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Depomed, Inc. (DEPO)

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DepoMed (DEPO)

Q4 2012 Earnings Call

February 20, 2013 4:30 pm ET

Executives

August J. Moretti - Chief Financial Officer and Senior Vice President

James A. Schoeneck - Chief Executive Officer, President and Director

Matthew M. Gosling - Senior Vice President and General Counsel

Analysts

Jason N. Butler - JMP Securities LLC, Research Division

Difei Yang - WallachBeth Capital, LLC, Research Division

Jason Napodano - Zacks Investment Research Inc.

John Rousmaniere Gordon - Deltec Asset Management, LLC

James F. Molloy - Janney Montgomery Scott LLC, Research Division

Presentation

Operator

Good afternoon, and welcome to the Depomed Fourth Quarter and Fiscal Year 2012 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mr. August J. Moretti, Chief Financial Officer and Senior Vice President. Please go ahead, sir.

August J. Moretti

Thank you, operator. Good afternoon, and welcome to our Fourth Quarter and Year-End 2012 Financial Results and Business Update Conference Call. With me today are Jim Schoeneck, President and Chief Executive Officer of Depomed; Matt Gosling, Senior Vice President and General Counsel; and Jack Anders, Senior Director of Finance.

Before we get started, I'd like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including those relating to the commercial efforts related to Gralise and Zipsor, the efforts of Santarus to commercialize Glumetza and our projected revenue expenses and year-end cash for 2013. Actual results may differ materially from the results predicted, and recorded results should not be considered an indication of future performance.

These and other risk factors are more fully discussed in our annual report on Form 10-K that we expect to file with the SEC by the end of this week, and they'll be most particularly dealt with under the caption Risk Factors.

Depomed disclaims any obligation to update or revise any forward-looking statement made on this call as a result of new information or future developments.

As a reminder, Depomed's policy is to only provide financial guidance and guidance on corporate goals for the current fiscal year and to provide, update or reconfirm its guidance only by issuing a press release or filing updated guidance with the SEC in a publicly accessible document. References to current cash, cash equivalents and investments are based upon balances as of December 31, 2012. All other guidance, including guidance relating to the company's expected revenues, expenses, year-end cash and corporate goals, is as of today, February 20, 2013.

I'll now turn the call over to Jim Schoeneck.

James A. Schoeneck

Thanks, Augie. And thank you, all, for joining us on the call today. 2012 was a very successful year for Depomed, and we're off to a good start in 2013. I'd like to summarize the operational and financial accomplishments of 2012 plus the first 1.5 months of '13. Now I'll turn the call back to Augie to discuss our finances, after which, we will open the call to questions.

We're very proud of our accomplishments in 2012, and I'll give you some of the highlights. We recognized over $90 million in revenue for the year and established a foundation of recurring revenues that will support our business going forward. In fact, our recurring fourth quarter revenue in 2012 annualizes to over $100 million for the first time in the company's history.

The Gralise launch continues to progress with over 130,000 prescriptions for the year, and our annualized run rate in December 2012 of more than $30 million. We acquired Zipsor in late June 2012. This asset fits nicely into our pain franchise, and we relaunched the product in late July. We recognized revenues of $9.8 million from the acquisition through the end of the year.

With respect to Glumetza, we settled litigation with our first filer, Lupin, and recently settled our litigation with Sun, our second filer. We recognized over $42 million in royalties from our agreement with Santarus in 2012.

We submitted the NDA for Serada in July. This was accepted by the FDA in October. We are now preparing for our FDA Advisory Committee panel, which is scheduled for March 4, and are looking forward to our May 31 PDUFA date.

We initiated, enrolled, completed and reported the results of our Phase II clinical trial with DM-1992 in Parkinson's. We're continuing to monitor the marketplace prior to further advancing that program.

We executed a license agreement with Janssen for Nucynta ER. In August, we received the $10 million upfront payment, and we received royalties on the net sales of Nucynta ER until 2021. We also received royalties from Merck on Janumet XR, as well as milestone payment from Boehringer Ingelheim and Ironwood.

We converted our full-time sales force from our contract organization to Depomed employees in September, and we've moved into a new headquarters in Newark, California in December.

We do agree it was quite a year for Depomed, and I'll now expand a bit on the various aspects of our business.

Gralise sales and prescriptions continue to grow. During the fourth quarter, we changed our revenue recognition policy for Gralise from a prescription basis to a sell-in basis. Our sales are now based on our shipments to wholesalers and trade accounts. Gralise product sales for the quarter were $7.6 million. We reported over 45,000 total prescriptions in the fourth quarter, a 25% increase over third quarter.

In the weekend of January 18, 2013, we hit a new, all-time weekly prescription high of 4,086 prescriptions. More than 10,000 health care providers have written prescriptions for Gralise since launch, and the majority of those prescriptions continue to be written by pain specialists and neurologists.

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