DEPO » Topics » Glumetza

These excerpts taken from the DEPO 10-K filed Mar 6, 2009.

GLUMETZA

    General

        The 500mg strength of GLUMETZA is our internally developed once-daily metformin product for type 2 diabetes. The FDA approved GLUMETZA for marketing in the United States in June 2005. At that time, a subsidiary of Biovail Corporation (Biovail) held US and Canadian marketing rights to GLUMETZA pursuant to a license agreement we entered into with the Biovail subsidiary in 2002. We reacquired the US rights to GLUMETZA from Biovail in December 2005.

        In June 2006, we entered into a promotion arrangement with King related to GLUMETZA under which we and King jointly commercialized GLUMETZA in the United States. GLUMETZA was launched in the United States in September 2006. In October 2007, we terminated our promotion agreement with King related to GLUMETZA, and King paid us $29.7 million in termination and other fees. King ended promotion of GLUMETZA in December 2007.

        In July 2008, we entered into a promotion agreement with Santarus granting Santarus exclusive rights to promote GLUMETZA in the United States. Santarus began promotion of GLUMETZA in October 2008.

        In connection with the restructuring of our GLUMETZA agreements with Biovail in December 2005, we also acquired the exclusive US license to a 1000mg strength of GLUMETZA utilizing proprietary Biovail drug delivery technology. In December 2007, the FDA approved the 1000mg formulation for marketing in the United States, and we began selling the 1000mg GLUMETZA in June 2008.

        The 500mg and 1000mg GLUMETZA have also been approved for marketing in Canada, where they are marketed by Biovail.

GLUMETZA

    General

        The 500mg strength of GLUMETZA is our internally developed once-daily metformin product for type 2 diabetes. The FDA approved GLUMETZA for marketing in the United States in June 2005. At that time, a subsidiary of Biovail Corporation (Biovail) held US and Canadian marketing rights to GLUMETZA pursuant to a license agreement we entered into with the Biovail subsidiary in 2002. We reacquired the US rights to GLUMETZA from Biovail in December 2005.

        In June 2006, we entered into a promotion arrangement with King related to GLUMETZA under which we and King jointly commercialized GLUMETZA in the United States. GLUMETZA was launched in the United States in September 2006. In October 2007, we terminated our promotion agreement with King related to GLUMETZA, and King paid us $29.7 million in termination and other fees. King ended promotion of GLUMETZA in December 2007.

        In July 2008, we entered into a promotion agreement with Santarus granting Santarus exclusive rights to promote GLUMETZA in the United States. Santarus began promotion of GLUMETZA in October 2008.

        In connection with the restructuring of our GLUMETZA agreements with Biovail in December 2005, we also acquired the exclusive US license to a 1000mg strength of GLUMETZA utilizing proprietary Biovail drug delivery technology. In December 2007, the FDA approved the 1000mg formulation for marketing in the United States, and we began selling the 1000mg GLUMETZA in June 2008.

        The 500mg and 1000mg GLUMETZA have also been approved for marketing in Canada, where they are marketed by Biovail.

GLUMETZA





    General





        The 500mg strength of GLUMETZA is our internally developed once-daily metformin product for type 2 diabetes. The FDA
approved GLUMETZA for marketing in the United States in June 2005. At that time, a subsidiary of Biovail Corporation (Biovail)
held US and Canadian marketing rights to GLUMETZA pursuant to a license agreement we entered into with the Biovail subsidiary in 2002. We reacquired the US rights to GLUMETZA from Biovail in December
2005.



        In
June 2006, we entered into a promotion arrangement with King related to GLUMETZA under which we and King jointly commercialized GLUMETZA in the United States. GLUMETZA was launched in
the United States in September 2006. In October 2007, we terminated our promotion agreement with King related to GLUMETZA, and King paid us $29.7 million in termination and other fees. King
ended promotion of GLUMETZA in December 2007.



        In
July 2008, we entered into a promotion agreement with Santarus granting Santarus exclusive rights to promote GLUMETZA in the United States. Santarus began promotion of GLUMETZA in
October 2008.



        In
connection with the restructuring of our GLUMETZA agreements with Biovail in December 2005, we also acquired the exclusive US license to a 1000mg strength of GLUMETZA utilizing
proprietary Biovail drug delivery technology. In December 2007, the FDA approved the 1000mg formulation for marketing in the United States, and we began selling the 1000mg GLUMETZA in June 2008.



        The
500mg and 1000mg GLUMETZA have also been approved for marketing in Canada, where they are marketed by Biovail.





GLUMETZA

        As noted above under "CRITICAL ACCOUNTING POLICIES—Revenue Recognition", beginning in the third quarter of 2008, we began to recognize GLUMETZA product sales at the time title transfers to our customer, and provide for an estimate of future product returns at that time. This resulted in a one-time increase for the year ended December 31, 2008, of $6.3 million in net product sales of GLUMETZA, representing product sales previously deferred, net of estimated product returns, managed care and Medicaid rebates, wholesaler and retail pharmacy fees and discounts, chargebacks and prompt payment discounts.

        The additional increases in GLUMETZA product sales in 2008 from 2007, and in 2007 from 2006, were primarily driven by increased penetration in the metformin prescription market, and to a lesser extent, price increases effective between 2007 and 2008. We began selling GLUMETZA in the third quarter of 2006.

        In October 2007, we terminated our promotion agreement related to GLUMETZA with King Pharmaceuticals and King's promotion obligations ended in December 2007. From February 2008 through September 2008, we promoted GLUMETZA through a contract sales organization. Product sales for GLUMETZA relative to its current runrate will depend in part on the success of our promotion partner, Santarus, which commenced promotion of GLUMETZA in October 2008.

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GLUMETZA

        As noted above under "CRITICAL ACCOUNTING POLICIES—Revenue Recognition", beginning in the third quarter of 2008, we began to recognize GLUMETZA product sales at the time title transfers to our customer, and provide for an estimate of future product returns at that time. This resulted in a one-time increase for the year ended December 31, 2008, of $6.3 million in net product sales of GLUMETZA, representing product sales previously deferred, net of estimated product returns, managed care and Medicaid rebates, wholesaler and retail pharmacy fees and discounts, chargebacks and prompt payment discounts.

        The additional increases in GLUMETZA product sales in 2008 from 2007, and in 2007 from 2006, were primarily driven by increased penetration in the metformin prescription market, and to a lesser extent, price increases effective between 2007 and 2008. We began selling GLUMETZA in the third quarter of 2006.

