DepoMed, Inc. (NASDAQ:DEPO)

CAPS Rating: 3 out of 5

A specialty pharmaceutical company focused on the development and commercialization of differentiated products that address growing markets and are based on proprietary oral drug delivery technologies.

Recs

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Player Avatar zzlangerhans (99.73) Submitted: 2/9/2013 2:19:47 AM : Underperform Start Price: $6.91 DEPO Score: +15.23

I think DepoMed's resurgence since the beginning of the year owes more to current biotech small cap froth than it does to a serious run-up ahead of the FDA Ad Comm for Serada scheduled for March 4. All three phase III trials of Serada for post-menopausal hot flashes failed to meet their primary endpoints. I know somebody out there is arguing that they actually did meet their endpoints, or they didn't but it doesn't matter, or something. Honestly I've been too busy researching my real trades to do full DD on CAPS red thumbs but I'm going with the smart money that ran from the stock every time one of the Breeze trials reported topline data. I like the way the bear case was presented here: http://www.thestreet.com/story/11830798/1/depomed-bear-case-fda-panel-will-ding-serada.html

The Ad Comm will certainly dominate the short-term behavior of the stock. Of course, there's the actual PDUFA date May 31 which will have to be taken into account if Serada squeaks by the Ad Comm. Gralise has shown a little life, but nothing to convince me that it will ever generate significant positive cash flow. The company has been doing a nice job growing Glumetza royalties, but I don't see how much further that can go. I think Zipsor will ultimately prove to be a dead end as well. Phase II data for DM-1992 in Parkinson's was weak. If Serada gets buried, DepoMed will have a hard time convincing the street that they have a future.

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