DURECT Corporation Announces Fourth Quarter and Year End 2008 Financial Results

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CUPERTINO, Calif., Feb. 9 /PRNewswire-FirstCall/ — DURECT Corporation
(Nasdaq: DRRX) announced today financial results for the three months and year
ended December 31, 2008. Total revenues were $6.6 million for the three months
ended December 31, 2008 and December 31, 2007. Net loss for the three months
ended December 31, 2008 was $19.5 million, compared to a net loss of $7.2
for the same period in 2007; net loss in the fourth quarter of 2008
included a $13.5 million non-cash write-down associated with a research and
development program (Chronogesic(R)) that we are no longer actively pursuing.

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

For the fiscal year ended December 31, 2008, total revenues were $26.0
, compared to $30.7 million for the same period in 2007. Net loss for
the year ended December 31, 2008 was $45.1 million (including the $13.5
write-down described above), compared to a net loss of $24.3 million
for the same period in 2007.

At December 31, 2008, DURECT had cash and investments of $52.7 million,
compared with cash and investments of $62.0 million at December 31, 2007,
including restricted investments of $1.0 million at December 31, 2008 and
2007. DURECT’s net decrease in cash and investments during 2008 was $9.3
, as compared to a net decrease in cash and investments during 2007 of
$19.6 million.

DURECT continued to advance our late stage pipeline in 2008, licensed
ELADUR(TM) on attractive terms including a $20 million upfront payment, and
strengthened our balance sheet through the elimination of our convertible
debt,” stated James E. Brown, D.V.M., President and CEO of DURECT. “Our goals
for 2009 include commencing the Phase III program with POSIDUR(TM), advancing
our other development programs in clinical studies, and pursuing favorable
collaborations around selected programs.”

Highlights for DURECT in Fiscal Year 2008 include:

— REMOXY. 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. Pain Therapeutics, the NDA sponsor and our collaborator, received a
Complete Response Letter from the FDA in December 2008 indicating that the NDA
is not approved in its present form. Pain Therapeutics has announced that the
FDA believes additional non-clinical data will be required to support the
approval of REMOXY, but that the FDA has not requested or recommended
additional clinical efficacy studies prior to approval.

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 patents and pending patent
applications owned by us, REMOXY is designed to resist common methods of
prescription drug misuse and abuse.

— POSIDUR (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, in December 2008 we commenced 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 prepared to commence 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). During 2008, DURECT presented data
showing improved pain control with ELADUR versus placebo over the three day
treatment period in a Phase IIa study. We also received Orphan Drug
Designation, such that if ELADUR is the first bupivacaine product approved for
Post-Herpetic Neuralgia (PHN), ELADUR will receive seven years of market
exclusivity for PHN following its approval by the FDA.

In September 2008, we entered into a development and license agreement
with Alpharma Ireland Ltd., an affiliate of Alpharma, Inc., granting Alpharma
exclusive worldwide rights to develop and commercialize ELADUR. 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 program.
Alpharma, Inc., including its rights and obligations under our agreement, was
acquired by King Pharmaceuticals in December 2008.

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, completed Phase
II studies designed to evaluate the conversion of patients on oral opioids to
TRANSDUR-Sufentanil during 2008.

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.

— Reduction in Convertible Notes. Our balance sheet was strengthened
during 2008 by the elimination of all of our $23.6 million of convertible
debt, which was converted into common stock in June 2008 per the original
terms of our indenture.

Financial Guidance for 2009 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 2009 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 2009 will be approximately $28-32 million.

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

— REMOXY. According to Pain Therapeutics, they and their outside
technical advisors are evaluating the FDA Complete Response Letter and plan to
meet with the FDA in Q2 2009. Pain Therapeutics believes this will provide
them with a more reliable context in which to make projections about REMOXY.

— POSIDUR. While not designed for statistical significance, we
anticipate having results from our on-going Phase IIb shoulder study by
mid-2009. We are continuing our dialogue with the FDA regarding our Phase III
program, and anticipate commencing that program in 2009.

— ELADUR. As the next step in developing this product candidate, we
anticipate that a Phase IIb study in PHN will be commenced in 2009.

— TRANSDUR-Sufentanil Patch. Endo Pharmaceuticals, our licensee for
commercialization of TRANSDUR-Sufentanil in the US and Canada, has stated that
they expect to hold an End-of-Phase II meeting with the FDA in early 2009.

