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Depomed Reports Fourth Quarter and Full Year 2016 Financial Results

- Record Annual Revenue of $456 million in 2016 -

- Record Quarterly Revenue of $124 million in Fourth Quarter –

- Conference Call Scheduled for Today at 4:30 PM EST; Dial-In Information Below -

NEWARK, Calif., Feb. 21, 2017 (GLOBE NEWSWIRE) -- Depomed, Inc. (Nasdaq:DEPO) today reported financial results and highlighted operational achievements for the quarter and twelve months ended December 31, 2016 and provided 2017 guidance.

“In 2016, we achieved key milestones strengthening our portfolio and de-leveraging our balance sheet.  We ended the year with record annual and quarterly revenue and EBITDA. In addition, we posted all-time net sales highs for every one of our brands,” said Jim Schoeneck, President and Chief Executive Officer of Depomed. “Our full-year net revenue reached $456 million, representing a 33% increase over 2015, with quarterly revenue of $124 million, an 11% increase year over year.  In addition, we have been successful in growing EBITDA from $7 million in 2014 to $111 million in 2015 and $156 million in 2016.  This, along with the early pay down of $100 million of our debt, significantly improves our credit profile and positions us well to refinance. We also built future value into the business as legal victories provided us with 9 more years to grow our flagship NUCYNTA franchise and allowed us to advance our patent infringement case against Purdue.”

Continued Mr. Schoeneck, “With the clarity on NUCYNTA’s exclusivity until December 2025 and the insights gained since its relaunch, in February we began implementing a multi-faceted growth initiative to increase the appropriate use of NUCYNTA Extended Release and Immediate Release and to drive growth across the portfolio. We continue to focus on opportunities to further differentiate our product portfolio, all with the goal of delivering value to our shareholders and to those we serve.”

Business and Financial Highlights

  • Record full year net product sales for 2016 were $455 million, an increase of 33% compared to $342 million for full year 2015
  • Full year GAAP net loss of ($89) million or ($1.45) per share, which includes a non-cash tax reserve adjustment of ($43) million
  • Full year non-GAAP adjusted earnings of $86 million, or $1.15 per share. We are modifying our method of calculating non-GAAP income taxes for non-GAAP adjusted earnings and non-GAAP adjusted earnings per share to align with the guidance under the Non-GAAP Financial Measures Compliance and Disclosure Interpretations issued by the SEC on May 17, 2016.  The amounts above reflect the Company’s prior methodology of calculating its non-GAAP income taxes for comparability to prior periods and to the Company’s prior guidance for 2016. Please see the non-GAAP tax discussion below for further discussion of the new methodology.
  • Full year non-GAAP adjusted EBITDA of $156 million
  • Fourth quarter 2016 net product sales were a record $124 million, compared to $111 million for fourth quarter of 2015, an increase of 11%
  • NUCYNTA franchise reported fourth quarter record net sales of $75 million
  • Fourth quarter ending cash and marketable securities was $177 million, cash generated during the quarter was $40 million
  • Quarterly GAAP net loss of ($44) million or ($0.72) per share, which includes a non-cash tax reserve adjustment of ($43) million
  • Quarterly non-GAAP adjusted earnings of $37 million, or $0.48 per share under the Company’s prior method of calculating its non-GAAP income tax expense.
  • Quarterly non-GAAP adjusted EBITDA of $51 million
  • U.S. District Court rules in favor of two key NUCYNTA patents, providing market exclusivity until December 2025
  • U.S. Court of Appeals upheld patents asserted against Purdue Pharma
  • Early payment of $100 million of secured debt in April 2016

NUCYNTA® Franchise Highlights

  • Full year 2016 record net sales of $281 million
  • Fourth quarter 2016 record net sales of $75 million
  • Net sales of $471 million since acquisition on April 2, 2015
  • NUCYNTA ER® reached record all-time quarterly prescription volume of over 90,000 in fourth quarter1
  • NUCYNTA ER 2016 total prescriptions of over 344,000, an increase of 19% over 20151
  • NUCYNTA ER reached record all-time quarterly market share of 2.08% of total long acting opioids in December1
  • NUCYNTA reached record all-time quarterly market share of 0.29% in fourth quarter1

Marking a continued commitment to unlock value from its portfolio, in February, the company launched the first of a series of initiatives aimed at driving NUCYNTA growth in 2017 which include:

  • Salesforce Deployment: adds 75 reps to Pain sales force for a total of 257, an increase  of 41%; Neuro and Oncology sales forces reduced by 70 positions to offset increase; new physician targeting emphasizes reimbursement coverage along with prescription volume  
  • Primary Care Physician Expansion: new salesforce deployment targets more coverage of high decile primary care prescribers
  • NUCYNTA ER Diabetic Peripheral Neuropathy (DPN) Indication: highlights indication in category unique to NUCYNTA ER
  • NUCYNTA Immediate Release Promotion: introduces a focused, stand-alone promotional campaign for the first time since relaunch
  • NUCYNTA Label Expansion Studies: initiating studies aimed at strengthening NUCYNTA’s respiratory depression and abuse profiles

