8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

July 22, 2005

Date of Report

(Date of earliest event reported)

DURECT CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	000-31615	94-3297098
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

10240 Bubb Road

Cupertino, CA 95014

(Address of principal executive offices) (Zip code)

(408) 777-1417

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

Item 8.01 Other Events.

On July 22, 2005, DURECT Corporation, a Delaware corporation (“DURECT”), announced its second quarter 2005 financial results. This Current Report is filed to disclose nonpublic information required to be disclosed by Regulation FD. A copy of DURECT’s press release is attached as Exhibit 99.1 hereto and incorporated by reference herein.

The information concerning financial results in this Form 8-K and in Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information concerning financial results in this Form 8-K and in Exhibit 99.1 shall not be incorporated into any registration statement or other document filed with the Securities and Exchange Commission by the company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits

99.1    Press Release of DURECT Corporation dated July 22, 2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DURECT Corporation
Date: July 22, 2005	By:	/s/ James E. Brown
		James E. Brown
		President and Chief Executive Officer

DURECT CORPORATION

INDEX TO EXHIBITS

Exhibit Number	Description
99.1	Press Release of DURECT Corporation dated July 22, 2005

EX-99.1

Exhibit 99.1

DURECT Corporation Announces Second Quarter 2005 Financial Results

CUPERTINO, Calif., July 22, 2005/PRNewswire-FirstCall/ — DURECT Corporation (NASDAQ: DRRX) announced today financial results for the three months ended June 30, 2005.

DURECT’s net loss for the three months ended June 30, 2005 was $3.6 million or 7 cents per share, compared to a net loss of $7.4 million or 14 cents per share for the same period in 2004. DURECT’s results for the three months ended June 30, 2005 included non-cash charges of $646,000 for the amortization of intangible assets and stock-based compensation, compared to $443,000 for the same period in 2004. Cash provided by operating activities was $4.8 million for the three months ended June 30, 2005, compared to $6.3 million cash used for the same period in 2004.

“We had a very positive second quarter and executed on our corporate objectives. We announced exciting preliminary results from cohort 2 of the Phase II study for our post-operative pain relief depot, SABER^™-Bupivacaine. In addition, we advanced this program into the third and last cohort of the Phase II study, which is anticipated to enroll 60 patients. Also, our partner Pain Therapeutics announced the completion of enrollment of their first Phase III study using our ORADUR sustained release oral gel-cap technology, and we look forward to the results from this study,” stated James E. Brown, DVM, President and CEO of DURECT.

Dr. Brown added, “We continue to make significant progress on our other development programs, including our collaborations with Voyager with respect to Alzheimer’s disease and ENDO with respect to our seven-day sufentanil patch. Today, we also announced that we have taken the opportunity to retire a portion of our outstanding convertible notes in order to further strengthen our financial position.”

Total revenues were $8.8 million for the three months ended June 30, 2005, compared to $3.1 million for the same period in 2004. Total collaborative research and development and other revenues were $6.9 million for the three months ended June 30, 2005, compared with $1.3 million for the same period in 2004. The increase in total revenues was primarily attributable to higher collaborative research and development revenue recognized from our agreements with Endo Pharmaceuticals, Inc. (TRANSDUR-sufentanil), Voyager Pharmaceutical Corporation, and Pain Therapeutics, Inc. and higher product revenues from our ALZET and polymer product lines.

Research and development expenses were $7.6 million for the three months ended June 30, 2005, compared to $6.0 million for the same period in 2004. The increase was primarily attributable to the higher development expenses for SABER-Bupivacaine, TRANSDUR-Sufentanil, DURIN-Leuprolide and certain other product candidates.

Selling, general and administrative expenses were $2.8 million for the three months ended June 30, 2005, compared to $2.3 million for the same period in 2004. The increase in the three months ended June 30, 2005 was primarily due to higher employee related costs and other external costs to comply with the Sarbanes-Oxley Act.

Interest and other income was $407,000 for the three months ended June 30, 2005, compared with $289,000 for the same period in 2004. The increase in interest income was primarily the result of higher yields on cash and investment balances held during the three months ended June 30, 2005 compared with the same period

in 2004. Interest expense was both $1.1 million for the three months ended June 30, 2005 and 2004. The interest expense was primarily the result of the interest accrued on the $60.0 million convertible notes the Company issued in June and July of 2003.

