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DURECT Corporation Announces Fourth Quarter 2013 Financial Results and Update of Programs

February 27, 2014

CUPERTINO, Calif., Feb. 27, 2014 /PRNewswire/ — DURECT Corporation (Nasdaq: DRRX) announced today financial results for the three months ended December 31, 2013. Total revenues were $4.3 million for the three months ended December 31, 2013 as compared to $3.3 million for the three months ended December 31, 2012. Net loss was $5.1 million for the three months ended December 31, 2013 as compared to a net loss of $5.5 million for the same period in 2012.

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Total revenues were $15.3 million and net loss was $21.5 million for the year ended December 31, 2013 as compared to total revenues of $53.1 million and net income of $16.2 million for the year ended December 31, 2012. The 2012 figures include the accelerated recognition in the first quarter of 2012 of $35.4 million in deferred revenue associated with upfront fees previously received under terminated collaboration agreements. This $35.4 million in revenue was non-recurring and had no cash flow impact for the year. Excluding the accelerated recognition of deferred revenue, DURECT’s reported revenues would have been $17.7 million for the year ended December 31, 2012 and reported net loss would have been $19.2 million for the year ended December 31, 2012.

At December 31, 2013, we had cash and investments of $24.4 million, compared to cash and investments of $28.9 million at December 31, 2012. We have no debt obligations, other than normal liabilities associated with running our business.

“Our team is hard at work preparing to meet with the FDA to gain more clarity on the next steps that would be required to address the issues cited in the recent Complete Response Letter for POSIDUR((TM)),” stated James E. Brown, D.V.M., President and CEO of DURECT. “Meanwhile, Pfizer has recently posted an additional study for REMOXY(®), indicating that that late-stage program is moving forward. We also are pleased to have started 2014 by establishing a collaboration with Impax whereby ELADUR(®) is now back in development for post-herpetic neuralgia (PHN), the indication for which it was originally designed.”

In 2014, we look forward to:

    --  Pfizer conducting the required studies for REMOXY to support an NDA
        resubmission in mid-2015
    --  Meeting with the FDA to clarify the next steps that would be required to
        address the issues raised in the POSIDUR Complete Response Letter
    --  Supporting Zogenix as they commence a multi-dose clinical study with
        Relday((TM)) in the second half of 2014
    --  Supporting Impax as they develop ELADUR for PHN
    --  Advancing existing feasibility projects and potentially entering into
        additional feasibility studies and collaborations

Highlights for DURECT in Fiscal Year 2013 and Major Potential Milestones over the Next 12-18 Months:

    --  POSIDUR (SABER(®)-Bupivacaine) Post-Operative Pain Relief Depot. In
        April 2013, we submitted a new drug application (NDA) as a 505(b)(2)
        application, which relies in part on the FDA's findings of safety and
        effectiveness of a reference drug.  In June 2013, we announced that our
        NDA submission had been accepted by the FDA.  On February 12, 2014 we
        received a Complete Response Letter from the FDA.  Based on its review,
        the FDA has determined that they cannot approve the NDA in its present
        form, stating the NDA does not contain sufficient information to
        demonstrate that POSIDUR is safe when used in the manner described in
        the proposed label, and the FDA has indicated that additional clinical
        safety studies need to be conducted.  We are evaluating the issues and
        recommendations described in the Complete Response Letter and plans to
        have further discussions with the FDA around them.  POSIDUR is our
        investigational 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.  We are in discussions with potential
        partners regarding licensing development and commercialization rights to
        POSIDUR, for which we hold worldwide rights.

