|
 Company
Profile:
Depomed, Inc.
is a specialty pharmaceutical company with one product candidate through
Phase 3 clinical development, another in Phase 3 clinical development, two
approved products on the market and other product candidates in its early
stage pipeline. Product candidate DM-1796 has completed Phase 3 clinical
developm=nt and has been licensed to Abbott Products, Inc. Product candidate
SeradaTM i= in Phase 3 clinical development for menopausal hot flashes.
GLUMETZA(R) (metfo=min hydrochloride extended release tablets) is approved
for use in adults with =ype 2 diabetes and promoted by Santarus, Inc. in the
United States. Depomed formulates its products and product candidates with
its proven, proprietary Acuform(R) drug delivery technology, which is
designed to improve existing oral medications, allowing for extended,
controlled release of medications to th= upper gastrointestinal tract.
Benefits of Acuform-enhanced pharmaceuticals include the convenience of
once-daily administration, improved treatment tolerability and enhanced
compliance and efficacy.
 Carl
Pelzel
President and CEO
Mr. Pelzel joined Depomed in June 2005 as vice president of Marketing and
Commercial Development. In September 2005, he was appointed executive vice
president and chief operating officer, a position he held until being
appointed president and chief executive officer in August 2007. Before
joining Depomed, Mr. Pelzel was senior vice president, Global Commercial
Operations at Chiron Corporation. Under his leadership, Chiron
Biopharmaceuticals generated sales on a global basis through operations in
North America and Europe as well as through a network of international
distributors. Prior to joining Chiron, Mr. Pelzel served as president and
chief executive officer of Invenux Inc., a privately-held biopharmaceutical
company. Mr. Pelzel also spent 11 years with GlaxoSmithKline in senior-level
sales, marketing and international operational positions, including country
manager of Hong Kong and China. He spent 13 years with American Home
Products, focused primarily on the company’s antibiotics business. During
his career, he directed the launch of five major pharmaceutical products,
many on a global basis. Mr. Pelzel received a B.A. degree from Hartwick
College of Oneonta, New York, and a Masters degree in Natural Sciences from
the University of Paris. |
Healthcare
Drug Manufacturers - Other
(DEPO-NASDAQ)
Depomed, Inc.
1360 O’Brien Drive
Menlo Park, CA 94025
Phone: 650-462-5900
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Interview conducted by: Walter Banks,
Publisher, CEOCFOinterviews.com, Published – July 2, 2010
CEOCFO:
Mr. Pelzel, how long have you been with Depomed, what brought you to the
company and what is the vision going forward?
Mr. Pelzel: I’ve been with Depomed for
five years and what brought me to the company is the opportunity that I saw
to use the company to take advantage of some massive changes that were
happening in healthcare. The company has a unique technology that can change
the performance of existing drugs in ways that I knew would be important to
managed care. Some of the changes that we are seeing in managed care are
eliminating the path of “me too” products that traditionally had formed the
backbone for the success of big pharma. So I saw Depomed as a vehicle that
could be used to take advantage of this change in the marketplace, by taking
existing drugs and giving them beneficial, patient oriented differences that
managed care would have to pay for, compared to simply changing an existing
compound in a small way and relaunching with a different brand name as big
pharma had been doing for years. The vision for the company is to take
Depomed through a transition to become a specialty pharma company. The
company was developed as a drug delivery company on the back of some very
innovative patents from which the company was founded. Those patents give us
the ability to create a tablet in a solid dosage form that sits in the
stomach for 9 hours and from that launching point, can deliver drugs in a
variety of ways that can impart clinical and side effect differences to
existing drugs. What makes Depomed exciting is that this is the only company
that has demonstrated what scientists called a gastric retention capability.
So it is the ability to keep a dosage form in the stomach for a prolonged
period of time and thereby change how some drugs perform. This transition
that I was talking about is indeed to move the company from a drug delivery
company, to a specialty pharma company. That will take two forms. Number
one, we are going to use our existing technology to solve formulation
problems for other companies and that will generate cash for us. We will
then use that cash to proceed with our development as a specialty pharma
company. Now how we do that, and again part of the vision, is that we will
take some of the products that come out of our development programs, and we
will at the right time, start a sales force and commercial organization that
will allow us to launch these products and thereby keep the majority of the
economics that these products have the potential to generate.
CEOCFO: Where are you now?
Mr. Pelzel: We have taken our technology
and we have broadly communicated that we are no longer a drug delivery
company. We will no longer do the traditional fee for service, in other
words we won’t do formulation work in the hope that we might eventually get
to a licensing deal. We will only practice our technology if there is a
licensing deal at the beginning. This has been demonstrated recently in the
deal with Merck last year and a deal with Covidien. We have developed a
product based on gabapentin, originally developed by Warner Lambert, which
is now Pfizer. We have taken that compound, which was very successful as it
did $2.7 billion worldwide in 2004 before it went generic, and we have made
it better. We have made it better in a way that is meaningful to managed
care. The two drawbacks to this product have always been the fact that it
causes a high incidence of dizziness, roughly 30%, and a very high incidence
of daytime sleepiness, roughly 35% to 30%. Both of these limit the extent to
which patients can tolerate the drug. We have taken this drug, put it into
our technology and all but eliminated the daytime sleepiness. It is the same
as placebo, and reduced the dizziness by two-thirds. What makes this
interesting is the following. When Pfizer saw that they were going to lose
their patent on gabapentin, they looked, as big pharma traditionally does,
for another product to take its place so that they wouldn’t completely lose
the sales franchise that they had worked so hard to develop. They developed
a product from the same drug class as Gabapentin which they call Lyrica and
they proceeded to launch that product. I predict that had they launched
Lyrica ten or fifteen years earlier, it would have been wildly successful.
