Good afternoon and welcome to Depomed’s Third Quarter Fiscal 2015 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Christopher Keenan, Vice President of Investor Relations. Sir, please go ahead.

Thank you, operator. Good afternoon, and welcome to our investor conference call to discuss the third quarter 2015 financial results announced earlier today. The press release covering our earnings for this period is available on the Investors page of our Web site at depomed.com. With me today are Jim Schoeneck, President and Chief Executive Officer of Depomed; August Moretti, Senior Vice President and Chief Financial Officer; Matt Gosling, Senior Vice President and General Counsel and Jack Anders, Vice President of Finance. I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including those relating to commercialization of NUCYNTA, NUCYNTA ER, Gralise, Cambia, Lazanda and Zipsor, the Company’s financial outlook for 2015, the Company’s views regarding Horizon’s unsolicited proposal to acquire Depomed and other statements that are not historical facts. Actual results may differ materially from the results predicted and recorded results should not be considered an indication of future performance. These and other risks are more fully discussed in the Risk Factors section and other sections of our Annual Report on Form 10-K for the year ended December 31, 2014, and of our quarterly report on Form 10-Q that we will file today with the SEC. 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 only provide financial guidance and guidance on corporate goals for the current fiscal year and to provide, update or reconfirm its guidance only by issuing a Press Release or filing updated guidance with the SEC in a publicly accessible document. References to current cash, cash equivalents and investments are based on balances as of September 30, 2015. All guidance, including that related to the Company’s expected total product revenues, operating expenses, adjusted non-GAAP earnings and non-adjusted EBITDA is as of today, November 09, 2015. I’ll now turn the call over to Jim Schoeneck.

Thank you, Chris and thank you all for joining us today. For today’s call, I’ll start by reviewing our achievements since our last earnings call, including our NUCYNTA growth strategies and Augie will discuss our financial results before I provide closing comments and open the call to questions. Depomed is now one of the top U.S. companies in pain and neurology. I’m proud to report another record quarter with outstanding top and bottom-line results. For the first time, we surpassed $100 million in quarterly product sales, finishing the quarter with $105 million in product revenue, an increase of 242% compared to the third quarter of last year. This exceptional growth was primarily driven by our flagship franchise NUCYNTA which was just re-launched in June. Our growth has continued in October. We had all-time leap in prescription rise for Gralise and Cambia and an all-time leap in revenue high for Lazanda. Most importantly, we are moving the needle on NUCYNTA, getting multiple all-time highs for NUCYNTA ER in October. Now above the highest ever recorded by J&J. This reflects the outstanding work of our commercial team, especially our salesforce, across the higher product line. Third quarter bottom-line results were also strong. We achieved non-GAAP adjusted earnings of $0.33 per share or $25 million, an increase over 1,000% compared to third quarter of 2014. Non-GAAP adjusted EBITDA for the quarter was $38 million. We also increased cash by $52 million in the quarter. In the two quarters since we closed the NUCYNTA acquisition, we have produced over $75 million in adjusted EBITDA, which annualizes to over $150 million and we have increased cash by $107 million for approximately $1.75 a share. This significant operating cash generation provides financial flexibility to pay down debt and to pursue additional acquisitions, all with the goal…

Thank you, Jim. Today I’ll cover two areas; first, a review of the highlights of our third quarter results; and second, our updated guidance for 2015. Before we get started, I want to mention that I will be discussing certain GAAP measurements, as well as certain non-GAAP measurements. Please refer to today’s press release for an explanation of our non-GAAP financial measures and a table that reconciles Depomed’s non-GAAP adjusted earnings per share. In addition, our guidance today will also include certain non-GAAP financial measures, which we expect to continue to present in future periods. As Jim outlined for you earlier in the call, the third quarter was an exceptionally strong one for Depomed, both in terms of product revenue and cash flow. Our strong cash flow during the quarter reflects our first full quarter of promotion of NUCYNTA ER and NUCYNTA. As of September 30, 2015, cash, cash equivalents and marketable securities were $175 million, which represents a quarterly increase of $52 million. In the six months after the closing of the NUCYNTA acquisition we have increased cash, cash equivalents and marketable securities by approximately $107 million. As we have stated since the closing of the NUCYNTA transaction, our intent is to prepay 100 million of our secured debt in the second quarter of 2016. We remain confident in our ability to do so, while maintaining our working capital needs. Total product revenue for the quarter ended September 30, 2015 was a record $105 million, representing a year-over-year product revenue growth of 242%. Putting this into perspective, total product revenue for Q3 2013 was $16 million and for Q3 2014 $31 million. I would like to note that the days on hand at the channel at the end of Q3 remained consistent with the end of Q2 and are…

