Depomed Announces Fourth Quarter and Full Year 2017 Financial Results

Loading...
Loading...

- Annual Net Revenues of $381 Million -

- Collegium, Slán Transactions and Expanded Neurology Field Force Position Company for Improved Profitability in 2018 and Beyond –

- New Corporate Headquarters Expected to be Operational in the Third Quarter -

- Conference Call Scheduled for Today at 4:30 PM EST; Dial In Information Below -

NEWARK, Calif., Feb. 27, 2018 (GLOBE NEWSWIRE) -- Depomed, Inc. DEPO today reported financial results for the quarter and twelve months ended December 31, 2017 and provided an update to the business.

"2017 was a challenging year for Depomed, and in response we have taken decisive steps to strengthen and diversify our business," said Arthur Higgins, President and CEO of Depomed. "During the fourth quarter, we not only introduced but also began to implement our new three pillar strategy of Maintain, Grow and Build positioning the company for improved profitability in 2018 and beyond."

Business and Financial Highlights

  • Full year net revenues were $381 million
  • Full year GAAP net loss of ($102) million or ($1.63) per share
  • Full year non-GAAP adjusted EBITDA of $117 million
  • Fourth quarter 2017 net revenues were $94 million
  • Fourth quarter 2017 GAAP net loss of ($33) million or ($0.52) per share
  • Fourth quarter 2017 non-GAAP adjusted EBITDA of $33 million
  • Fourth quarter 2017 ending cash and marketable securities were $128 million
  • NUCYNTA® Commercialization Agreement with Collegium Pharmaceutical provides minimum royalties on net sales of NUCYNTA® and NUCYNTA ER® 
  • Acquisition of rights to cosyntropin (Synthetic ACTH Depot) creates new specialty/orphan franchise
  • Lazanda® sale to Slán Medicinal Holdings
  • Company restructuring and corporate headquarters relocation aligns with new business model

Collegium Pharmaceutical Commercialization Agreement Maintains a Strong NUCYNTA® Franchise

In January 2018, Depomed closed a Commercialization Agreement with Collegium Pharmaceutical, Inc. ("Collegium") under which Collegium will commercialize both NUCYNTA Extended Release and NUCYNTA Immediate Release and, in exchange, for the first four years of the agreement, Depomed expects to receive a minimum royalty of $135 million per year.

Slán Medicinal Holdings Strategic Asset Transaction Diversifies Portfolio and Creates New Specialty/Orphan Franchise

In November 2017, Depomed entered into a Strategic Asset Transaction with Slán Medicinal Holdings Limited ("Slán") under which Depomed acquired from Slán the rights to market the specialty drug candidate, cosyntropin (Synthetic ACTH Depot) in the United States and divested its Lazanda (fentanyl) nasal spray CII to Slán. This transaction formed the foundation of Depomed's new Specialty/ Orphan portfolio. Under the terms of the agreement, West Therapeutic Development, a subsidiary of Slán, is expected to submit a New Drug Application with the U.S. Food and Drug Administration for a to-be-disclosed first indication for cosyntropin in late 2018, with the goal of a potential launch in late 2019 or early 2020. In parallel, Depomed is pursuing a second indication for cosyntropin in infantile spasms, a specific seizure type seen in infantile epilepsy syndrome.

Neurology Salesforce Expansion Expected to Grow Business

In September 2017, Depomed expanded its Neurology salesforce to 90 representatives who are focused on Gralise®, CAMBIA®, and Zipsor®. The Company believes this sales platform will increase sales of these products and allow for the potential addition of other neurology-based product acquisitions.

Loading...
Loading...

Corporate Restructuring and Corporate Headquarters Relocation Aligns with New Business Model

In December 2017, Depomed announced a restructuring and headquarters relocation to align Depomed's staff, office size and location with its new business model. The restructuring reduces headquarters' staff by approximately 40% and the headquarters' office space requirement by 50%. The Company is in negotiations to move to a yet to be disclosed location and expects to be fully operational in its new headquarters in the third quarter of 2018.

Puerto Rico Product Supply Update

Results for the fourth quarter of 2017 were negatively impacted by shortages of certain dosage strengths of NUCYNTA ER.  While Depomed's manufacturing partner for NUCYNTA ER has informed us that their plant is now fully operational, they are still working to fill back orders.  As a result, there have been spot outages of certain strengths of NUCYNTA ER. While this situation may continue into the future, the Company believes that, based on current information, supply should return to normalized levels by mid-March 2018.

