By Karen Pihl-Carey

Durect Corp. hopes to raise $115 million in an initial public offering (IPO) that will fund clinical costs of its lead product for the treatment of chronic pain.

The Cupertino, Calif.-based company, a spin-off of Palo Alto, Calif.-based Alza Corp., did not specify in its SEC filing the number of shares it plans to offer or at what price. The company did say, however, that all of the shares offered will be sold by the company, with net proceeds going to the funding of research, development, manufacturing and commercialization of existing and future products, as well as general corporate purposes.

Morgan Stanley Dean Witter, of New York, is acting as the lead manager for the offering, with Chase H&Q and CIBC World Markets Corp., both of New York, acting as co-managers.

Durect, formed in June 1998, is a company focused on the development and commercialization of drug delivery systems based on Alza's Duros technology. Duros is a miniature drug-dispensing pump that releases small quantities of concentrated drug formulations in a continuous, consistent flow for as long as one year using an osmotic engine. The pump is made of titanium and can be as small as a wooden matchstick implanted under the skin. In March, the FDA approved the first product that uses the Duros implant technology, Alza's Viadur (leuprolide acetate implant) to treat prostate cancer.

Durect is developing systems to address therapeutic areas such as chronic pain, central nervous system disorders, cardiovascular diseases and inner ear disorders. It has an initial focus on off-patent molecules, but intends to move into the delivery of genes and proteins. The company's lead product to treat chronic pain combines the Duros technology with a proprietary formulation of sufentanil, a potent opioid used in hospitals as an anesthetic. The company completed a Phase I trial in November and intends to begin a pharmacokinetic study and a Phase II trial later this year. The company has said it hopes to market it as soon as 2002. The product is aimed at a $1 billion market, the company said in its SEC filing.

A second product in development is designed to target the delivery of hydromorphone, an opioid approved for use as an analgesic, via a catheter to the intended site of action in the central nervous system. The product, which is moving into preclinical studies this year, will treat end-stage cancer pain.

As of Dec. 31, Durect had $18.9 million in cash, cash equivalents and investments. Its net revenue for 1999 was $86,000. The company posted a net loss for the year of $9.3 million.

The company raised $20 million last August in a private placement of preferred convertible stock. The Series B preferred stock is convertible to common stock at the IPO price for Durect. (See BioWorld Today, Aug. 4, 1999, p. 1.)

The financing was the second round for Durect, which raised $9.4 million when it first formed. Alza, the largest shareholder, owns about 17.2 percent of Durect. Brookside Capital Partners, of Boston, owns 10 percent and Morgan Trust, of New York, owns 6.1 percent.

Once public, the company expects to list its stock on the Nasdaq National Market under the symbol, DRRX.