At June 30, 2005, DURECT had cash and investments of $60.5 million, including $2.4 million in restricted investments, compared with cash and investments of $61.8 million at December 31, 2004. We anticipate that our December 31, 2005 cash and investments balance to be in the range of $48.0 million to $50.0 million.

About DURECT Corporation

DURECT Corporation is an emerging specialty pharmaceutical company focused on the development of pharmaceutical systems based on its proprietary drug delivery platform technologies that treat chronic debilitating diseases and enable biotechnology products. These platform technologies include the SABER^™ Delivery System (a patented and versatile depot injectable useful for protein and small molecule delivery), the ORADUR^™ sustained release oral gel-cap technology (an oral sustained release technology with several potential abuse deterrent properties), the DURIN^™ Biodegradable Implant (drug-loaded implant system), the TRANSDUR^™ transdermal technology and the MICRODUR^™ Biodegradable Microparticulates (microspheres injectable system). DURECT also collaborates with pharmaceutical companies to develop and commercialize proprietary and enhanced pharmaceutical products based on its technologies. DURECT has five disclosed on-going development programs of which four are in collaboration with pharmaceutical partners. Additional information about DURECT is available at www.durect.com.

NOTE: SABER^™, ORADUR^™, DURIN^™, TRANSDUR^™ and MICRODUR^™ are trademarks of DURECT Corporation. Other referenced trademarks belong to their respective owners.

DURECT Forward-Looking Statement

The statements in this press release regarding DURECT’s products in development, product development plans, clinical trials and projected financial results 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 complete the design, development, and manufacturing process development of the product candidate, obtain product and manufacturing approvals from regulatory agencies and manufacture and commercialize the product candidate, as well as marketplace acceptance of the product candidate. Further information regarding these and other risks is included in DURECT’s Quarterly Report on Form 10-Q for the period ended March 31, 2005 filed with the SEC on May 6, 2005 under the heading “Factors that may affect future results.”

DURECT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three months ended June 30,						Six months ended June 30,
	2005			2004			2005			2004
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Product revenue, net	$	1,889		$	1,760		$	3,646		$	3,125
Collaborative research and development and other revenue		6,930			1,320			10,527			3,340
Total revenues		8,819			3,080			14,173			6,465
Operating expenses:
Cost of revenues		689			867			1,360			1,432
Research and development		7,613			6,040			14,231			11,449
Selling, general and administrative		2,812			2,339			5,316			4,563
Amortization of intangible assets		303			308			606			643
Stock-based compensation(1)		343			135			393			170
Total operating expenses		11,760			9,689			21,906			18,257
Loss from operations		(2,941	)		(6,609	)		(7,733	)		(11,792	)
Other income (expense):
Interest and other income		407			289			892			593
Interest expense		(1,114	)		(1,113	)		(2,234	)		(2,224	)
Net other expense		(707	)		(824	)		(1,342	)		(1,631	)
Net loss	$	(3,648	)	$	(7,433	)	$	(9,075	)	$	(13,423	)
Net loss per common share, basic and diluted	$	(0.07	)	$	(0.14	)	$	(0.17	)	$	(0.26	)
Shares used in computing basic and diluted net loss per share		52,047			51,396			51,967			51,260
(1)    Stock-based compensation related to the following:
Cost of revenues	$	—		$	(2	)	$	—		$	1
Research and development		—			126			46			153
Selling, general and administrative		343			11			347			16
	$	343		$	135		$	393		$	170

DURECT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2005		December 31, 2004 (1)
Assets
Current assets:
Cash and cash equivalents	$	30,269	$	20,032
Short-term investments		18,918		21,765
Accounts receivable		6,166		2,481
Inventories		1,911		1,929
Prepaid expenses and other current assets		1,139		1,364
Total current assets		58,403		47,571
Property and equipment, net		7,258		7,112
Goodwill		6,399		6,399
Intangible assets, net		1,138		1,745
Long-term investments		8,926		17,218
Restricted investments		2,425		2,798
Other non-current assets		2,310		2,625
Total assets	$	86,859	$	85,468
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued liabilities and deferred revenue	$	7,612	$	5,006
Long-term obligations, current portion		366		483
Total current liabilities		7,978		5,489
Long-term obligations, noncurrent portion		68,647		61,589
Stockholders’ equity		10,234		18,390
Total liabilities and stockholders’ equity	$	86,859	$	85,468

(1) Derived from audited financial statements.

SOURCE DURECT Corporation

CONTACT: Schond L. Greenway, Executive Director, Investor Relations and Strategic Planning of DURECT Corporation,

+1-408-777-1417