        In October 2007, we terminated our promotion agreement related to GLUMETZA with King Pharmaceuticals and King's promotion obligations ended in December 2007. From February 2008 through September 2008, we promoted GLUMETZA through a contract sales organization. Product sales for GLUMETZA relative to its current runrate will depend in part on the success of our promotion partner, Santarus, which commenced promotion of GLUMETZA in October 2008.

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GLUMETZA

        GLUMETZA royalties relate to royalties we received from Biovail based on net sales of GLUMETZA in Canada and royalties we received from LG based on net sales of LG's version of GLUMETZA, Novamet GR, in Korea. We began receiving royalties from Biovail in the first quarter of 2006 and from LG in the first quarter of 2007.

GLUMETZA

        GLUMETZA royalties relate to royalties we received from Biovail based on net sales of GLUMETZA in Canada and royalties we received from LG based on net sales of LG's version of GLUMETZA, Novamet GR, in Korea. We began receiving royalties from Biovail in the first quarter of 2006 and from LG in the first quarter of 2007.

GLUMETZA

        GLUMETZA license revenue for the year ended December 31, 2008 consisted primarily of license revenue recognized from the $25.0 million license fee received from Biovail in July 2005 and from the $12.0 million upfront fee received from Santarus in July 2008. We are recognizing the $25.0 million license fee payment from Biovail as revenue ratably until October 2021, which represents the estimated length of time our obligations exist under the arrangement related to royalties we are obligated to pay Biovail on net sales of GLUMETZA in the United States and for our obligation to use Biovail as our sole supplier of the 1000mg GLUMETZA. We are recognizing the $12.0 million upfront payment from Santarus as revenue ratably until October 2021, which represents the estimated length of time our obligations exist under the arrangement related to promotion fees we are obligated to pay Santarus for GLUMETZA in the United States.

        We received a $0.6 million upfront license fee from LG in August 2004 and a $0.5 million milestone payment in November 2006 with respect to LG's approval to market LG's extended-release metformin product that incorporates our AcuForm technology, Novamet GR, in the Republic of Korea. These payments were originally deferred and amortized as license revenue over the estimated length of time we were obligated to provide assistance in development and manufacturing. In January 2007, we amended our agreement with LG, granted LG a license to certain of the Company's intellectual property rights to manufacture the 500mg Novamet GR in exchange for royalties on net sales of Novamet GR in Korea, and removed the provisions of the original agreement providing for the supply of 500mg Novamet GR tablets by us to LG. Under the amended agreement, we no longer have continuing performance obligations to LG, and recognized the remaining $0.9 million of previously deferred license revenue in the first quarter of 2007. As a result of this one time recognition in 2007, GLUMETZA license revenue increased in 2007 as compared to 2006, and decreased in 2008 as compared to 2007.

GLUMETZA

        GLUMETZA license revenue for the year ended December 31, 2008 consisted primarily of license revenue recognized from the $25.0 million license fee received from Biovail in July 2005 and from the $12.0 million upfront fee received from Santarus in July 2008. We are recognizing the $25.0 million license fee payment from Biovail as revenue ratably until October 2021, which represents the estimated length of time our obligations exist under the arrangement related to royalties we are obligated to pay Biovail on net sales of GLUMETZA in the United States and for our obligation to use Biovail as our sole supplier of the 1000mg GLUMETZA. We are recognizing the $12.0 million upfront payment from Santarus as revenue ratably until October 2021, which represents the estimated length of time our obligations exist under the arrangement related to promotion fees we are obligated to pay Santarus for GLUMETZA in the United States.

        We received a $0.6 million upfront license fee from LG in August 2004 and a $0.5 million milestone payment in November 2006 with respect to LG's approval to market LG's extended-release metformin product that incorporates our AcuForm technology, Novamet GR, in the Republic of Korea. These payments were originally deferred and amortized as license revenue over the estimated length of time we were obligated to provide assistance in development and manufacturing. In January 2007, we amended our agreement with LG, granted LG a license to certain of the Company's intellectual property rights to manufacture the 500mg Novamet GR in exchange for royalties on net sales of Novamet GR in Korea, and removed the provisions of the original agreement providing for the supply of 500mg Novamet GR tablets by us to LG. Under the amended agreement, we no longer have continuing performance obligations to LG, and recognized the remaining $0.9 million of previously deferred license revenue in the first quarter of 2007. As a result of this one time recognition in 2007, GLUMETZA license revenue increased in 2007 as compared to 2006, and decreased in 2008 as compared to 2007.

GLUMETZA



        As noted above under "CRITICAL ACCOUNTING POLICIES—Revenue
Recognition
", beginning in the third quarter of 2008, we began to recognize GLUMETZA product sales at the time title transfers to our customer, and provide for an estimate of
future product returns at that time. This resulted in a one-time increase for the year ended December 31, 2008, of $6.3 million in net product sales of GLUMETZA, representing
product sales previously deferred, net of estimated product returns, managed care and Medicaid rebates, wholesaler and retail pharmacy fees and discounts, chargebacks and prompt payment discounts.



        The
additional increases in GLUMETZA product sales in 2008 from 2007, and in 2007 from 2006, were primarily driven by increased penetration in the metformin prescription market, and to a
lesser extent, price increases effective between 2007 and 2008. We began selling GLUMETZA in the third quarter of 2006.



        In
October 2007, we terminated our promotion agreement related to GLUMETZA with King Pharmaceuticals and King's promotion obligations ended in December 2007. From February 2008 through
September 2008, we promoted GLUMETZA through a contract sales organization. Product sales for GLUMETZA relative to its current runrate will depend in part on the success of our promotion partner,
Santarus, which commenced promotion of GLUMETZA in October 2008.



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GLUMETZA



        GLUMETZA royalties relate to royalties we received from Biovail based on net sales of GLUMETZA in Canada and royalties we received from
LG based on net sales of LG's version of GLUMETZA, Novamet GR, in Korea. We began receiving royalties from Biovail in the first quarter of 2006 and from LG in the first quarter of 2007.



