By Matthew Willett

Durect Corp. will issue more than 2 million shares to acquire Southern BioSystems Inc., a developer and marketer of drug delivery systems, in an all-stock transaction valued at $25 million.

Durect will issue 1.35 million shares of common stock and an additional 750,000 shares to cover outstanding Southern BioSystems options and warrants to offer in exchange for all of SBS¿s outstanding equity interests. Durect also will assume about $1.7 million in debt.

SBS, of Birmingham, Ala., became a wholly owned subsidiary of Cupertino, Calif.-based Durect upon close of the transaction Monday. Durect acquired three patented drug delivery technologies: the Saber delivery system, microsphere technology and a drug-loaded implant system.

Durect CEO James Brown said the acquisition will create synergies in the future.

¿From our standpoint, this Saber technology they¿ve developed at SBS was an outstanding depot technology,¿ he told BioWorld Today. ¿We¿re developing Duros, which delivers drugs from months to a year or more, and that part we had pretty well covered.¿

The Saber technology, a depot system intended for use as a subcutaneous liquid injection that remains highly viscous following injection in order to conform to body shape, and other technologies in the deal ¿deliver products from one week to three months,¿ Brown said.

¿We really liked the opportunities for this technology,¿ Brown added. ¿Most microsphere technology has a very involved manufacturing process with a number of different stages, but with the Saber it¿s simply taking something we have today in nearly every soda out there, an emulsifying agent, and blending that with a [therapeutic] agent. It¿s simple to manufacture.¿

SBS has several collaborations in animal therapeutics, and deals for human drugs with Purdue Pharma L.P.; AstraZeneca plc, of London; and Alcon Pharmaceuticals Ltd., of Fort Worth, Texas.

Brown said his company will put an internally funded product using the newly acquired technology into development this year. He said that, as of the end of the first quarter, Durect had about $102 million in cash and marketable securities and about 46 million shares outstanding.

¿We currently utilize in the range of about $25 million per year, and we¿ve talked about becoming profitable in 2004,¿ Brown said. ¿This doesn¿t change that estimation. We¿re simply adding some other products we¿ll be working on in our company.¿

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