DURECT Corporation Announces Fourth Quarter and Year End 2011 Financial Results

Highlights for DURECT in Fiscal Year 2011 and Major Potential Milestones over the Next 12-18 Months:

REMOXY.  On June 23, 2011, Pfizer received a Complete Response Letter from the U.S. Food and Drug Administration (FDA) for the REMOXY NDA which had been resubmitted in December 2010 by King Pharmaceuticals (acquired by Pfizer in February 2011).  The FDA’s Complete Response Letter raised concerns related to, among other matters, the Chemistry, Manufacturing, and Controls (CMC) section of the NDA for REMOXY.  Pfizer has efforts underway to resolve these issues and stated in its last earnings call on January 31, 2012 that it expects to conduct two bioavailability studies in the second quarter of 2012 and then meet with the FDA in the third quarter to discuss next steps.

REMOXY, an investigational drug, is a unique long-acting oral formulation of oxycodone intended to treat moderate to severe pain. Based on DURECT’s ORADUR® 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. DURECT is eligible for a potential royalty on REMOXY of between 6.0% to 11.5% of net sales depending on the sales volumes.  In addition, we supply to Pfizer two of the key excipients used in the manufacture of REMOXY for which we are paid our manufacturing cost plus a specified percentage mark-up.

POSIDUR (SABER™-Bupivacaine) Post-Operative Pain Relief Depot.  After preparation of integrated safety and efficacy summaries combining our previous well controlled studies with data from the BESST trial, we intend to hold a pre-NDA meeting with the FDA in mid-2012, with a potential NDA submission later in the year.  The BESST trial supplemented our safety database with an additional 305 patients, each of whom agreed to extensive cardiac monitoring.  While the results trended positive for both pain reduction and reduction of supplemental opioid use in the first three days after surgery, they did not reach statistical significance for the selected primary endpoints.  Previous well controlled Phase II studies for hernia and shoulder surgery demonstrated positive efficacy results compared to placebo for both pain reduction and reduction of supplemental opioid use in the first three days after surgery.  

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 Hospira for commercialization in the U.S. and Canada. We retain commercialization rights in all other countries.

ORADUR-ADHD Program.  We and Orient Pharma have completed several Phase I pharmacokinetic studies with multiple formulations.  Based on information from those studies, we are continuing to evaluate our lead formulations.  Orient Pharma is our licensee for certain Asian and South Pacific countries.

Relday™ (Risperidone Program).  In July 2011, we signed a development and license agreement with Zogenix to develop Relday, a product candidate targeting the antipsychotic market.  Zogenix expects to initiate clinical studies for Relday in patients with schizophrenia in 2012.  

Relday is a proprietary, long-acting (once-monthly) injectable formulation of 0.5 mL of risperidone using DURECT’s SABER controlled-release formulation technology in combination with Zogenix’s DosePro® needle-free, subcutaneous drug delivery system.  

ELADUR (TRANSDUR®-Bupivacaine).  In February 2012, Pfizer notified us that they are returning their worldwide development and commercialization rights to ELADUR.  Pfizer has committed to assist in an orderly and rapid transition of program data back to DURECT.   We intend to initiate discussions with other potential partners regarding licensing development and commercialization rights to this program.

ELADUR is our proprietary transdermal patch intended to deliver bupivacaine for a period of up to three days from a single application.  ELADUR demonstrated a positive efficacy trend in a Phase 2a study for post-herpetic neuralgia (PHN); a poster describing this study was presented at the 27th Annual Scientific Meeting of the American Pain Society on May 8, 2008 and is accessible on DURECT’s website at www.www.durect.com/wt/durect/page_name/Publications.

TRANSDUR-Sufentanil.  We continue discussions with potential partners regarding licensing development and commercialization rights to this program to which we hold worldwide rights.

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.

Feasibility Projects and Other Activities.  During 2011, we continued work on several feasibility projects as a means of demonstrating that our technologies can achieve the drug delivery objectives set forth by our collaborators and are worthy of further development.  The Zogenix program, described above, was one such project which has matured into a development and license agreement.

Financial Guidance.  Our net cash consumption is influenced by the timing and structure of new corporate collaborations, the achievement of milestones under existing collaborations, and the extent to which we choose to fund unpartnered programs.  While we anticipate entering into new collaborations in the future, assuming current funding plans for our R&D programs, no new collaborations and no milestone payments, we currently anticipate our net cash consumption in 2012 will be approximately $12 million.

Business Development Activities.  We have multiple programs that may potentially be partnered over the next 12-18 months.  These include POSIDUR for Japan and other territories outside the U.S. and Canada, TRANSDUR-Sufentanil worldwide rights, ELADUR worldwide rights, ORADUR-ADHD for territories outside certain Asian and South Pacific markets, as well as various internal programs which we have not described publicly in detail.

DURECT CORPORATION

STATEMENTS OF OPERATIONS DATA

(in thousands, except per share amounts)

(unaudited)

Three months ended

Year ended

December 31,

December 31,

2011

2010

2011

2010

Collaborative research and development and other revenue

$  6,454

$  5,929

$  22,360

$  20,091

Product revenue, net

2,481

2,567

11,127

11,500

        Total revenues

8,935

8,496

33,487

31,591

Operating expenses:

        Cost of revenues (1)

927

1,177

4,713

4,275

        Research and development (1)

7,013

9,447

34,053

36,214

        Selling, general and administrative (1)

3,154

4,045

13,574

14,937

        Total operating expenses

11,094

14,669

52,340

55,426

Loss from operations

(2,159)

(6,173)

(18,853)

(23,835)

Other income (expense):

        Interest and other income

25

838

134

943

        Interest and other expense

(4)

19

(46)

(6)

Net other income (expense)

21

857

88

937

Net loss

$ (2,138)

$ (5,316)

$ (18,765)

$ (22,898)

Net loss per share, basic and diluted

$   (0.02)

$   (0.06)

$     (0.21)

$     (0.26)

Shares used in computing basic and diluted net loss per share

87,514

86,976

87,410

86,868

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

Cost of revenues

$       81

$       88

$       328

$       341

Research and development

904

1,223

4,181

4,941

Selling, general and administrative

389

497

2,132

2,520

        Total stock-based compensation

$  1,374

$  1,808

$    6,641

$    7,802

DURECT CORPORATION

BALANCE SHEET DATA

(in thousands)

As of

As of

December 31, 2011

December 31, 2010 (1)

(unaudited)

ASSETS

Current assets:

   Cash and cash equivalents

$                           8,896

$                    10,437

   Short-term investments

19,535

35,005

   Short-term restricted investments

367

66

   Accounts receivable

3,448

3,716

   Inventories

3,252

2,836

   Prepaid expenses and other current assets

1,803

2,785

Total current assets

37,301

54,845

Property and equipment, net

3,124

1,776

Goodwill

6,399

6,399

Intangible assets, net

53

71

Long-term investments

1,530

3,197

Long-term restricted Investments

501

867

Other long-term assets

288

405

Total assets

$                         49,196

$                    67,560

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

   Accounts payable

$                           1,274

$                         981

   Accrued liabilities

4,884

6,740

   Contract research liability

1,361

2,109

   Deferred revenue, current portion

7,372

8,079

Total current liabilities

14,891

17,909

Deferred revenue, noncurrent portion

30,090

34,849

Other long-term liabilities

738

315

Stockholders’ equity

3,477

14,487

Total liabilities and stockholders’ equity

$                         49,196

$                    67,560

(1)  Derived from audited financial statements.