GLUMETZA



        GLUMETZA license revenue for the year ended December 31, 2008 consisted primarily of license revenue recognized from the
$25.0 million license fee received from Biovail in July 2005 and from the $12.0 million upfront fee received from Santarus in July 2008. We are recognizing the $25.0 million
license fee payment from Biovail as revenue ratably until October 2021, which represents the estimated length of time our obligations exist under the arrangement related to royalties we are obligated
to pay Biovail on net sales of GLUMETZA in the United States and for our obligation to use Biovail as our sole supplier of the 1000mg GLUMETZA. We are recognizing the $12.0 million upfront
payment from Santarus as revenue ratably until October 2021, which represents the estimated length of time our obligations exist under the arrangement related to promotion fees we are obligated to pay
Santarus for GLUMETZA in the United States.



        We
received a $0.6 million upfront license fee from LG in August 2004 and a $0.5 million milestone payment in November 2006 with respect to LG's approval to market LG's
extended-release metformin product that incorporates our AcuForm technology, Novamet GR, in the Republic of Korea. These payments were originally deferred and amortized as license revenue over the
estimated length of time we were obligated to provide assistance in development and manufacturing. In January 2007, we amended our agreement with LG, granted LG a license to certain of the Company's
intellectual property rights to manufacture the 500mg Novamet GR in exchange for royalties on net sales of Novamet GR in Korea, and removed the provisions of the original agreement providing for the
supply of 500mg Novamet GR tablets by us to LG. Under the amended agreement, we no longer have continuing performance obligations to LG, and recognized the remaining $0.9 million of previously
deferred license revenue in the first quarter of 2007. As a result of this one time recognition in 2007, GLUMETZA license revenue increased in 2007 as compared to 2006, and decreased in 2008 as
compared to 2007.



GLUMETZA

        In May 2002, the Company entered into a development and license agreement granting Biovail Laboratories Incorporated (Biovail) an exclusive license in the United States and Canada to manufacture and market GLUMETZA. Under the terms of the agreement, the Company was responsible for completing the clinical development program in support of the 500mg GLUMETZA. In April 2003, Biovail submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) for approval and in July 2005, Biovail received FDA approval to market GLUMETZA in the United States. In accordance with the license agreement, Biovail paid a $25.0 million license fee payment to the Company.

        In April 2004, the Company and Biovail amended the GLUMETZA license agreement. Under the amended agreement, the Company would receive royalties on sales of Biovail's 1000mg metformin HCl tablet in the United States and Canada in exchange for allowing Biovail to use the Company's clinical data for its Metformin GR, a 500mg metformin HCl tablet, to support and accelerate regulatory submissions for Biovail's 1000mg tablet and to establish equivalence between the two dosage forms. In May 2005, Biovail received a Notice of Compliance for the 500mg and 1000mg strengths of GLUMETZA from the Therapeutic Products Directorate of Canada to market the products in Canada.

        In October 2005, the Company delivered a notice of breach to Biovail and subsequently filed suit in respect of its license agreement with Biovail, related to the failure of Biovail to make the first commercial sale of the 500mg strength GLUMETZA within 120 days of approval in each of Canada and the United States as required in the license agreement. In December 2005, the Company settled its dispute with Biovail and entered into an amended license agreement whereby the Company granted to Biovail an exclusive license in Canada to manufacture and market the 500mg formulation of GLUMETZA and the Company established its right to manufacture and market the 500mg GLUMETZA in the United States and internationally with the exception of Canada. The Company will recognize the $25.0 million license fee payment as revenue ratably until November 2021, which represents the estimated length of time the Company's obligations exist under the arrangement related to royalties it is obligated to pay Biovail on net sales of the 500mg GLUMETZA in the United States and to use Biovail as the Company's sole supplier of the 1000mg GLUMETZA. The Company recognized $1.5 million of license revenue related to the amortization of this upfront fee for each of the years ended December 31, 2008, 2007 and 2006, respectively.

        Under the agreement, Biovail is obligated to pay the Company royalties of six percent on Canadian net sales of the 500mg GLUMETZA and one percent on Canadian net sales of the 1000mg GLUMETZA. In July 2007, the royalty percentage increased to ten percent on Canadian net sales of the 500mg GLUMETZA, and returned to six percent in January 2008, on FDA approval of the 1000mg formulation of GLUMETZA in the United States. The Company recognized royalty revenue under the agreement of $0.3 million, $0.2 million, and $0.1 million for the years ended December 31, 2008, 2007 and 2006, respectively.

        The Company is obligated to pay Biovail royalties of one percent on net sales of the 500mg GLUMETZA in the United States. The Company recognized royalty expense under the agreement of $0.3 million, $0.1 million and $0.1 million for the years ended December 31, 2008, 2007 and 2006, respectively.

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DEPOMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2. LICENSE AND COLLABORATIVE ARRANGEMENTS (Continued)

        As part of the same settlement, Biovail granted the Company an exclusive license to market the 1000mg GLUMETZA in the United States. The Company is obligated to purchase the 1000mg GLUMETZA exclusively from Biovail, subject to back-up manufacturing rights in the Company's favor. If the Company exercises its back-up rights, compensation to Biovail will change from a supply-based arrangement to royalties of six percent on net sales of the 1000mg GLUMETZA. The Company began selling the 1000mg GLUMETZA in the United States in June 2008.

GLUMETZA

        In May 2002, the Company entered into a development and license agreement granting Biovail Laboratories Incorporated (Biovail) an exclusive license in the United States and Canada to manufacture and market GLUMETZA. Under the terms of the agreement, the Company was responsible for completing the clinical development program in support of the 500mg GLUMETZA. In April 2003, Biovail submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) for approval and in July 2005, Biovail received FDA approval to market GLUMETZA in the United States. In accordance with the license agreement, Biovail paid a $25.0 million license fee payment to the Company.

        In April 2004, the Company and Biovail amended the GLUMETZA license agreement. Under the amended agreement, the Company would receive royalties on sales of Biovail's 1000mg metformin HCl tablet in the United States and Canada in exchange for allowing Biovail to use the Company's clinical data for its Metformin GR, a 500mg metformin HCl tablet, to support and accelerate regulatory submissions for Biovail's 1000mg tablet and to establish equivalence between the two dosage forms. In May 2005, Biovail received a Notice of Compliance for the 500mg and 1000mg strengths of GLUMETZA from the Therapeutic Products Directorate of Canada to market the products in Canada.

