NEWARK, Calif., July 29, 2015 /PRNewswire/ -- Depomed,
Inc. (NASDAQ: DEPO) ("Depomed" or the "Company") today
announced that its Board of Directors, after careful consideration
and with the assistance of its independent financial and legal
advisors, has unanimously rejected the purported revised, highly
conditional, unsolicited and non-binding proposal from Horizon
Pharma plc (NASDAQ: HZNP) ("Horizon") to acquire all of the
outstanding shares of Depomed in an all-stock transaction (the
"July 21 Proposal").
The Depomed Board concluded that the July
21 Proposal is inadequate and not in the best interests of
Depomed and its shareholders. The Depomed Board believes that
the July
21 Proposal substantially undervalues Depomed's business and
does not reflect the inherent value of Depomed in light of its
standalone prospects. The Board strongly believes that an
independent Depomed will create significant and sustainable value
for its shareholders both in the short and long-term, through the
focused execution of the Company's business plan and strategic
vision.
The Depomed Board also notes that the purported increase in the
July 21 Proposal does not reflect any
increase in the amount of Horizon stock that the Depomed
shareholders would receive, nor any increase in the pro-forma
ownership for the Depomed shareholders, in each case as compared to
Horizon's prior proposal first communicated in May. The
purported "increase" in Horizon's July
21 Proposal is the result of the trading price of Horizon's
stock having increased since it made its initial proposal.
"Horizon's purported revised, unsolicited proposal does not
reflect the value inherent in Depomed's business, nor does it
reflect Depomed's compelling prospects for long-term growth and
value creation," commented Peter D.
Staple, Depomed's Chairman of the Board. "Our Board
continues to believe that the timing of Horizon's proposal is
opportunistic as the combination would transfer the future value of
Depomed to Horizon at a price we believe does not represent the
value of our assets, business and prospects."
Jim Schoeneck, President and CEO
of Depomed added, "As demonstrated by the Company's record sales
and cash flow during the second quarter, Depomed continues to drive
tremendous value for shareholders and has significant growth
opportunities that extend well into the next decade. It is evident
that Depomed is in a period of accelerated growth and our results
clearly demonstrate that we are on the right track to becoming one
of the top five pharmaceutical pain companies in the United States by 2016, based on branded
revenue. We are confident that executing our strategic plan is the
best path forward and one that will deliver more value to Depomed
shareholders than Horizon's inadequate proposal."
The following is the text of the letter that was sent on
July 29, 2015, to Horizon's Chairman,
President and Chief Executive Officer, Timothy Walbert:
July 29, 2015
Timothy P. Walbert
Chairman of the Board, President and Chief Executive Officer
Horizon Pharma plc
Connaught House, 1st
Floor, 1 Burlington Road
Dublin 4, Ireland
Dear Tim:
The Board of Directors of Depomed, Inc. received your letter
dated July 21, 2015 communicating a
purported revised, highly conditional, unsolicited proposal that
Horizon Pharma plc acquire all of the outstanding shares of Depomed
in an all-stock transaction (the "July
21 Proposal").
As a threshold matter, I note that Horizon's July 21 Proposal does not reflect
any increase in the amount of Horizon stock that the
Depomed shareholders would receive, nor any increase in the
pro-forma ownership for the Depomed shareholders, in each case as
compared to your prior proposal first communicated in May.
The purported "increase" in your July
21 Proposal is the result of the trading price of Horizon's
stock having increased since it made its initial proposal.
Therefore, the characterization of your Revised July 21 Proposal as a "price increase" in your
public statements last week is disingenuous, in our view.
In fact, we believe your decision not to include an exchange
ratio for your initial proposal or purported revised proposal, and
your decision to pre-announce earnings the day before the
July 21 Proposal, misled the market
about the substance of your proposal.
After careful consideration, including a thorough review of the
terms and conditions of the July 21
Proposal with Depomed's financial and outside legal advisors, and
consistent with its fiduciary duties under applicable law, the
Depomed Board, by unanimous vote, has determined that the
July 21 Proposal is inadequate and
not in the best interests of Depomed and its shareholders.
The Depomed Board believes that the July
21 Proposal substantially undervalues Depomed's business and
does not reflect the inherent value of Depomed in light of its
standalone prospects.
