DepoMed, Inc. (DEPO)
Q4 2008 Earnings Call Transcript
March 5, 2009 5:00 pm ET
Matt Gosling – VP and General Counsel
Carl Pelzel – President and CEO
Mike Sweeney – VP, Product Development
Tammy Cameron – VP, Finance
Scott Henry – Roth Capital
John Borzilleri – GRT Capital
John Gordon – Deltec Asset Management
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Good afternoon. This is Matt Gosling with DepoMed's Investor Relations Department. With me today are Carl Pelzel, President and Chief Executive Officer at DepoMed; Tammy Cameron, our Vice President, Finance; and Dr. Mike Sweeney, Vice President, Research and Development. At the close of market today, we issued our financial results for the fourth quarter and year ended December 31, 2008. They can be accessed from our company website at www.DepoMed.com. 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 annual report on Form 10-K and our most recent quarterly report on Form-10Q.
I will now turn the call over to Carl Pelzel.
Thank you, Matt. Good afternoon and thank you for joining us for DepoMed's fourth quarter and year end earnings call. I would like to start our call today by acknowledging the challenging economic environment we are currently operating in and the importance it places on prudently using our cash position and leveraging our portfolio and technology to generate additional cash. In that regard, we are extremely pleased that we are able to sign two partnerships with Solvay and Covidien in the fourth quarter of 2008, which have greatly enhanced our current cash position and our future cash prospects. We anticipate several significant milestones in 2009, including top line results for our ongoing Phase III PHN and hot flash studies and results from our trial and Parkinson's patients. In the mean time we are advancing well on our 2009 goals. We finished 2008 with a strong cash position of $82.1 million compared to $85.5 million at the end of the third quarter of 2008 and $69.5 million at the end of 2007. I should note that the cash balance at the end of the fourth quarter does not include the $25 million cash payment we received from Solvay pharmaceuticals on February 25th of this year. Our strong cash position is a direct result of achieving all of the 2008 financial and operational goals announced at the start of the year and a company-wide philosophy which has thousands rigorous expense management. Let me briefly recap our goals for 2008 and how we scored on them. I would then go into more detail in each goal and then I will revive our objectives for 2009.
First, we said out to rigorously manage cash and build our cash position. We ended the year with $82.1 million, including $9.4 million in debt, compared to $69.5 million at December 31, 2007. Our second goal was to partner Glumetza with a committed partner who needed Glumetza to be successful and who could allocate significant sales reps to the effort. We partnered with Santarus in July and we were thus able to eliminate DepoMed costs associated with the continued promotion of Glumetza. Third, we sort to develop and partner DM-1796 and DM-5689. We partnered DM-1796 to Solvay in November and both products are advancing well in their Phase III development. Fourth, we recognized the need to advance our early stage pipeline. We initiated our DM-1992 program in Parkinson’s with a grant from the Michael J Fox foundation. Our final goal was to resolve our law suite against Teva. In April, we settled with Teva for $10 million in cash and royalties. Now not only do we benefit from the settlement in terms of the cash infusion and the reduction in legal cost and management time spent on the law suit, but the law suit itself significantly strengths the IP protecting our core product assets. With those goals achieved 2009 is a critical execution year for us. We have established the following goals for the organization in 2009.
First, effective manage cash and maximize our revenue opportunities. There are a number of components to this goal. Now for least of which is extracting value from non-core assets and continuing commoditized value of our AcuForm Technology through strategic deals such as the recent Covidien deal. Second, we will complete the three Phase III studies of DM-1796, DM-5689, and report results in 2009. Third, we will complete a Phase I trial of DM-1992 in Parkinson’s disease. We will also further advance our pre-clinical pipeline and seek new product development candidates were our technology may provide significant patient benefits. Fourth, we will complete two of the potential four formulations for Covidien, which would trigger modest milestone payments. I would like to expand on how we achieved our 2008 objectives and how we will execute on our 2009 goals. Our first goal was and will continue to be to effectively manage our cash and enter into strategic deals that bring in more cash. We do this by carefully monitoring our expenses and maximizing our revenue opportunities. Our operating expenses for the year 2008 were $46.2 million. We received an upfront cash payment of $25 million from Solvay only last week and we anticipate further pre-commercial development milestones of up to $70 million, up to $300 million sales milestones and royalties of 14% to 20% of products sales. This potential future income stream alone could significantly alter the financing needs and risk profile of DepoMed and lift the company to the next level of valuation.