        In October 2005, the Company delivered a notice of breach to Biovail and subsequently filed suit in respect of its license agreement with Biovail, related to the failure of Biovail to make the first commercial sale of the 500mg strength GLUMETZA within 120 days of approval in each of Canada and the United States as required in the license agreement. In December 2005, the Company settled its dispute with Biovail and entered into an amended license agreement whereby the Company granted to Biovail an exclusive license in Canada to manufacture and market the 500mg formulation of GLUMETZA and the Company established its right to manufacture and market the 500mg GLUMETZA in the United States and internationally with the exception of Canada. The Company will recognize the $25.0 million license fee payment as revenue ratably until November 2021, which represents the estimated length of time the Company's obligations exist under the arrangement related to royalties it is obligated to pay Biovail on net sales of the 500mg GLUMETZA in the United States and to use Biovail as the Company's sole supplier of the 1000mg GLUMETZA. The Company recognized $1.5 million of license revenue related to the amortization of this upfront fee for each of the years ended December 31, 2008, 2007 and 2006, respectively.

        Under the agreement, Biovail is obligated to pay the Company royalties of six percent on Canadian net sales of the 500mg GLUMETZA and one percent on Canadian net sales of the 1000mg GLUMETZA. In July 2007, the royalty percentage increased to ten percent on Canadian net sales of the 500mg GLUMETZA, and returned to six percent in January 2008, on FDA approval of the 1000mg formulation of GLUMETZA in the United States. The Company recognized royalty revenue under the agreement of $0.3 million, $0.2 million, and $0.1 million for the years ended December 31, 2008, 2007 and 2006, respectively.

        The Company is obligated to pay Biovail royalties of one percent on net sales of the 500mg GLUMETZA in the United States. The Company recognized royalty expense under the agreement of $0.3 million, $0.1 million and $0.1 million for the years ended December 31, 2008, 2007 and 2006, respectively.

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DEPOMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2. LICENSE AND COLLABORATIVE ARRANGEMENTS (Continued)

        As part of the same settlement, Biovail granted the Company an exclusive license to market the 1000mg GLUMETZA in the United States. The Company is obligated to purchase the 1000mg GLUMETZA exclusively from Biovail, subject to back-up manufacturing rights in the Company's favor. If the Company exercises its back-up rights, compensation to Biovail will change from a supply-based arrangement to royalties of six percent on net sales of the 1000mg GLUMETZA. The Company began selling the 1000mg GLUMETZA in the United States in June 2008.

GLUMETZA



        In May 2002, the Company entered into a development and license agreement granting Biovail Laboratories Incorporated (Biovail) an
exclusive license in the United States and Canada to manufacture and market GLUMETZA. Under the terms of the agreement, the Company was responsible for completing the clinical development program in
support of the 500mg GLUMETZA. In April 2003, Biovail submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) for approval and in July 2005, Biovail received FDA approval to
market GLUMETZA in the United States. In accordance with the license agreement, Biovail paid a $25.0 million license fee payment to the Company.



        In
April 2004, the Company and Biovail amended the GLUMETZA license agreement. Under the amended agreement, the Company would receive royalties on sales of Biovail's 1000mg metformin HCl
tablet in the United States and Canada in exchange for allowing Biovail to use the Company's clinical data for its Metformin GR, a 500mg metformin HCl tablet, to support and accelerate regulatory
submissions for Biovail's 1000mg tablet and to establish equivalence between the two dosage forms. In May 2005, Biovail received a Notice of Compliance for the 500mg and 1000mg strengths of GLUMETZA
from the Therapeutic Products Directorate of Canada to market the products in Canada.




        In
October 2005, the Company delivered a notice of breach to Biovail and subsequently filed suit in respect of its license agreement with Biovail, related to the failure of Biovail to
make the first commercial sale of the 500mg strength GLUMETZA within 120 days of approval in each of Canada and the United States as required in the license agreement. In December 2005, the
Company settled its dispute with Biovail and entered into an amended license agreement whereby the Company granted to Biovail an exclusive license in Canada to manufacture and market the 500mg
formulation of
GLUMETZA and the Company established its right to manufacture and market the 500mg GLUMETZA in the United States and internationally with the exception of Canada. The Company will recognize the
$25.0 million license fee payment as revenue ratably until November 2021, which represents the estimated length of time the Company's obligations exist under the arrangement related to
royalties it is obligated to pay Biovail on net sales of the 500mg GLUMETZA in the United States and to use Biovail as the Company's sole supplier of the 1000mg GLUMETZA. The Company recognized
$1.5 million of license revenue related to the amortization of this upfront fee for each of the years ended December 31, 2008, 2007 and 2006, respectively.



        Under
the agreement, Biovail is obligated to pay the Company royalties of six percent on Canadian net sales of the 500mg GLUMETZA and one percent on Canadian net sales of the 1000mg
GLUMETZA. In July 2007, the royalty percentage increased to ten percent on Canadian net sales of the 500mg GLUMETZA, and returned to six percent in January 2008, on FDA approval of the 1000mg
formulation of GLUMETZA in the United States. The Company recognized royalty revenue under the agreement of $0.3 million, $0.2 million, and $0.1 million for the years ended
December 31, 2008, 2007 and 2006, respectively.



        The
Company is obligated to pay Biovail royalties of one percent on net sales of the 500mg GLUMETZA in the United States. The Company recognized royalty expense under the agreement of
$0.3 million, $0.1 million and $0.1 million for the years ended December 31, 2008, 2007 and 2006, respectively.



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DEPOMED, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



NOTE 2. LICENSE AND COLLABORATIVE ARRANGEMENTS (Continued)



        As
part of the same settlement, Biovail granted the Company an exclusive license to market the 1000mg GLUMETZA in the United States. The Company is obligated to purchase the 1000mg
GLUMETZA exclusively from Biovail, subject to back-up manufacturing rights in the Company's favor. If the Company exercises its back-up rights, compensation to Biovail will
change from a supply-based arrangement to royalties of six percent on net sales of the 1000mg GLUMETZA. The Company began selling the 1000mg GLUMETZA in the United States in June 2008.



This excerpt taken from the DEPO 10-Q filed Nov 7, 2008.

GLUMETZA®

 

Santarus, Inc. In July 2008, we entered into a promotion agreement with Santarus granting Santarus exclusive rights to promote GLUMETZA in the United States. Santarus paid us a $12.0 million upfront fee, and based on the achievement of specified levels of annual GLUMETZA net product sales, Santarus may be required to pay us additional one-time sales milestones, totaling up to $16.0 million.

 

Santarus began promotion of GLUMETZA in October 2008. Santarus is required to meet certain minimum promotion obligations during the term of the agreement, and required to make certain minimum marketing, advertising, medical affairs and other commercial support expenditures. We will continue to record revenue from the sales of GLUMETZA product and, beginning in the fourth quarter of 2008, will pay Santarus a fee ranging from 75% to 80% of the gross margin earned from net sales of GLUMETZA product in the United States.

