Welcome to the Depomed yearend 2007 conference call. (Operator Instructions) At this time, I would like to turn the conference over to Ina Cu with Investor Relations. Please go ahead.

Good afternoon. This is Ina Cu, and with me today are Carl Pelzel, President and Chief Executive Officer and Tammy Cameron, our Controller and Principal Accounting and Financial Officer. At the close of market today, we issued our preliminary financial results for the year ended December 31, 2007. The purpose of this call is to expand on the contents of our press release and to provide financial guidance for 2008. Before we begin, I would like to remind you that during this call we will be making forward-looking statements related to various aspects of our business, including clinical development time lines, financial matters, and commercialization of our marketed products. Actual results may differ materially from the results described. We encourage you to review the risk factors in our most recent Annual Report on Form 10-K and quarterly report on Form 10-Q. And with that, I will turn the call over to Carl Pelzel.

Thank you, Ina. Good afternoon, and thank you for joining us today for our fourth quarter and yearend 2007 conference call. First, let me report on the excellent progress we've made toward completing the management team that will be responsible for executing our business plan. In November, Mike Sweeney joined us as Vice President of Product Development and in February, Abid Rawn came on as Vice President of Sales and Marketing. Mike spent more than a decade at Pfizer and several years at CV Therapeutics. I've known Abid for years and worked with him at GSK. These are two strong individuals who complement the members of the team already on Board. Our priorities in 2008 and beyond are focused on conserving cash, driving revenue, executing cash, generating business deals and bringing new development programs to public view. There are two critical value trading activities that we are focused on executing in the near-term. Those are the two Phase 3 registration programs for Gabapentin GR. The approval of Gabapentin GR for postherpetic pain and for hot flashes will be transformational events for Depomed. These trials come with the substantial price tag, so we will be moving forward to partner these Gabapentin programs as soon as possible so that the cost of the trials can be covered by the deal terms of those partnerships. We are engaged in partnership discussions with multiple parties on the three product opportunities we have before us, the two Gabapentin products and GLUMETZA. Because of the sensitive nature of these discussions, I will not comment on the stage of the discussions or their likely closing date, because this would compromise our ability to negotiate the best deal terms. We are tightly controlling costs and driving revenue from our two commercialized products in order to minimize our cash…

(Operator Instructions). We'll take our first question from John Gordon with Deltec Asset Management.

Carl, thank you very much for a clear and dynamic presentation. I have a couple of questions. The first is just to clear up something that you just said about the $11 million expenses for the Phase 3 PHN trial, and $11 million for Phase 3 hot flashes. I don't recall hearing you saying that you would initiate anything with respect to hot flashes this year. I just heard something about hoping to have a partner by the end of the year. Is there actually going to be an initiation of a Phase 3 for hot flashes in '08?

Yes, John, good question. Maybe I should clarify that in the presentation. As I did mention, we have started the PHN trial. We haven't even had our discussion with the FDA on what trials would be necessary for hot flash, and our discussions with partners are going exceedingly well, especially after we launched the data. But I felt, in order to present the most conservative view to our investors, I would need to put those costs out there. It is not my objective to start that hot flash trial, given our current cash position. So the reason for including it is just to present the most conservative view as we can possibly on our expenses and cash position.

Okay. And then, just again, related to sort of financial considerations for this year as it relates to GLUMETZA, I'm assuming that your $24 million to $28 million of G&A expenses does not include anything for product cost for GLUMETZA?

John, it does include, again, we are taking a very conservative approach, it does include some minimal costs to maintain the temporary sales force through June, July. I think it's very possible that we'll have a deal before then. And, as I think I've mentioned before, we have the ability to discontinue the services of that sales organization as soon as we need to. So there are some minimal expenses in that SG&A number that relate to marketing, as well as this contract sales organization.

Right. But I take it that you are not giving any guidance with respect to GLUMETZA operating profit or revenues for this year?

That's right. And the reason for that, John, is because there is so much uncertainty around that at this point. The scripts, as we have seen, are continuing to hold that very nicely. When we get a new partner on board, I would anticipate that that would change for the better very quickly, and our costs associated with that would go down. But to be conservative, we want to include those costs at least through the end of June.