Cebranopadol Development Update

In January 2018, consistent with the Company's decision to cease commercialization of opioids, Depomed provided to Grünenthal GmbH ("Grünenthal"), 120 days' written notice of the termination of the December 2015 license agreement between Depomed and Grünenthal and returned to Grünenthal the U.S. and Canadian rights to cebranopadol, an opioid analgesic in development for the treatment of moderate to severe chronic nociceptive and neuropathic pain.   

Revenue Summary

          
REVENUES (GAAP BASIS) 
(in thousands, unaudited) 
          
  Three Months Ended  Twelve Months Ended 
  December 31,  December 31,  
  2017 2016 2017 (1) 2016 
          
Product sales, net:         
Nucynta products $  60,018 $  74,693 $  239,539 $  281,261 
Gralise    20,208    24,995    77,034    88,446 
Cambia    7,749    8,373    31,597    31,273 
Lazanda    1,770    7,454    15,010    26,547 
Zipsor    4,415    8,160    16,700    27,539 
       Total product sales, net    94,160    123,675    379,880    455,066 
          
Royalties    248    236    844    831 
          
Total revenues (GAAP Basis) $   94,408  $   123,911  $   380,724  $   455,897  
          
(1) In the the first quarter of 2017, the Company reserved an incremental $4.7 million associated with a dispute with a pharmacy benefit manager.  This dispute was settled in the fourth quarter of 2017 at an amount equal to the Company'sreserve.  The $4.7 million has been allocated to the specific products subject to the dispute and settlement. 
  


2018 Financial Guidance
The Company is providing the following 2018 financial guidance.

                      Guidance
 Neurology Franchise Net Sales$120 to $125 million
 GAAP SG&A Expense$123 to $133 million
 GAAP R&D Expense$11 to $16 million
 Non-GAAP SG&A Expense$110 to $120 million
 Non-GAAP R&D Expense$10 to $15 million
 GAAP Net Loss($72) to ($82) million
 Non-GAAP Adjusted EBITDA$125 to $135 million

As the Company is no longer responsible for the commercialization of the NUCYNTA franchise, the Company is not providing revenue guidance on total revenue. The difference between GAAP Expenses and Non-GAAP Expenses relates to stock based compensation.

Non-GAAP Financial Measures

To supplement our financial results presented on a U.S. generally accepted accounting principles, or GAAP, basis, we have included information about non‑GAAP adjusted earnings, non‑GAAP adjusted earnings per share and non-GAAP adjusted EBITDA, non‑GAAP financial measures, as useful operating metrics. We believe that the presentation of these non‑GAAP financial measures, when viewed with our results under GAAP and the accompanying reconciliation, provides supplementary information to analysts, investors, lenders, and our management in assessing the Company's performance and results from period to period. We use these non‑GAAP measures internally to understand, manage and evaluate the Company's performance, and in part, in the determination of bonuses for executive officers and employees. 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 and non‑GAAP adjusted earnings 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 amortization, IPR&D and non‑cash adjustments related to product acquisitions, stock‑based compensation expense, non‑cash interest expense related to debt,  costs associated with the special meeting requests made by an activist investor and CEO transition, costs associated with an attempted debt refinancing, restructuring costs, adjustments associated with non-recurring legal settlements and disputes, and to adjust for the tax effect related to each of the non-GAAP adjustments. Non‑GAAP adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and represents GAAP net income (loss) adjusted to exclude interest income, interest expense, amortization, IPR&D and non‑cash adjustments related to product acquisitions, stock‑based compensation expense, depreciation, taxes, transaction costs, restructuring costs, adjustments related to non-recurring legal settlements and disputes, costs associated with an attempted debt refinancing, the special meeting requests made by an activist investor, and CEO transition. Non‑GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non‑GAAP measures used by other companies.

Conference Call and Webcast

Depomed will host a conference call today, Tuesday, February 27, 2018 beginning at 4:30 p.m. EST (1:30 p.m. PST) to discuss its results. This event can be accessed in three ways:

  • From the Depomed website: http://investor.depomedinc.com/  Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.
     
  • By telephone: Participants can access the call by dialing (844) 839-0046 (United States) or (857) 270-6032 (International) referencing Conference ID 2157887.
     
  • By replay: A replay of the webcast will be located under the Investor Relations section of Depomed's website approximately two hours after the conclusion of the live call and will be available for three months.

