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Depomed, Inc. (DEPO)

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DepoMed (DEPO)

Q1 2013 Earnings Call

May 08, 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

Jack Anders

Analysts

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

Jason Napodano - Zacks Investment Research Inc.

Presentation

Operator

Good day, and welcome to the Depomed First Quarter 2013 Financial Results and Business Update Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. August Moretti, Senior Vice President and Chief Financial Officer. Please go ahead, sir.

August J. Moretti

Thank you, operator. Good afternoon, and welcome to our first quarter 2013 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 commercialization of Gralise, Zipsor and 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 and in our quarterly report on Form 10-Q that we expect to file with the SEC by the end of this week, most particularly under the caption Risk Factors in both documents. 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 March 31, 2013. All other guidance, including guidance relating to the company's expected revenues, expenses, year-end cash and corporate goals is as of today, May 8, 2013.

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

James A. Schoeneck

Thanks, Augie, and thanks to all of you for joining us on the call today. I'd like to summarize our operational and financial accomplishments in the first 4 months of 2013, then I'll turn the call back over to Augie to discuss our finances, after which we'll open the call to questions.

Depomed continues to make progress toward becoming a growth-oriented and profitable specialty pharmaceutical company. Our first quarter 2013 revenues were $26.2 million, an increase of 55% over first quarter 2012. Our prescription growth for Gralise has slowed in the first quarter of 2013, 7% above fourth quarter 2012. In late January of this year, we realigned our sales force to increase the frequency of calls on our top potential prescribers and to better balance our sales territories. We eliminated or merged 16 of our 164 sales territories and established 7 new territories in areas that we see as ripe for growth.

We believe that the resulting disruption of the sales rep-physician relationships affected our first quarter prescription growth. We expect that the sales force optimization will create additional demand in future quarters. We have also taken additional actions that we believe will help the growth of our brands. So with that as background, let's start with Gralise.

Gralise prescriptions continued to grow in the first quarter with over 50,000 total prescriptions in the quarter, more than tripling the prescription volume of the first quarter of 2012. Gralise sales for the quarter were $6.1 million. I'd like to mention 3 factors relating to our quarterly sales report.

First, product sales were impacted by a 9% price increase for Gralise effective April 1, 2013. The price increase caused us to increase our return reserve at March 31, 2013, which in turn reduced first quarter 2013 Gralise product revenue by approximately $300,000. Second, during the first quarter of this year, key wholesalers reduced their inventories of Gralise from year-end 2012 levels.

Finally, fourth quarter 2012 sales were higher than first quarter 2013 sales because fourth quarter benefited from the change of our revenue recognition policy for Gralise from a prescription basis to a methodology based on shipments to wholesalers. That resulted in a onetime recognition of $1.6 million in Gralise product sales in the fourth quarter of 2012.

We have seen an uptake in Gralise prescriptions in recent weeks. Total prescriptions for March reached 17,562, an all-time monthly high. We have continued to see growth in April as well, reaching 4,367 scripts for the week ending April 26, a second consecutive all-time high in weekly prescriptions. We believe that the sales force alignment we implemented in January is beginning to positively impact growth.

We've recently rolled out 3 additional measures that we believe would accelerate the growth of Gralise. We have added programs aimed at helping more prescriptions get filled at the pharmacy level and want to increase the number of successful prior authorizations for the brand. In addition, we've made changes to the representation of the brand in managed care.

On April 29, we instituted a new eVoucher program for Gralise. The eVoucher is being implemented in 41,000 participating pharmacies and means that patients who are covered by insurance and present prescriptions at these participating pharmacies will see reduced co-pays through the electronic system and will not need to use our co-pay card. We expect that this program will result in more prescriptions being filled with Gralise, particularly for patients facing a high co-pay amounts.

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