DARA BioSciences, Inc (NASDAQ: DARA)is a pharmaceutical development company that acquires promising therapeutic candidates and develops them through proof of concept (pre-phase III) in humans for subsequent sale or out-licensing to larger pharmaceutical companies.

1. November 18, 2011
Jason Napodano, CFA
Small-Cap Research 312-265-9421
jnapodano@zacks.com
scr.zacks.com 111 North Canal Street, Chicago, IL 60606
DARA BioSciences, Inc. (DARA-NASDAQ)
DARA: Pipeline Moving Forward OUTLOOK
Over the past year, DARA Bio has presented strong phase 2
data on its lead development candidate, KRN5500, for
neuropathic pain and positive phase 1 data on DB959 for the
Current Recommendation Neutral treatment of type 2 diabetes. DARA s goal is to advance both
candidates in 2012 to the stage where they can strike a
Prior Recommendation Outperform
development and commercialization partnership with a larger
Date of Last Change 03/30/2011 pharmaceutical company. Both candidates represent potential
billion-dollar opportunities.
Current Price (11/18/11) $1.58
$3.00 We remain fans of DARA s business model, believing that
Target Price pharma pipelines are drying up and candidates such as
KRN550 and DB959 would fit well within the product suite of
most big pharma names. However, we are currently at a
Neutral rating while we wait for additional data before a
partnership is expected.
SUMMARY DATA
52-Week High $4.13 Risk Level High
52-Week Low $1.36 Type of Stock Small-Growth
One-Year Return (%) -33.63 Industry Med-Biomed/Gene
Beta 1.56
Average Daily Volume (sh) 46,406 ZACKS ESTIMATES
Shares Outstanding (mil) 5 Revenue
(In millions of $)
Market Capitalization ($mil) $8
Q1 Q2 Q3 Q4 Year
Short Interest Ratio (days) 4.21
Institutional Ownership (%) 1 (Mar) (Jun) (Sep) (Dec) (Dec)
Insider Ownership (%) 5 2010 0A 0A 0A 0A 0A
2011 0A 0A 0A 0E 0E
Annual Cash Dividend $0.00 2012 0E
Dividend Yield (%) 0.00 2013 0E
5-Yr. Historical Growth Rates Earnings per Share
(EPS is operating earnings before non recurring items)
Sales (%) N/A
Q1 Q2 Q3 Q4 Year
Earnings Per Share (%) N/A
(Mar) (Jun) (Sep) (Dec) (Dec)
Dividend (%) N/A
2010 -$0.38 A -$0.66 A -$0.56 A -$0.24 A -$1.80 A
2011 -$0.26 A -$0.31 A -$0.18 A -$0.21 E -$0.99 E
P/E using TTM EPS N/A 2012 -$0.76 E
P/E using 2010 Estimate N/A 2013 -$0.70 E
P/E using 2011 Estimate N/A
© Copyright 2011, Zacks Investment Research. All Rights Reserved.

2. WHAT S NEW
Q2 2011 10Q Filed
On November 15, 2011, DARA Bio filed its 10Q for the third quarter 2011. The company reported no revenues
during the quarter, or in 2010 for that matter. Operating loss for the quarter was $0.92 million, or $0.18 per share.
Operating cash burn in the quarter was roughly $1.2 million. DARA exited the third quarter with $2.2 million in cash
and investments. We forecast burn is around $0.9 million per quarter. We see the current cash balance as sufficient
to fund operations into the third quarter 2012. We believe the company may seek to raise funds during the first half
of 2012 to keep the clinical pipeline on track. We note that in March 2011, the company filed a shelf registration
statement with the SEC allowing the company to offers and sell up to $30 million of securities, including equity, debt
and other securities as described in the registration statement. DARA s last offering was in December 2010, where
the company secured $4.8 million in a registered direct offering.
Positive Phase 1b On DB959
On November 1, 2011, DARA announced positive results from a successfully completed phase 1b clinical study for
DB959, the company s once daily peroxisome proliferator activated receptor (PPAR) delta/gamma agonist, a non-
TZD oral drug in development for the treatment of type 2 diabetes. The study was a randomized, placebo-
controlled, double-blind, escalating multiple dose clinical trial that enrolled 32 healthy male and female volunteers at
Quintiles' Phase 1 facility in Overland Park, Kansas.