In reaching its determination to reject the July 21 Proposal, the Depomed Board considered
numerous factors in consultation with Depomed's management and
Depomed's financial and legal advisors, including, but not limited
to, the following:
1. The July 21 Proposal
is inadequate and we believe substantially undervalues Depomed's
current financial performance and future growth prospects.
Depomed has an established track record of delivering
shareholder value through the successful execution of its
acquisition and commercialization strategy. The
Depomed Board believes that Depomed is in a period of significant
growth given the highly successful execution of its acquisition and
commercialization strategy.
- The Company's financial and share price performance over the
last three years speaks to the soundness of Depomed's strategy and
its ability to create value for its shareholders. At the
midpoint of Depomed's updated 2015 guidance, the Company's product
sales will have achieved at a compounded annual growth rate since
2012 of 129%. Since the beginning of 2013, Depomed's share
price has increased approximately 431%, as of July 28, 2015.
- Depomed has created significant value through strong commercial
execution of its product portfolio.
- We believe that NUCYNTA has blockbuster potential – an even
bigger opportunity than we originally anticipated – and we've just
relaunched NUCYNTA with our new product positioning and expanded
commercial efforts that we initiated in
mid-June.
- Gralise has continued its strong growth trajectory, with year
over year growth of 38% in the second quarter.
- Depomed has demonstrated the ability to grow products post
acquisition, having increased product net sales for Cambia and
Lazanda of over 45% and 375%, respectively, since their
acquisition.
Depomed expects its promising outlook to create
significant near-term and long-term value for
shareholders. The Depomed Board is confident in
Depomed's potential to create shareholder value on the basis
of many factors, including its products' strong intellectual
property protection and its ability to complete accretive and
strategic acquisitions, such as NUCYNTA, to further expand and
diversify its business.
2. Depomed's second quarter 2015 business and financial
performance reflect a continued period of accelerated
growth.
Depomed has rapidly become a leading company in the pain
and neurology marketplace. The Company has achieved
significant net product revenue growth that positions us to
continue to deliver substantial value to our shareholders in both
the immediate and long term. Growth in the second quarter was led
by our flagship product NUCYNTA, which had a strong performance in
the first quarter of the Company distributing the product. Second
quarter highlights include:
- Record quarterly net product sales for the second quarter of
2015 were $94.3 million, an increase
of 234% compared to $28.2 million for
second quarter of 2014 and an increase of 198% compared to
$31.7 million for first quarter of
2015;
- Second quarter 2015 cash increase of $55 million.
Depomed is highly confident in its ability to continue to
increase shareholder value by successfully executing its strategy
for the NUCYNTA franchise and its other differentiated
products. In April
2015, Depomed acquired the U.S. rights to the NUCYNTA
franchise in a transformational transaction for the
Company.
- The NUCYNTA franchise is a flagship product for Depomed in
the multi-billion dollar pain market and Depomed recorded full
second quarter NUCYNTA net sales of $56.7
million.
- The product franchise was officially re-launched in mid-June
with an expanded sales force of 275 plus full marketing and medical
support.
- The Depomed Board believes that the NUCYNTA franchise will
significantly increase the Company's product revenue, earnings
before interest, taxes, depreciation and amortization (EBITDA),
adjusted earnings per share, and cash flow in 2015 and
beyond.
This, together with Depomed's other significant growth
opportunities that extend well into the next decade, makes the
timing of the July 21 Proposal
disadvantageous to Depomed's shareholders.
3.We believe the July 21
Proposal does not appropriately reflect Depomed's contribution to
the pro forma enterprise.
The proposal outlined in your letter
dated July 7 suggests that Depomed shareholders would own
only approximately 25% of the
combined company. However, Depomed's preliminary analysis shows
that the Company's contribution across various metrics such as
revenue, EBITDA and unlevered free cash flow would be much
greater.
4. The July 21 Proposal
fails to appropriately compensate Depomed's shareholders for the
significant synergies that Horizon claims would be created by a
business combination between Horizon and Depomed.
As noted in Horizon's July 7 press
release, Horizon believes that a combination of the companies could
yield significant synergies. As stated above, the July 21 Proposal does not appropriately reflect
Depomed's contribution to the pro forma enterprise on a stand-alone
basis, let alone its contribution after the realization of
potential operating synergies and tax savings.
- With regards to operating synergies, even if Horizon were to
retain Depomed's salesforce, there exist meaningful cost synergies
in both the general and administrative infrastructure of
Depomed.