    --  REMOXY (oxycodone) Extended-Release Capsules CII.  Pfizer has efforts
        underway to resolve the issues raised in the REMOXY Complete Response
        Letter, which are primarily related to manufacturing. In October 2013,
        Pfizer stated that, having achieved technical milestones related to
        manufacturing, they will continue the development program for REMOXY.
        Following guidance received from the FDA earlier in 2013, Pfizer
        announced that they will proceed with the additional clinical studies
        and other actions required to address the Complete Response Letter
        received in June 2011. These new clinical studies will include, in part,
        a pivotal bioequivalence study with the modified REMOXY formulation to
        bridge to the clinical data related to the original REMOXY formulation,
        and an abuse-potential study with the modified formulation.  As
        previously disclosed, the complete response submission is not expected
        to occur prior to mid-2015.  REMOXY, an investigational drug, is a
        unique long acting oral formulation of oxycodone intended to treat pain
        severe enough to require daily, around-the-clock, long-term opioid
        treatment and for which alternative treatment options are inadequate.
        Based on DURECT's ORADUR(®) technology, which is covered by issued
        patents and pending patent applications owned by us, REMOXY is designed
        to discourage common methods of tampering associated with prescription
        opioid analgesic misuse and abuse.

    --  Other ORADUR-based Opioids.  We have licensed three other ORADUR-based
        opioids to Pain Therapeutics, which has recently regained all rights
        from Pfizer with respect to these drug candidates (hydrocodone,
        hydromorphone and oxymorphone).    Pain Therapeutics is now free to
        develop and commercialize these product candidates on its own or with a
        licensee.  Phase I clinical trials have been conducted for
        ORADUR-hydrocodone and ORADUR-hydromorphone, and an Investigational New
        Drug (IND) application has been accepted by the FDA for
        ORADUR-oxymorphone.   Pain Therapeutics has stated that they have not
        yet made a decision to develop or out-license the three product
        candidates.

    --  ELADUR(®) (TRANSDUR-bupivacaine).   On January 7, 2014 we announced
        that we had entered into an agreement granting Impax the exclusive
        worldwide rights to develop and commercialize ELADUR.  Under the terms
        of the agreement, Impax has paid DURECT an upfront fee of $2 million,
        with possible additional payments of up to $61 million upon the
        achievement of predefined development and commercialization milestones.
        If ELADUR is commercialized, DURECT would also receive a tiered royalty
        on product sales. Impax will control and fund the development program.
        ELADUR, for topical neuropathic conditions such as post-herpetic
        neuralgia (PHN), is our proprietary transdermal patch intended to
        deliver bupivacaine for a period of up to three days from a single
        application; existing lidocaine patches for this condition can be worn
        for 12 hours with a rest period of 12 hours during which time many
        patients experience breakthrough pain.

    --  Relday((TM)) (Risperidone Program).  In January 2013, Zogenix (our
        licensee) announced positive single-dose pharmacokinetic (PK) results
        from a Phase 1 clinical trial of Relday.  According to Zogenix, adverse
        events in the Phase 1 trial in patients diagnosed with schizophrenia
        were generally mild to moderate and consistent with other risperidone
        products. The Phase 1 clinical trial for Relday was conducted as a
        single-center, open-label, safety and PK trial of 30 patients with
        chronic, stable schizophrenia or schizoaffective disorder.  Per Zogenix,
        based on the favorable safety and PK profile demonstrated with the 25 mg
        and 50 mg once-monthly doses tested in the Phase 1 trial, Zogenix
        extended the study to include a 100 mg dose of the same formulation. In
        May 2013, Zogenix announced positive results with the 100 mg arm,
        demonstrating dose proportionality across the full dose range that would
        be anticipated to be used in clinical practice.  According to Zogenix,
        the positive results from this study extension positions Zogenix to
        begin a multi-dose clinical trial, which would provide the required
        steady-state pharmacokinetic and safety data prior to initiating Phase 3
        development studies, and Zogenix plans to commence this multi-dose trial
        in the second half of 2014.Relday is a proprietary, long-acting,
        once-monthly subcutaneous injectable formulation of risperidone using
        DURECT's SABER controlled-release formulation technology.  An existing
        long-acting injectable risperidone product, which achieved $1.3 billion
        in global net sales in 2013, requires twice-monthly, intramuscular
        injections and drug reconstitution prior to use.