 

Santarus is responsible for all costs associated with its sales force and for all other marketing expenses associated with its promotion of GLUMETZA product. We are responsible for overseeing product manufacturing and supply. A joint commercialization committee has been formed to oversee and guide the strategic direction of the GLUMETZA alliance.

 

Pursuant to the terms of the promotion agreement, we retain the option to co-promote GLUMETZA product in the future to obstetricians and gynecologists. The promotion agreement will continue in effect until the expiration of the last-to-expire patent or patent application with a valid claim in the territory covering a GLUMETZA product, unless terminated sooner.

 

Contract Sales Organization. In February 2008, we entered into a professional detailing services agreement with Publicis Selling Services (Publicis) pursuant to which approximately 33 part-time Publicis sales representatives detailed GLUMETZA to physicians.  The arrangement with Publicis ended in September 2008.

 

1000mg Formulation.  In December 2007, the FDA approved the 1000mg formulation for marketing in the United States.  In June 2008, we began selling the 1000mg GLUMETZA.

 

19



This excerpt taken from the DEPO 10-Q filed Aug 8, 2008.

GLUMETZA®

 

Santarus, Inc. In July 2008, we entered into a promotion agreement with Santarus, Inc. (Santarus) granting Santarus exclusive rights to promote GLUMETZA in the United States. Santarus paid us a $12 million upfront fee, and based on the achievement of specified levels of annual GLUMETZA net product sales, Santarus may be required to pay us additional one-time sales milestones, totaling up to $16 million.

 

Santarus is required to train its field sales representatives on GLUMETZA, and to begin promotion of GLUMETZA in the fourth quarter of 2008. Santarus is also required to meet certain minimum promotion obligations during the term of the agreement, and required to make certain minimum marketing, advertising, medical affairs and other commercial support expenditures. We will continue to record revenue from the sales of GLUMETZA product and, beginning in the fourth quarter of 2008, will pay Santarus a fee ranging from 75% to 80% of the gross margin earned from net sales of GLUMETZA product in the United States.

 

Santarus will be responsible for all costs associated with its sales force and for all other marketing expenses associated with its promotion of GLUMETZA product. We will be responsible for overseeing product manufacturing and supply. A joint commercialization committee has been formed to oversee and guide the strategic direction of the GLUMETZA alliance.

 

Pursuant to the terms of the promotion agreement, we retain the option to co-promote GLUMETZA product in the future to obstetricians and gynecologists. The promotion agreement will continue in effect until the expiration of the last-to-expire patent or patent application with a valid claim in the territory covering a GLUMETZA product, unless terminated sooner.

 

Contract Sales Organization. In February 2008, we entered into a professional detailing services agreement with Publicis Selling Services (Publicis) pursuant to which approximately 33 part-time Publicis sales representatives detail GLUMETZA to physicians.  Publicis began detailing GLUMETZA to physicians in February 2008. The arrangement with Publicis is scheduled to end in September 2008.

 

1000mg Formulation.  In December 2007, the FDA approved the 1000mg formulation for marketing in the United States.  In June 2008, we began selling the 1000mg GLUMETZA.

 

18



This excerpt taken from the DEPO 10-Q filed May 7, 2008.

GLUMETZA®

 

Contract Sales Organization. In February 2008, we entered into a professional detailing services agreement with Publicis Selling Services (Publicis) pursuant to which approximately 33 part-time Publicis sales representatives detail GLUMETZA to physicians.  Publicis began detailing GLUMETZA to physicians in February 2008. The term of the agreement is six months, with options to extend or shorten the length of the agreement.

 

Promotion Fees. In October 2007, we terminated our promotion agreement with King related to GLUMETZA. Pursuant to the termination agreement, we are not required to pay King promotion fees on sales of GLUMETZA for periods after September 30, 2007.  We are in discussions with potential marketing partners for GLUMETZA in the United States.

 

1000mg Formulation.  In December 2007, the FDA approved the 1000mg formulation for marketing in the United States.  We expect the 1000mg GLUMETZA to be available late in the second quarter of 2008.

 

 

These excerpts taken from the DEPO 10-K filed Mar 12, 2008.

GLUMETZA

        In May 2002, the Company entered into a development and license agreement granting Biovail Laboratories Incorporated (Biovail) an exclusive license in the United States and Canada to manufacture and market GLUMETZA. Under the terms of the agreement, the Company was responsible for completing the clinical development program in support of the 500mg GLUMETZA. In April 2003, Biovail submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) for approval and in July 2005, Biovail received FDA approval to market GLUMETZA in the United States. In accordance with the license agreement, Biovail paid a $25.0 million license fee payment to the Company.

        In April 2004, the Company and Biovail amended the GLUMETZA license agreement. Under the amended agreement, the Company would receive royalties on sales of Biovail's 1000mg metformin HCl tablet in the United States and Canada in exchange for allowing Biovail to use the Company's clinical data for its Metformin GR, a 500mg metformin HCl tablet, to support and accelerate regulatory submissions for Biovail's 1000mg tablet and to establish equivalence between the two dosage forms. In May 2005, Biovail received a Notice of Compliance for the 500mg and 1000mg strengths of GLUMETZA from the Therapeutic Products Directorate of Canada to market the products in Canada.

        In October 2005, the Company delivered a notice of breach to Biovail and subsequently filed suit in respect of its license agreement with Biovail, related to the failure of Biovail to make the first

82


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2. LICENSE AND COLLABORATIVE ARRANGEMENTS (Continued)


commercial sale of the 500mg strength GLUMETZA within 120 days of approval in each of Canada and the United States as required in the license agreement. In December 2005, the Company settled its dispute with Biovail and entered into an amended license agreement whereby the Company granted to Biovail an exclusive license in Canada to manufacture and market the 500mg formulation of GLUMETZA and the Company established its right to manufacture and market the 500mg GLUMETZA in the United States and internationally with the exception of Canada. The Company will recognize the $25.0 million license fee payment as revenue ratably until February 2023, which represents the estimated length of time the Company's obligations exist under the arrangement related to royalties it is obligated to pay Biovail on net sales of the 500mg GLUMETZA in the United States and to use Biovail as the Company's sole supplier of the 1000mg GLUMETZA. The Company recognized $1.5 million, $1.5 million, and $0.1 million of license revenue related to the amortization of this upfront fee for the years ended December 31, 2007, 2006 and 2005, respectively.

