Depomed Announces Restructuring
Depomed, a Newark, California-headquartered specialty pharmaceutical company, has announced a restructuring plan to reduce staff by approximately 40% to approximately 70 employees. The decision follows Depomed’s agreement to sell its product, Nucynta (tapentadol), a long-acting opioid, to Collegium Pharmaceutical, a Canton, Massachusetts-headquartered pharmaceutical company. In April 2015, Depomed acquired the US rights to the Nucynta franchise from Janssen Pharmaceuticals, part of Johnson & Johnson, for $1.05 billion. In 2016, Depomed’s revenues from the drug were $281.3 million.
Under the agreement, Collegium will commercialize both Nucynta Extended Release and Nucynt Immediate Release. In exchange for Collegium’s commercialization of Nucynta, Depomed will receive a royalty rate on all Nucynta revenues based on certain net sales thresholds. As long as the agreement is in force, for the first four years, Depomed will receive a minimum royalty of $135 million per year. After year four, the royalty mechanism remains the same but without a minimum. The royalty rate will be adjusted post patent expiry, which Depomed believes will not occur until at least late 2025. As a result of this transaction, Depomed will eliminate its pain salesforce and cease all brand spending on Nucynta.
Completion of the transaction is subject to customary conditions, including antitrust clearance in the US. The transaction is expected to close in early January 2018.
With the restructuring, the company plans to relocate its headquarters sometime in mid-2018 and is currently evaluating potential Midwest and East Coast locations. The move is designed to reduce headquarters office space requirement by 50%. Depomed expects to save approximately $10 million annually as a result of the headquarters restructuring and relocation.