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

November 1, 2007

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.)

2 Results Way

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.

On November 1, 2007, DURECT Corporation, a Delaware corporation (“DURECT”), announced its third quarter 2007 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.

(d) Exhibits

99.1 Press Release of DURECT Corporation dated November 1, 2007

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: November 1, 2007	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 November 1, 2007

EX-99.1

Exhibit 99.1

DURECT Corporation Announces Third Quarter 2007 Financial Results

CUPERTINO, Calif., November 1, 2007/PRNewswire-FirstCall/ — DURECT Corporation (Nasdaq: DRRX) announced today financial results for the three months ended September 30, 2007. Total revenues were $4.9 million for the three months ended September 30, 2007, compared to $5.1 million for the same period in 2006. Net loss for the three months ended September 30, 2007 was $7.9 million, compared to a net loss of $8.6 million for the same period in 2006. Cash used in operating activities was $1.0 million for the three months ended September 30, 2007, compared to $3.1 million in the three months ended September 30, 2006. At September 30, 2007, we had cash and investments of $66.6 million, including $1.3 million in restricted investments, compared with cash and investments of $81.6 million at December 31, 2006. Cash flow in the third quarter of 2007 and the cash and investments balance at September 30, 2007 reflect the $8.0 million POSIDUR milestone payment from Nycomed that was recognized as revenue in the second quarter but was received in the third quarter.

“Our third quarter efforts focused on advancing our product development pipeline and improving our balance sheet. Toward that end, we recently reported positive results from our POSIDUR Phase IIb hernia study, King Pharmaceuticals and Pain Therapeutics completed enrollment in the Remoxy^™ pivotal Phase III trial and Endo initiated their Phase II program with our TRANSDUR^™-Sufentanil patch,” stated James E. Brown, D.V.M., President and CEO of DURECT. “In addition, we took proactive steps to generate early conversions of our convertible notes to decrease our outstanding debt and to meter out the issuance of the underlying shares.”

Recent Company Highlights:

• POSIDUR. In July we announced positive results from a 122 patient Phase IIb clinical trial in which POSIDUR at a dose of 5 mL demonstrated statistically significant reductions in post-operative pain (by approximately 30% versus placebo) and in total consumption of supplemental opioid analgesic medications (approximately 3x less versus placebo) in patients undergoing inguinal hernia repair. This Phase IIb trial was designed to be the study upon which we and our collaborator Nycomed would base our decision for advancing POSIDUR into Phase III clinical trials. These successful results triggered an $8 million milestone payment by Nycomed to DURECT under the parties’ collaborative agreement. We have held an end-of-Phase II meeting with the U.S. Food & Drug Administration (FDA) and are in dialogue with the FDA regarding the Phase III program. Hospira, our manufacturer of POSIDUR, has produced supplies for ICH stability, validation and Phase III clinical trials.

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 DURECT has retained commercialization rights in the US, Canada and Asia.

• Remoxy. According to our licensee, Pain Therapeutics, and its sublicensee, King Pharmaceuticals, the Remoxy Phase III pivotal study is fully enrolled and top-line results of this study are expected in the fourth quarter of 2007. This pivotal Phase III trial is being conducted in accordance with a Special Protocol Assessment (SPA) with the FDA.

Remoxy is an abuse-resistant long-acting form of oxycodone based on our ORADUR^™ technology intended for the treatment of chronic pain.

• TRANSDUR^™-Sufentanil. According to its public disclosures, Endo Pharmaceuticals, our licensee for commercialization in the US and Canada, commenced its Phase II program in June 2007.

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

• ELADUR^™ (TRANSDUR-Bupivacaine). We have completed enrollment of patients and expect to report results in 2007 from a Phase IIa trial designed to assess safety as well as the magnitude, duration and characteristics of analgesic activity of ELADUR in approximately 50 patients with Post-Herpetic Neuralgia (PHN).

ELADUR is our proprietary transdermal patch intended to provide bupivacaine for a period of up to three days from a single application. DURECT retains full commercial rights to this drug candidate.

• Reduction in Convertible Notes. We reduced the balance of our outstanding convertible notes from $37.3 million at June 30, 2007 to $23.6 million as of October 31, 2007 ($33.1 million at September 30, 2007) by paying a small premium over the future interest payments due on these notes in order to induce early conversion.

• Inclusion in New NASDAQ^® Index. Effective September 25, 2007, we were selected as an inaugural member in the NASDAQ NeuroInsights^® Neurotech Index (ticker: NERV). The Neurotech Index tracks the stock performance of 32 companies which meet certain minimum market criteria and were identified by NeuroInsights as being significantly involved in researching, developing, manufacturing and marketing pharmaceuticals, biologics, medical devices and diagnostics for the brain and nervous system.