The company plans to present detailed results at an upcoming scientific meeting in the first half of 2012. However,
initial analysis of the data show that DB959 was safe and well-tolerated throughout the 40-fold dose-range tested,
with an overall safety profile similar to placebo when dosed for 1 week. Pharmacokinetic (PK) analysis indicates that
DB959 is highly likely to meet the target dosing regimen of once-a-day. The data confirm DARA s phase 1a data
from a single-ascending dose study showing excellent safety and tolerability, previously presented at the American
Diabetes Association (ADA) meeting in June 2011.
Changes in the circulating profile of adiponectin, the established biomarker of PPAR agonism, seen in this study
suggests that DB959 will be pharmacologically active in patients with type 2 diabetes within the well tolerated dose
range utilized in this study.
Adiponectin is a fat tissue-derived plasma protein whose expression is regulated by PPAR-gamma. It may play a modulatory role in multiple
metabolic processes; plasma levels of adiponectin correlate with insulin sensitivity and correlate inversely with percent body fat.
Improvements in one's metabolic health, as may be seen with weight loss, can be accompanied by increases in plasma adiponectin.
Plasma adiponectin levels can be used as a biomarker or indicator of in vivo PPAR-gamma agonism. Numerous published studies have
shown that PPAR-gamma agonists dose-dependently increase plasma adiponectin levels in both non-diabetic and diabetic populations at
doses known to improve glucose homeostasis and insulin sensitivity.
Previous Data Suggest Unique Profile
Preclinical results demonstrated that DB959 lowered glucose to normal levels, raised HDL, raised the HDL:LDL
ratio, and lowered triglycerides. These beneficial effects on glucose and lipids were observed without causing the
weight gain which has been seen with other PPAR agonists. Positive lipid effects on cholesterol and triglycerides
would provide a unique profile to DB959 in the treatment of type 2 diabetes. We note approximately 85% of patients
with type 2 diabetes also have mixed dyslipidemia.
Zacks Investment Research Page 2 www.zacks.com

3. INVESTMENT OVERVIEW
KRN5500 Impressive In Early-Stage
DARA Bio presented positive study results from its phase 2a dose escalation study with KRN5500 at the 13th World
Congress on Pain. The multicenter, placebo-controlled phase 2a study was designed to evaluate the safety and
efficacy of KRN5500 for treatment of neuropathic pain in patients with cancer. The trial assessed KRN550 vs.
placebo to compare treatment differences in median changes from baseline in pain scores recorded by patients in a
daily diary as measured by the numeric rating scale (NRS). Results show:
KRN5500 significantly reduced neuropathic pain when compared to placebo (24% vs. 0%; p = 0.03) when
looking at the median decrease in pain intensity from baseline.
KRN5500 significantly reduced neuropathic pain when compared to placebo (29.5% vs. 0%; p = 0.02) when
looking at the median decrease in maximum pain score reduction from baseline.
KRN5500 significantly improved the number of patients achieving pain reduction from baseline of > 20% when
compared to placebo (83% vs. 29%; p = 0.04).
KRN5500 improved the number of patients achieving pain reduction from baseline of > 30% when compared to
placebo (50% vs. 14%; p = ns).
Regression analysis of the best response for each patient over doses showed a significant linear decrease in
pain intensity with increase in dose (slope = -18.2; p = 0.009).
Showed improvement in Dynamic Allodynia (touch-induced pain) compared to placebo (33% vs. 0%; p = ns).
Showed improvement in Thermal Allodynia (cold-induced pain) compared to placebo (33% vs. 8%; p = ns).
Source: DARA BioSciences, Inc.
