Depomed Reports Record Sales and Cash Flow in Second Quarter 2015 and Raises Full Year 2015 Guidance

- Record second quarter 2015 with net product sales of $94.3 million, up 234% compared to the second quarter of 2014

- NUCYNTA® strong second quarter performance with net sales of $56.7 million

- Second quarter cash increase of $55 million, non-GAAP adjusted EBITDA of $37 million

- Conference call scheduled for today at 4:30 PM EDT; Dial in information below

Jul 29, 2015, 16:04 ET from Depomed, Inc.

NEWARK, Calif., July 29, 2015 /PRNewswire/ -- Depomed, Inc. (Nasdaq: DEPO) today reported financial results and highlighted operational achievements for the quarter ended June 30, 2015.

"Depomed has rapidly become a leading force in the pain and neurology marketplace, with significant net product revenue growth that positions us to continue to deliver substantial value to our shareholders in both the immediate and long term," said Jim Schoeneck, President and CEO of Depomed. "Growth in the second quarter was led by our flagship product NUCYNTA, which had a strong performance in the first quarter of the Company distributing the product. We believe that NUCYNTA has blockbuster potential – an even bigger opportunity than we originally anticipated – and we've just relaunched NUCYNTA with our new product positioning and expanded commercial efforts that we initiated in mid-June. We also see future growth opportunity for Gralise®, Cambia® and Lazanda® including increases in unit demand and market share plus product line extensions. Depomed is now in a period of accelerated growth, one that we see extending well into the future." 

Business and Financial Highlights Reflect Continued Period of Accelerated Growth

  • Record quarterly net product sales for the second quarter of 2015 were $94.3 million, an increase of 234% compared to $28.2 million for second quarter of 2014 and an increase of 198% compared to $31.7 million for first quarter of 2015
  • NUCYNTA acquisition completed earlier than expected on April 2, enabling Depomed to record full second quarter NUCYNTA net sales of $56.7 million; product franchise was officially re-launched in mid-June with expanded sales force of 275 plus full marketing and medical support
  • Second quarter 2015 cash increase of $55 million positions Depomed to prepay $100 million of secured debt in second quarter 2016
  • Quarterly non-GAAP adjusted earnings of $20.0 million, or $0.27 per share
  • Quarterly GAAP net loss of ($21.7 million), or ($0.36) loss per share
  • Federal income tax refund of $16 million expected for 2015, resulting in negative effective tax rate for the year
  • Multiple successes in defending and enforcing intellectual property rights:
    • Favorable decision in Inter Partes Review proceeding expected to pave way to proceed with case against Purdue Pharma alleging infringement of patents by Purdue's reformulated Oxycontin® product
    • Separate litigation settlements with first filers provide for Gralise exclusivity until 2024 and Zipsor® exclusivity to 2022

"We are committed to growing the business and have proven that Depomed can acquire, integrate and grow products – marked by sales growth, prescription growth, market share growth -- and we expect this trend to continue," said Schoeneck. "Considering the strong performance of our product portfolio, we are raising 2015 product sales guidance to $320-$340 million, which is essentially triple our 2014 sales. At the midpoint of revised 2015 guidance, year-over-year product sales growth would be 189% with sales compounded annual growth rate since 2012 of 129%. I am confident that we have the right team and strategy in place to gain significant market share and drive value to our shareholders as we continue our path to becoming one of the top five revenue pain companies in the United States by 2016."

Product Performance Highlighted by Sales Growth, Prescription Growth, Market Share Growth

  • NUCYNTA second quarter net sales were $56.7 million; the effect of the re-launch strategy and the tripled sales force is expected to impact NUCYNTA prescription growth beginning later this year
  • Quarterly total product prescriptions for the second quarter of 2015 for Gralise, Cambia and Lazanda were:
    • Record Gralise second quarter 2015 total prescriptions were 83k, up 18% compared to second quarter 2014
    • Record Cambia second quarter 2015 total prescriptions were 35k, up 35% compared to second quarter 2014
    • Record Lazanda total sprays of 148k in the second quarter 2015 up 156% compared to second quarter 2014
  • Commercial strategy is resulting in gains in market share:
    • Gralise market share of 3.2% up from 2.8% in second quarter 2014
    • Cambia market share of 7.5% up from 5.2%  in second quarter 2014
    • Lazanda market share of 4.2% nearly doubled from second quarter 2014













