Good afternoon, everyone, and welcome to the DepoMed year end financial results conference call. [Operator Instructions] Please also note that today's event is being recorded. At this time, I'd like to turn the conference call over to Mr. August Moretti. Sir, please go ahead.

Thank you, operator. Good afternoon, and welcome to our Fourth Quarter and Fiscal Year 2013 Financial Results and Business Update Conference Call. With me today are Jim Schoeneck, President and Chief Executive Officer of Depomed; Matt Gosling, Senior Vice President and General Counsel; and Jack Anders, Vice President of Finance. I'd like to remind you that the matters discussed on this call will contain forward-looking statements that involve risks and uncertainties, including those related to commercialization plans for our marketed products, expectations regarding intellectual property, litigation and corporate development efforts, and our projected revenue and EPS. Actual results may differ materially from the results predicted and recorded results should not be considered an indication of future performance. These and other risk factors are more fully discussed in our Annual Report on Form 10-K that we will file with the SEC in the next few days, most particularly under the caption Risk Factors. Depomed disclaims any obligation to update or revise any forward-looking statements made on this call as a result of new information or future developments. Depomed's policy is to provide financial guidance and guidance on corporate goals for the current fiscal year and to update or confirm its guidance only by issuing a press release or filing updated guidance with the SEC in a publicly accessible document or providing such information on a publicly available Investor Conference Call. References to current cash, cash equivalents and investments are based upon balances at December 31, 2013. All other guidance, including guidance relating to the company's expected revenues, GAAP EPS, non-GAAP EPS, and year-end cash is as of today, March 12, 2014. I'll now turn the call over to Jim Schoeneck.

Thank you, Augie, and thank you, all, for joining us today. 2013 was a transformational year for Depomed. When we started the year, we had 2 marketed products for the management of pain, Gralise and Zipsor. And we had a royalty stream facing a patent cliff in 2016 from Glumetza sales in the type 2 diabetes market. Since then, we've added 2 new products in the area of pain and neurology with long-term growth potential. Both are already in the market. Lazanda, which treats breakthrough pain for patients with cancer. And CAMBIA, the only single-agent drug in its class approved for the treatment of acute migraine in the United States. Importantly, in 2013, we sold our interest and milestones and royalties for our type 2 diabetes portfolio for $240.5 million, positioning us financially to bring on additional products in pain, neurology and adjacent areas. In short, we more than doubled our direct product revenue and tripled our cash position compared to 2012. Business transactions we executed last year were essential to our transformation. In addition, our commercial achievements in 2013 demonstrated our ability to create value and drive growth on our marketed products. We achieved total product revenues of $58 million, an increase of 112% over 2012. This growth was in part due to our acquisition strategy, but also the execution of our commercial strategy. We generated 2013 net income before taxes of $4.6 million. Augie will go through the details behind those numbers shortly. We had prescription growth throughout 2013 for Gralise, generating an increase in year-over-year Gralise sales of 109% between 2012 and 2013. For Zipsor, we refocused our sales force to maximize its growth and reverse the prescription decline that was there when we purchased the product. Zipsor posted over $20 million in net sales and 17%…

Thank you, Jim. There are 3 areas I'll cover today. First, I'll review the accounting treatment of our PDL royalty sale transaction, and then I'll review our fourth quarter and full year results for 2013. And finally, I'll provide our guidance for 2014, including our future use of non-GAAP reporting. So let's start with the PDL transaction. To understand our fourth quarter and full year financials, it's important to understand the accounting treatment of our PDL transaction. To remind everyone, in October 2013, Depomed sold certain interests and future royalty and milestone payments in the type 2 diabetes therapeutic area to PDL for $240.5 million in cash. The underlying agreements that gave rise to the future royalties and milestones are complex licensed agreements. And as a result of Depomed's continuing supply obligations with respect to the underlying agreements, Depomed is accounting for this transaction under the debt accounting method. Debt accounting requires us to initially record the proceeds of $240.5 million as a liability on our balance sheet and to impute an ongoing noncash interest charge against the amount of the liability that is deemed to be unpaid. Although we do not keep the cash proceeds of the royalty and milestone payments sold to PDL, debt accounting requires us to continue to recognize these underlying amounts as revenue on our income statement. As these royalties and milestone payments are received by PDL, the related liability on our balance sheet is reduced, and a noncash implied interest expense is recognized. During the fourth quarter of 2013, we recognized $18.1 million of noncash revenues and $4.5 million of noncash interest expense related to this arrangement. And we reduced the amount of the liability by approximately $13.5 million. We recognize that this accounting may not be intuitively obvious, given the fact that we…