These results indicate that KRN5500 was effective in reducing pain in patients with chemotherapy induced
peripheral neuropathy (CIPN) in a dose-response relationship. The data show that higher doses of KRN5500 result
in greater reductions in pain over time. KRN5500 was generally well tolerated with adverse reactions limited to
nausea and vomiting. We are encouraged by the phase 2a results. DARA has been presenting data from the trial at
medical conferences, most recently the 2011 International Conference on Accelerating the Development of
Enhanced Pain Treatments, and published the findings in peer-review journals, including the Journal of Pain and
Symptom Management. The article can be found online here: JPSM-KRN5500
In April 2010, DARA Bio announced that it has entered into a clinical trial agreement on KRN5500 with the Division
of Cancer Prevention (DCP), National Cancer Institute (NCI), National Institutes of Health (NIH), for the treatment of
Chemotherapy Induced Peripheral Neuropathy (CIPN) in patients with cancer. Under the terms of the collaboration,
NCI will fund the studies and DARA will supply KRN5500 at costs plus expenses. We note that DARA will supply
(at cost) DCP-NCI with a new improved nano-emulsion formulation of KRN5500. The new formulation has been
proved equivalent and is that is lyophilized to provide for easier dosing administration.
Zacks Investment Research Page 3 www.zacks.com

4. Phase 2b To Start Q2-2012
The NCI will utilize its established national network of investigators (Community Clinical Oncology Program --
CCOP) to conduct the phase 2b study. They will also handle all costs to run the trial, which we estimate at around
$4 million, except for the drug supply as noted above. This should cost DARA only around $250K.
We expect this program will begin around March / April 2012 and will enroll approximately 100 subjects with CIPN in
a multi-center, randomized, double-blind, placebo-controlled format. The trial should take approximately 18 months
to complete. Similar to the phase 2a program, we expect that patients will have to have had confirmed CIPN for a
period of time, actively failing standard-of-care pain meds, including NSAIDs, anticonvulsants, antidepressants, and
opioids. We note the phase 2a data showed a meaningful reduction in CIPN patients taking KRN5500 even after
having failed previous cycles with high-dose opioids. It s a difficult trial, but one that should work to the benefit of
KRN5500 if positive given the significant treatment opportunity and limited competition. We remind investors that
the U.S. FDA has granted DARA Fast Track status for KRN5500 in this indication. We believe data from this
program will be highly intriguing to a potential partner if positive.
With DCP-NCI handling the costs and expenses for the planned phase 2b program in CIPN, we believe that
KRN5500 will work in other neuropathic pain indications, including post-herpetic neuralgia (PHN), diabetic
peripheral neuropathy (DPN), and HIV-associated distal neuropathy (HIV-DSP). No clinical trials are planned to test
this hypothesis, but it certainly presents upside to the DARA story, especially after a development partnership is
signed on the drug because DARA can bake in additional milestones and regulatory payments on label expansion.
Partnership After phase 2b
Management has reported being in discussion with several interested parties on KNR5500. We see neuropathic
pain as a sizable market opportunity for KRN5500. CIPN represents an excellent niche indication with a quick route
to market, especially with the FDA Fast Track designation and funding from the NCI. Larger indications within
neuropathic pain and fibromyalgia represent a billion-dollar opportunity. However, given the highly competitive
nature of the indications and the fact that the market is dominated by generic gabapentin, along with billion-dollar
branded pharmaceuticals in Lyrica and Cymbalta, and the recently approved gabapentin extended release
molecule, Gralise, we are not expecting that DARA will be able to secure an upfront payment and phase 3
development partnership until after the phase 2b data on KRN5500 has been released.
Based on expected timelines, this would be around late 2013. At that time investors and potential partners will have
a much better understanding of the market potential for the drug. Partnering now, we believe the company would
receive vastly less than if the phase 2b data are positive.
Zacks Investment Research Page 4 www.zacks.com

5. Positive Phase 1b On DB959
On November 1, 2011, DARA announced positive results from a successfully completed phase 1b clinical study for
DB959, the company s once daily peroxisome proliferator activated receptor (PPAR) delta/gamma agonist, a non-
TZD oral drug in development for the treatment of type 2 diabetes. The study was a randomized, placebo-
controlled, double-blind, escalating multiple dose clinical trial that enrolled 32 healthy male and female volunteers at
Quintiles' Phase 1 facility in Overland Park, Kansas.
The company plans to present detailed results at an upcoming scientific meeting in the first half of 2012. However,
initial analysis of the data show that DB959 was safe and well-tolerated throughout the 40-fold dose-range tested,
with an overall safety profile similar to placebo when dosed for 1 week. Pharmacokinetic (PK) analysis indicates that
DB959 is highly likely to meet the target dosing regimen of once-a-day. The data confirm DARA s phase 1a data
from a single-ascending dose study showing excellent safety and tolerability, previously presented at the American
Diabetes Association (ADA) meeting in June 2011.