Three Months Ended


Six Months Ended


June 30,


June 30,


2015


2014


2015


2014


(in thousands, unaudited)


(in thousands, unaudited)

Product sales, net:












NUCYNTA products

$

56,653


$

-


$

56,653


$

-

Gralise


20,927



15,111



38,201



25,970

Cambia


6,848



4,958



12,214



9,582

Lazanda


3,853



1,354



7,039



2,034

Zipsor


6,014



6,822



11,859



12,165

         Total product sales, net


94,295



28,245



125,966



49,751













Royalties

$

209


$

430



742



925













License and other revenue:












Mallinckrodt

$

-


$

5,000


$

-


$

15,000

Other


-



760



-



2,520

         Total license and other revenue


-



5,760



-



17,520













Non-cash PDL royalty revenue

$

-


$

33,297


$

-


$

76,081













Total revenues (GAAP Basis)

$

94,504


$

67,732


$

126,708


$

144,277

























NUCYNTA has Blockbuster Potential – Commercial Strategy Designed to Achieve Greater Peak Sales than Originally Anticipated

  • Sales force tripled to 275 reps in June; new medical support and speaker program underway
  • New positioning focused on dual mechanism of action designed to target both nociceptive and neuropathic pain
  • Capturing market share in large and growing markets
    • Over 100 million US patients with chronic pain, 31 million with chronic lower back pain (CLBP)
    • Specific targeting of CLBP patient population
    • Just now being launched for moderate to severe painful diabetic peripheral neuropathy (DPN), which affects another 1-2 million patients
  • Managed care dynamics continue to provide broad patient access
    • Effective July 1, 2015, United Healthcare Commercial formulary change benefits NUCYNTA ER; Oxycontin now triple step edit behind NUCYNTA
  • Physician education focusing on proper titration/dosing expected to have the potential to increase sales by 50 or more
  • Pricing adjustment now brings NUCYNTA on par with competitors
  • Market exclusivity: composition of matter patents on tapentadol (Feb. 2023 with pediatric extension) and marketed polymorph form (Dec. 2025 with pediatric extension); DPN pain use patent to 2028

Product Portfolio and Future Acquisitions to Drive Significant Growth in the Immediate and Long Term

  • Price adjustments made in June to Gralise, Cambia, Lazanda and Zipsor to stay on par with the market leaders
  • Aggressive "Acquire, Integrate, Grow, Repeat" strategy – evaluated more than 60 acquisition candidates in 1H 2015
  • Actively engaged in discussions to acquire marketed, accretive products to further accelerate Depomed's growth

Revised 2015 Financial Outlook

As a result of the strong second quarter financial performance, Depomed is raising its 2015 financial guidance for total product sales, adjusted earnings and adjusted EBITDA:


Updated Guidance

Prior Guidance

Total Product Sales

$320 to $340 million

$310 to 335 million

Total SG&A and R&D Expense*

$195 to $210 million

$195 to 210 million

Non-GAAP Adjusted Earnings

$40 to $50 million

$16 to 28 million

Non-GAAP Adjusted EBITDA

$95 to $110 million

$85 to 100 million

* Includes approximately $21 million of one-time NUCYNTA deal and relaunch expenses

