Depomed signs agreement with Patheon, says Esprit planning to make $10 million payment in December

By Jennifer Lanning Drey and E. Janene Geiss

Eugene, Ore. Aug. 7 - Depomed, Inc. said Monday that it has signed a collaboration agreement with Patheon Inc., granting it access to Depomed's proprietary AcuForm drug delivery technology.

Depomed, Inc. said Monday that it has signed a collaboration agreement with Patheon Inc., granting it access to Depomed's proprietary AcuForm drug delivery technology.

"Through this partnership, we have essentially added a global research and development reach for Depomed without incurring the expense which would otherwise be associated with maintaining worldwide operations," said John Fara, chief executive officer of Depomed, during a company conference call held Monday.

Depomed and Patheon will form joint committees to review compounds prior to initiating work to ensure there are no conflicts with Depomed's internal programs, Fara said.

The committees also will determine the terms of development and license arrangements with third-party clients, the companies said in the news release.

Patheon currently manufactures Depomed's two approved products, Glumetza and ProQuin XR.

Esprit reiterates commitment

Depomed also said Monday that it has received a statement from Esprit Pharma saying that the company plans to meet all of its obligations under the licensing agreement it has with Depomed.

"Esprit continues to reiterate their commitment to ProQuin," said Carl Pelzel, chief operating officer of Depomed, during Monday's call.

Esprit failed to make a $10 million license fee payment to Depomed due July 21.

Following the missed payment, Depomed amended its agreement with Esprit to allow Depomed co-promotional rights of ProQuin XR.

"Since amending our agreement, Esprit was successful in raising additional finances with an announcement last week of a $90 million venture capital round," Pelzel said.

Depomed also said obtaining co-promotional rights for ProQuin XR was one of its long-term goals.

"Since the original agreement was signed, we have envisioned, at some point, acquiring co-promotional rights for ProQuin XR as a potential element of our emergence as a commercial company," Pelzel said.

Depomed granted Esprit an extension on making the payment until December.

Second quarter results

Depomed reported a second quarter net loss of $9.9 million, or $0.24 per share, compared to a net loss of $6.8 million, or $0.18 per share for the comparable period of 2005, according to a company news release.

Second quarter revenues increased to $2.2 million from $428,000 in the same period of 2005, according to the release.

The revenue increase was primarily due to amortization of license fees previously received from Esprit, Biovale Pharmaceuticals and LG Life Sciences, as well as increased product sales of ProQuin XR, said John Hamilton, chief financial officer of Depomed, during Monday's conference call.

Cash and investment balances at June 30 were $45.3 million.

The company said it expects its cash position to be enhanced by revenue streams from Glumetza and ProQuin, as well as license fee payments including the $10 million installment now expected from Esprit in December.

Depomed plans to launch Glumetza for type 2 diabetes later this month.

In addition, the company's goals for the rest of the year include completing enrollment in the phase 3 clinical trial of Gabapentin GR and announcing another product's entrance into clinical trials, Fara said.

"Commercial execution and expanding our pipeline are our priorities as we grow our company," said Fara.

Patheon deal details

Under the agreement with Patheon, Patheon will assume primary responsibility for initial feasibility work with technical assistance from Depomed.

For projects that advance beyond feasibility, Depomed, Patheon and the client will establish a license agreement, and Depomed and Patheon will share in any license fees, milestone payments and royalties pursuant to an agreed upon ratio, officials said.

Patheon said it is the contract manufacturer for Depomed's two approved products, ProQuin XR and Glumetza, and is therefore familiar with Depomed's patented technology.

The collaboration agreement stipulates that formulated products developed under this agreement be manufactured at a Patheon site to maintain protection of the AcuForm technology, officials said.

AcuForm is a proprietary drug delivery platform developed by Depomed based on polymer technology that provides targeted drug delivery solutions for a wide range of compounds.

Depomed is a Menlo Park, Calif., specialty pharmaceutical company.

Patheon is a Mississauga, Ont., provider of drug development and manufacturing services to the pharmaceutical industry.

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