        Under the agreement, Biovail is obligated to pay the Company royalties of six percent on Canadian net sales of the 500mg GLUMETZA and one percent on Canadian net sales of the 1000mg GLUMETZA. In July 2007, the royalty percentage increased to ten percent on Canadian net sales of the 500mg GLUMETZA, and returned to six percent in January 2008, on FDA approval of the 1000mg formulation of GLUMETZA in the United States. The Company recognized royalty revenue under the agreement of $0.2 million, $0.1 million and zero for the years ended December 31, 2007, 2006 and 2005, respectively.

        The Company is obligated to pay Biovail royalties of one percent on net sales of the 500mg GLUMETZA in the United States. The Company recognized royalty expense under the agreement of $0.1 million, $0.1 million and zero for the years ended December 31, 2007, 2006 and 2005, respectively.

        As part of the same settlement, Biovail granted the Company an exclusive license to market the 1000mg GLUMETZA in the United States. The Company is obligated to purchase the 1000mg GLUMETZA exclusively from Biovail, subject to back-up manufacturing rights in the Company's favor. If the Company exercises its back-up rights, compensation to Biovail will change from a supply-based arrangement to royalties of six percent on net sales of the 1000mg GLUMETZA.

GLUMETZA



        In May 2002, the Company entered into a development and license agreement granting Biovail Laboratories Incorporated (Biovail) an exclusive license in the United
States and Canada to manufacture and market GLUMETZA. Under the terms of the agreement, the Company was responsible for completing the clinical development program in support of the 500mg GLUMETZA. In
April 2003, Biovail submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) for approval and in July 2005, Biovail received FDA approval to market GLUMETZA in the United
States. In accordance with the license agreement, Biovail paid a $25.0 million license fee payment to the Company.



        In
April 2004, the Company and Biovail amended the GLUMETZA license agreement. Under the amended agreement, the Company would receive royalties on sales of Biovail's 1000mg metformin HCl
tablet in the United States and Canada in exchange for allowing Biovail to use the Company's clinical data for its Metformin GR, a 500mg metformin HCl tablet, to support and accelerate regulatory
submissions for Biovail's 1000mg tablet and to establish equivalence between the two dosage forms. In May 2005, Biovail received a Notice of Compliance for the 500mg and 1000mg strengths of GLUMETZA
from the Therapeutic Products Directorate of Canada to market the products in Canada.



        In
October 2005, the Company delivered a notice of breach to Biovail and subsequently filed suit in respect of its license agreement with Biovail, related to the failure of Biovail to
make the first



82









DEPOMED, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



NOTE 2. LICENSE AND COLLABORATIVE ARRANGEMENTS (Continued)






commercial
sale of the 500mg strength GLUMETZA within 120 days of approval in each of Canada and the United States as required in the license agreement. In December 2005, the Company settled
its dispute with Biovail and entered into an amended license agreement whereby the Company granted to Biovail an exclusive license in Canada to manufacture and market the 500mg formulation of GLUMETZA
and the Company established its right to manufacture and market the 500mg GLUMETZA in the United States and internationally with the exception of Canada. The Company will recognize the
$25.0 million license fee payment as revenue ratably until February 2023, which represents the estimated length of time the Company's obligations exist under the arrangement related to
royalties it is obligated to pay Biovail on net sales of the 500mg GLUMETZA in the United States and to use Biovail as the Company's sole supplier of the 1000mg GLUMETZA. The Company recognized
$1.5 million, $1.5 million, and $0.1 million of license revenue related to the amortization of this upfront fee for the years ended December 31, 2007, 2006 and 2005,
respectively.



        Under
the agreement, Biovail is obligated to pay the Company royalties of six percent on Canadian net sales of the 500mg GLUMETZA and one percent on Canadian net sales of the 1000mg
GLUMETZA. In July 2007, the royalty percentage increased to ten percent on Canadian net sales of the 500mg GLUMETZA, and returned to six percent in January 2008, on FDA approval of the 1000mg
formulation of GLUMETZA in the United States. The Company recognized royalty revenue under the agreement of $0.2 million, $0.1 million and zero for the years ended December 31,
2007, 2006 and 2005, respectively.



        The
Company is obligated to pay Biovail royalties of one percent on net sales of the 500mg GLUMETZA in the United States. The Company recognized royalty expense under the agreement of
$0.1 million, $0.1 million and zero for the years ended December 31, 2007, 2006 and 2005, respectively.



        As
part of the same settlement, Biovail granted the Company an exclusive license to market the 1000mg GLUMETZA in the United States. The Company is obligated to purchase the 1000mg
GLUMETZA exclusively from Biovail, subject to back-up manufacturing rights in the Company's favor. If the Company exercises its back-up rights, compensation to Biovail will
change from a supply-based arrangement to royalties of six percent on net sales of the 1000mg GLUMETZA.




This excerpt taken from the DEPO 10-Q filed Nov 8, 2007.

GLUMETZA™

 

King Pharmaceuticals. In October 2007, we terminated our promotion agreement with King related to GLUMETZA. Pursuant to the termination agreement, King paid us $29.9 million in termination and other fees, and will fulfill its GLUMETZA promotion obligations through December 31, 2007. We have no obligation to pay King promotion fees on sales of GLUMETZA for periods after September 30, 2007. We are in discussions with potential marketing partners for GLUMETZA in the United States.

 

In April 2007, we submitted a prior approval supplement to the FDA covering a 1000mg tablet strength of GLUMETZA seeking approval to market the product in the United States.  In August 2007, we received an approvable letter from the FDA in response to the prior approval supplement.  The conditions to approval set forth in the letter relate primarily to manufacturing, and we are working with Biovail to resolve them. We expect that the conditions will be satisfied, and the 1000mg GLUMETZA to be commercially available in the second quarter of 2008.

 

This excerpt taken from the DEPO 10-Q filed Aug 8, 2007.

GLUMETZA™

In April 2007, we submitted a prior approval supplement to the FDA covering the 1000mg GLUMETZA seeking approval to market the product in the United States. In August 2007, we received an approvable letter from the FDA in response to the prior approval supplement.  The conditions to approval set forth in the letter relate primarily to manufacturing, and we are working with Biovail to resolve them.  We expect that the conditions will be satisfied, and the 1000mg GLUMETZA to be commercially available in the first quarter of 2008.