This is because at that time managed care did not have the power that they
have today. Unfortunately for Pfizer, when they launched Lyrica, managed
care and physicians recognized that there were very few, if any differences
between their old drug gabapentin and their new drug Lyrica. Both of those
products cause the same amount of dizziness and daytime sleepiness, and both
work to the same extent in reducing pain. As a result, managed care rather
uniformly, refused to allow reimbursement for the new drug Lyrica until
patients failed on the original drug which is now generic – Gabapentin. As a
result, Lyrica has only achieved modest success. I say modest success, even
though Lyrica generated about $1.5 billion in the United States last year,
but the marketplace is a $5 to $6 billion marketplace, so they could have
generated much larger sales had Lyrica had some meaningful advantages to
offer patients that managed care would have been willing to pay for. This is
interesting because managed care was able to halt the success of Lyrica,
because there were no differences between the two compounds. As a result,
doctors could not convince managed care to pay for the new drug. However,
our product was specifically designed to bring forward patient benefits that
would be meaningful to doctors, patients and managed care, so that
physicians will be able to convince managed care to pay for our product,
which is dosed once a day, has virtually no daytime sleepiness and has 1/3
the dizziness of the original compound.
CEOCFO: Where does that take you?
Mr. Pelzel: We have taken that compound,
developed it for nerve pain and we have licensed it to Abbott. Our filed NDA
(New Drug Application) has been accepted and we anticipate a rapid FDA
review. Once approved, that will generate a very significant 14% to 20%
revenue stream for Depomed. That cash will be used to complete our
transition from a drug delivery company to a specialty pharma. In addition
to the royalties, we will get up to $60 million in milestones at approval
and again that cash is important to us. We then took that same gabapentin
program and we developed it for hot flashes, which is a very debilitating
side effect of menopause. The only drug that is currently approved in the
U.S. for menopausal hot flashes is estrogen. As we all know, estrogen has
been under intense scrutiny because of the proposed link between the use of
estrogen and breast cancer, cardiovascular events, and stroke. Therefore,
our gabapentin product has the potential to be the first and only
non-hormonal therapy for hot flashes. This program is not currently
partnered as it represents the springboard for us becoming a specialty
pharma company. We are about to start our last Phase III trial that will
bring us to registration and approval for the hot flash product. So to
complete the vision, we will use the funds that will come from our Abbott
collaboration to create a specialty pharma company in women’s health. That
women’s health company will initially promote our hot flash product and will
also promote other products that we have been able to gain access to for
women’s health.
I would like to digress and talk about how we have used our technology to
generate cash to enable us not to have to raise any money since the 2nd
Quarter of 2007, and yet in the last quarter to have $71 million in the
bank. We have consistently been successful at using our technology, because
of its uniqueness, to generate cash through business development deals that
require very little work on our part. As I mentioned, we have a deal with
Merck, we have a deal with Covidien on up to four products and these deals
and these fields continue to be explored, keep us away from the capital
markets and keep us well funded.
CEOCFO: Why then should investors be
interested in Depomed?
Mr. Pelzel: There are three reasons why
investors should be interested in Depomed. First, we are positioning
ourselves for the changes that are happening in healthcare, as opposed to
having those changes thrust upon us. We think that by using our technology
in a way that will be attractive to managed care that we are positioning
ourselves for success in this new environment, as opposed to trying to run
away from it. Number two, we are well capitalized and we have a continuing
source of capital in our unique technology. Number three, we have a clear
vision and path to being a profitable company with our hot flash program and
women’s health business. What is important there is that most specialty
pharma companies become specialty pharma companies by buying someone else’s
existing product and trying to find a way to generate more sales than the
original owner of the product was able to. Now in some cases that is
successful. But it is a rather risky roll of the dice and incredibly
expensive, because you are buying an existing asset with an existing revenue
stream. We on the other hand have used our technology to develop our own
compounds in a relatively inexpensively manner, because we are not buying
them. We focus on developing products in large rapidly expanding markets,
that being the nerve pain market and represented by our collaboration with
Abbott, and our hot flash product, which is unique in that it is the only
product other than estrogen to treat menopausal hot flashes. So that is the
investment premise for the company in a nutshell.
CEOCFO: In closing, how did Depomed come
to be in position of your current products; was it through licensing,
acquisition or partnering?
Mr. Pelzel: With our gabapentin program
for example, gabapentin is available generically, so we had access to it and
we identified the side effects associated with gabapentin as particular side
effects upon which our technology could confer advantages. Our technology
can not make every product better of course, but there are certain products
where our technology can be brought to bear to the benefit of patients from
a side effect or a clinical efficacy perspective.
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