Non-GAAP Financial Measures

In this press release, Depomed includes information about non-GAAP adjusted earnings (loss), non-GAAP adjusted earnings (loss) per share and non-GAAP adjusted EBITDA, non-GAAP financial measures, as useful operating metrics for the six month periods ended June 30, 2015 and 2014 and its full year 2015 financial outlook. The Company believes that the presentation of these non-GAAP financial measures, when viewed with our results under GAAP and the accompanying reconciliations, provides supplementary information to investors. The Company uses these non-GAAP financial measures in connection with its own planning and forecasting purposes and for measuring the Company's performance. These non-GAAP financial measures should be considered in addition to, and not a substitute for, or superior to, net income or other financial measures calculated in accordance with GAAP. Non-GAAP adjusted earnings (loss) and non-GAAP adjusted earnings (loss) per share are not based on any standardized methodology prescribed by GAAP and represent GAAP net income (loss) and GAAP earnings (loss) per share adjusted to exclude (1) non-cash PDL royalty revenue, net of related costs, (2) non-cash interest expense on the liability related to the sale of future royalties and milestones to PDL, (3) amortization related to product acquisitions, (4) stock-based compensation expense, (5) non-cash interest expense related to debt, and to adjust (6) the income tax provision to reflect the estimated amounts payable or receivable in cash. Non-GAAP adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and represents GAAP net income (loss) adjusted to exclude (1) non-cash PDL royalty revenue, net of related costs, (2) interest income (3) interest expense, (4) amortization related to product acquisitions, (5) stock-based compensation expense, (5) depreciation, (6) taxes and (7) transaction costs associated with product acquisitions. Non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, non-GAAP measures used by other companies.

The following table reconciles the Company's GAAP net income (loss) to non-GAAP adjusted loss for the three and six months ended June 30, 2015 and 2014:

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EARNINGS (LOSS)

(in thousands, except per share amounts)






















Three Months Ended


Six Months Ended



June 30,




June 30,



2015


2014


2015


2014


(unaudited)


(unaudited)





















GAAP net income (loss)

$

(21,653)


$

12,746


$

(33,286)


$

30,684

     Non-cash PDL royalties, net of related costs


-



(32,865)



-



(75,210)

     Non-cash interest expense on PDL liability


-



4,903



-



10,282

     Non-cash interest expense on debt


3,984



-



7,405



-

     Amortization related to product acquisitions


41,458



4,933



43,044



9,489

     Stock based compensation


3,249



2,299



6,061



4,170

     Non-cash income tax adjustment


(7,036)



8,300



(11,216)



20,128

Non-GAAP adjusted earnings (loss)

$

20,002


$

316


$

12,008


$

(457)

Non-GAAP adjusted earnings (loss) per share (1)

$

0.27


$

0.01


$

0.19


$

(0.01)





















 

(1) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt.  There was no add-back of interest expense or additional dilutive shares related to the convertible debt for the six months ended June 30, 2015 and the three and six months ended June 30, 2014, as the effect is anti-dilutive.

The following table reconciles the Company's GAAP net income (loss) to non-GAAP adjusted EBITDA for the three and six months ended June 30, 2015 and 2014:

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA

(in thousands)






















Three Months Ended


Six Months Ended



June 30,




June 30,



2015


2014


2015


2014


(unaudited)


(unaudited)





















GAAP net income (loss)

$

(21,653)


$

12,746


$

(33,286)


$

30,684

     Non-cash PDL royalties, net of related costs


-



(32,865)



-



(75,210)

     Amortization related to product acquisitions


41,458



4,933



43,044



9,489

     Stock based compensation


3,249



2,299



6,061



4,170

     Interest income (other)


(61)



(13)



(118)



(31)

     Interest expense


21,432



4,903



27,010



10,282

     Depreciation


432



479



853



1,000

     Provision (benefit) from income taxes


(17,578)



8,300



(21,758)



20,128

     Transaction costs


9,685



-



12,117



-

Non-GAAP Adjusted EBITDA

$

36,964


$

782


$

33,923


$

512

Conference Call

Depomed will host a conference call today, Wednesday, July 29th, beginning at 4:30 p.m. EDT (1:30 p.m. PDT) to discuss its results. Participants can access the call by dialing 877-317-6789 (United States) or 412-317-6789 (international). The conference call will also be available via a live webcast on the investor relations section of Depomed's website at http://www.Depomed.com.   Access the website 15 minutes prior to the start of the call to download and install any necessary audio software. An archived webcast replay will be available on the Company's website for three months.