Thanks, Augie. As we stand back and look at where we are today, we have clearly established Depomed as a leading specialty pharmaceutical company in pain and neurology. We have 4 proprietary marketed products with long-term, high-growth potential. We have a track record of creating value from our product acquisitions. We have approximately $0.25 billion in cash to acquire new products to further fuel that growth, and our Acuform IP and formulation expertise provides us upside as an attractive partnering technology. 2013 was a great year for Depomed and we look forward to updating you on what we expect to be an even better 2014. Operator, we will now open the call to questions.

[Operator Instructions] And our first question comes from Jason Butler from JMP Securities.

Maybe starting with the product sales guidance. Can you give us any more color there on the contribution of the different products and, maybe, specifically, Gralise to that guidance?

Jason, our policy has been to give aggregate product revenue guidance and not to break it down product by product.

Jason, one thing I would add is that, at the end of last year, we were at approximately $50 million run rate base on demand. And as I think you're aware, we took a 19% price increase the end of February. So that should at least give you some idea where we're coming into the year.

Sure. And then for CAMBIA. When you guys acquired Zipsor, there was a transition period and you mentioned before a period of negative growth following -- during the acquisition. Do you expect something similar at CAMBIA or could there - is there any reason to believe the transition would be different?

The thing that I would expect to be different is that Zipsor was actually on a pretty steep decline when we acquired it. So it was -- the first job was to stem the decline and flatten that, and then to begin growth. With CAMBIA, it's a bit different. CAMBIA had already been growing in terms of the prescriptions. So if anything, during the transition, I might expect a bit of a flattening and then a resumption of growth.

Okay. In terms of both cash and noncash tax payments in 2014, other than the payment for the 50-month $9 million payment for 1Q, do you expect to be paying tax in 2014?

Jason, this is Jack Anders. If there were any taxes, it will be minimal amounts. There may be some noncash tax expense running through our financials and we've disclosed what those are in the reconciliation in our non-GAAP to GAAP reconciliation. So I wouldn't expect there to be much in terms of actual cash payment.

Okay, great. And then, just last question and I'll jump back in the queue. Any update on either the Orphan Drug exclusivity debate with the FDA, or any idea or expectations for timing of the ANDA litigation for Gralise?

Yes, Jason, it's Matt Gosling. As for the suit with the FDA, it's hard to speculate at this point. We don't -- honestly don't know why we haven't seen a decision yet. It certainly could come at any time. Though, we're no longer speculating as to when we'll see that. I will say, and as Jim mentioned, we're confident we'll get a long period of market exclusivity for Gralise. The trial has been scheduled for -- beginning May 12. So one, and two, the 30-month stay after, the first filer expires in mid-July. So we would expect a resolution certainly sometime before mid-July.

[Operator Instructions] Your next question comes from John Gordon from Deltec Asset Management.

Jim and Augie, I have a couple of questions just sort of bouncing around, the first is, on the $58 million of tax payments, since you're basically going to be recognizing revenue, obviously, on a noncash basis, over an extended period of time, is -- was the $59 million -- is that cash is going to out the door that will represent the full payment with respect to PDL or was it a present value? Because, in fact, you're not actually going to be paying it out all at once? What's the correlation on the timing basis between your extended release, no pun intended, revenue recognition and the payment of taxes?

