. Hogan, Chief Financial Officer of DURECT
Corporation, +1-408-777-4936
Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20020717/DRRXLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
Web site: http://www.www.durect.com

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