Changes in the circulating profile of adiponectin, the established biomarker of PPAR agonism, seen in this study
suggests that DB959 will be pharmacologically active in patients with type 2 diabetes within the well tolerated dose
range utilized in this study.
Adiponectin is a fat tissue-derived plasma protein whose expression is regulated by PPAR-gamma. It may play a modulatory role in multiple
metabolic processes; plasma levels of adiponectin correlate with insulin sensitivity and correlate inversely with percent body fat.
Improvements in one's metabolic health, as may be seen with weight loss, can be accompanied by increases in plasma adiponectin.
Plasma adiponectin levels can be used as a biomarker or indicator of in vivo PPAR-gamma agonism. Numerous published studies have
shown that PPAR-gamma agonists dose-dependently increase plasma adiponectin levels in both non-diabetic and diabetic populations at
doses known to improve glucose homeostasis and insulin sensitivity.
Previous Data Suggest Unique Profile
Preclinical results demonstrated that DB959 lowered glucose to normal levels, raised HDL, raised the HDL:LDL
ratio, and lowered triglycerides. These beneficial effects on glucose and lipids were observed without causing the
weight gain which has been seen with other PPAR agonists.
Data with DB959 suggest HbA1c efficacy on par with
PPAR-gamma agonist, rosiglitazone (Avandia), with the
ability to raise HDLc (good cholesterol) on part with
PPAR-delta agonists, such as GlaxoSmithKline s
GW501516 (currently in phase 2 development). Finally,
the drug has shown powerful triglyceride lowering
capabilities far beyond rosiglitazone.
Positive lipid effects on cholesterol and triglycerides
would provide a unique profile to DB959 in the treatment
of type 2 diabetes. We note approximately 85% of
patients with type 2 diabetes also have mixed
dyslipidemia.
The key differentiator for DB959, however, is its potential to
be weight neutral. Thiazolidinedione (TZD) drugs like
rosiglitazone (Avandia) and pioglitazone (Actos) have been
shown to contribute to weight gain with regular use. This is
an important stat because over 80% of patients with type 2
diabetes are considered over-weight (BMI > 28). TZDs
have also been associated with greater incidence fractures
and macular edema. Despite this, sales of Actos and
Avandia eclipsed $6 billion worldwide in 2007, prior to the
meta-analysis calling into question the cardiovascular
safety of Avandia. The potential to have a weight neutral
effect with DB959, with similar HbA1c lowering efficacy and
positive effects on cholesterol and triglycerides equates to
a potential blockbuster profile for DB959.
Zacks Investment Research Page 5 www.zacks.com

6. Next Step: Wrap-Up Preclinical Work, Then Move Into Phase 2a
The next clinical step for DB959 is a phase 2a study in which DARA plans to study DB959 as both monotherapy
and in combination with other standard glucose lowering agents such as metformin, dipeptidyl-peptidase IV (DPP-4)
inhibitors, and sulphonylureas (SU). However, before that trial can begin, management must complete some
preclinical toxicology and animal (rodent and non-human primate) model data. We expect that DARA will also
conduct a 2-year carcinogenicity program on DB959, as well as a 29-day toxicology study so that all the preclinical
data can be analyzed and in hand by the time the company is ready to seek a development or out-license partner
on DB959 after the phase 2a program is complete. We are expecting that the preclinical work will be completed
during the first half of 2012, meaning that the phase 2a trial should be under-way by the fourth quarter 2012. We are
not expecting a partner on DB959 until 2013.
Love The Story, But Need More Data
We are big fans of the DARA business model. The company is well-positioned to take advantage of the growing
pipeline drain at big pharma companies. Both candidates, KRN5500 and DB959, represent a potential billion-dollar
market opportunity that surely peak interest at big pharma.
Source: DARA BioSciences, Inc.
However, the partnering environment remains difficult. There are hundreds of small biotech companies looking for
deals and big pharma has been hesitant to spend money given the uncertain economic outlook around the world.
We believe both DARA s candidates are partnerable, but we do not see the market bidding up DARA shares
significantly until a deal is in hand.