Other Product Portfolio Highlights

  • Gralise® full-year net sales were $88 million, an increase of 9% compared to $81 million in 2015, fourth quarter net sales were $25 million, an increase of 15% compared to $22 million in the same period last year
     
  • Cambia® full-year net sales were $31 million, an increase of 14% compared to $27 million in 2015, fourth quarter 2016 net sales were $8.4 million, an increase of 3% compared to $8.2 million in the same period last year

    -Introduction of an aspartame-free formulation of CAMBIA for the treatment of migraine

  • Lazanda® full-year net sales were $27 million, an increase of 50% compared to $18 million in 2015, fourth quarter net sales were $7.5 million, an increase of 42% compared to $5.2 million in the same period last year and record all-time market share of 4.5% in December1

    -Introduction of a 300 mcg dose strength of Lazanda for the treatment of breakthrough cancer pain 

  • Zipsor® full-year net sales were $28 million, an increase of 7% compared to $26 million in 2015, fourth quarter net sales were $8.2 million, an increase of 6% compared to $7.7 million in the same period last year

1 Source: SHA IDV

REVENUES (GAAP BASIS)  
(in thousands, unaudited)  
                   
    Three Months Ended    Twelve Months Ended  
    December 31,   December 31,  
      2016     2015     2016     2015  
                   
Product sales, net:                  
Nucynta products1   $   74,693   $   68,260   $   281,261   $   189,854  
Gralise       24,995       21,737       88,446       81,054  
Cambia       8,373       8,157       31,273       27,426  
Lazanda       7,454       5,236       26,547       17,711  
Zipsor       8,160       7,669       27,539       25,705  
  Total product sales, net       123,675       111,059       455,066       341,750  
                   
Royalties       236       113       831       985  
                   
Total revenues (GAAP Basis)   $    123,911   $    111,172   $    455,897   $    342,735  
                   
1 Nucynta acquisition completed April 2015              


Change in Non-GAAP taxes

We are modifying our method of calculating non-GAAP income tax expense for non-GAAP adjusted earnings and non-GAAP adjusted earnings per share to align with the guidance under the Non-GAAP Financial Measures Compliance and Disclosure Interpretations issued by the SEC on May 17, 2016. This new methodology, which the Company will use exclusively beginning in first quarter of 2017, calculates non-GAAP tax expense (benefit) by adjusting the GAAP tax expense (benefit) for the estimated tax impact of each non-GAAP adjustment.  The estimated tax impact is based on the statutory income tax rate for each non-GAAP adjustment.  Previously, we adjusted the non-GAAP tax expense (benefit) to reflect the estimated amount we expected to pay or receive in taxes for the period.

The following tables show the calculation of non-GAAP adjusted earnings and non-GAAP adjusted earnings per share under both the prior and new methodologies for each of the quarters of 2015 and 2016.

 

2016 NON-GAAP ADJUSTED EARNINGS AND NON-GAAP ADJUSTED EARNINGS PER SHARE (PRIOR METHODOLOGY)
(in thousands, except per share amounts)
             
     Q1 2016  Q2 2016 Q3 2016 Q4 2016 FY 2016
As reported - GAAP net loss   $   (20,917 ) $   (10,541 ) $   (12,894 ) $   (44,368 ) $   (88,720 )
Non-GAAP adjustments       35,794       37,769       38,562       80,629       192,754  
Non-cash tax adjustment (1)       (7,014 )     (7,447 )     (4,739 )     784       (18,416 )
Non-GAAP adjusted earnings (prior methodology)   $   7,863   $   19,781   $   20,929   $   37,045   $   85,618  
Add interest expense of convertible debt, net of tax       2,156       2,156       2,156       2,156       8,624  
Numerator   $   10,019   $   21,937   $   23,085   $   39,201   $   94,242  
Shares used in calculation       80,693       81,356       81,940       82,258       81,597  
Non-GAAP adjusted earnings per share (prior methodology)   $   0.12   $   0.27   $   0.28   $   0.48   $   1.15  
             
(1) Adjusts the provision for income taxes to reflects the estimated amount we expected to pay or receive in taxes for the period. 
             
2016 NON-GAAP ADJUSTED EARNINGS AND NON-GAAP ADJUSTED EARNINGS PER SHARE (NEW METHODOLOGY)
(in thousands, except per share amounts)
             
     Q1 2016  Q2 2016 Q3 2016 Q4 2016 FY 2016
As reported - GAAP net loss   $   (20,917 ) $   (10,541 ) $   (12,894 ) $   (44,368 ) $   (88,720 )
Non-GAAP adjustments       35,794       37,769       38,562       80,629       192,754  
Income tax effect of non-GAAP adjustments (1)       (12,543 )     (13,190 )     (13,479 )     (13,220 )     (52,431 )
Non-GAAP adjusted earnings (new methodology)   $   2,334   $   14,038   $   12,189   $   23,041   $   51,603  
Add interest expense of convertible debt, net of tax (2)       1,348       1,348       1,348       1,348       5,390  
Numerator   $   3,682   $   15,386   $   13,537   $   24,389   $   56,993  
Shares used in calculation       80,693       81,356       81,940       82,258       81,597  
Non-GAAP adjusted earnings per share (new methodology)   $   0.05   $   0.19   $   0.17   $   0.30   $   0.70  
             
(1) Calculated by taking the pre-tax non-GAAP adjustments and applying the statutory tax rate.     
(2) Uses the statutory tax rate.            

