Depomed Swings To Profit, Outlook Strong; Stock Up - Update

(RTTNews) - Drug maker Depomed Inc (DEPO), Wednesday reported a surprise profit for the fourth quarter compared with a loss last year, due to higher revenue including that related to a October royalty deal with PDL Biopharma. The results crushed Wall Street estimates.

Depomed also provided robust guidance for 2014 and its shares gained 6 percent in after-hours trade on the Nasdaq.

Depomed operates as a specialty pharmaceuticals company for pain and neurology and has four products: Gralise, Cambia, Zipsor, and Lazanda.

The recent quarter benefited from improved sales of Gralise and, Zipsor, with contribution from licensing.

But what drove the results were non-cash revenue from an October 2013 deal under which Depomed sold interests in future royalty and milestone payments in the Type 2 diabetes therapeutic area to PDL Biopharma Inc. (PDL).

Due to supply order obligations with respect to the underlying royalties, Depomed is accounting for the PDL deal, valued at $240.5 million, under the debt accounting method that resulted in non-cash revenue of $18 million for the recent quarter.

Newark, California-based Depomed posted fourth-quarter net income of $41.8 million or $0.72 per share, compared with a net loss of $3.7 million or $0.07 per share last year.

On average, three analysts polled by Thomson Reuters expected a loss of $0.20 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter climbed to $40.6 million from $26.6 million a year ago. Analysts projected revenues of $19 million for the quarter.

For fiscal year 2014, DepoMed estimates net earnings of $0.21 to $0.36 per share, adjusted earnings of break-even to $0.16 per share and revenue of $200 million to $215 million. Analysts currently expect loss of $0.08 per share on revenue of $132.9 million.

Depomed stock closed Wednesday at $13.50, up $0.49 or 3.77%, on a volume of over 1 million shares on the Nasdaq. In after hours, the stock gained $0.80 or 5.93% at $14.30.