![75 mg Nucynta (tapentadol) tablets. [Rotellam1/Wikimedia]](https://genengnews.com/wp-content/uploads/2018/08/Dec5_2017_Wikimedia_Nucynta1051761062-1.jpg)
75 mg Nucynta (tapentadol) tablets. [Rotellam1/Wikimedia]
Depomed said it will cut about three-quarters of its sales force and 40% of its headquarters staff following a planned relocation next year, as it adopts a new business model away from reliance on opioid pain drugs—reflected by an up-to-$540 million-plus commercialization deal disclosed yesterday.
Depomed has granted commercialization rights to its top selling products—the Nucynta® (tapentadol) opioid franchise, including its extended-release and immediate-release forms—to Collegium Pharmaceutical.
During the first nine months of 2017, Nucynta accounted for nearly two-thirds ($183.299 million) of Depomed’s total $286.317 million in revenues. But Depomed revenues have skidded since last year—with Nucynta revenues falling 11%, and total revenues nearly 14%, from January–September 2016. The company blamed its third-quarter revenue decreases on supply problems following hurricanes Irma and Maria, as well as on the overall decline in the opioid market as authorities and healthcare providers attempt to curb abuse by cutting back on opioid prescriptions.
“Given the dynamics in the opioid market, we concluded that a broader portfolio of products would more effectively compete and meet the needs of patients, physicians, and payors,” Depomed President and CEO Arthur Higgins said in a statement. “Strategically, this transaction supports the growth of Nucynta, allows for new investment into our Neurology and Specialty businesses, and transforms Depomed into a leaner, more nimble specialty pharmaceutical company poised for growth.”
As a result, Depomed said, it will align operations with its new strategy by cutting its 500-person staff, which consists of a 380-person sales force and 120 headquarters employees. The company plans to shrink to an approximately 100-person sales force and 70 employees based at a new HQ.
The cuts, Depomed said in an investor presentation included within a regulatory filing, will include the elimination of its pain drug sales force and the termination of spending on brand marketing for Nucynta—actions the company said will reduce its selling, general, and administrative expenses by approximately $70 million annually.
Last year, Depomed reported 490 full-time employees as of December 31, 2016, in its Form 10-K annual report for last year, filed February 24.
Shrinking HQ by Half
Depomed also plans to vacate its current headquarters in Newark, CA, “sometime in mid-2018,” and is assessing potential locations in the Midwest and East Coast, with plans to shrink its office space by 50%, from its current 60,000 square feet to about 30,000 square feet, the company said. The headquarters restructuring and relocation are expected to generate approximately $10 million in annual savings, the company said.
“As we are executing on our new strategy, we needed to right size the organization. Taking these steps, in terms of headcount reductions and office relocation, will provide additional financial and strategic benefits,” Higgins added.
Collegium has agreed to pay Depomed $10 million upfront plus royalties of at least $135 million a year for the first four years of their agreement based on specified net sales thresholds. During that period, Collegium also agreed to pay Depomed 25% of annual net sales of Nucynta between $233 million and $258 million and 17.5% of annual net sales of Nucynta $258 million, Depomed disclosed in the filing.
After the fourth year, Collegium agreed to pay Depomed additional royalties, with no specified minimum. Depomed said those additional royalties would consist of 58% of net sales of Nucynta up to $233 million, 25% of annual net sales of Nucynta between $233 million and $258 million, and 17.5% of annual net sales of Nucynta above $258 million.
If annual net sales of Nucynta are less than $180 million through January 1, 2022, or less than $140 million per year in any 12-month period starting January 1, 2022, Depomed said, it has the right to terminate the commercialization agreement without penalty, the company said in its filing.
The transaction is expected to close in early January 2018.
Collegium president and CEO Michael Heffernan said his company views Nucynta as a best-in-class immediate-release treatment, and sees Nucynta’s extended-release form as being complementary to Collegium’s Xtampza® ER (oxycodone) extended-release product.
“We believe that this portfolio of products will expand the continuum of care for pain patients, and establish Collegium as a leader in the pain management market,” Heffernan stated.
Depomed bought U.S. rights to the Nucynta franchise in 2015 for $1.05 billion from Johnson & Johnson’s Janssen Pharmaceuticals, which had licensed the products from Grünenthal Group since 2003. At the time, Depomed’s then-president and CEO Jim Schoeneck envisioned the Nucynta franchise as a flagship asset in a growing portfolio of pain and neurology specialty pharmaceuticals.