      

2015 NON-GAAP ADJUSTED EARNINGS AND NON-GAAP ADJUSTED EARNINGS PER SHARE (PRIOR METHODOLOGY)
(in thousands, except per share amounts)
             
     Q1 2015  Q2 2015 Q3 2015 Q4 2015 FY 2015
As reported - GAAP net loss   $   (11,633 ) $   (21,653 ) $   (11,785 ) $   (30,667 ) $   (75,738 )
Non-GAAP adjustments       7,821       48,909       38,752       69,212       164,694  
Non-cash tax adjustment (1)       (4,181 )     (7,036 )     (2,076 )     (27,845 )     (41,138 )
Non-GAAP adjusted earnings (prior methodology)   $   (7,993 ) $   20,220   $   24,891   $   10,700   $   47,818  
Add interest expense of convertible debt, net of tax (2)       -        2,156       2,156       2,156       8,624  
Numerator   $   (7,993 ) $   22,376   $   27,047   $   12,856   $   56,442  
Shares used in calculation       59,561       81,186       81,830       81,023       81,099  
Non-GAAP adjusted earnings per share (prior methodology)   $   (0.13 ) $   0.28   $   0.33   $   0.16   $   0.70  
             
(1) Adjusts the provision for income taxes to reflects the estimated amount we expected to pay or receive in taxes for the period. 
(2) The Company did not use the if-converted method in Q1 2015 as the result would be anti-dilutive.
             
2015 NON-GAAP ADJUSTED EARNINGS AND NON-GAAP ADJUSTED EARNINGS PER SHARE (NEW METHODOLOGY)
(in thousands, except per share amounts)
             
     Q1 2015   Q2 2015   Q3 2015   Q4 2015   FY 2015 
As reported - GAAP net loss   $   (11,633 ) $   (21,653 ) $   (11,785 ) $   (30,667 ) $   (75,738 )
Non-GAAP adjustments       7,821       48,909       38,752       69,212       164,694  
Income tax effect of non-GAAP adjustments (1)       (2,300 )     (17,609 )     (13,715 )     (24,935 )     (58,559 )
Non-GAAP adjusted earnings (new methodology)   $   (6,112 ) $   9,647   $   13,252   $   13,610   $   30,397  
Add interest expense of convertible debt, net of tax (2)       -        1,348       1,348       1,348       5,390  
Numerator   $   (6,112 ) $   10,995   $   14,599   $   14,957   $   35,787  
Shares used in calculation       59,561       81,186       81,830       81,023       81,099  
Non-GAAP adjusted earnings per share (new methodology)   $   (0.10 ) $   0.14   $   0.18   $   0.18   $   0.44  
             
(1) Calculated by taking the pre-tax non-GAAP adjustments and applying the statutory tax rate. 
(2) Uses the statutory tax rate. The Company did not use the if-converted method in Q1 2015 as the result would be anti-dilutive.

Valuation Allowance on Deferred Tax Assets

The Company recorded a $43 million GAAP tax expense charge related to the establishment of a reserve against the Company’s deferred tax assets during the fourth quarter of 2016.   This charge has no effect on the Company’s cash flows or non-GAAP financial measures and could reverse in future periods.

2017 Financial Outlook

As of February 21, 2017, Depomed is providing its financial outlook for total revenue, non-GAAP adjusted EBITDA, non-GAAP SG&A expense, and non-GAAP R&D expense for the full year 2017: 

  2017 Guidance
Total Revenue $490 to $520 million
Non-GAAP Adjusted EBITDA $170 to $195 million
Non-GAAP SG&A Expense $192 to $202 million
Non-GAAP R&D Expense $30 to $38 million

The Company is not providing GAAP net loss or GAAP expense guidance as the Company is not able to estimate its non-recurring expenses for 2017.