LG Life Sciences.  In January 2007, we amended our GLUMETZA license agreement with LG covering Korea. We granted LG a license to manufacture the 500mg GLUMETZA in exchange for royalties on net sales of GLUMETZA in Korea, and removed the provisions of the original agreement providing for the supply of 500mg GLUMETZA tablets by the Company to LG.

This excerpt taken from the DEPO 10-Q filed May 9, 2007.

GLUMETZA™

In April 2007, we submitted a supplemental New Drug Application, or NDA, to the FDA covering the 1000mg GLUMETZA seeking approval to market the product in the United States. If approved, we expect the 1000mg GLUMETZA to be available late in 2007, or in the first quarter of 2008.

LG Life Sciences.  In January 2007, we amended our GLUMETZA license agreement with LG covering Korea. We granted LG a license to manufacture the 500mg GLUMETZA in exchange for royalties on net sales of GLUMETZA in Korea, and removed the provisions of the original agreement providing for the supply of 500mg GLUMETZA tablets by the Company to LG.

This excerpt taken from the DEPO 10-K filed Mar 16, 2007.
GLUMETZA.   GLUMETZA competes against immediate release metformin, which is marketed primarily by generic manufacturers. GLUMETZA also competes against both branded and generic extended-release versions of metformin, such as Bristol-Myers Squibb’s Glucophage XR and Sciele Pharma’s Fortamet. Generic extended-release metformin manufacturers include Barr Pharmaceuticals, Inc., ANDRX Corporation, Mylan Laboratories, Inc. and Teva Pharmaceutical Industries, Ltd., among others.

GLUMETZA also competes against oral type 2 diabetes medications other than metformin, such as Takeda’s Actos (pioglitazone hydrochloride), GlaxoSmithKline’s Avandia (risiglitazon), Pfizer’s Glucotrol (sulfonylurea) and Merck’s Januvia (sitagliptin), among others.

16




This excerpt taken from the DEPO 10-Q filed Nov 9, 2006.

Glumetza™

In May 2005, our collaborative partner, Biovail Laboratories International, or Biovail, received a Notice of Compliance for the 500mg strength of Glumetza from the Therapeutic Products Directorate Canada, or TPD. The 500mg Glumetza is our internally developed once-daily metformin product for Type 2 diabetes. In June 2005, the FDA approved the NDA to market the 500mg Glumetza in the United States, and in July 2005, in accordance with our license agreement, Biovail paid us a $25.0 million license payment. The TPD and the FDA also approved a 1000mg strength of Glumetza utilizing a Biovail drug delivery technology. Biovail does not intend to commercialize the original formulation of the 1000mg Glumetza, and is in the process of reformulating it. If approved, the new formulation may be commercially available in 2007.

In June 2006, we entered into a promotion agreement with King Pharmaceuticals, Inc., or King, pursuant to which King was granted the co-exclusive right to promote Glumetza in the United States. Under the agreement, King is required to promote Glumetza to physicians in the United States through its sales force, to deliver a minimum number of annual detail calls to potential Glumetza prescribers, and to maintain a sales force of a minimum size. In consideration for its promotion of Glumetza, King receives a promotion fee equal to fifty percent of gross margin, which is defined in the agreement as sales of Glumetza, net of returns, discounts, rebates and chargebacks, minus cost of goods sold and certain adjustments, including the one percent royalty due to Biovail Laboratories International with respect to the 500mg Glumetza tablet. We are entitled to promote Glumetza to physicians to whom King does not make detail calls, or does not make detail calls with sufficient regularity. Incremental sales generated by physicians called upon by us, over a baseline established prior to our promotion, are excluded from net sales for purposes of calculating the promotion fee. We share out-of-pocket marketing expenses with King at an agreed-upon ratio. The 1000mg formulation of Glumetza to which we have rights to in the United States from Biovail Laboratories International will also be subject to the agreement, if that formulation is approved for sale. The agreement also provides for a six-month option in favor of King to negotiate with us the terms of an exclusive license in the United States to our AcuForm drug delivery technology in combination with metformin hydrochloride and any other active pharmaceutical ingredient. The term of the promotion agreement is five years, with additional one year renewal periods if agreed upon by the parties. In September 2006, we launched the 500mg Glumetza in the United States.

19




Pursuant to our December 2005 agreements with Biovail related to Glumetza, Biovail’s exclusive license to the 500mg Glumetza is limited to Canada. In December 2005, Biovail launched the 500mg Glumetza in Canada.

We also have a supply agreement and a manufacturing transfer agreement with Biovail related to the new formulation of the 1000mg Glumetza. Under the agreements, we have an exclusive license to market the 1000mg Glumetza in the United States, Biovail will be our exclusive supplier of the 1000mg Glumetza, Biovail has agreed to perform development and certain other tasks associated with the completion of the development of the new formulation of the 1000mg Glumetza, and will assist us with the preparation and submission of a supplement to the Glumetza NDA covering the new formulation of the 1000mg Glumetza. Biovail also agreed to perform certain additional limited development if the supplemental NDA related to this product is not approved by the FDA.

This excerpt taken from the DEPO 10-Q filed Aug 7, 2006.

Glumetza™

In May 2005, our collaborative partner, Biovail Laboratories International, or Biovail, received a Notice of Compliance for the 500mg strength of Glumetza from the Therapeutic Products Directorate Canada, or TPD. The 500mg Glumetza is our internally developed once-daily metformin product for Type II diabetes. In June 2005, the FDA approved the NDA to market the 500mg Glumetza in the United States, and in July 2005, in accordance with our license agreement, Biovail paid us a $25.0 million license payment. The TPD and the FDA also approved a 1000mg strength of Glumetza utilizing a Biovail drug delivery technology. Biovail does not intend to commercialize the original formulation of the 1000mg Glumetza, and is in the process of reformulating it in order to reduce the manufacturing cost. The new formulation is targeted for commercial availability in the first half of 2007.