    --  ORADUR-ADHD Program.  In 2013, we selected a lead formulation for the
        lead program in our ORADUR-ADHD (Attention Deficit Hyperactivity
        Disorder) program, ORADUR-Methylphenidate.  This formulation was chosen
        based on its potential for rapid onset of action, long duration with
        once-a-day dosing and target pharmacokinetic profile as demonstrated in
        a Phase 1 trial.  In addition, this product candidate utilizes a small
        capsule size relative to the leading existing long acting products on
        the market and incorporates our ORADUR anti-tampering technology.  Our
        licensee, Orient Pharma, has met with the Taiwan Food and Drug
        Administration (TFDA) to discuss the Phase 3 program in that market and
        is developing its plans for further development in the defined Asian and
        South Pacific countries to which it has rights from us.  We retain
        rights to all other markets in the world, notably including the U.S.,
        Europe and Japan, and have initiated licensing discussions with other
        companies now that the lead formulation has been selected.

    --  Feasibility Projects and Other Activities.  During the fourth quarter of
        2013, we continued work on several feasibility projects and signed new
        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.
    --  Business Development Activities.  We have multiple programs that may
        potentially be licensed over the next 12-18 months.  These include
        POSIDUR, TRANSDUR-Sufentanil, ORADUR-ADHD (territories outside certain
        Asian and South Pacific markets), as well as various other programs
        which we have not described publicly in detail.

Earnings Conference Call

A live audio webcast of a conference call to discuss fourth quarter 2013 results will be broadcast live over the internet at 4:30 p.m. Eastern Time on February 27 and is available by accessing DURECT’s homepage at 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 a specialty pharmaceutical company developing innovative drugs for pain and chronic diseases, with late-stage development programs including REMOXY(®), POSIDUR((TM)), ELADUR(®), and TRANSDUR(®)-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 www.durect.com.

NOTE: POSIDUR((TM)), SABER(®), ORADUR(®), TRANSDUR(®) and ELADUR(®) are trademarks of DURECT Corporation. Other referenced trademarks belong to their respective owners. REMOXY, POSIDUR, ELADUR, TRANSDUR-Sufentanil, ORADUR-Methylphenidate and Relday are drug candidates under development and have not been approved for commercialization by the U.S. Food and Drug Administration or other health authorities.

DURECT Forward-Looking Statement

The statements in this press release regarding the potential regulatory meetings and submissions for REMOXY and POSIDUR, anticipated clinical trials (including timing and results) for Relday, ORADUR-Methylphenidate and our other drug candidates, potential milestone payments from Impax, the potential benefits and uses of our drug candidates, collaborations with third parties and potential business development activities 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, the risk that Pfizer will discontinue development of REMOXY, the risk of adverse decisions by regulatory agencies, including rejection of meeting requests, requests for additional information or product non-approval or non-acceptance of our POSIDUR or other NDA submissions, delays and additional costs due to requirements imposed by regulatory agencies, potential adverse effects arising from the testing or use of our drug candidates, the potential failure of clinical trials to meet their intended endpoints, our potential failure to maintain our collaborative agreements with third parties or consummate new collaborations and risks related to our (and our third party collaborators where applicable) ability to design, enroll, conduct and complete clinical trials, complete the design, development, and manufacturing process development of product candidates, manufacture and commercialize product candidates, obtain marketplace acceptance of product candidates, avoid infringing patents held by other parties and secure and defend patents of our own, and manage and obtain capital to fund operations and expenses. Further information regarding these and other risks is included in DURECT’s Form 10-Q on November 5, 2013 under the heading “Risk Factors.”