Earnings Conference Call

A live audio webcast of a conference call to discuss 2008 results will be
broadcast live over the internet at 4:30 p.m. Eastern Time on February 9 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 under the heading “Financial Guidance
for 2009 and Major Potential Milestones over the Next 12-18 Months,” other
statements regarding development and potential uses of REMOXY, POSIDUR, ELADUR
and TRANSDUR-Sufentanil, and potential milestone payments or royalties based
on the sale of such products 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, delays and additional costs due to
requirements imposed by regulatory agencies, DURECT’s (and that of its third
party collaborators where applicable) difficulty or failure 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 secure
and defend 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 November 4, 2008 under the
heading “Risk Factors.”

                                DURECT CORPORATION
                     (in thousands, except per share amounts)

                                         Three months ended     Year ended
                                            December 31,       December 31,
                                          2008      2007     2008       2007

    Collaborative research and
     development revenue                  $4,715   $4,559   $17,192   $22,417
    Product revenue, net                   1,867    2,026     8,765     8,258
        Total revenues                     6,582    6,585    25,957    30,675

    Operating expenses:
        Cost of revenues (1)                 691      807     3,365     3,225
        Research and development (1)       8,456    9,502    39,411    38,342
        Selling, general and
         administrative (1)                3,684    3,262    15,462    13,618
        Write down of deferred
         royalties and commercial
         rights                           13,480      -      13,480       -
        Amortization of intangible
         assets                               13        8        48        31
        Total operating expenses          26,324   13,579    71,766    55,216

    Loss from operations                 (19,742)  (6,994)  (45,809)  (24,541)

    Other income (expense):
        Interest and other income            262      753     1,547     3,545
        Interest expense                     (16)    (475)     (789)   (2,625)
        Debt conversion expense               -      (495)       -       (718)
    Net other income (expense)               246     (217)      758       202

    Net loss                            $(19,496) $(7,211) $(45,051) $(24,339)

    Net loss per share, basic and
     diluted                              $(0.24)  $(0.10)   $(0.58)   $(0.35)

    Shares used in computing basic and
     diluted net loss per share           81,927   73,641    78,332    70,483

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

    Cost of revenues                         $25      $32      $135      $130
    Research and development               1,308      995     5,575     4,286
    Selling, general and administrative      722      553     2,790     2,273
        Total stock-based compensation    $2,055   $1,580    $8,500    $6,689

                             DURECT CORPORATION
                           Condensed Balance Sheet
                               (in thousands)

                                                    As of          As of
                                                December 31,    December 31,
                                                    2008           2007(1)
    Current assets:
      Cash and cash equivalents                      $29,445        $37,589
      Short-term investments                          20,836         19,710
      Accounts receivable                              4,055          3,622
      Inventories                                      3,475          1,963
      Prepaid expenses and other current assets        1,849          1,904
    Total current assets                              59,660         64,788

    Property and equipment, net                        5,971          7,658
    Goodwill                                           6,399          6,399
    Intangible assets, net                               157            180
    Long-term investments                              1,362          3,697
    Restricted Investments                             1,049          1,020
    Other non-current assets                             276            278
    Total assets                                     $74,874        $84,020

    Current liabilities:
      Accounts payable                                $1,018         $1,834
      Accrued liabilities                              5,204          5,499
      Contract research liability                        995          1,946
      Interest payable on convertible notes                -             61
      Deferred revenue, current portion                9,033          5,728
      Equipment financing obligations,
       current portion                                    43             38
      Bonds payable, current portion                     240            225
      Convertible subordinated notes due 2008              -         23,599
      Other short-term liabilities                       148            158
    Total current liabilities                         16,681         39,088

    Bond payable and equipment financing
     obligations, noncurrent portion                      60            343
    Deferred revenue, noncurrent portion              21,118          9,268
    Other long-term liabilities                          596            740

    Stockholders' equity                              36,419         34,581
    Total liabilities and stockholders' equity       $74,874        $84,020

    (1) Derived from audited financial statements.


CONTACT: Matt Hogan, Chief Financial Officer of DURECT Corporation,
Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20020717/DRRXLOGO
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Web site: http://www.www.durect.com

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