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Depomed Reports Second Quarter 2006 Financial Results; Revenues Increase to $2.2 Million Compared to $428,000 in 2005

Posted on: Monday, 7 August 2006, 09:00 CDT

Depomed, Inc. (NASDAQ:DEPO) today announced its financial results for the quarter ended June 30, 2006. For the quarter, a net loss of $9.9 million or $0.24 per share was reported compared to a net loss of $6.8 million or $0.18 per share for the comparable period in 2005. Cash and investment balances at June 30, 2006 were $45.3 million.

Revenues increased to $2.2 million in the second quarter of 2006 from $428,000 in the same period of 2005 primarily as a result of product sales and license and royalty revenue for the company's two commercialized products, ProQuin(R) XR and Glumetza(TM). Operating expenses for the quarter ended June 30, 2006 were $11.7 million compared to $8.3 million for the same period in 2005. The increase in operating expenses was primarily related to costs associated with late-stage development of Gabapentin GR(TM) and pre-launch activities for Glumetza. Additionally, on January 1, 2006, the company adopted FAS 123R, which resulted in $669,000 in stock-based compensation expense for the second quarter of 2006.

"We have made solid progress in the first half of 2006, which has positioned us well for the remainder of the year and beyond," said John F. Hamilton, chief financial officer of Depomed. "Through our co-promotion agreement with King Pharmaceuticals, Inc. signed in June, we look forward to the launch of Glumetza in the U.S. before the end of the third quarter. For ProQuin XR, our partner, Esprit Pharma, is showing improved market penetration with the 3-tablet pack, which was introduced in the second quarter. We are pursuing additional promotion partners who may be able to supplement Esprit's marketing efforts for expanded commercialization reach, as we now have co-promotion rights under our recently amended agreement with Esprit. On the development front, we expect to complete enrollment in our Phase III clinical trial for Gabapentin GR late this year or early next year. In addition, as announced today, we believe the collaboration with Patheon will result in new projects using our AcuForm delivery technology with drug compounds provided by other pharmaceutical companies who are clients of Patheon. We expect that our cash position will be enhanced by the revenue streams from Glumetza and ProQuin as well as license fee payments, including the $10 million license fee installment from Esprit now due in December 2006."

The company will webcast a conference call today, beginning at 10:00 a.m. ET, 7:00 a.m. PT to discuss its results and to provide an update and future outlook on company events. Interested parties can access a live broadcast of the call at http://www.shareholder.com/depomedinc/Medialist.cfm or on the companies website at www.depomedinc.com.

About Depomed

Depomed, Inc. is a specialty pharmaceutical company utilizing its innovative AcuForm(TM) drug delivery technology to develop novel oral products and improved, extended release formulations of existing oral drugs. AcuForm-based products are designed to provide once daily administration and reduced side effects, improving patient convenience, compliance and pharmacokinetic profiles. ProQuin(R) XR (ciprofloxacin hydrochloride) extended-release tablets have been approved by the FDA for the once daily treatment of uncomplicated urinary tract infections and are currently being marketed in the United States. In addition, once daily Glumetza(TM) (metformin hydrochloride extended release tablets) has been approved for use in adults with Type II diabetes and is currently being marketed in Canada. The company is conducting a Phase III trial in postherpetic neuralgia with its product candidate, Gabapentin GR(TM). Additional information about Depomed may be found at its web site, www.depomedinc.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 our expectations regarding collaborative relationships and the performance of our marketing partners; our research and development efforts, including pre-clinical and clinical testing; regulation by the FDA and other government agencies; the timing of regulatory applications and product launches; 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 subsequent Quarterly Reports on Form 10-Q. 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. DEPOMED, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------------------------- --------------------------- 2006 2005 2006 2005 ------------- ------------ ------------- ------------- Revenue: License revenue $ 893,165 $ 18,750 $ 1,786,330 $ 37,500 Collaborative revenue 74,750 409,718 74,750 409,718 Royalties 80,146 -- 429,467 -- Product sales 1,165,304 -- 1,264,977 -- ------------- ------------ ------------- ------------- Total revenue 2,213,365 428,468 3,555,524 447,218 Costs and expenses: Cost of sales 1,050,836 -- 1,125,189 -- Research and development 6,767,852 5,053,603 12,451,934 10,070,461 General and administrative 4,898,162 3,216,391 8,829,455 4,932,455 ------------- ------------ ------------- ------------- Total costs and expenses 12,716,850 8,269,994 22,406,578 15,002,916 ------------- ------------ ------------- ------------- Loss from operations (10,503,485) (7,841,526) (18,851,054) (14,555,698) Other income (expenses): Gain on extinguishment of debt -- 1,058,935 -- 1,058,935 Interest and other income 586,077 197,097 1,180,936 368,971 Interest expense -- (226,545) -- (459,684) ------------- ------------ ------------- ------------- Total other income 586,077 1,029,487 1,180,936 968,222 ------------- ------------ ------------- ------------- Net loss (9,917,408) (6,812,039) (17,670,118) (13,587,476) Deemed dividend on preferred stock (162,188) (210,283) (334,820) (403,940) ------------- ------------ ------------- ------------- Net loss applicable to common stock shareholders $(10,079,596) $(7,022,322) $(18,004,938) $(13,991,416) ============= ============ ============= ============= Basic and diluted net loss applicable to common stock shareholders per common share $ (0.24) $ (0.18) $ (0.44) $ (0.36) ============= ============ ============= ============= Shares used in computing basic and diluted net loss per common share 41,517,862 39,752,902 41,182,550 39,406,482 ============= ============ =========================== DEPOMED, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2006 2005(1) ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 4,894,750 $ 7,565,556 Marketable securities 40,447,327 51,507,509 Accounts receivable 364,247 1,094,840 Unbilled accounts receivable 410,247 861,576 Inventories 1,221,095 864,786 Prepaid and other current assets 2,273,407 1,107,710 ------------- ------------- Total current assets 49,611,073 63,001,977 Property and equipment, net 2,822,718 3,146,611 Other assets 181,485 228,926 ------------- ------------- $ 52,615,276 $ 66,377,514 ============= ============= LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY Current liabilities: Accounts payable $ 3,091,804 $ 1,588,999 Accrued compensation 1,477,647 1,989,606 Other accrued liabilities 1,143,784 781,793 Royalty advances 625,959 -- Deferred margin -- 45,486 Deferred revenue, current portion 3,772,196 3,572,196 Other current liabilities 93,073 93,073 ------------- ------------- Total current liabilities 10,204,463 8,071,153 Deferred revenue, non-current portion 49,634,933 51,421,263 Other long-term liabilities 77,563 124,099 Commitments Shareholders' (deficit) equity: Preferred stock, no par value, 5,000,000 shares authorized; Series A convertible preferred stock, 25,000 shares designated, 18,159 and 17,543 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively, with an aggregate liquidation preference of $18,158,848 12,015,000 12,015,000 Common stock, no par value, 100,000,000 shares authorized; 41,774,427 and 40,689,369 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively 142,954,295 139,640,599 Deferred compensation -- (337,049) Accumulated deficit (162,122,015) (144,451,897) Accumulated other comprehensive loss (148,963) (105,654) ------------- ------------- Total shareholders' (deficit) equity (7,301,683) 6,760,999 ------------- ------------- $ 52,615,276 $ 66,377,514 ============= ============= (1) The balance sheet as of December 31, 2005 was derived from the audited balance sheet included in the Company's 2005 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 16, 2006.

Source: Business Wire

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