A Specialty Pharmaceutical Leader Focused in Pain and ... · Migraine Attacks Breakthrough Cancer...
Transcript of A Specialty Pharmaceutical Leader Focused in Pain and ... · Migraine Attacks Breakthrough Cancer...
A Specialty Pharmaceutical Leader Focused in Pain and Neurology
Jefferies Healthcare Conference
June 2, 2015
Forward-Looking Statements
The statements that are not historical facts contained in this presentation are forward-looking statements that involve risks
and uncertainties including, but not limited to, those related to Depomed’s acquisition of the NUCYNTA® franchise in the
United States, Depomed’s post-acquisition strategy, plans, objectives, expectations (financial or otherwise) and intentions,
future financial results and growth potential, our plans, prospects and strategy related to Gralise®, CAMBIA®, Lazanda® and
Zipsor ®, and other statements that are not historical facts. These forward-looking statements are based on Depomed’s
current expectations and inherently involve significant risks and uncertainties.
Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a
result of these risks and uncertainties, which include, without limitation, risks associated with product acquisition
transactions, such as the risk that the acquired products will not be integrated successfully, that such integration may be
more difficult, time-consuming or costly than expected or that the expected benefits of the transaction will not occur; risks
related to Depomed’s future opportunities and plans, including uncertainty of Depomed’s expected financial performance
following completion of the transaction; disruption from the transaction, making it more difficult to conduct business as usual
or maintain relationships with customers, employees or suppliers; and the possibility that if Depomed does not achieve the
perceived benefits of the transaction as rapidly or to the extent anticipated by financial analysts or investors, the market price
of Depomed’s shares could decline, as well as other risks related to Depomed's business detailed from time-to-time under
the caption "Risk Factors" and elsewhere in Depomed's SEC filings and reports, including in its Annual Report on Form 10-K
for the year ended December 31, 2014, and in its Quarterly Report on our 10-Q for the quarter ended March 31, 2015.
Depomed undertakes no duty or obligation to update any forward-looking statements contained in this presentation as a
result of new information, future events or changes in its expectations.
June 2015 2
Depomed Acquires NUCYNTA® April 2, 2015
NUCYNTA - Becomes Flagship Product
June 2015 3
Transformational acquisition enhances Depomed’s position as a leading
pain and neurology focused specialty pharmaceutical company
Expect to be Top 5 U.S. Pain Company by 2016
Reworked
Santarus deal
and tripled
net revenue
>67% y/y
revenue growth
and 25% volume
growth
in 2014
Acquired Dec
2013;relaunched
Q1 2014; Q1 2015
demand up 34%
over Q1 2014
TYPE 2
DIABETES DEAL
Non-strategic
milestones
& royalties sold
for $240 millionRelaunch Q4
2013 following
acquisition;
369% increase in
net sales Q1 2015
over Q1 2014
$60 million
net sales since
acquisition;
>95% gross
margins
Depomed Track Record of Successful Deals -Acquire and Integrate Products, then Generate Growth
Exceptional fit
with core
portfolio
June 2015 4
NUCYNTA® ER and NUCYNTA ® Have Broad Pain Indications
With Untapped Potential
for the management of moderate-
to-severe acute pain in adults
US Approval in November 2008
for the management of pain severe enough to
require daily, around-the-clock, long-term opioid
treatment and for which alternative treatment
options are inadequate
for the management of neuropathic pain
associated with diabetic peripheral neuropathy
(DPN) in adults severe enough to require daily,
around-the-clock, long-term opioid treatment and
for which alternative treatment options are
inadequate
US Approval in August 2011
June 2015 5