Non-GAAP Financial Measures

To supplement our financial results presented on a U.S. generally accepted accounting principles, or GAAP, basis, we have included information about non‑GAAP adjusted earnings, non‑GAAP adjusted earnings per share and non-GAAP adjusted EBITDA, non‑GAAP financial measures, as useful operating metrics. We believe that the presentation of these non‑GAAP financial measures, when viewed with our results under GAAP and the accompanying reconciliation, provides supplementary information to analysts, investors, lenders, and our management in assessing the Company’s performance and results from period to period. We use these non‑GAAP measures internally to understand, manage and evaluate the Company’s performance, and in part, in the determination of bonuses for executive officers and employees. These non‑GAAP financial measures should be considered in addition to, and not a substitute for, or superior to, net income or other financial measures calculated in accordance with GAAP. 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 (loss) and GAAP earnings (loss) per share adjusted to exclude amortization, IPR&D and non‑cash adjustments related to product acquisitions, stock‑based compensation expense, non‑cash interest expense related to debt, costs associated with the Company’s defense against the Horizon Pharma hostile takeover bid in 2015 and the special meeting requests made by an activist investor in 2016, adjustments associated with legal settlements, and to adjust for the tax effect related to each of the non-GAAP adjustments (new methodology) or to adjust for the income tax provision to reflect the estimated amounts payable or receivable in cash (prior methodology). Non‑GAAP adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and represents GAAP net income (loss) adjusted to exclude interest income, interest expense, amortization, IPR&D and non‑cash adjustments related to product acquisitions, stock‑based compensation expense, depreciation, taxes, adjustments related to legal settlements, costs associated with the our defense against the Horizon Pharma hostile takeover bid in 2015 and the special meeting requests made by an activist investor in 2016, and transaction costs associated with product acquisitions. Non‑GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non‑GAAP measures used by other companies.

Conference Call

Depomed will host a conference call today, Tuesday, February 21st, beginning at 4:30 p.m. EST (1:30 p.m. PST) to discuss its results. Participants can access the call by dialing (866) 643-3010 (United States) or (857) 270-6032 (international) referencing Conference ID 71033060.  The conference call will also be available via a live webcast on the Investor Relations section of Depomed's website at http://www.Depomed.com. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software. An archived webcast replay will be available on the Company's website for three months.

  

 CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS) 
 (in thousands, except per share amounts) 
                 
    Three Months Ended    Twelve Months Ended
    December 31,   December 31,
      2016       2015       2016       2015  
    (unaudited)   (unaudited)
Revenues:                
Product sales, net   $   123,675     $   111,059     $   455,066     $   341,750  
Royalties        236         113         831         985  
Total revenues        123,911         111,172         455,897         342,735  
                 
Costs and expenses:                
Cost of sales        22,657         21,007         87,414         67,898  
Research and development expense        9,154         6,340         32,631         17,541  
Acquired in-process research and development       -          54,900         -          54,900  
Selling, general and administrative expense       48,462         58,337         204,498         199,352  
Amortization of intangible assets       25,734         27,060         106,845         83,344  
Gain on settlement agreement       -          (29,900 )       -          (29,900 )
Total costs and expenses        106,007         137,744         431,388         393,135  
                 
Income (loss) from operations        17,904         (26,572 )       24,509         (50,400 )
Interest and other income       175         417         485         599  
Loss on prepayment of senior notes       -          -          (5,777 )       -   
Interest expense       (20,537 )       (22,701 )       (83,719 )       (73,436 )
Benefit/(Provision) from income taxes        (41,910 )       18,189         (24,218 )       47,499  
Net loss   $   (44,368 )   $   (30,667 )   $   (88,720 )   $   (75,738 )
                 
Basic and diluted net loss per share    $   (0.72 )   $   (0.51 )   $   (1.45 )   $   (1.26 )
Shares used in calculating basic and diluted net loss per share       61,695         60,580         61,289         60,117  

 

 

CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
(unaudited)
    December 31,   December 31,
      2016     2015
         
         
Cash, cash equivalents and marketable securities   $   177,420   $   209,768
Accounts receivable       102,589       71,687
Inventories       13,033       10,494
Income taxes receivable       -        6,358
Property and equipment, net       15,526       14,794
Intangible assets, net       902,149       1,008,994
Deferred tax assets       -        22,995
Prepaid and other assets       14,620       12,159
Total assets   $   1,225,337   $   1,357,249
         
Accounts payable       14,855       12,805
Income tax payable       59       - 
Interest payable       15,924       18,672
Accrued liabilities       59,398       62,931
Accrued rebates, returns and discounts       131,536       121,058
Senior notes       466,051       563,012
Convertible notes       252,725       237,313
Contingent consideration liability       14,825       14,971
Other liabilities       19,176       11,432
Shareholders’ equity       250,788       315,055
Total liabilities and shareholders’ equity    $   1,225,337   $   1,357,249

 

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA
(in thousands)
                 
    Three Months Ended    Twelve Months Ended
    December 31,   December 31,
      2016       2015       2016       2015  
    (unaudited)   (unaudited)
                 
