EX-99.1 2 a08-20526_1ex99d1.htm EX-99.1

Exhibit 99.1

 

Contact:

 

Ina Cu

Investor Relations

650-462-5900

 

DEPOMED REPORTS SECOND QUARTER 2008 FINANCIAL RESULTS

 

MENLO PARK, Calif., July 31, 2008 – Depomed, Inc. (NASDAQ: DEPO) today reported financial results for the second quarter ended June 30, 2008.

 

Depomed reported net income of $3.5 million, or $0.07 per share, for the second quarter of 2008 compared to a net loss of $9.0 million, or $0.20 per share, for the second quarter of 2007.  Net income for the second quarter of 2008 is primarily attributable to a one-time gain of $7.5 million on litigation related to the settlement of the patent infringement suit against IVAX Corporation.

 

Revenues increased to $6.3 million in the second quarter of 2008 from $3.6 million in the same period of 2007, primarily as a result of $5.4 million of product sales of the company’s commercialized diabetes product, GLUMETZA® (metformin hydrochloride extended release tablets).

 

Operating expenses for the quarter ended June 30, 2008 were $2.4 million and included the one-time gain of $7.5 million on litigation related to the IVAX settlement, which had the effect of reducing operating expenses for the quarter.  Operating expenses for the same period in 2007 were $12.5 million.  Stock-based compensation expense for the second quarter of 2008 was $601,000.

 

Cash, cash equivalents and marketable securities as of June 30, 2008 were $71.2 million, compared to $69.5 million as of December 31, 2007.  This does not include an additional $12 million payment received in July 2008 pursuant to the company’s previously disclosed GLUMETZA promotion agreement with Santarus, Inc.

 

“We have strengthened our balance sheet through the first half of 2008 during trying economic times with a $10 million cash and royalty settlement of our patent litigation lawsuit against IVAX, a $15 million credit facility from Oxford Finance and GE Capital, and a $12 million upfront fee from the GLUMETZA promotion agreement with Santarus, Inc.,” stated Carl A. Pelzel, president and chief executive officer of Depomed.  “We are focused on signing a partner for our PHN program and executing on trials of late-stage Gabapentin GR® programs.  We anticipate starting the Phase 3 trials in menopausal hot flashes in the third quarter, as we had a successful end-of-Phase 2 meeting with the FDA in June.”

 

Second Quarter 2008 and Other Recent Highlights

 

·                  Granted Santarus exclusive rights to promote GLUMETZA in the U.S. for $12 million in upfront fees and up to a total of $16 million in one-time sales milestone payments. Santarus will begin promotion of GLUMETZA in the fourth quarter of 2008 and Depomed will pay Santarus a promotion fee ranging from 75% to 80% of the gross margin earned from net sales of GLUMETZA (July 2008).

 

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·                  Entered into a $15 million credit facility with Oxford Finance Corporation and GE Capital Corporation, drew $3.8 million under the facility in June 2008, and an additional $5.6 million in July 2008.

 

·                  Held a successful end-of-Phase 2 meeting with the FDA related to our Phase 3 registration program for Gabapentin GR in menopausal hot flashes, and finalized the design of the program. The Phase 3 registration program will include two randomized, double-blind, placebo-controlled studies of approximately 540 patients per study. The treatment duration in one of the studies will be three months. The treatment duration in the other study will be six months, in order to assess safety and persistence of efficacy.  (June 2008).

 

·                  Settled our patent litigation lawsuit against IVAX.  In the settlement, we received a $7.5 million settlement payment and will receive up to $2.5 million in future royalties on generic Glucophage® XR (metformin hydrochloride extended release tablets) product sold by IVAX or its parent company, Teva Pharmaceuticals USA, in the United States (April 2008).

 

Conference Call

 

Depomed will host a conference call and webcast to discuss second quarter 2008 financial results and other aspects of its business today, Thursday, July 31, at 5:00 p.m. ET.  The webcast can be accessed on the investor section of the Depomed website at www.depomedinc.com.

 

About Depomed

 

Depomed, Inc. is a specialty pharmaceutical company with two approved products on the market and other product candidates in its pipeline.  The company utilizes its proven, proprietary AcuFormTM drug delivery technology to improve existing oral medications, allowing for extended, controlled release of medications to the upper gastrointestinal tract.  Benefits of AcuForm-enhanced pharmaceuticals include the convenience of once-daily administration, improved treatment tolerability and enhanced compliance and efficacy.  GLUMETZA® (metformin hydrochloride extended release tablets) is approved for use in adults with type 2 diabetes.  ProQuin® XR (ciprofloxacin hydrochloride) extended release tablets are approved in the United States for the once-daily treatment of uncomplicated urinary tract infections and is being marketed in the United States within the urology, Ob/Gyn and long-term care specialties by Watson Pharmaceuticals.  Product candidate Gabapentin GR® is currently in clinical development for the treatment of neuropathic pain and menopausal hot flashes.  Additional information about Depomed may be found on its website, www.depomedinc.com.