In that regard, we do not see a deal on either KRN5500 or DB959 until after the next planned trial with each
candidate. The NCI plans to take KRN5500 into a phase 2b program during the first half of next year. Data should
be available late 2013. With DB959, management must complete some preclinical data during the first half of 2012,
and then move into phase 2a late 2012. That would put a data read-out on the phase 2b DB959 program mid-2013.
Therefore, our financial model expects no deal on either KRN5500 or DB959 until the second half of 2013.
In the meantime, DARA hold $2.2 million in cash. We forecast burn is around $0.9 per quarter. Therefore, we find
the current cash balance to be sufficient to fund operations into the third quarter 2012. We believe that management
may seek to raise funds in the second quarter 2012 in order to keep the clinical programs for KRN5500 and DB959
moving forward at full speed. We remind investors that DARA currently holds around 400K shares and 100K
warrants in privately-held MRI Interventions (formerly SurgiVision, Inc.). MRII had filed an S-1 earlier in the year to
go public through an IPO, but it was delayed by the difficult equity market. We suspect that MRII will seek to re-
initiate its IPO at some point in 2012. This could provide significant non-dilutive cash to DARA. The potential aslo
exists that DARA may seek to sell a portion of these privately-held shares back to MRII before the IPO in an attempt
to raise non-dilutive cash.
Zacks Investment Research Page 6 www.zacks.com

7. PROJECTED FINANCIALS
DARA BioSciences, Inc.
Income Statement
2009 A 2010 A Q1 A Q2 A Q3 A Q4 E 2011 E 2012 E 2013 E
KRN5500 (Neuro Pain) $0 $0 $0 $0 $0 $0 $0 $0 $0
YOY Growth - - - - - - - - -
DB959 (T-2 Diabetes) $0 $0 $0 $0 $0 $0 $0 $0 $0
YOY Growth - - - - - - - - -
Licensing & Collaborative $0 $0 $0 $0 $0 $0 $0 $0 $0
YOY Growth - - - - - - - - -
Total Revenues $0 $0 $0 $0 $0 $0 $0 $0 $0
YOY Growth - - - - - - - - -
Cost of Goods Sold $0 $0 $0 $0 $0 $0 $0 $0.0 $0.0
Product Gross Margin - - - - - - - - -
SG&A $2.85 $3.14 $0.92 $0.67 $0.71 $0.75 $3.05 $3.25 $3.50
% SG&A - - - - - - - - -
R&D $1.89 $3.34 $0.40 $0.99 $0.56 $0.45 $2.40 $2.75 $3.00
% R&D - - - - - - - - -
Operating Income ($4.95) ($6.48) ($1.32) ($1.66) ($1.27) ($1.20) ($5.45) ($6.00) ($6.50)
Operating Margin - - - - - - - - -
Interest & Other Net $1.17 $0.49 ($0.00) $0.00 $0.09 ($0.00) $0.09 ($0.01) ($0.01)
Pre-Tax Income ($3.78) ($5.99) ($1.32) ($1.66) ($1.18) ($1.20) ($5.36) ($6.01) ($6.51)
Taxes / Other $0 $0 $0 $0 ($0.2) $0 $0 $0 $0
Tax Rate 0% 0% 0% 0% 0% 0% 0% 0% 0%
Non-Controlling Interest $0.22 $0.34 $0.07 $0.09 $0.07 $0.10 $0.33 $0.30 $0.20
Net Income ($3.56) ($5.65) ($1.25) ($1.57) ($0.92) ($1.10) ($5.03) ($5.71) ($6.31)
YOY Growth - 58.7% - - - - -11.0% 13.5% 10.5%
Net Margin - - - - - - - - -
Reported EPS ($1.63) ($1.80) ($0.26) ($0.31) ($0.18) ($0.21) ($0.99) ($0.76) ($0.70)
YOY Growth - 10.9% - - - - -45.3% -22.9% -7.9%
Shares Outstanding 2.2 3.1 4.7 5.1 5.2 5.3 5.1 7.5 9.0
Source: Zacks Investment Research, Inc. Jason Napodano, CFA
© Copyright 2011, Zacks Investment Research. All Rights Reserved.

8. HISTORICAL ZACKS RECOMMENDATIONS
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