NUCYNTA is an Ideal Strategic Fit for Depomed
Highly differentiated, long-tailed asset in multi-billion
dollar pain market
Transformative acquisition in scale, market coverage
and financial impact
• $310-335 million net product sales per 2015 guidance
• Leverages Depomed’s expanded sales force and
expertise (pain specialists, neurologists and primary care)
• >65% of NUCYNTA ER prescriptions written by pain
specialists and mid-levels as Depomed core targets
Provides scale to drive further growth, cash flow and
additional acquisitions
6June 2015
Tapentadol (NUCYNTA/NUCYNTA ER) – A Unique, Highly
Differentiated Molecule With Unrealized Potential
Proprietary new chemical entity (NCE) with dual
mechanism of action (MOA)
Only NCE approved in U.S. CII opioid space in the last
30 years
Strong IP with composition of matter to 2022/2023,
with potential exclusivity beyond that timeframe
Addresses both nociceptive and neuropathic pain
Only opioid approved for pain associated with diabetic
peripheral neuropathy (DPN) and chronic pain
Low abuse profile and side effect rate
7June 2015
Large Market and Strong Baseline to Potentially Grow
NUCYNTA
8June 2015
Short Acting Opioid Market Long Acting Opioid Market
$7.1B in 2014 $5.5B in 2014
~230MM TRx in 2014 ~20M TRx in 2014
NUCYNTA 0.3% market share NUCYNTA ER 1.5% market share
Over 800,000 prescriptions written for NUCYNTA and NUCYNTA ER in 2014
with modest promotion
NUCYNTA Integration
Transaction closed April 2, 2015
• NDA immediately transferred to Depomed
• Product shipments to wholesalers began April 6th
• Pricing adjustment upon closing; monthly price of
NUCYNTA ER is now approximately equal to Oxycontin
Provides full quarter of NUCYNTA revenue in Q2
9June 2015
Flexible Loan Agreement Supports Potential Future
Acquisitions and Avoids Dilution
All debt transaction for $575 million
• 7 year secured loan; no principal payment required for 3years
• Coupon at three month LIBOR plus 9.75% (1% floor), subject to quarterly adjustment with rate cap
Loan flexibility supports continued growth
• Allows EBITDA positive acquisitions
• Allows pre-payments; $100 million after year one at par plus 5%; full pre-payment allowed after two years
Zero dilution to shareholders
‘Covenant-lite’ structure – only financial covenant is net sales based
10June 2015
NUCYNTA Re-launch
Re-launch targeted for June 2015
• New product positioning and ad campaign
• Resumption of full medical education support with Medical
Science Liaisons (MSLs) and speaker programs
• Quintile’s contract sales organization (CSO) reps currently
promoting NUCYNTA until re-launch
• Expanded sales force of >270 reps expected at launch
–Early deal closing helps recruiting: over 3,000 applicants for
130 field positions
11June 2015
NUCYNTA is Transformative:
Adds Significant Revenue and Earnings
Financial Guidance for 2015
• Total Product Sales (9 months NUCYNTA) $310-$335mm
• Total SG&A and R&D (Includes ~ $21mm of 1x costs) $195-$210mm
• Adjusted EBITDA $85-$100mm
• Non-GAAP Adjusted Earnings $16-$28mm
$0
$50
$100
$150
$200
$250
$300
$350
2011 2012 2013 2014 2015guidance
DIRECT MARKETED PRODUCT REVENUE (MILLIONS)
June 2015 12
2016
Full year with NUCYNTA
*Reconciliation of GAAP to non-GAAP can be found at end of presentation
Depomed’s Products are Differentiated in Large Markets
Product
IndicationModerate to Severe
Chronic/Acute Pain
Management of
Postherpetic
Neuralgia
Acute Treatment of
Migraine Attacks
Breakthrough
Cancer Pain
Mild to Moderate
Acute Pain
Differentiation
Dual MOA; only
opioid FDA-approved
for both chronic pain
and DPN
1x daily with less
dizziness and
somnolence
Only single agent in
its therapeutic class
for acute migraine
attacks
Only fentanyl
product
delivered nasally
Rapidly dispersed,
low dose version of
diclofenac
Q1 Annualized
Sales$176MM (1) $70MM $21MM $13MM $27MM
Year over Year
Sales Growth(Acquired 4/2/15) 59% 16% 369% 9%
IPPatent protection out
to 2025+
August 2014 D.Ct.
