Depomed Inc. is a specialty pharmaceutical company utilizing its innovative AcuForm 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 XR 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 has been approved for use in adults with type two diabetes and is currently being marketed in the United States and Canada. The company is currently evaluating Gabapentin GR for the treatment of two pain indications postherpetic neuralgia and diabetic peripheral neuropathy and menopausal hot flashes. Depomed Inc. has a market cap of $196.2 million; its shares were traded at around $3.83 with and P/S ratio of 5.5.
Highlight of Business Operations:· Operating expenses for the three months ended June 30, 2009 were $20.0 million, compared to $2.4 million for the three months ended June 30, 2008. Operating expenses for the three months ended June 30, 2008 included a one-time gain of $7.5 million on litigation related to the IVAX settlement, which had the effect of reducing operating expenses for the quarter.
· Cash, cash equivalents and marketable securities were $84.0 million as of June 30, 2009, compared to $82.1 million as of December 31, 2008.
Pursuant to the agreement, Solvay Pharmaceuticals paid us a $25 million upfront fee in February 2009. We are also eligible to receive aggregate milestone payments of up to $70 million for acceptance and FDA approval of the New Drug Application for DM-1796 for PHN, and up to $300 million in potential sales milestone payments. Solvay will pay us royalties of 14 to 20 percent of net product sales, depending on the level of net product sales.
Teva. In April 2008, we entered into a settlement and license agreement with Teva related to the patent infringement lawsuit against Teva affiliates IVAX Corporation and IVAX Pharmaceuticals, Inc. we initiated in January 2006 related to Tevas generic Glucophage XR tablets. In connection with the settlement and license agreement we may receive up to a total of $2.5 million in future royalties on Tevas generic Glucophage XR product in the United States. For the three and six months ended June 30, 2009, we recognized $0.5 million and $0.9 million, respectively, in royalty revenue related to this arrangement. As of June 30, 2009, a cumulative total of $2.1 million in royalties has been recognized to date, with $0.4 million remaining under the aggregate cap.
GLUMETZA. GLUMETZA license revenue for the three and six months ended June 30, 2009 consisted of license revenue recognized from the $25.0 million upfront license fee received from Biovail in July 2005 and the $12.0 million upfront fee received from Santarus in July 2008. License revenue for the three and six months ended June 30, 2008 consisted solely of license revenue recognized from the $25.0 million upfront license fee received from Biovail.
Acuform Technology. In November 2008, we entered into a license agreement with Covidien granting Covidien worldwide rights to utilize our Acuform technology for the exclusive development of four products containing acetaminophen in combination with opiates. Through November 2008, Covidien paid us a total of $5.5 million in upfront fees, representing a $4.0 million upfront license fee and a $1.5 million upfront payment for formulation work to be performed by Depomed under the agreement. The entire $5.5 million is being accounted for as a single unit of accounting and being amortized ratably through November 2011, which is the length of time Depomed is obligated to perform formulation work under the agreement.
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