Endo Pharmaceuticals Holdings Inc and Durect Corporation have signed an agreement to collaborate on the development and commercialization of Durect's Chronogesic (sufentanil) Pain Therapy System for the U.S. and Canada. The companies believe Chronogesic has significant potential to treat patients with chronic pain resulting from a variety of malignant and non-malignant causes. If approved, the product would represent the first systemic medication that provides patients with uninterrupted pain treatment for three months from a single application.

"Endo looks for innovative medicines to help patients and physicians in need of treatment options for pain, and Chronogesic represents one of the most important potential advances in pain management," stated Carol A. Ammon, Chairman and Chief Executive Officer of Endo. "The collaboration with Durect demonstrates our continued commitment to execute our strategies for growth. We are very excited about this opportunity and look forward to a successful partnership with Durect."

"With an established commercial infrastructure, a number of gold standard pain products and over 200 sales representatives focused on promoting therapies for pain management, Endo is a well-established player in the pain management arena," stated Dr. James Brown, President and Chief Executive Officer of Durect. "Chronogesic attracted high interest from a number of potential partners. In the end, we selected Endo as our partner because of their strong commitment to be a focused leader in the pain field. They have commercial, sales and marketing executives with established track records for successfully launching and building new ethical pharmaceutical product businesses. Endo is a major player in the specialty pharmaceuticals business, and Chronogesic only adds to their leadership position in the pain management arena."

In previous clinical trials, Chronogesic was shown to have an acceptable safety and efficacy profile in over 80 patients. The Chronogesic clinical development program is on temporary hold pending agreement between Durect and the Food and Drug Administration (FDA) regarding additional monitoring and data collection. These protocol changes requested by the FDA were not in relation to any observed safety issue or adverse event. In addition, Durect is implementing some necessary design and manufacturing enhancements to the Chronogesic product. Durect anticipates that the changes to the existing clinical protocol, and the implementation of these design and manufacturing enhancements, will delay the restart of clinical trials until the second half of 2003.

Under the terms of the agreement, Durect will be responsible for the Chronogesic product's design and development. In connection with the execution of the agreement, Endo will purchase $5.0 million of newly issued common shares of Durect. Once the clinical trials are restarted, Endo will fund 50% of the ongoing development costs and will reimburse Durect for a portion of prior development costs upon the achievement of certain milestones. Milestone payments made by Endo under this agreement could total up to $52 million. The agreement also contains terms and conditions customary for this type of arrangement, including representations, warranties, indemnities and termination rights. For a full description of the arrangement, please see the companies' public filings with the Securities and Exchange Commission, including Endo's Form 8-K.

In addition, under the agreement, Endo has licensed exclusive promotional rights to Chronogesic in the U.S. and Canada. Endo will be responsible for marketing, sales and distribution, including providing specialty sales representatives dedicated to supplying technical and training support for Chronogesic therapy. Durect will be responsible for the manufacture of Chronogesic. Endo and Durect will share profits equally, based on projected financial performance of Chronogesic.

Chronogesic is intended to target patients with opioid responsive chronic pain that results from a variety of causes. Chronogesic is designed to deliver sufentanil continuously for three months of pain therapy. Sufentanil is an opioid that is currently used in hospitals as an analgesic agent.

Chronic pain is a significant problem associated with chronic diseases, including cancer and various neurological and skeletal disorders. Chronic nonmalignant pain affects as many as 34 million Americans annually. In addition, the National Cancer Institute estimates that 8.4 million Americans alive today have a history of cancer. Sales of opioids for the treatment of malignant and nonmalignant pain currently exceed $3 billion.