Okay. And then, I don't want to manipulate the time, so I'd just ask one or two more quick ones. If you were to put the short pattern of the doctors writing script for GLUMETZA on the map of the United States, would it be sort of one big dot around a particular geographical area, or is it equally distributed over all 50 states? What can you tell us about how the distribution of scripts is geographically?

Sure. It's a little bit of short pattern. But, I think we have to exclude sort of the Northern Mid-West states as not much there.

Right.

Heavy use in California, New York; New York, specifically because of the Sweeney Law that gives new products a tier 2 status. And then along the Eastern Seaboard, Atlanta; oddly enough, one of our biggest territories is Las Vegas, and I think that's because of some managed care opportunities there. But it's sort of West Coast to East Coast, certain amount around Atlanta, and then the rest of the country is pretty spotty. But we do have our 33 sales reps specifically targeted to where those opportunities are. So, the sales reps that we have are not geographically distributed to cover the US, rather they are very specifically targeted where we have strong users.

Okay. So basically there is a fair bit of the populated part of the country, let's forget North and South Dakota, that hasn't really been introduced the therapeutic benefits of GLUMETZA?

Well, they were when King was calling, was detailing.

Okay.

So what we've done, I think everyone, if you will, a large number of doctors have been exposed to it. What we've chosen to do, because this is a short-term effort, is focus on the folks that already like the message, are already seeing side effect benefits in patients, and we're focusing on those folks to keep those scripts high.

Okay. And then one last thing on GLUMETZA, how would you describe the competitive landscape? What are the attributes that are proving compelling for sales of GLUMETZA in relation to competition?

Yes, it's a very good question. I think the answer to that question is what's made our partners pretty enthusiastic about the opportunity, and that is, it's a huge market and has very few competitors. In other words, we have Fortamet out there, not proving to be very strong competitor. But frankly the biggest competitor is simply the presence of lower price generics. And so now that we've taken the product over, as we go and talk to doctors with our own sales reps, we find that physicians that are using the product actually have personal experience with patients being able to tolerate our products, where they had prior problems tolerating the generic. So our mandate then is to go out and get doctors to actually try it in 10 to 15 patients to see that difference for themselves. Because once they do, then we don't need to spend a lot of time and money pushing on them, as you would, if you were selling a lipid-lowering agent, for example, where the competitive environment is very tough, and where it's very hard for a physician or patient to actually witness the difference.

Right. Okay. And then, just one last question, if I may impose on you. With respect to hot flashes, given all that has happened in that particular medical malady space, in terms of a lot of compelling only positive attributes alternate therapies, I am just curious whether the FDA might actually give you sort of accelerated kind of treatment in terms of, boy, let's get you in the Phase 3 as soon as possible, because there is nothing else out there, or because of the scar tissue associated with hormone therapy, et cetera. Are they likely to be, in fact, more cautious than normally? I can't figure out which way seems cut in terms of the deficiencies in hormone therapy.

And John, they are very insightful questions. Just let me say because this, we don't want to tell the FDA how they might respond, that your thoughts about what's happening with estrogen in the market is a very good one. And certainly, we'll be discussing alternatives when we go and talk to the FDA, but really can't project how they might respond. But, frankly, I think the developments on the estrogen front, the developments with Pfizer on their Lyrica analog, and as you may recall, they also had a use pattern to the exclusive use of their analogs in hot flashes, and so that program has gone away. And the recent data that Wyeth has communicated on Prestique with the very, very high side effect profile, I think, all works together to make us even more enthusiastic on hot flashes than we were previously.

Well, I guess, this is one last question. Given what you've just said, does that mean you have sent out your Phase 2 study to every sort of women's health organization in the country?

No, we haven't. And the reason for that is, before we stimulate any kind of demand or use, we want to make sure that we have a product available that will deliver Gabapentin with the positive side effect profile that we feel we can deliver. So, we certainly talk to partners about that and will be talking to the FDA about it. We just don't want to stimulate patient demand if we can't satisfy that.

Thanks so much, Carl. Keep up the great work.

Thank you.

(Operator Instructions). We'll go next to Andy Schopick with Nutmeg Securities.

Thanks. I realized you want to stay away from revenue forecast per se, but I did want to ask could you just comment briefly on the deferred revenue that is on the balance sheet, and whether that deferred product sales of $6.5 million is likely to be recognized this year?