About Depomed

Depomed is a leading specialty pharmaceutical company committed to putting the patient first in everything it does. Depomed is focused on enhancing the lives of patients, families, physicians, providers and payors through the commercialization of products in the areas of pain and neurology, and in the development of drugs in areas of unmet medical need. Depomed currently markets three medicines focused on neuropathic pain and migraine through its neurology and pain franchises and its emerging specialty/orphan franchise is focused on orphan drug indications and areas of unmet medical need. To learn more about Depomed, visit 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, the commercialization of Gralise, CAMBIA, and Zipsor, royalties associated with Collegium's commercialization of NUCYNTA and NUCYNTA ER, Depomed's financial outlook for 2018 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 most recent Annual Report on Form 10-K 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.

INVESTOR AND MEDIA CONTACTS:

Christopher Keenan
VP, Investor Relations and Corporate Communications
510-744-8000
ckeenan@depomed.com

Dan Peisert
VP, Business Development
dpeisert@depomed.com

          
CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS) 
(in thousands, except per share amounts) 
          
  Three Months Ended  Twelve Months Ended 
  December 31,  December 31,  
  2017 2016 2017 2016 
  (unaudited) (unaudited) 
Revenues:         
Product sales, net $  94,160  $  123,675  $  379,880  $  455,066  
Royalties     248     236     844     831  
Total revenues     94,408     123,911     380,724     455,897  
          
Costs and expenses:         
Cost of sales     17,704     22,657     72,598     87,414  
Research and development expense     1,259     9,154     13,718     32,631  
Selling, general and administrative expense    48,318     48,462     195,695     204,498  
Amortization of intangible assets    25,541     25,734     102,745     106,845  
Restructuring charges    9,372     -      13,247     -   
Cosyntropin IPR&D    24,900     -      24,900     -   
Total costs and expenses     127,094     106,007     422,904     431,388  
          
Loss from operations     (32,685)    17,904     (42,180)    24,509  
Interest and other income    77     175     681     485  
Loss on prepayment of senior notes    (573)    -      (5,938)    (5,777) 
Gain on divestiture of Lazanda    17,064     -      17,064     -   
Interest expense    (17,857)    (20,537)    (73,552)    (83,719) 
(Provision for)/Benefit from income taxes     870     (41,910)    1,429     (24,218) 
Net loss $  (33,104) $  (44,368) $  (102,496) $  (88,720) 
          
Basic and diluted net loss per share  $  (0.52) $  (0.72) $  (1.63) $  (1.45) 
Shares used in calculating basic and diluted net loss
per share
    63,137     61,695     62,702     61,297  
          

 

      
CONSOLIDATED CONDENSED BALANCE SHEETS 
(in thousands) 
(unaudited) 
  December 31,  December 31, 
  2017 2016 
      
      
Cash, cash equivalents and marketable securities $  128,089 $  177,420 
Accounts receivable    72,482    102,589 
Inventories    13,042    13,033 
Property and equipment, net    13,024    15,526 
Intangible assets, net    793,873    902,149 
Prepaid and other assets    18,107    14,620 
Total assets $  1,038,617 $  1,225,337 
      
Accounts payable $  14,732 $  14,855 
Income tax payable    126    59 
Interest payable    13,220    15,924 
Accrued liabilities    60,496    59,398 
Accrued rebates, returns and discounts    135,828    131,536 
Senior notes    357,220    466,051 
Convertible notes    269,510    252,725 
Contingent consideration liability    1,613    14,825 
Other liabilities    16,364    19,176 
  Shareholders' equity    169,508    250,788 
Total liabilities and shareholders' equity  $  1,038,617 $  1,225,337 
      


          
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA 
(in thousands) 
          
  Three Months Ended  Twelve Months Ended 
  December 31,  December 31,  
  2017 2016 2017 2016 
  (unaudited) (unaudited) 
          
GAAP net loss $  (33,104) $  (44,368) $  (102,496) $  (88,720) 
   Pharmacy benefit manager dispute settlement    -      -      4,742     -   
   Intangible amortization related to product acquisitions    25,541     25,734     102,745     106,845  
   Inventory step-up related to product acquisitions    -      -      -      15  
   Contingent consideration related to product acquisitions    (104)    694     (6,629)    2,287  
   Stock based compensation    3,095     4,570     12,965     17,172  
   Interest income    (77)    (137)    (410)    (447) 
   Interest expense    18,361     19,932     78,190     87,088  
   Depreciation    918     652     2,757     2,530  
   Benefit from income taxes    (870)    41,910     (1,429)    24,218  
   Restructuring and other costs (1)    9,817     2,409     16,834     5,352  
   Acquired in process research and development    24,900     -      24,900     -   
   Gain on divestiture of Lazanda    (17,064)    -      (17,064)    -   
   Transaction costs    1,435     -      1,435     45  
Non-GAAP adjusted EBITDA $  32,847  $  51,397  $  116,540  $  156,385  
          
  (1) Restructuring and other costs represents non-recurring costs associated with the Company's restructuring, special meeting requests of an activist investor, CEO transition and an attempted debt refinancing. 
          