About Depomed

Depomed is a specialty pharmaceutical company that commercializes products for pain and neurology related disorders. Our NUCYNTA® franchise includes NUCYNTA® ER (tapentadol) extended release tablets indicated for the management of pain, including neuropathic pain associated with diabetic peripheral neuropathy (DPN), severe enough to require daily, around-the-clock, long-term opioid treatment, and NUCYNTA® (tapentadol), an immediate release version of tapentadol, for management of moderate to severe acute pain in adults. Gralise® (gabapentin) is a once-daily treatment approved for the management of postherpetic neuralgia. CAMBIA® (diclofenac potassium for oral solution) is a non-steroidal anti-inflammatory drug indicated for acute treatment of migraine attacks with or without aura in adults (18 years of age or older). Zipsor® (diclofenac potassium) Liquid Filled Capsules is a non-steroidal anti-inflammatory drug indicated for relief of mild to moderate acute pain in adults. Lazanda® (fentanyl) Nasal Spray is an intranasal fentanyl drug used to manage breakthrough pain in adults (18 years of age or older) who are already routinely taking other opioid pain medicines around-the-clock for cancer pain. Gralise and various partner product candidates are formulated with Depomed's proven, proprietary Acuform® drug delivery technology. Additional information about Depomed may be found at www.Depomed.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties including, but not limited to, those related to the commercialization of NUCYNTA ER, NUCYNTA, Gralise, CAMBIA, Zipsor and Lazanda, Depomed's financial outlook for 2015 and expectations regarding financial results and potential business opportunities and other risks detailed in the company's Securities and Exchange Commission filings, including the company's Annual Report on Form 10-K for the year ended December 31, 2014 and most recent Quarterly Report on Form 10-Q. The inclusion of forward-looking statements should not be regarded as a representation that any of the company's plans or objectives will be achieved. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS)

(in thousands, except per share amounts)
















Three Months Ended


Six Months Ended



June 30,


June 30,



2015


2014


2015


2014



(unaudited)


(unaudited)

Revenues:













Product sales, net

$

94,295


$

28,245


$

125,966


$

49,751

Royalties



209



430



742



925

License and other revenue


-



5,760



-



17,520

Non-cash PDL royalty revenue


-



33,297



-



76,081

Total revenues



94,504



67,732



126,708



144,277














Costs and expenses:












Cost of sales


22,865



4,675



25,977



8,377

Research and development expense


4,714



1,397



6,572



3,439

Selling, general and administrative expense


57,408



32,573



91,950



65,090

Amortization of intangible assets


26,731



2,542



29,271



5,081

Total costs and expenses


111,718



41,187



153,770



81,987














Income from operations


(17,214)



26,545



(27,062)



62,290

Other income (expense)


61



(596)



118



(1,196)

Interest expense


(22,078)



-



(28,100)



-

Non-cash interest expense on PDL liability


-



(4,903)



-



(10,282)

Benefit from (provision for) income taxes


17,578



(8,300)



21,758



(20,128)

Net income (loss)

$

(21,653)


$

12,746


$

(33,286)


$

30,684














Basic net income (loss) per share

$

(0.36)


$

0.22


$

(0.56)


$

0.53

Diluted net income (loss) per share

$

(0.36)


$

0.21


$

(0.56)


$

0.51














Shares used in calculating basic net income per share


59,992



58,106



59,778



57,827

Shares used in calculating diluted net income per share


59,992



60,430



59,778



60,258














CONSOLIDATED BALANCE SHEETS

(in thousands)








June 30,


December 31,


2015


2014


(unaudited)










Cash, cash equivalents and marketable securities

$

122,559


$

566,402

Accounts receivable


60,497



28,078

Inventories


10,376



8,456

Income taxes receivable


13,891



4,030

Property and equipment, net


16,013



7,055

Intangible assets, net


1,062,579



72,361

Deferred tax assets


9,601



9,601

Prepaid and other assets


27,243



15,082

Total assets

$

1,322,759


$

711,065







Accounts payable and accrued liabilities

$

133,179


$

52,686

Senior notes


562,516



-

      Convertible notes


236,315



229,891

Contingent consideration liability


14,720



14,252

Deferred tax liabilities


18,994



32,589

Other liabilities


10,937



17,200

Shareholders' equity


346,098



364,447

Total liabilities and shareholders' equity

$

1,322,759


$

711,065







 

SOURCE Depomed, Inc.



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