Yeah, Andy, it's a really good question. We recognized revenue based on prescriptions that we see for the product. And that's because we have to demonstrate that we have a strong belief that the product sold no longer has the ability to come back as a return. So we're taking a very conservative approach to that. And as time goes on, as we see the prescriptions begin to equal the sales, at that point over time, we can begin to recognize more of that revenue that's held up on the balance sheet. But the product, as I mentioned, grew 22% in prescriptions in the last quarter of last year, and we anticipate bringing a partner on in a very near-term. So having a good handle on that is not where we are at the present time. The dynamics of that are as follows; as a product grows more rapidly, wholesalers hold more of the product in the pipeline so they can satisfy that demand, and as they increase the channel, in the other words, the amount of GLUMETZA in the pipeline, we have to hold back, or fail to recognize more of the revenue that goes out the door. So at some point in time, we'll reach a steady state. And the prescriptions that are generated will about equal the amount of sales for the wholesalers. But we're not there yet.

Okay. What about deferred license revenue? Can you just comment on that line item?

Yeah. Tammy, do you want to?

Yeah. Let me step in there for a minute. The deferred license revenue on the balance sheet right now is primarily tied to Biovail. That recognition is about 1.5 million annually and that goes to 2023. So, we will continue to recognize that.

Well, of course, there is about one point 4.5 or, 4 million, or 5 million, I think, right now under deferred license revenue.

That's in the current--

In the current, right.

Yeah. And long-term has the balance of it.

Okay. Thank you.

(Operator Instructions). And we will go to John Gordon with Deltec Asset Management.

Hope, you don't mind, Carl, but so I am not hogging the line, can we just spend a second or two on ProQuin, and let me just ask the same geographical question about ProQuin that I asked about GLUMETZA?

Yes. Different answer, because Watson has broad geographic coverage of the United States for both our OB/GYN and urology sales forces, so in that case with a few exceptions, as you said North and South Dakota, we have broad coverage of the product opportunity with representatives, and that would include all major metropolitan areas and all parts of the country.

Okay. As a general matter, wouldn't people that sign up for GLUMETZA stay on it for a while, whereas people did or signed for ProQuin are using it on an episodic basis?

Exactly right. That’s what makes GLUMETZA so attractive is the fact that, once you get patient on the product, theoretically they should stay on as long as that product is keeping their blood sugar under control, whereas uncomplicated UTIs, obviously, our antibiotics scripts that has to be thought for…

Right.

…on a daily basis.

Right. Okay. And then just lastly, you did throw a penalizing sense or two in your initial remarks about two compounds, that we're going to be doing something to other products that -- did you use the term be brought into the clinical, I mean what would you like us to know about those two products?

Yeah. I guess our pipeline is really comprised at this point of three. One is good and because we have three business development initiatives ongoing, and that being GLUMETZA and the two Gabapentin GR programs, we put GERD on hold until probably the spring, until one or more of those deals have been concluded. And we're spending our time on process development and fine tuning the manufacturing and that really complex dosage form. The other two programs, we're not prepared to talk about them at the present time, but I can say that they have the same type of differentiation that GERD does. In other words, we do not feel that our pharmacists will be able to look at the advantages of these two other programs and simply substitute a generic product. The same would be true for GERD. With the GERD program, we delivered a dose of omeprazole at two in the morning, and a pharmacist would not, in his right mind, be in a position to substitute generic omeprazole for that prescription. So, there are large markets. They have a high degree of product differentiation, the formulations are essentially done. So the next stage of the process would be to manufacture small lots for Phase 1 study that we would either do here or ex-U.S., but the cost of those, because we do the manufacturing ourselves in-house is minimal, and also because this small number of patients is needed for a Phase 1.

Very good. Thank you again, Carl.

Thank you.

And there are no other questions at this time. I would like to turn the conference back to our speakers for any closing remarks.

Thank you. In summary, we are very pleased with the progress we've made in 2007 and look forward to 2008 as we work to establish a greater commercial presence and advance our existing product pipeline. Thank you for your continued support and interest in Depomed and I look forward to keeping you appraise of our progress in the coming months. Thank you.

Thank you. A replay of today's conference will be available today at 7 pm central time at 888-203-1112 or 719-457-0820, conformation code 4892180. Once again that starting at 7 pm central time today at the number 888-203-1112 or 719-457-0820, conformation code 4892180. That concludes today's conference. You may now disconnect.