          
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED EARNINGS 
(in thousands, except per share amounts) 
          
  Three Months Ended  Twelve Months Ended 
  December 31,  December 31,  
  2017 2016 2017 2016 
  (unaudited) (unaudited) 
          
GAAP net loss $  (33,104) $  (44,368) $  (102,496) $  (88,720) 
   Non-cash interest expense on debt    5,340     4,588     20,953     18,449  
   Managed care dispute settlement    -      -      4,742     -   
   Intangible amortization related to product acquisitions    25,541     25,734     102,745     106,845  
   Inventory step-up related to product acquisitions    -      -      -      15  
   Contingent consideration related to product acquisitions    (104)    694     (6,629)    2,287  
   Stock based compensation    3,095     4,570     12,965     17,172  
   Acquired in process research and development    24,900     -      24,900     -   
   Gain on divestiture of Lazanda    (17,064)    -      (17,064)    -   
   Restructuring and other costs (1)    9,817     2,409     16,834     5,352  
   Valuation allowance on deferred tax assets    11,017     42,634     30,291     42,634  
   Income tax effect of non-GAAP adjustments (3)    (18,626)    (13,220)    (56,875)    (52,431) 
Non-GAAP adjusted earnings $  10,813  $  23,041  $  30,366  $  51,603  
Add interest expense of convertible debt, net of tax (2)    1,348     1,348     5,390     5,390  
Numerator $  12,160  $  24,389  $  35,756  $  56,993  
Shares used in calculation (2)    81,360     82,258     81,619     81,597  
Non-GAAP adjusted earnings per share $  0.15  $  0.30  $  0.44  $  0.70  
          
          
  (1) Restructuring and other costs represents non-recurring costs associated with the Company's restructuring, the special meeting requests of an activist investor, CEO transition and an attempted debt refinancing. 
  (2) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt.  
  (3) Calculated by taking the pre-tax non-GAAP adjustments and applying the statutory tax rate.  Expected cash taxes were zero for the three months ended December 31, 2017 and zero for the three months ended December 31, 2016. Expected cash taxes were zero for the twelve months ended December 31, 2017 and zero for the twelve months ended December 31, 2016.  
          


          
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION 
For the three months ended December 31, 2017 
(in thousands) 
(unaudited) 
          
  Cost of
sales
Research and
development
expense
Selling,
general and
administrative
expense
Restructuring
Charges
Amortization
of intangible
assets
Interest
expense
Benefit from
(provision for)
income taxes
 
GAAP as reported $  17,704 $  1,259 $  48,318 $  9,372 $  25,541 $  (17,857)$  870  
    Non-cash interest expense on debt    -     -     -     -     -     5,340    -   
    Intangible amortization related to product acquisitions    -     -     -     -     (25,541)   -     -   
    Contingent consideration related to product acquisitions    -     -     166    -     -     62    -   
    Stock based compensation    (14)   (58)   (3,023)   -     -     -     -   
    Restructuring and other costs    -     -     (445)   (9,372)   -     -     -   
    Valuation allowance on deferred tax assets    -     -     -     -     -     -     11,017  
    Income tax effect of non-GAAP adjustments     -     -     -     -     -     -     (18,626) 
Non-GAAP adjusted  $  17,690 $  1,201 $  45,016 $  -  $  -  $  (12,455)$  (6,738) 
          

 

RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION 
For the three months ended December 31, 2016 
(in thousands) 
(unaudited) 
        
 Cost of
sales
Research and
development
expense
Selling,
general and
administrative
expense
Amortization of
intangible assets
Interest
expense
Benefit from
(provision for)
income taxes
 
GAAP as reported$  22,657 $  9,154 $  48,462 $  25,734 $  (20,537)$  (41,910) 
    Non-cash interest expense on debt   -     -     -     -     4,588    -   
    Intangible amortization related to product acquisitions   -     -     -     (25,734)   -     -   
    Contingent consideration related to product acquisitions   -     -     (89)   -     605    -   
    Stock based compensation   (15)   (166)   (4,389)   -     -     -   
    Restructuring and other costs   -     -     (2,409)   -     -     -   
    Valuation allowance on deferred tax assets   -     -     -     -     -     42,634  
    Income tax effect of non-GAAP adjustments    -     -     -     -     -     (13,220) 
Non-GAAP adjusted $  22,642 $  8,988 $  41,574 $  -  $  (15,344)$  (12,496) 
  