- Horizon will also accrue meaningful tax savings as part of this
transaction. A reduction in Depomed's effective tax rate
would substantially increase Depomed's contribution to
Horizon.
5. We believe the July 21
Proposal is opportunistic and takes advantage of a temporary
decrease in Depomed's stock price.
The timing of Horizon's unsolicited proposal allows Horizon to
offer inadequate consideration while claiming that it is offering a
significant premium. The July
21 Proposal is an insignificant premium over $28.16, the 52-week high of Depomed common stock
on April 27, 2015, only one month
prior to Horizon's initial offer to acquire Depomed. Equally
important, as explained above, the Depomed Board believes that
Depomed is in a period of significant growth and is highly
confident in Depomed's ability to deliver shareholder value by
successfully executing its strategy for the NUCYNTA franchise and
its other differentiated products.
6. We believe that Horizon's stock and business model
present significant risks and uncertainties for Depomed
shareholders.
We believe there are risks to Horizon's business model
that are not reflected in its stock price.
The Depomed Board believes that Horizon's urgency in buying
Depomed evidences its concerns with its own long-term growth
prospects. Horizon's business model focuses on serial
acquisitions and price increases. Thus, the Depomed Board believes
that Horizon needs to complete the Depomed transaction or another
significant transaction to sustain its business model. In
contrast, Depomed's continued strong performance and long-term
projections suggest that the urgency of Horizon's unsolicited
proposal benefits Horizon, not Depomed's shareholders.
Conclusion
For the reasons stated above, among others, the Depomed Board
unanimously rejects your July 21
Proposal. The Board strongly believes that an independent
Depomed will create significant and sustainable value for its
shareholders both in the short and long-term, through the focused
execution of our business plan and strategic vision.
On behalf of the Board of Directors
/s/ Jim Schoeneck
Jim Schoeneck
President and Chief Executive Officer
Morgan Stanley & Co. LLC and Leerink Partners LLC are
serving as financial advisors to Depomed and Baker Botts L.L.P. and
Gibson, Dunn & Crutcher LLP are serving as legal counsel.
About Depomed
Depomed is a specialty pharmaceutical company that
commercializes products for pain and neurology related disorders.
Our NUCYNTA® franchise includes NUCYNTA® ER (tapentadol) extended
release tablets indicated for the management of pain, including
neuropathic pain associated with diabetic peripheral neuropathy
(DPN), severe enough to require daily, around-the-clock, long-term
opioid treatment, and NUCYNTA® (tapentadol), an immediate release
version of tapentadol, for management of moderate to severe acute
pain in adults. Gralise® (gabapentin) is a once-daily treatment
approved for the management of postherpetic neuralgia. CAMBIA®
(diclofenac potassium for oral solution) is a non-steroidal
anti-inflammatory drug indicated for acute treatment of migraine
attacks with or without aura in adults (18 years of age or older).
Zipsor® (diclofenac potassium) Liquid Filled Capsules is a
non-steroidal anti-inflammatory drug indicated for relief of mild
to moderate acute pain in adults. Lazanda® (fentanyl) Nasal Spray
is an intranasal fentanyl drug used to manage breakthrough pain in
adults (18 years of age or older) who are already routinely taking
other opioid pain medicines around-the-clock for cancer pain.
Gralise, Nucynta ER and various partner product candidates are
formulated with Depomed's proven, proprietary Acuform® drug
delivery technology. Additional information about Depomed may be
found at www.depomed.com.
Forward-Looking Statements
"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995. The statements that are not
historical facts contained in this release are forward-looking
statements that involve risks and uncertainties including, but not
limited to, those related to Depomed's prospects as a standalone
business, Depomed's business strategy, expectations regarding
Depomed's future financial results and the ability to create
shareholder value, expectations regarding anticipated growth and
the future contributions and potential of NUCYNTA, and other risks
detailed in the company's Securities and Exchange Commission
filings, including the company's Annual Report on Form 10-K for the
year ended December 31, 2014 and its
most recent Quarterly Report on Form 10-Q. The inclusion of
forward-looking statements should not be regarded as a
representation that any of the company's plans, objectives or
expectations will be achieved. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date hereof. The company undertakes no obligation to
publicly release the result of any revisions to these
forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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SOURCE Depomed, Inc.