 

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995.  Statements in this press release that are not historical facts are forward-looking statements that involve risks and uncertainties. The inclusion of forward-looking statements, including those related to expectations regarding clinical programs, potential business transactions, product development, and potential benefits of our products and product candidates, should not be regarded as a representation that any of our plans will be achieved. Actual results may differ materially from those set forth in this release due to the risks and uncertainties inherent in our business, including, without limitation, risks and uncertainties related to: our research and development efforts, including pre-clinical and clinical testing; regulation by the FDA and other government agencies; the timing of regulatory applications and product launches; our ability to successfully commercialize our products; the success of our collaborative arrangements with development and commercialization partners; and other risks detailed in our filings with the Securities and Exchange Commission filings, including our most recent Annual

 

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Report on Form 10-K and our most recent Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to revise or update this release to reflect events or circumstances that occur after the date of this release.

 

-Financial Tables Follow-

 

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DEPOMED, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Revenues:

 

 

 

 

 

 

 

 

 

Product sales

 

$

5,519

 

$

2,502

 

$

10,745

 

$

3,833

 

Royalties

 

433

 

45

 

545

 

79

 

License revenue

 

363

 

1,059

 

727

 

3,523

 

Collaborative revenue

 

—

 

2

 

—

 

2

 

Total revenues

 

6,315

 

3,608

 

12,017

 

7,437

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales

 

962

 

569

 

2,171

 

874

 

Research and development

 

4,680

 

6,129

 

10,750

 

14,701

 

Selling, general and administrative

 

5,241

 

6,323

 

11,748

 

12,550

 

Gain on litigation settlement

 

(7,500

)

—

 

(7,500

)

—

 

Total costs and expenses

 

3,383

 

13,021

 

17,169

 

28,125

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

2,932

 

(9,413

)

(5,152

)

(20,688

)

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and other income

 

553

 

456

 

1,356

 

866

 

Interest expense

 

(5

)

—

 

(5

)

—

 

Total other income (expense)

 

548

 

456

 

1,351

 

866

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) before income taxes

 

3,480

 

(8,957

)

(3,801

)

(19,822

)

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

—

 

(3

)

—

 

(4

)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

3,480

 

(8,960

)

(3,801

)

(19,826

)

 

 

 

 

 

 

 

 

 

 

Deemed dividend on preferred stock

 

(180

)

(170

)

(355

)

(337

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) applicable to common stock shareholders

 

$

3,300

 

$

(9,130

)

$

(4,156

)

$

(20,163

)

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) applicable to common stock shareholders per common share

 

$

0.07

 

$

(0.20

)

$

(0.09

)

$

(0.46

)

Diluted net income (loss) applicable to common stock shareholders per common share

 

$

0.07

 

$

(0.20

)

$

(0.09

)

$

(0.46

)

 

 

 

 

 

 

 

 

 

 

Shares used in computing basic net income (loss) per common share

 

48,041,855

 

46,233,946

 

47,954,052

 

44,166,899

 

Shares used in computing diluted net income (loss) per common share

 

48,355,732

 

46,233,946

 

47,954,052

 

44,166,899

 

 

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DEPOMED, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (in thousands, except share and per share amounts)

 

 

 

June 30,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(Unaudited)

 

(1)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

48,934

 

$

14,374

 

Marketable securities

 

22,266

 

39,091

 

Accounts receivable

 

3,526

 

3,390

 

Unbilled accounts receivable

 

361

 

233

 

Inventories

 

3,547

 

3,263

 

Prepaid and other current assets

 

3,497

 

2,418

 

Total current assets

 

82,131

 

62,769

 

Marketable securities

 

—

 

16,058

 

Property and equipment, net

 

1,271

 

1,621

 

Other assets

 

197

 

197

 

 

 

$

83,599

 

$

80,645

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

722

 

$

1,134

 

Accrued compensation

 

1,365

 

1,558

 

Accrued clinical trial expense

 

376

 

322

 

Other accrued liabilities

 

3,510

 

3,322

 

Deferred product sales

 

9,129

 

6,489

 

Deferred license revenue

 

1,480

 

1,453

 

Other current liabilities

 

51

 

56

 

Current portion of long-term debt

 

587

 

—

 

Total current liabilities

 

17,220

 

14,334

 

Deferred license revenue, non-current portion

 

20,009

 

20,763

 

Long-term debt, net of current portion

 

2,925

 

—

 

Other long-term liabilities

 

326

 

28

 

Commitments

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock, no par value, 5,000,000 shares authorized; Series A convertible preferred stock, 25,000 shares designated, 18,158 shares issued and outstanding at June 30, 2008 and December 31, 2007, with an aggregate liquidation preference of $18,159

 

12,015

 

12,015

 

Common stock, no par value, 100,000,000 shares authorized; 48,113,260 and 47,865,529 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively

 

169,726

 

168,287

 

Accumulated deficit

 

(138,693

)

(134,892

)

Accumulated other comprehensive gain

 

71

 

110

 

Total shareholders’ equity

 

43,119

 

45,520

 

 

 

$

83,599

 

$

80,645

 

 

(1)          Derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

 

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