Depomed, Inc. (DEPO)

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Depomed, Inc. (DEPO)

Q3 2008 Earnings Call Transcript

October 30, 2008, 5:00 pm ET


Ina Cu – IR

Carl Pelzel – President and CEO

Mike Sweeney – VP, Product Development


Scott Henry – Roth Capital



Good day, everyone, and welcome to the Depomed Third Quarter 2008 Financial Conference Call. As a reminder, today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ms. Ina Cu in the Investor Relations Department. Please go ahead.

Ina Cu

Thank you. Good afternoon everyone.

This is Ina Cu in Depomed's Investor Relations Department. With me today are Carl Pelzel, President and Chief Executive Officer at Depomed, Tammy Cameron, our Controller and Principal Accounting and Financial Officer; and Dr. Mike Sweeney, our Vice President of Product Development. At the close of market today, we issued our financial results for the third quarter ended September 30, 2008. They can be accessed from the company website at

Before we begin, I would like to remind you that during this call we will be making forward-looking statements related to various aspects of our business, including statements related to clinical development, financial matters, and commercialization of our marketed products. Actual results may differ materially from the results described. We encourage you to review the risk factors in our most recent quarterly report on Form 10-Q.

I will now turn the call over to Carl Pelzel.

Carl Pelzel

Thank you, Ina. Good afternoon and thank you for joining us for Depomed's third quarter earnings call.

I would like to start our call today by acknowledging this unprecedented economic environment we are currently experiencing. Clearly, this has been a quarter unlike any other. All our stock has suffered with the rest of the market. I am pleased to announce that fundamentals of the company have gotten stronger and that we had a good quarter and achieved several key milestones.

On our call today, I will review the highlights of the quarter then discuss our financial results in more detail. Our goal is for fiscal 2008, which is to rigorously manage cash, partnered Glumetza, develop and partner DM-1796 and DM-5689, our Gabapentin programs, advance our early stage pipeline and to resolve the IVAX lawsuit. I'm pleased to report we are delivering on those objectives.

First, we continue to rigorously manage our cash. We are carefully managing our expenses as evidenced by the reduced expense guidance we will discuss later in the call. We are using our partnerships to allow us to more cost effectively fund our commercialization effort. We have a cash balance of $85.5 million as of the end of the third quarter, up from $71.2 million at the end of the second quarter of this year. We are working diligently to advance our partnership efforts and anticipate additional cash from these activities. You may have seen the reports from Rodman & Renshaw that shows a number of public biotech companies with less than a year's worth of cash are up by more than 65% since the first quarter to a 113 companies. I'm sorry to see this but I am happy to report that we have enough cash to comfortably complete our late-stage clinical programs.

As for partnering, Glumetza was partnered with Santarus in July of this year with an up-front payment of $12 million, and we retain promotional rights for the OB-GYN space. This was timely with our 1000-mg tablet launch in June of this year. Glumetza is currently being promoted by 300 highly motivated sales representatives who have been honing their skills in the very competitive PPI market with Zegerid. We are confident Santarus has the ability to enhance our market credit penetration providing us with additional royalty revenue and milestones to support our development activities.

In addition, during the quarter we entered into a contract with CVS Caremark, the nation's largest pharmacy benefit management company, which has Glumetza available to its members as a tier 2, brand preferred metformin for the treatment of diabetes. This should positively position Glumetza as the branded metformin of choice for physicians who care for patient whose benefits are managed by Caremark.

Regarding the development and partnering of DM-1796 and 5689, the new pivotal registration Phase 3 clinical trial in PHN that we started in March is progressing well. The study has a 450 patient placebo-controlled, double-blind trial with a 10-week stable treatment period. In addition, after a successful end of Phase II meeting with the FDA related to DM-5689, our hot flash program, we initiated Breeze 1 and Breeze 2, our two Phase III trials for hot flashes which begun in September and October of this year respectively. These are randomized double-blind placebo-controlled studies of approximately 540 patients per study or 180 patients per hour. You may recall that the Phase II trial had only 30 patients per hour.

Now as for the status of partnering discussion, the process has been longer than we hoped, but even in these difficult economic times I remained pleased with our progress. These discussions are of course very sensitive so I am not in the position to provide additional comment today.

As for our early stage pipeline, our goal is to focus on strategic large market opportunity which represent a unique fit with our technology and which thereby afforded a high degree of product differentiation that will move the needle with patience, positions, and payers. We plan to move one quick clinical program into Phase I this year and another next year.

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