In June 2006, we entered into a promotion agreement with King Pharmaceuticals, Inc., or King, pursuant to which King was granted the co-exclusive right to promote Glumetza in the United States. Under the agreement, King is required to promote Glumetza to physicians in the United States through its sales force, to deliver a minimum number of annual detail calls to potential Glumetza prescribers, and to maintain a sales force of a minimum size. In consideration for its promotion of Glumetza, King will receive a promotion fee equal to fifty percent of gross margin, which is defined in the agreement as sales of Glumetza, net of returns, discounts, rebates and chargebacks, minus cost of goods sold and certain adjustments, including the one percent royalty due to Biovail Laboratories International with respect to the 500 mg Glumetza tablet. We are entitled to promote Glumetza to physicians to whom King does not make detail calls, or does not make detail calls with sufficient regularity. Incremental sales generated by physicians called upon by us, over a baseline established prior to our promotion, are excluded from net sales for purposes of calculating gross margin. We will share out-of-pocket marketing expenses with King at an agreed-upon ratio. The 1000mg formulation of Glumetza to which we have rights from Biovail Laboratories International will also be subject to the agreement, if that formulation is approved for sale in the United States. The agreement also provides for a six-month option in favor of King to negotiate with us the terms of an exclusive license in the United States to our AcuForm drug delivery technology in combination with metformin hydrochloride and any other active pharmaceutical ingredient. The term of the promotion agreement is five years, with additional one year renewal periods if agreed upon by the parties.

18




Pursuant to our December 2005 agreements with Biovail related to Glumetza, Biovail’s exclusive license to the 500mg Glumetza is limited to Canada. In December 2005, Biovail launched the 500mg Glumetza in Canada.

We also have a supply agreement and a manufacturing transfer agreement with Biovail related to the new formulation of the 1000mg Glumetza. Under the agreements, we have an exclusive license to market the 1000mg Glumetza in the United States, Biovail will be our exclusive supplier of the 1000mg Glumetza, Biovail has agreed to perform development and certain other tasks associated with the completion of the development of the new formulation of the 1000mg Glumetza, and will assist us with the preparation and submission of a supplement to the Glumetza NDA covering the new formulation of the 1000mg Glumetza. Biovail also agreed to perform certain additional limited development if the supplemental NDA related to this product is not approved by the FDA.

This excerpt taken from the DEPO 10-Q filed May 10, 2006.

Glumetza™

 

In May 2005, our collaborative partner, Biovail Laboratories International, or Biovail, received a Notice of Compliance for the 500mg strength of Glumetza from the Therapeutic Products Directorate Canada, or TPD. The 500mg Glumetza is our internally developed once-daily metformin product for Type II diabetes. In June 2005, the FDA approved the NDA to market the 500mg Glumetza in the United States, and in July 2005, in accordance with our license agreement, Biovail paid us a $25.0 million license payment. The TPD and the FDA also approved a 1000mg strength of Glumetza utilizing a Biovail drug delivery technology. Biovail does not intend to commercialize the original formulation of the 1000mg Glumetza, and is in the process of reformulating it in order to reduce the manufacturing cost. The new formulation is targeted for commercial availability in the first half of 2007.

 

Pursuant to our agreements with Biovail related to Glumetza entered into in December 2005, Biovail’s exclusive license to the 500mg Glumetza is limited to Canada, and we have the right to manufacture and market the 500mg Glumetza in the U.S. and internationally with the exception of Canada. In December 2005, Biovail launched the 500mg Glumetza in Canada. We are currently developing the U.S. commercial launch strategy for the 500mg Glumetza, which we expect to implement in the third quarter of 2006.

 

16



 

We also have a supply agreement and a manufacturing transfer agreement with Biovail related to the new formulation of 1000mg Glumetza. Under the agreements, we have an exclusive license to market 1000mg Glumetza in the U.S., Biovail will be our exclusive supplier of 1000mg Glumetza, Biovail has agreed to perform development and certain other tasks associated with the completion of the development of the new formulation of 1000mg Glumetza, and will assist us with the preparation and submission of a supplement to the Glumetza NDA covering the new formulation of the 1000mg Glumetza. Biovail also agreed to perform certain additional limited development if the supplemental NDA related to this product is not approved by the FDA.

 

This excerpt taken from the DEPO 10-K filed Mar 16, 2006.

Glumetza™

 

In May 2005, our collaborative partner, Biovail Laboratories International, or Biovail, received a Notice of Compliance for the 500mg and 1000mg strength of Glumetza from the Therapeutic Products Directorate Canada, or TPD. The 500mg Glumetza is our internally developed once-daily metformin product for Type II diabetes. The 1000mg Glumetza was developed by Biovail utilizing a Biovail drug delivery technology. In June 2005, Biovail received FDA approval to market the 500mg and 1000mg Glumetza in the United States, and in July 2005, in accordance with our license agreement, Biovail paid us a $25.0 million license payment. Biovail is in the process of reformulating the 1000mg Glumetza in order to reduce the manufacturing cost. The new formulation is targeted for commercial availability in the first half of 2007 and Biovail does not intend to commercialize the original formulation of the 1000mg Glumetza.

 

In October 2005, we delivered a notice of breach to Biovail and subsequently filed suit in respect of our license agreement with Biovail. The notice of breach and lawsuit primarily related to Biovail’s commercial launch and marketing obligations under the license agreement with respect to the 500mg strength of Glumetza. In December 2005, we resolved the dispute with Biovail and entered into an amended license agreement whereby Biovail’s exclusive license to the 500mg Glumetza is limited to Canada, and we have the right to manufacture and market the 500mg Glumetza in the U.S. and internationally with the exception of Canada. Under the agreement, Biovail will pay us royalties of 6 percent on Canadian net sales of the 500mg Glumetza and 1 percent on Canadian net sales of the 1000mg Glumetza. We are currently developing the U.S. commercial launch strategy for the 500mg Glumetza, which we expect to implement in the third quarter of 2006. We will pay Biovail a 1 percent royalty on U.S. net sales of the 500mg Glumetza.

 

Also in connection with the resolution of the dispute with Biovail, we entered into a supply agreement and a manufacturing transfer agreement with Biovail related to the development, manufacturing, supply and marketing of the new formulation of 1000mg Glumetza. Under the agreements, Biovail transferred the NDA covering the 500mg Glumetza to us, granted us an exclusive license to market the new formulation of the 1000mg Glumetza in the U.S., agreed to perform development and certain other tasks associated with the completion of the development of the new formulation of the 1000mg Glumetza, and to assist us with the preparation and submission of a supplement to the Glumetza NDA covering the new formulation of the 1000mg Glumetza. Biovail also agreed to perform certain additional limited development if the supplemental NDA is not approved by the FDA. We will purchase the new formulation of the 1000mg Glumetza for specified supply prices, and subject to our back-up manufacturing rights under the supply agreement, Biovail will be our exclusive supplier of the new formulation of the 1000mg Glumetza.

 

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