GAAP net loss   $   (44,368 )   $   (30,667 )   $   (88,720 )   $   (75,738 )
Intangible amortization related to product acquisitions       25,734         27,060         106,845         83,344  
Inventory step-up related to product acquisitions       -          35         15         6,023  
Product sales benefit related to product acquisitions       -          (488 )       -          9,977  
Contingent consideration related to product acquisitions       694         652         2,287         (1,377 )
Stock based compensation       4,570         4,531         17,172         14,228  
Interest income       (137 )       (417 )       (447 )       (599 )
Interest expense       19,932         22,091         87,088         71,129  
Depreciation       622         661         2,530         2,390  
Income taxes       41,910         (18,189 )       24,218         (47,499 )
Other costs (1)       2,409         8,249         5,352         11,869  
Gain on settlement agreement       -          (29,900 )       -          (29,900 )
Transaction costs       -          189         45         12,456  
Non-GAAP adjusted EBITDA   $   51,367     $   38,707     $   156,385     $   111,203  
                 
(1) Other costs represents non-recurring costs associated with the special meeting requests of an activist investor and costs associated with the Company's defense of Horizon Pharma's hostile takeover attempt


 

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED EARNINGS (PRIOR METHODOLOGY)
(in thousands, except per share amounts)
                 
    Three Months Ended    Twelve Months Ended
    December 31,   December 31,
      2016       2015       2016       2015  
    (unaudited)   (unaudited)
                 
GAAP net loss   $   (44,368 )   $   (30,667 )   $   (88,720 )   $   (75,738 )
Non-cash interest expense on debt       4,588         4,173         18,449         15,630  
Intangible amortization related to product acquisitions       25,734         27,060         106,845         83,344  
Inventory step-up related to product acquisitions       -          35         15         6,023  
Product sales benefit related to product acquisitions       -          (488 )       -          9,977  
Contingent consideration related to product acquisitions       694         652         2,287         (1,377 )
Stock based compensation       4,570         4,531         17,172         14,228  
Acquired in process research and development       -          54,900         -          54,900  
Gain on settlement agreement       -          (29,900 )       -          (29,900 )
Other costs (1)       2,409         8,249         5,352         11,869  
Valuation allowance on deferred tax assets       42,634         -          42,634         -   
Non-cash income tax adjustment (3)       784         (27,845 )       (18,416 )       (41,138 )
Non-GAAP adjusted earnings (prior methology)   $   37,045     $   10,700     $   85,618     $   47,818  
Add interest expense of convertible debt, net of tax (2)       2,156         2,156         8,624         8,624  
Numerator   $   39,201     $   12,856     $   94,242     $   56,442  
Shares used in calculation (2)       82,258         81,023         81,597         81,099  
Non-GAAP adjusted earnings per share (prior methodology)   $   0.48     $   0.16     $   1.15     $   0.70  
                 
(1) Other costs represents non-recurring costs associated with the special meeting requests of an activist investor and costs associated with the Company's defense of Horizon Pharma's hostile takeover attempt
(2) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt.   
(3) Prior methodology. Reflects the estimated amount we expected to pay or receive in taxes for the period.       

 

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED EARNINGS (NEW METHODOLOGY)
(in thousands, except per share amounts)
                 
    Three Months Ended    Twelve Months Ended
    December 31,   December 31,
      2016       2015       2016       2015  
    (unaudited)   (unaudited)
                 
GAAP net loss   $   (44,368 )   $   (30,667 )   $   (88,720 )   $   (75,738 )
Non-cash interest expense on debt       4,588         4,173         18,449         15,630  
Intangible amortization related to product acquisitions       25,734         27,060         106,845         83,344  
Inventory step-up related to product acquisitions       -          35         15         6,023  
Product sales benefit related to product acquisitions       -          (488 )       -          9,977  
Contingent consideration related to product acquisitions       694         652         2,287         (1,377 )
Stock based compensation       4,570         4,531         17,172         14,228  
Acquired in process research and development       -          54,900         -          54,900  
Gain on settlement agreement       -          (29,900 )       -          (29,900 )
Other costs (1)       2,409         8,249         5,352         11,869  
Valuation allowance on deferred tax assets       42,634         -          42,634         -   
Income tax effect of non-GAAP adjustments (3)       (13,220 )       (24,935 )       (52,431 )       (58,559 )
Non-GAAP adjusted earnings (new methology)   $   23,041     $   13,610     $   51,603     $   30,397  
Add interest expense of convertible debt, net of tax (2)       1,348         1,348         5,390         5,390  
Numerator   $   24,389     $   14,957     $   56,993     $   35,787  
Shares used in calculation (2)       82,258         81,023         81,597         81,099  
Non-GAAP adjusted earnings per share (new methodology)   $   0.30     $   0.18     $   0.70     $   0.44  
                 
(1) Other costs represents non-recurring costs associated with the special meeting requests of an activist investor and costs associated with the Company's defense of Horizon Pharma's hostile takeover attempt
(2) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt. 
(3) New methodology. Calculated by taking the pre-tax non-GAAP adjustments and applying the statutory tax rate.  Expected cash taxes for the period was ($1,508) and zero for the three and twelve months ended December 31, 2016 and $9,656 and ($6,361) for the three and twelve months ended December 31, 2015.