Earnings Conference Call

A live audio webcast of a conference call to discuss third quarter 2007 results will be broadcast live over the internet at 4:30 p.m. Eastern Time 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 Corporation is an emerging specialty pharmaceutical company developing pharmaceutical systems based on its proprietary drug delivery platform technologies. The Company currently has a number of late-stage pharmaceutical products in development addressing large markets in pain management, with a number of research programs underway targeting chronic disease and other therapeutic areas. For more information, please visit www.durect.com.

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

DURECT Forward-Looking Statement

The statements in this press release regarding our products in development, product development plans, anticipated data announcements from the ELADUR Phase IIa trial and the Remoxy pivotal Phase III trial, discussions with the FDA and other anticipated regulatory, clinical and development milestones and timing thereof, future clinical trial results and our intended 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, our (and that of our third party collaborators where applicable) abilities to design, enroll, conduct and complete clinical trials, complete the design, development, and manufacturing process development of the product candidate, obtain product and manufacturing approvals from regulatory agencies, manufacture and commercialize the product candidate and manage and obtain capital to fund our growth, operations and expenses. Further information regarding these and other risks is included in our Form 10-Q filed on August 8, 2007 under the heading “Risk Factors.”

DURECT CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2007			2006			2007			2006
Collaborative research and development revenue	$	2,992		$	3,158		$	9,858		$	10,264
Milestone revenue		—			—			8,000			—
Product revenue, net		1,940			1,976			6,232			6,189
Total revenues		4,932			5,134			24,090			16,453
Operating expenses:
Cost of revenues (1)		780			666			2,418			2,265
Research and development (1)		8,858			9,930			28,840			25,643
Selling, general and administrative (1)		3,135			3,346			10,356			9,540
Amortization of intangible assets		8			22			23			416
Total operating expenses		12,781			13,964			41,637			37,864
Loss from operations		(7,849	)		(8,830	)		(17,547	)		(21,411	)
Other income (expense):
Interest and other income		906			957			2,792			2,841
Interest expense		(716	)		(710	)		(2,150	)		(2,719	)
Debt conversion expense		(223	)		—			(223	)		(2,287	)
Net other income (expense)		(33	)		247			419			(2,165	)
Net loss	$	(7,882	)	$	(8,583	)	$	(17,128	)	$	(23,576	)
Net loss per share, basic and diluted	$	(0.11	)	$	(0.12	)	$	(0.25	)	$	(0.36	)
Shares used in computing basic and diluted net loss per share		69,655			68,688			69,414			64,943
(1)    Includes stock-based compensation related to the following:
Cost of revenues		31		$	20		$	98		$	47
Research and development		1,038			774			3,291			2,084
Selling, general and administrative		497			368			1,720			1,011
Total stock-based compensation	$	1,566		$	1,162		$	5,109		$	3,142

DURECT CORPORATION

CONDENSED BALANCE SHEETS

(in thousands)

	As of September 30, 2007		As of December 31, 2006 (1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	36,030	$	41,554
Short-term investments		27,314		28,297
Accounts receivable		5,437		2,152
Inventories		2,027		2,052
Prepaid expenses and other current assets		1,989		1,744
Total current assets		72,797		75,799
Property and equipment, net		7,918		7,451
Goodwill		6,399		6,399
Intangible assets, net		88		111
Long-term investments		1,983		10,472
Restricted Investments		1,283		1,284
Other non-current assets		280		969
Total assets	$	90,748	$	102,485
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	606	$	864
Accrued liabilities		7,051		4,522
Contract research liability		1,536		1,624
Interest payable on convertible notes		604		97
Deferred revenue, current portion		5,239		5,348
Equipment financing obligations, current portion		37		34
Bonds payable, current portion		210		210
Other short-term liabilities		149		—
Convertible subordinated notes due 2008		33,145		—
Total current liabilities		48,577		12,699
Bond payable and equipment financing obligations, noncurrent portion		578		606
Convertible subordinated notes due 2008		—		37,337
Deferred revenue, noncurrent portion		10,578		14,507
Other long-term liabilities		780		304
Stockholders’ equity		30,235		37,032
Total liabilities and stockholders’ equity	$	90,748	$	102,485

(1) Derived from audited financial statements

SOURCE DURECT Corporation

CONTACT:

Matthew J. Hogan, Chief Financial Officer, DURECT Corporation, +1-408-777-4936

Media Contact:

Feinstein Kean Healthcare

Jeremiah Hall, Senior Vice President, +415 677-2700, jeremiah.hall@fkhealth.com