 

          
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION 
For the twelve months ended December 31, 2017 
(in thousands) 
(unaudited) 
          
 Product
Sales
Cost of
sales
Research and
development
expense
Selling,
general and
administrative
expense
Restructuring
Charges
Amortization of
intangible assets
Interest
expense
Benefit from
(provision for)
income taxes
 
GAAP as reported$  380,724$  72,598 $  13,718 $  195,695 $  13,247 $  102,745 $  (73,552)$  1,429  
   Non-cash interest expense on debt   -    -     -     -     -     -     20,953    -   
   Managed care dispute settlement   4,742   -     -     -     -     -     -     -   
   Intangible amortization related to product acquisitions   -    -     -     -     -     (102,745)   -     -   
   Contingent consideration related to product acquisitions   -    -     -     7,708    -     -     1,079    -   
   Stock based compensation   -    (98)   (710)   (12,157)   -     -     -     -   
   Restructuring and other costs   -    -     -     (3,587)   (13,247)   -     -     -   
   Valuation allowance on deferred tax assets   -    -     -     -     -     -     -     30,291  
   Income tax effect of non-GAAP adjustments    -    -     -     -     -     -     -     (56,875) 
Non-GAAP adjusted $  385,466$  72,500 $  13,008 $  187,659 $  -  $  -  $  (51,520)$  (25,155) 
          

 

         
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION 
For the twelve months ended December 31, 2016 
(in thousands) 
(unaudited) 
         
  Cost of
sales
Research and
development
expense
Selling,
general and
administrative
expense
Amortization of
intangible assets
Interest
expense
Benefit from
(provision for)
income taxes
 
GAAP as reported $  87,414 $  32,631 $  204,498 $  106,845 $  (83,719)$  (24,218) 
    Non-cash interest expense on debt    -     -     -     -     18,449    -   
    Intangible amortization related to product acquisitions    -     -     -     (106,845)   -     -   
    Inventory step-up related to product acquisitions    (15)   -     -     -     -     -   
    Contingent consideration related to product acquisitions    -     -     120    -     2,407    -   
    Stock based compensation    (43)   (496)   (16,633)   -     -     -   
    Restructuring and other costs    -     -     (5,352)   -     -     -   
    Valuation allowance on deferred tax assets    -     -     -     -     -     42,634  
    Income tax effect of non-GAAP adjustments     -     -     -     -     -     (52,431) 
Non-GAAP adjusted  $  87,356 $  32,135 $  182,633 $  -  $  (62,863)$  (34,015) 
         

 

          
RECONCILIATION OF GAAP NET LOSS PER SHARE TO NON-GAAP ADJUSTED EARNINGS PER SHARE 
(unaudited) 
          
  Three Months Ended  Twelve Months Ended 
  December 31,  December 31,  
  2017 2016 2017 2016 
          
          
GAAP net loss per share $  (0.52) $  (0.72) $  (1.63) $  (1.45) 
    Conversion from basic shares to diluted shares    0.12     0.18     0.38     0.36  
    Non-cash interest expense on debt    0.07     0.06     0.26     0.23  
    Managed care dispute settlement    -      -      0.06     -   
    Intangible amortization related to product acquisitions    0.31     0.31     1.25     1.31  
    Contingent consideration related to product acquisitions    (0.00)    0.01     (0.08)    0.03  
    Stock based compensation    0.04     0.06     0.16     0.21  
    Acquired in process research and development    0.30     -      0.30     -   
    Gain on divestiture of Lazanda    (0.21)    -      (0.21)    -   
    Restructuring and other costs    0.12     0.03     0.21     0.06  
    Valuation allowance on deferred tax assets    0.14     0.52     0.37     0.52  
    Income tax effect of non-GAAP adjustments    (0.23)    (0.16)    (0.70)    (0.64) 
    Add interest expense of convertible debt, net of tax    0.02     0.02     0.07     0.07  
Non-GAAP adjusted earnings per share $  0.15  $  0.30  $  0.44  $  0.70  
          

 

   
RECONCILIATION OF FY 2018 GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA GUIDANCE 
(in millions) 
   
GAAP net loss($72) - ($82) 
    Intangible amortization related to product acquisitions$102 
    Interest Expense$63 - $66 
    Stock Based Compensation$13 - $15 
    Taxes$0 - $3 
    Depreciation$3 
    Restructuring$20 - $24 
Non-GAAP adjusted EBITDA$125 - $135 
   

Loading...
Loading...
Posted In: EarningsPress Releases
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...