Product revenue from the sale of ALZET pumps, LACTEL Polymers, and certain excipients to King increased by approximately $1.4 million or 59%, from $2.4 million in the first quarter last year to $3.9 million in the first quarter this year. Our gross margin on these products was around 64% in the first quarter. These businesses continue to be strongly cash flow positive for us.

R&D expense was $9.4 million in the first quarter this year, as compared to $9.9 million in the first quarter last year. Now these figures included stock-based compensation of $1.3 million in the first quarter this year, and $2.3 million in the first quarter last year. So if we exclude stock-based comp, R&D expense actually increased by about $522,000.

SG&A expenses were $3.5 million in the first quarter, as compared to $4.3 million in the first quarter last year. These figures included $669,000 of stock-based compensation in the first quarter this year and $1.2 million of stock-based compensation in the first quarter last year. Excluding the stock-based compensation, SG&A expense declined by about $253,000.

Our net loss for the first quarter was $6.6 million, compared to a net loss of $8.7 million for the same period last year. Probably a more relevant financial metric for us than our net loss was net cash consumed during the quarter; that figure was $5.8 million. So at March 31, we had cash and investments of $35.8 million, compared with cash and investments of $41.6 million at December 31.

Thanks again for joining the call and I will now turn it over to Jim for a non-financial discussion.

Jim Brown

Thank you, Matt. The first quarter was a strong one for DURECT. With regard to POSIDUR, we started BESST, the pivotal U.S. Phase III study. Nycomed continued their Phase II studies in Europe, and we amended our licensing agreement with Nycomed to separate funding and control of development for the U.S. and EU markets.

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