                                       DURECT CORPORATION

                      CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                            (in thousands, except per share amounts)

                                          (unaudited)

                        Three months
                            ended               Year ended

                        December 31,           December 31,
                        ------------           ------------

                                   2013                  2012                 2013  2012(1)
                                   ----                  ----                 ----   ------

     Collaborative
     research
     and
     development
     and
     other
     revenue                     $1,414                  $813               $3,590  $42,494

     Product
     revenue,
     net                          2,875                 2,449               11,736   10,576

       Total
       revenues                   4,289                 3,262               15,326   53,070
                                  -----                 -----               ------   ------

     Operating
     expenses:

       Cost
       of
       product
       revenues                   1,033                 1,038                4,837    4,654

       Research
       and
       development                4,850                 4,904               18,945   20,265

       Selling,
       general
       and
       administrative             3,498                 2,911               12,706   12,095

     Total
     operating
     expenses                     9,381                 8,853               36,488   37,014
                                  -----                 -----               ------   ------

     Income
     (loss)
     from
     operations                  (5,092)               (5,591)             (21,162)  16,056

     Other
     income
     (expense):

       Interest
       and
       other
       income
       (expenses)                    (7)                   95                 (284)     151

       Interest
       expense                       (1)                   (2)                  (6)      (7)
                                    ---                   ---                  ---      ---

     Net
     other
     income
     (expense)                       (8)                   93                 (290)     144

     Net
     Income
     (loss)                     $(5,100)              $(5,498)            $(21,452) $16,200
                                =======               =======             ========  =======

     Net
     income
     (loss)
     per
     share

      Basic                      $(0.05)               $(0.06)              $(0.21)   $0.18
                                 ======                ======               ======    =====

      Diluted                    $(0.05)               $(0.06)              $(0.21)   $0.18
                                 ======                ======               ======    =====

     Weighted-
     average
     shares
     used
     in
     computing
     net
     income
     (loss)
     per
     share

      Basic                     106,416                90,881              103,078   88,433
                                =======                ======              =======   ======

      Diluted                   106,416                90,881              103,078   88,589
                                =======                ======              =======   ======

     Total
     comprehensive
     income
     (loss)                     $(5,101)              $(5,498)            $(21,457) $16,201
                                =======               =======             ========  =======

      (1)
       Derived
       from
       audited
       financial
       statements.


                                     DURECT CORPORATION

                                  CONDENSED BALANCE SHEETS

                                       (in thousands)

                                                As of                  As of

                                          December 31, 2013    December 31, 2012(1)
                                          -----------------    --------------------

                                             (unaudited)

    ASSETS

    Current assets:

        Cash and cash
         equivalents                                    $7,836              $11,195

        Short-term
         investments                                    12,753               17,337

        Accounts receivable                              2,349                2,166

        Inventories                                      3,502                3,399

        Prepaid expenses
         and other current
         assets                                          1,888                2,258
                                                         -----                -----

    Total current
     assets                                             28,328               36,355

    Property and
     equipment, net                                      1,985                2,457

    Goodwill                                             6,399                6,399

    Intangible assets,
     net                                                    18                   36

    Long-term
     investments                                         3,352                    -

    Long-term
     restricted
     Investments                                           450                  400

    Other long-term
     assets                                                288                  288

    Total assets                                       $40,820              $45,935
                                                       =======              =======

    LIABILITIES AND
     STOCKHOLDERS'
     EQUITY

    Current
     liabilities:

        Accounts payable                                  $736               $1,785

        Accrued liabilities                              5,865                3,997

        Contract research
         liability                                         329                  483

        Deferred revenue,
         current portion                                   255                  662
                                                           ---                  ---

    Total current
     liabilities                                         7,185                6,927

    Deferred revenue,
     noncurrent portion                                  1,296                1,480

    Other long-term
     liabilities                                         1,618                1,197

    Stockholders'
     equity                                             30,721               36,331

    Total liabilities
     and stockholders'
     equity                                            $40,820              $45,935
                                                       =======              =======

    (1)  Derived from audited financial statements.

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SOURCE DURECT Corporation


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