ANDA victory
upholds patents;
appeal now settled;
exclusivity expected
to 2024
ANDA settlement with
exclusivity expected
to January 2023
Patents out to
October 2024
Patents out to
February 2029
Sales Reps 188 Sales Representatives and expanding to approximately 300 by June 2015 (2)
(1) Does not include April price increase of 44%
(2) Over 270 representatives will promote NUCYNTA, Gralise, CAMBIA, and Zipsor; 24 representatives promote Lazanda.
13June 2015
PATENT PROTECTION 2015 2020 2025 2030
DEPOMED PRODUCTS
NUCYNTA
(Mod/severe pain) Acquired April 2015; composition of matter to 2022/23; patents to 2025/2028
Gralise
(PHN)
Exclusivity expected to 2024; D.Ct. ANDA litigation victory and
settlements resolve all ANDAs
CAMBIA
(Acute migraine) ANDA settlement with expected protection to Jan 2023
Lazanda
(BTCP) 2 orange book patents; patents pending; last OB patent to expire Oct 2024
Zipsor
(Mild/Mod pain) 5 orange book patents; last to expire Feb 2029
PARTNERED PRODUCTS: Xartemis XR (Mallinkrodt); MNK-155 (Mallinkrodt) and IW-3718 (Ironwood)
Provide milestones and royalty income out to 2032
Lengthy Exclusivity Periods Mean Products
Contributing to Revenue Growth for a Long Time
14June 2015
Gralise Showing Strong Revenue Growth
Indicated for the management of
postherpetic neuralgia (PHN)
~$75 million run rate as of April 2015,
tablet demand up 19% year over year
for quarter ended March 2015
Will be promoted by >270 sales
professionals who also sell NUCYNTA,
CAMBIA and Zipsor
Tier 2 coverage at the three largest
pharmacy benefit managers:
CVS/Caremark, ESI, Catamaran
Market exclusivity expected until 2024;
won District Court decision vs. first filer,
Actavis; appeal with Actavis now settled
15
Q1 2015 Gralise prescriptions up 18% over Q1 2014
June 2015
Gralise Prescriptions Continue to Build – up +18%
since Q1 2014
16June 2015
$8
$10
$12
$14
$16
$18
$20
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Gralise Quarterly Product Sales (Net $MM)
Source: Symphony Healthcare Analytics PHAST
Annual run rate ~$75 million as of April 2015.
50
60
70
80
90
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Gralise Quarterly Prescriptions (000s)
CAMBIA is Differentiated in Acute Migraine
Only single agent in its therapeutic class
approved in the U.S. for treatment of
acute migraine attacks in adults
Powdered formulation of diclofenac
dissolves in liquid; provides rapid relief of
pain and is easy to take
Cambia can be a complementary
treatment for patients taking triptans
American Headache Society updated
guidelines in Jan 2015, upgrading
diclofenac powder (CAMBIA) to first line
therapy for acute migraine treatment
17June 2015
CAMBIA Total Rx up 34% and New Rx up 46% Since
Depomed’s Re-launch in Q1 2014
18June 2015
$3
$4
$5
$6
$7
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
CAMBIA Quarterly Product Sales (Net $MM)
Source: Symphony Healthcare Analytics PHAST
CAMBIA prescriptions reached an all-time high in April 2015
>$30 million annual run rate at April 2015
15
20
25
30
35
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
CAMBIA Quarterly Prescriptions (000s)
Lazanda is Contributing to Core Growth
Rapid-acting fentanyl nasal spray for the
management of breakthrough cancer pain in
cancer patients 18 years of age and older who
are already receiving and who are tolerant to
opioid therapy for their underlying persistent
cancer pain
Focus on expanded prescriber base of pain
specialists as well as oncologists; salesforce
expanded to 24 in January 2015
Concentrated marketing opportunity as ~ 2,000
providers write 90% of prescriptions; may only be
dispensed by providers enrolled in TIRF REMS
Access program
Only branded TIRF product currently covered on
the Express Scripts National Formulary