 

RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (PRIOR METHODOLOGY)
For the three months ended December 31, 2016
(in thousands)
(unaudited)
             
  Cost of sales Research and
development
expense
Selling, general
and
administrative
expense
Amortization
of intangible
assets
Interest
expense
Benefit from
(provision for)
income taxes
GAAP as reported $   22,657   $   9,154   $   48,462   $   25,734   $   (20,537 ) $   (41,910 )
Non-cash interest expense on debt     -        -        -        -        4,588       -   
Intangible amortization related to product acquisitions     -        -        -        (25,734 )     -        -   
Inventory step-up related to product acquisitions     -        -        -        -        -        -   
Contingent consideration related to product acquisitions     -        -        (89 )     -        605       -   
Stock based compensation     (16 )     (167 )     (4,387 )     -        -        -   
Other costs     -        -        (2,409 )     -        -        -   
Valuation allowance on deferred tax assets     -        -        -        -        -        42,634  
Non-cash income tax adjustment (prior methodology)     -        -        -        -        -        784  
Non-GAAP adjusted (prior methodology) $   22,641   $   8,987   $   41,577   $   -    $   (15,344 ) $   1,508  
             
             
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (PRIOR METHODOLOGY)
For the twelve months ended December 31, 2016
(in thousands)
(unaudited)
             
  Cost of sales Research and
development
expense
Selling, general
and
administrative
expense
Amortization
of intangible
assets
Interest
expense
Benefit from
(provision for)
income taxes
GAAP as reported $   87,414   $   32,631   $   204,498   $   106,845   $   (83,719 ) $   (24,218 )
Non-cash interest expense on debt     -        -        -        -        18,449       -   
Intangible amortization related to product acquisitions     -        -        -        (106,845 )     -        -   
Inventory step-up related to product acquisitions     (15 )     -        -        -        -        -   
Contingent consideration related to product acquisitions     -        -        120       -        2,407       -   
Stock based compensation     (43 )     (496 )     (16,633 )     -        -        -   
Other costs     -        -        (5,352 )     -        -        -   
Valuation allowance on deferred tax assets     -        -        -        -        -        42,634  
Non-cash income tax adjustment (prior methodology)     -        -        -        -        -        (18,416 )
Non-GAAP adjusted (prior methodology) $   87,356   $   32,135   $   182,633   $   -    $   (62,863 ) $   -   

 

RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (PRIOR METHODOLOGY)
For the three months ended December 31, 2015
(in thousands)
(unaudited)
                   
  Product Sales Cost of sales Research and development
expense
IPR&D Selling, general
and
administrative expense
Amortization
of intangible
assets
Gain on Settlement Interest expense Benefit from
(provision for)
income taxes
GAAP as reported $   111,059   $   21,007   $   6,340   $   54,900   $   58,337   $   27,060   $   (29,900 ) $   (22,701 ) $   18,189  
Non-cash interest expense on debt     -        -        -        -        -        -        -        4,173       -   
Intangible amortization related to product acquisitions     -        -        -        -        -        (27,060 )     -        -        -   
Inventory step-up related to product acquisitions     -        35       -        -        -        -        -        -        -   
Product sales benefit related to product acquisitions     (488 )     -        -        -        -        -        -        -        -   
Contingent consideration related to product acquisitions     -        -        -        -        (42 )     -        -        610       -   
Stock based compensation     -        (12 )     (58 )     -        (4,461 )     -        -        -        -   
Acquired in process research and development     -        -        -        (54,900 )     -        -        -        -        -   
Gain on settlement agreement     -        -        -        -        -        -        29,900       -        -   
Other costs     -        -        -        -        (8,249 )     -        -        -        -   
Non-cash income tax adjustment (prior methodology)     -        -        -        -        -        -        -        -        (27,845 )
Non-GAAP adjusted (prior methodology) $   110,571   $   21,030   $   6,282   $   -    $   45,585   $   -    $   -    $   (17,918 ) $   (9,656 )
                   
                   
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (PRIOR METHODOLOGY)
For the twelve months ended December 31, 2015
(in thousands)
(unaudited)
                   
  Product Sales Cost of sales Research and development
expense
IPR&D Selling, general
and
administrative expense
Amortization
of intangible assets
Gain on Settlement Interest expense Benefit from
(provision for)
income taxes
GAAP as reported $   341,750   $   67,898   $   17,541   $   54,900   $   199,352   $   83,344   $   (29,900 ) $   (73,436 ) $   47,499  
Non-cash interest expense on debt     -        -        -        -        -        -        -        15,630       -   
Intangible amortization related to product acquisitions     -        -        -        -        -        (83,344 )     -        -        -   
Inventory step-up related to product acquisitions     -        (6,023 )     -        -        -        -        -        -        -   
Product sales benefit related to product acquisitions     9,977       -        -        -        -        -        -        -        -   
Contingent consideration related to product acquisitions     -        -        -        -        3,684       -        -        2,307       -   
Stock based compensation     -        (21 )     (277 )     -        (13,930 )     -        -        -        -   
Acquired in process research and development     -        -        -        (54,900 )     -        -        -        -        -   
Gain on settlement agreement     -        -        -        -        -        -        29,900       -        -   
Other costs     -        -        -        -        -        -        -        -        -   
Non-cash income tax adjustment (prior methodology)     -        -        -        -        -        -        -        -        (41,138 )
Non-GAAP adjusted (prior methodology) $   351,727   $   61,854   $   17,264   $   -    $   189,106   $   -    $   -    $   (55,499 ) $   6,361  

