A Specialty Pharmaceutical Leader Focused in Pain and Neurology. Jefferies Healthcare Conference June 2, 2015

Transcription

1 A Specialty Pharmaceutical Leader Focused in Pain and Neurology Jefferies Healthcare Conference June 2, 2015

2 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, 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. 2

3 Depomed Acquires NUCYNTA April 2, 2015 NUCYNTA - Becomes Flagship Product 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

4 Depomed Track Record of Successful Deals - Acquire and Integrate Products, then Generate Growth Reworked Santarus deal and tripled net revenue >67% y/y revenue growth and 25% volume growth in 2014 $60 million net sales since acquisition; >95% gross margins Relaunch Q following acquisition; 369% increase in net sales Q over Q TYPE 2 DIABETES DEAL Non-strategic milestones & royalties sold for $240 million Acquired Dec 2013;relaunched Q1 2014; Q demand up 34% over Q Exceptional fit with core portfolio 4

5 NUCYNTA ER and NUCYNTA Have Broad Pain Indications With Untapped Potential 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 for the management of moderateto-severe acute pain in adults US Approval in November

6 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 $ 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 6

7 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 7

8 Large Market and Strong Baseline to Potentially Grow NUCYNTA 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 8

9 NUCYNTA Integration Transaction closed April 2, 2015 NDA immediately transferred to Depomed Product shipments to wholesalers began April 6 th Pricing adjustment upon closing; monthly price of NUCYNTA ER is now approximately equal to Oxycontin Provides full quarter of NUCYNTA revenue in Q2 9

10 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 3 years 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 10

11 NUCYNTA Re-launch Re-launch targeted for 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 11

12 NUCYNTA is Transformative: Adds Significant Revenue and Earnings Financial Guidance for 2015 Total Product Sales (9 months NUCYNTA) Total SG&A and R&D (Includes ~ $21mm of 1x costs) Adjusted EBITDA Non-GAAP Adjusted Earnings $310-$335mm $195-$210mm $85-$100mm $16-$28mm DIRECT MARKETED PRODUCT REVENUE (MILLIONS) $350 $300 $250 $200 $150 $100 $50 $ guidance 2016 Full year with NUCYNTA *Reconciliation of GAAP to non-gaap can be found at end of presentation 12

13 Depomed s Products are Differentiated in Large Markets Product Indication Moderate 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 Year over Year Sales Growth $176MM (1) $70MM $21MM $13MM $27MM (Acquired 4/2/15) 59% 16% 369% 9% IP Patent protection out to 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 (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. 13

14 Lengthy Exclusivity Periods Mean Products Contributing to Revenue Growth for a Long Time PATENT PROTECTION DEPOMED PRODUCTS NUCYNTA (Mod/severe pain) Gralise (PHN) Acquired April 2015; composition of matter to 2022/23; patents to 2025/2028 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

15 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 Q Gralise prescriptions up 18% over Q

16 Gralise Prescriptions Continue to Build up +18% since Q Gralise Quarterly Prescriptions (000s) $20 $18 Gralise Quarterly Product Sales (Net $MM) 80 $16 70 $14 $12 60 $10 50 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 $8 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Annual run rate ~$75 million as of April Source: Symphony Healthcare Analytics PHAST 16

17 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 17

18 CAMBIA Total Rx up 34% and New Rx up 46% Since Depomed s Re-launch in Q CAMBIA Quarterly Prescriptions (000s) $7 CAMBIA Quarterly Product Sales (Net $MM) 30 $6 25 $5 20 $4 15 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 $3 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 CAMBIA prescriptions reached an all-time high in April 2015 >$30 million annual run rate at April 2015 Source: Symphony Healthcare Analytics PHAST 18

19 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 19

20 Lazanda Net Sales More Than Tripled in Q compared to Q Total Sprays up +44% over Q4 120 Lazanda Total Sprays by Quarter (000s) $4 Lazanda Quarterly Net Product Sales ($MM) 100 $ $2 40 $ Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 $0 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 In April, TRx market share exceeded 4% for the first time Source: Symphony Healthcare Analytics PHAST, Sprays calculation based on 8 sprays per bottle 20

21 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 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $- Zipsor Quarterly Net Revenue 1Q14 2Q14 3Q14 4Q14 1Q15 21

22 Collaborations and Intellectual Property Provide Revenue Upside Over the Next Decade 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 IP Litigation IW-3718 Program for refractory GERD Positive Phase 2a reported February 2015 Future milestones and royalties Potential future cash flow from IP litigation against Purdue Pharma and Endo 22

23 NUCYNTA Transforms Depomed Achieving Scale, Growth and Significant Cash Flow 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 $ million, up from $114 million in 2014 Growth opportunities abound, with long periods of exclusivity NUCYNTA ER dual MOA, unique profile and DPN Gralise Q net sales up 59% over Q CAMBIA Rx up 34% in twelve months since re-launch Lazanda Q net sales up >300% over Q

24 Thank You

25 GAAP to Non-GAAP Reconciliation Q (in millions of $) FY 2014 Q GAAP net income $ $ (11.6) Non-cash PDL royalties, net of related costs (241.7) - Non-cash interest expense on PDL liability Non-cash interest expense on convertible debt Amortization related to product acquisitions Stock based compensation 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) 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. 25

26 GAAP to Adjusted EBITDA Reconciliation FY 2014 And Q (in millions of $) Q 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) 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. 26