19June 2015
Lazanda Net Sales More Than Tripled in Q1 2015
compared to Q1 2014 – Total Sprays up +44% over Q4
20June 2015
$0
$1
$2
$3
$4
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Lazanda Quarterly Net Product Sales ($MM)
Source: Symphony Healthcare Analytics PHAST, Sprays calculation based on 8 sprays per bottle
In April, TRx market share exceeded 4% for the first time
0
20
40
60
80
100
120
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Lazanda Total Sprays by Quarter (000s)
Zipsor Strong Financial Contribution with 95% Gross Margins
Rapidly dispersed, liquid-filled
capsule provides acute pain relief in
<1 hour
Acquired in 2012; cumulative net
sales of > $60 million since
acquisition
Depomed halted sales decline and
resumed growth of product in 2013
Current annual run rate > $27 million
21June 2015
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
1Q14 2Q14 3Q14 4Q14 1Q15
Zipsor Quarterly Net Revenue
Collaborations and Intellectual Property Provide Revenue Upside
Over the Next Decade
22
Licenses
Acetaminophen /opiate combination products with abuse resistance potential
• Xartemis XR launched March 2014; high single digit royalty
• MNK-155 $10 million approval milestone; timing unknown
• High single-digit royalties for 15+ years from first sale of each product
IW-3718
• Program for refractory GERD
• Positive Phase 2a reported February 2015
• Future milestones and royalties
IP Litigation
Potential future cash flow from IP litigation against Purdue Pharma and Endo
June 2015
NUCYNTA Transforms Depomed Achieving Scale, Growth
and Significant Cash Flow
June 2015 23
NUCYNTA is a perfect fit, combining a differentiated long-tailed NCE with Depomed’s already strong business
Deal financing flexibility allows further growth from acquisitions
2015 net product sales guidance of $310-335 million, up from $114 million in 2014
Growth opportunities abound, with long periods of exclusivity
• NUCYNTA ER dual MOA, unique profile and DPN
• Gralise Q1 2015 net sales up 59% over Q1 2014
• CAMBIA Rx up 34% in twelve months since re-launch
• Lazanda Q1 2015 net sales up >300% over Q1 2014
Thank You
www.depomed.com
GAAP to Non-GAAP Reconciliation – Q1 2015
25June 2015
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 and GAAP earnings
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 convertible debt, and to adjust (6) the income tax provision to reflect the
estimated amounts payable in cash. 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.
(in millions of $) FY 2014 Q1 2015
GAAP net income 131.8$ (11.6)$
Non-cash PDL royalties, net of related costs (241.7) -
Non-cash interest expense on PDL liability 14.6 -
Non-cash interest expense on convertible debt 4.2 3.4
Amortization related to product acquisitions 16.9 1.6
Stock based compensation 8.9 2.8
Non-cash income tax adjustment 81.3 (4.2)
Non-GAAP adjusted earnings 16.0$ (8.0)$
Non-GAAP adjusted earnings per share 0.21$ (0.13)$
GAAP to Adjusted EBITDA Reconciliation – FY 2014 And Q1 2015
26June 2015
Adjusted EBITDA are not based on any standardized methodology prescribed by GAAP and represent
GAAP net income adjusted to exclude (1) amortization related to product acquisitions, (2) stock-based
compensation expense, (3) interest Income (4) interest expense (5) depreciation (6) taxes, and (7) one
time transaction costs for NUCYNTA. Adjusted EBITDA measures used by the Company may be
calculated differently from, and therefore may not be comparable to, adjusted EBITDA measures used
by other companies.
(in millions of $) Q1 2015
GAAP net income (11.6)$
Amortization related to product acquisitions 1.6
Stock based compensation 2.8
Interest income (0.1)
Interest expense 5.6
Depreciation 0.3
Taxes (4.2)
Transaction costs 2.4
Adjusted EBITDA (3.2)$