 

RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (NEW METHODOLOGY)
For the three months ended December 31, 2016
(in thousands)
(unaudited)
             
  Cost of sales Research and
development
expense
Selling, general
and
administrative
expense
Amortization
of intangible
assets
Interest
expense
Benefit from
(provision for)
income taxes
GAAP as reported $   22,657   $   9,154   $   48,462   $   25,734   $   (20,537 ) $   (41,910 )
Non-cash interest expense on debt     -        -        -        -        4,588       -   
Intangible amortization related to product acquisitions     -        -        -        (25,734 )     -        -   
Inventory step-up related to product acquisitions     -        -        -        -        -        -   
Contingent consideration related to product acquisitions     -        -        (89 )     -        605       -   
Stock based compensation     (16 )     (167 )     (4,387 )     -        -        -   
Other costs     -        -        (2,409 )     -        -        -   
Valuation allowance on deferred tax assets     -        -        -        -        -        42,634  
Income tax effect of non-GAAP adjustments (new methodology)     -        -        -        -        -        (13,220 )
Non-GAAP adjusted (new methodology) $   22,641   $   8,987   $   41,577   $   -    $   (15,344 ) $   (12,496 )
             
             
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (NEW METHODOLOGY)
For the twelve months ended December 31, 2016
(in thousands)
(unaudited)
             
  Cost of sales Research and
development
expense
Selling, general
and
administrative
expense
Amortization
of intangible
assets
Interest
expense
Benefit from
(provision for)
income taxes
GAAP as reported $   87,414   $   32,631   $   204,498   $   106,845   $   (83,719 ) $   (24,218 )
Non-cash interest expense on debt     -        -        -        -        18,449       -   
Intangible amortization related to product acquisitions     -        -        -        (106,845 )     -        -   
Inventory step-up related to product acquisitions     (15 )     -        -        -        -        -   
Contingent consideration related to product acquisitions     -        -        120       -        2,407       -   
Stock based compensation     (43 )     (496 )     (16,633 )     -        -        -   
Other costs     -        -        (5,352 )     -        -        -   
Valuation allowance on deferred tax assets     -        -        -        -        -        42,634  
Income tax effect of non-GAAP adjustments (new methodology)     -        -        -        -        -        (52,431 )
Non-GAAP adjusted (new methodology) $   87,356   $   32,135   $   182,633   $   -    $   (62,863 ) $   (34,015 )

 

RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (NEW METHODOLOGY)
For the three months ended December 31, 2015
(in thousands)
(unaudited)
                   
  Product Sales Cost of sales Research and development
expense
IPR&D Selling, general
and
administrative expense
Amortization
of intangible
assets
Gain on Settlement Interest expense Benefit from
(provision for)
income taxes
GAAP as reported $   111,059   $   21,007   $   6,340   $   54,900   $   58,337   $   27,060   $   (29,900 ) $   (22,701 ) $   18,189  
Non-cash interest expense on debt     -        -        -        -        -        -        -        4,173       -   
Intangible amortization related to product acquisitions     -        -        -        -        -        (27,060 )     -        -        -   
Inventory step-up related to product acquisitions     -        35       -        -        -        -        -        -        -   
Product sales benefit related to product acquisitions     (488 )     -        -        -        -        -        -        -        -   
Contingent consideration related to product acquisitions     -        -        -        -        (42 )     -        -        610       -   
Stock based compensation     -        (12 )     (58 )     -        (4,461 )     -        -        -        -   
Acquired in process research and development     -        -        -        (54,900 )     -        -        -        -        -   
Gain on settlement agreement     -        -        -        -        -        -        29,900       -        -   
Other costs     -        -        -        -        (8,249 )     -        -        -        -   
Income tax effect of non-GAAP adjustments (new methodology)     -        -        -        -        -        -        -        -        (24,935 )
Non-GAAP adjusted (new methodology) $   110,571   $   21,030   $   6,282   $   -    $   45,585   $   -    $   -    $   (17,918 ) $   (6,746 )
                   
                   
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (NEW METHODOLOGY)
For the twelve months ended December 31, 2015
(in thousands)
(unaudited)
                   