John, this is Jack here again. With regards to the $59 million in tax that we expect to pay, in 2013, we -- from a tax perspective, we had to recognize that full $240 million as income from a tax perspective. We did utilize NOLs from the federal perspective to offset some of that gain from a tax perspective and that $59 million represents the full amount of the PDL recognition.

So John, maybe said another way, the tax piece was immediately released and the GAAP recognition is extended-release.

Okay, very good. Okay, now just moving on to a couple of things that are sort of topical. Literally today, Purdue Pharma issued a press release talking about making a filing of camper-resistant competitor, Zogenix, and its powerful pain pill. And no reason you would have necessarily even seen it, let alone have looked at the composition of their own particular therapy. But it's a nice segue into asking how things are going with Purdue and OxyContin, and I don't know whether, in fact, just your smell test would say that this latest sort of potential infringement by Purdue sounds comparable to the earlier one or not?

John, we certainly did see it, and I'll turn it over to Matt for the answer.

Yes, as far as how the case is going, it's moving a long time. And that we just -- we remain confident that we have a good case there. And hope for a good resolution at some point. It's hard to predict when that resolution may come. As far as we certainly did also see the news from today, and we will certainly kind of take a look with interest at that product when it's available.

Does it look like it might be in a somewhat contiguous zip code to the prior potential infringement or it could be something completely different?

Yes, John. At this point, I don't think we'd want to speculate. It's one where and we take this very seriously and we would do the requisite lab testing on it to see if indeed we believe there were factors there that caused our IP to read on it.

Right. Okay. And then, Jim, I happened to see last week that there was a company called Insys, that I guess has that therapy that is at least somewhat comparable to Lazanda in terms of being a cancer pain therapy. But I guess it's administered under the tongue as opposed to being a nasal spray in the nose. Could you or somebody just comment on pricing of the 2, and relative efficacy and things like that?

All of the drugs in this class for breakthrough cancer pain now that you spent, which is used in both of the products, both Insys product and our product are titrated by the physicians to get effective pain relief. So there's not a single dose of the drug. It can be anywhere from 100 micrograms a drug up to 1600 micrograms for some of the drugs. On a price basis, we are priced approximately at the same microgram per microgram level. There is some data out there that shows that our product may be -- may require lower doses to be able to get equivalent pain relief. So on a pure microgram per microgram, we're equivalent in price. And in terms of an effective dose, we may actually be less expensive.

Okay. And then just a couple of other quickies. First, with respect to XARTEMIS that was approved. I have heard that it did not get the hope for labeling as it related to, I guess, tamper-resistance. And I'm just wondering what your understanding is of choreography with the FDA as to whether that's a "well, you had your chance and you didn't get it," or whether there's reasonable prospects for ongoing dialogue that might get a change in the label after it's on the market?

Yes, I mean, definitely a better question for Mallinckrodt then for us. But I think in terms of what they even said today, they said that they would keep an ongoing dialogue with the agency and look at what needed to be done to be able to get those claims on the abuse resistance.

And then just one last catch basin question. I mean, you've been doing a tremendous amount over the course of the last 6 months and so, I could see why you might want a nice, healthy period of digestion. But at the same time, you do still have a lot of cash on the balance sheet even after sharing some with Uncle Sam. And just curious as to what the level of fever pitch is with respect to looking at other potential acquisition opportunities?

I think I'm going to take it directly with what I said out of the script that the business development team and strategy group are as busy as ever. I mean, they are still coming to us going, "Okay, Boss, help us prioritize, we still have a lot going on."

[Operator Instructions] And at this time, I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

So, all, I want to thank you for taking the time today to be on the call. Thank you for the support, both over the last few months, and for some of you, much longer than that. And we look forward to being able to share, hopefully, great results over our next few calls and at the conferences over the upcoming year. Thank you again.