Associate

Durect Corp. is proposing an offering of $50 million in convertible notes.

The notes would be due in 2008 and convertible into stock at a price to be determined. Initial purchasers of the notes would have an option to purchase another $10 million principal amount.

Durect focuses on treating chronic diseases and conditions by developing and commercializing pharmaceutical systems to deliver drugs. Its core areas are chronic diseases including pain, cardiovascular diseases, central nervous system disorders and asthma.

Its lead product is the Chronogesic (sufentanil) Pain Therapy System, an osmotic implant that delivers sufentanil, an opioid medication, continuously for three months for treating chronic pain. The basis for the drug is the Duros implant technology that Durect holds an exclusive license to from ALZA Corp., a subsidiary of Johnson & Johnson, of New Brunswick, N.J.

The Cupertino, Calif.-based company completed in 2001 a pilot Phase III trial of the Chronogesic product, and announced positive results in 2002. The company initiated a Phase III trial of the product in June 2002.

Last August the FDA requested a delay in enrolling new patients in the trial until the clinical trial protocol was revised and approved by the FDA. The company discontinued all patients from the trial in September, and the trial is on hold. Durect said in its first-quarter report that it intended to revise the existing clinical trial protocol to provide additional monitoring measures and data collection requested by the FDA. It anticipates restarting the trial in the second half of the year.

In November, Durect entered an agreement with Endo Pharmaceuticals Holdings Inc. for the companies to collaborate on the development and commercialization of Chronogesic in the U.S. and Canada. Endo will fund 50 percent of the ongoing development costs and will reimburse Durect for a portion of its prior development costs for the product upon the achievement of certain milestones. The deal includes milestones that could equal $52 million. Endo has licensed exclusive promotional rights in the U.S. and Canada and would be responsible for marketing, sales and distribution. (See BioWorld Today, Nov. 12, 2002.)

Durect receives revenue from its Alzet osmotic pumps for animal research use, IntraEAR catheters for inner ear disorders and Lactel biodegradable polymers through its wholly owned subsidiary, BPI.

At the end of the first quarter, Durect had cash, cash equivalents and short-term investments of $37.3 million. It posted a net loss for the quarter of $5.9 million.

Its stock (NASDAQ:DRRX) fell $1.48 Thursday, or 37 percent, to close at $2.52.