  Product Sales Cost of sales Research and development
expense
IPR&D Selling, general
and
administrative expense
Amortization
of intangible assets
Gain on Settlement Interest expense Benefit from
(provision for)
income taxes
GAAP as reported $   341,750   $   67,898   $   17,541   $   54,900   $   199,352   $   83,344   $   (29,900 ) $   (73,436 ) $   47,499  
Non-cash interest expense on debt     -        -        -        -        -        -        -        15,630       -   
Intangible amortization related to product acquisitions     -        -        -        -        -        (83,344 )     -        -        -   
Inventory step-up related to product acquisitions     -        (6,023 )     -        -        -        -        -        -        -   
Product sales benefit related to product acquisitions     9,977       -        -        -        -        -        -        -        -   
Contingent consideration related to product acquisitions     -        -        -        -        3,684       -        -        2,307       -   
Stock based compensation     -        (21 )     (277 )     -        (13,930 )     -        -        -        -   
Acquired in process research and development     -        -        -        (54,900 )     -        -        -        -        -   
Gain on settlement agreement     -        -        -        -        -        -        29,900       -        -   
Other costs     -        -        -        -        -        -        -        -        -   
Income tax effect of non-GAAP adjustments (new methodology)     -        -        -        -        -        -        -        -        (58,559 )
Non-GAAP adjusted (new methodology) $   351,727   $   61,854   $   17,264   $   -    $   189,106   $   -    $   -    $   (55,499 ) $   (11,060 )

 

RECONCILIATION OF GAAP NET LOSS PER SHARE TO NON-GAAP ADJUSTED EARNINGS PER SHARE (PRIOR METHODOLOGY)
                 
    Three Months Ended    Twelve Months Ended
    December 31,   December 31,
      2016       2015       2016       2015  
    (unaudited)   (unaudited)
                 
GAAP net loss per share   $   (0.72 )   $   (0.51 )   $   (1.45 )   $   (1.26 )
Conversion from basic shares to if-converted diluted shares       0.18         0.13         0.36         0.32  
Non-cash interest expense on debt       0.06         0.05         0.23         0.19  
Intangible amortization related to product acquisitions       0.31         0.33         1.31         1.03  
Inventory step-up related to product acquisitions       -          -          -          0.07  
Product sales benefit related to product acquisitions       -          (0.01 )       -          0.12  
Contingent consideration related to product acquisitions       0.01         0.01         0.03         (0.02 )
Stock based compensation       0.06         0.06         0.21         0.18  
Acquired in process research and development       -          0.68         -          0.68  
Gain on settlement agreement       -          (0.37 )       -          (0.37 )
Other costs (1)       0.03         0.10         0.07         0.15  
Valuation allowance on deferred tax assets       0.52         -          0.52         -   
Non-cash income tax adjustment (3)       0.01         (0.34 )       (0.23 )       (0.51 )
Add interest expense of convertible debt, net of tax (2)       0.03         0.03         0.11         0.11  
Non-GAAP adjusted earnings per share (prior methodology)   $   0.48     $   0.16     $   1.15     $   0.70  
                 
(1) Other costs represents non-recurring costs associated with the special meeting requests of an activist investor and costs associated with the Company's defense of Horizon Pharma's hostile takeover attempt
(2) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt.   
(3) Prior methodology. Reflects the estimated amount we expected to pay or receive in taxes for the period.       

 

RECONCILIATION OF GAAP NET LOSS PER SHARE TO NON-GAAP ADJUSTED EARNINGS PER SHARE (NEW METHODOLOGY)
                 
    Three Months Ended    Twelve Months Ended
    December 31,   December 31,
      2016       2015       2016       2015  
    (unaudited)   (unaudited)
                 
GAAP net loss per share   $   (0.72 )   $   (0.51 )   $   (1.45 )   $   (1.26 )
Conversion from basic shares to if-converted diluted shares       0.18         0.13         0.36         0.32  
Non-cash interest expense on debt       0.06         0.05         0.23         0.19  
Intangible amortization related to product acquisitions       0.31         0.33         1.31         1.03  
Inventory step-up related to product acquisitions       -          -          -          0.07  
Product sales benefit related to product acquisitions       -          (0.01 )       -          0.12  
Contingent consideration related to product acquisitions       0.01         0.01         0.03         (0.02 )
Stock based compensation       0.06         0.06         0.21         0.18  
Acquired in process research and development       -          0.68         -          0.68  
Gain on settlement agreement       -          (0.37 )       -          (0.37 )
Other costs (1)       0.03         0.10         0.07         0.15  
Valuation allowance on deferred tax assets       0.52         -          0.52         -   
Income tax effect of non-GAAP adjustments (3)       (0.16 )       (0.31 )       (0.64 )       (0.72 )
Add interest expense of convertible debt, net of tax (2)       0.02         0.02         0.07         0.07  
Non-GAAP adjusted earnings per share (new methodology)   $   0.30     $   0.18     $   0.70     $   0.44  
                 
(1) Other costs represents non-recurring costs associated with the special meeting requests of an activist investor and costs associated with the Company's defense of Horizon Pharma's hostile takeover attempt
(2) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt.   
(3) New methodology. Calculated by taking the pre-tax non-GAAP adjustments and applying the statutory tax rate.     

  

INVESTOR AND MEDIA CONTACT:

Christopher Keenan
VP, Investor Relations and Corporate Communications
510-744-8000
ckeenan@depomed.com

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