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Serada is an investigational formulation of gabapentin, an FDA-approved immediate release pharmaceutical for the treatment of partial epilepsy and management of postherpetic neuralgia. Gabapentin lost patent protection a few years back and is available in generic versions. Even though Serada is an investigational formulation of gabapentin, it is not bioequivalent to generic gabapentin and DepoMed has exclusive license for use of gabapentin in menopausal hot flashes through 2020.
Hot flashes -- a sudden wave of mild or intense body heat caused by the hormonal changes of menopause, affect about 32 million women in the United States each year, of which approximately 13 million seek treatment. Hormone Replacement Therapy, or HRT is one of the most effective treatments for hot flashes. Wyeth's Premarin and Prempro are examples of HRT drugs.
However, prescriptions for HRT have dropped dramatically in recent years following evidence of a correlation between HRT and an increased risk for breast cancer, giving significant opportunity for non-hormonal non-anti depressant drugs.
Existing non-hormonal pharmaceutical alternatives to HRT for the treatment of hot flashes include off-label administration of anti-depressants and currently there are no approved non hormonal and non antidepressant treatments for hot flashes. While DepoMed sees a billion dollar market potential for non-hormonal alternatives to hot flashes, market research firm Datamonitor has a conservative estimate. According to Datamonitor, "Non-hormonal treatments for hot flashes have the potential to capture, at least, $535 million in the US and EU."
In a phase II study, Serada significantly reduced the frequency and severity of hot flashes from baseline to the end of treatment compared to placebo in the 124 patient study. The phase III program, whose results are expected in the coming weeks, includes two studies -- Breeze 1 and Breeze 2 with approximately 540 patients per study. In each study, patients were randomized into three treatment arms -- placebo; 1200mg of Serada dosed once daily; or a total dose of 1800mg of Serada dosed 600mg in the morning and 1200mg in the evening.
Yet another late-stage drug whose results are expected to be released in the coming weeks is DM-1796, which is evaluated for postherpetic neuralgia.
Postherpetic neuralgia, or PHN, is a persistent neuropathic pain condition caused by nerve damage after a shingles, or herpes zoster, viral infection and afflicts approximately one in five patients diagnosed with shingles (about 150,000 individuals) in the United States. The current phase III study of DM-1796 is a reformulated version of an earlier phase III trial, which failed to meet the trial goals in July of 2007. DepoMed stock lost nearly 60% of its value to close at $2 on July 10, 2007 -- the day the company revealed that its drug had flunked a late-stage trial of PHN.
The current late stage trial of DM-1796 is a randomized, double-blind, placebo-controlled study of approximately 450 PHN patients. Patients in the study were randomized to receive placebo, or 1800mg of DM-1796 dosed once daily.
The failed phase III trial of 2007 involved 407 PHN patients who were randomized into one of three treatment groups for ten weeks of treatment -- DM-1796 once-daily, DM-1796 twice-daily (each with 1800 mg total daily-dose) and placebo.
DepoMed has a deal in place with Solvay Pharmaceuticals under which DM-1796 is being developed. The agreement crafted on November 20, 2008 triggered an upfront payment of $25 million for DepoMed from Solvay. In addition, Solvay is entitled to make milestone payments to Depomed, subject to the fulfillment of future regulatory and sales milestones, of up to $370 million and pay a royalty of 14% - 20%, depending on product sales. Solvay will be responsible for NDA filing and has the option to develop DM-1796 in further pain indications other than PHN.
DepoMed has two FDA-approved drugs on the market -- Glumetza, a once-daily treatment for adults with type 2 diabetes and Proquin XR, a once-daily treatment for uncomplicated urinary tract infections. In the U.S., Glumetza is commercialized with Santarus Inc. while Proquin XR is jointly commercialized with Watson Pharmaceuticals, Inc. (WPI | Quote | Chart | News | PowerRating).
The company's other investigational drugs include -- DM-3458, a phase I clinical trial product for the treatment of gastroesophageal reflux disease; and DM-1992, a phase I clinical trial product that targets Parkinson's disease. In addition, DM-1796, the late-stage drug for PHN, is also in phase II clinical trail for diabetic peripheral neuropathy.
On August 10, the company reported encouraging results from a phase I trial of DM-1992 for Parkinson's disease and another phase I trial to confirm the performance of the formulation is expected to be taken up before out licensing the program.
DepoMed's approved drugs employ its patented AcuForm delivery technology, which is also being evaluated with partner companies for numerous other compounds.
Last November, DepoMed licensed worldwide rights of its AcuForm gastric retentive drug delivery technology to Covidien plc. (COV | Quote | Chart | News | PowerRating) under a $68 million deal.
In July of this year, DepoMed licensed certain patents related to metformin extended release technology to Merck & Co., Inc. (MRK | Quote | Chart | News | PowerRating) to be used in developing fixed dose combinations of sitagliptin and extended release metformin in exchange for a $10 million upfront fee and future milestone payment upon filing of the New Drug Application for the therapeutic candidate, as well as modest royalties on any net product sales for an agreed-upon period.
DepoMed generates revenue from license fees, product sales, royalties, collaborative research and development arrangements and feasibility studies.
For the second quarter ended June 30, 2009, the company reported a net loss of $9.6 million or $0.19 per share compared to net income of $3.5 million or $0.07 per share in the year-ago quarter. The year-ago quarterly profit was due to a one-time gain of $7.5 million on litigation related to the settlement of the patent infringement suit against Ivax Corp.
DepoMed's quarterly revenue was $11.6 million, up from $6.3 million in the comparable quarter a year before, thanks to higher product sales and license revenue.
Product sales, which mainly consisted of Glumetza product sales, rose to $8.4 million in the second-quarter of 2009 from $5.5 million in the second-quarter of 2008. License revenue for the quarter increased to $2.7 million from $363,000 in the comparable quarter prior year.
As of June 30, 2009, DepoMed's total debt was $7.63 million, while cash, cash equivalents, and marketable securities were $84 million.
DEPO, which has thus far hit a 52-week low of $1.01 and 52-week high of $4.25, closed Friday's trading at $4.16.
With three pending late-stage trial results, the upcoming events are make-or-break events for DepoMed as the stock is poised to surge overnight on success or crater on failure to achieve its primary endpoints. Assuming positive trial data, the company expects to file New Drug Application for both the drugs in the first quarter of 2010.
Will DepoMed's drugs successfully pass the clinical trials? Stay tuned...
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