Thanks Augie. The financial results we reported today reflect our team’s commitment and outstanding performance in 2015. I’d be remised if I didn’t take a moment to thank our employees, for their focus and dedication to make Depomed great. I am surrounded by people, passionate about what they are doing and about the patient lives that they directly and indirectly help. Our hard work is evidenced as we get the reports about how Depomed is now being increasingly recognized by the medical community as a driving force in our industry segments. Furthermore, feedback from PAINWeek and other recent conferences have seen physicians commenting on how impressed they are with what we are accomplishing with NUCYNTA and the depth of our pain portfolio. Payors continue to provide strong formulary coverage based on the value of our products. This success on the ground is translating into financial success that we’ve reported today. I’ll conclude my comments by briefly discussing the latest developments with respect to Horizon Pharma. As we’ve discuss previously, Depomed’s Board, after careful consideration with the assistance of financial and legal advisors, unanimously rejected Horizon’s unsolicited offers and recommends against the exchange offer initiated by Horizon on September 11, 2015. In mid-September, prior to the enhanced focus on drug price increases that we’ve all seen in the media. Depomed filed its schedule 14(d)9 with the SEC, highlighting the Board’s reservations about Horizon’s business model and strategy, while observing that the nature of Horizon’s business model had the potential to lead to significant volatility in the price of Horizon stock. Importantly since our filing, numerous reports from major media outlets to the firm that establishes one of the largest drug formularies, have reiterated and validated these serious concerns. We continue to believe that the offer proposed by Horizon substantially undervalues Depomed.…

Thank you, sir. We will begin the question-and-answer session. [Operator Instructions] First question comes today from Randall Stanicky with RBC Capital Markets.

Just a couple, Jim, first looking at the $500 million revenue outlook for NUCYNTA in 2018, that implies about 25% growth off of the current 3Q run rate, which is pretty robust growth. The IR has stabilized. The ER growth is in the low double-digits on a rolling basis. Can you just breakdown for us effectively how you're going to get there as we think about volume and price? And then I have a couple of follow-ups.

Yes. Well Randall, on the pricing side, this category has typically seen price increase of about 5% to 8% a year. So it’s been in the single-digit range. And that’s where we would expect to be. I think the second component of it is the volume piece as you’ve mentioned, and we’ve taken NUCYNTA ER from about a 4% year-over-year growth to 17 just in the four months since we’ve re-launched it and we’ve moved the NUCYNTA IR, to just NUCYNTA from double-digit loss to now increasing it quarter-over-quarter, so we’re seeing really robust growth. And I think the third piece of it is the potential to see increased milligram volume on the scripts as physicians get more comfortable with using the drug at the same type of levels that have been seen in the clinical trials.

So I guess to be more clear should we continue to expect the current growth that we are seeing post the re-launch continue to accelerate, then to -- as we think about getting onto a run rate from a volume perspective that can hit that target?

Yes. We believe that the acceleration we’re seeing now is going to continue.

Okay. Secondly, I want to just touch on acquisitions and opportunities there because you called it out again in your Press Release. How much flexibility do you have to do a deal from a size perspective? And then what are you guys looking for? I mean, are we talking about companies, products? And what's the ability to finance a deal there?

So why don’t I handle the piece, the first piece and I will let Augie talk about the financing piece. We actually have not changed what we have said we’ve been looking for. Which is we’re looking for products that are either in the market or are to Phase 3, essentially either through Phase 3 or ready for registration as a primary. We’ve said and that’s in neurology and pain. And then with that adjacencies things like addiction therapy on one end and then perhaps some things that may move into rheumatology orthopedics on the other now that we’re calling on those audiences. With that, we also look at things that maybe a little bit farther back in the pipeline things that would be more ready for Phase 3, but only doing that when we can pay for an auto operating revenue. And so now that we have hit some more robust operating pieces, we see at least the possibility of doing that and I would think if you kind of relate it to another model think of more the early to mid-Forest model where they were bring in some interesting things in finish up the Phase 3 and then bring it to market.

And Randall to address the flexibility issue. I think we have a large capacity to be able to finance additional transactions. As I think about the balance sheet, our net secured debt today is $400 million. And so if I annualize, we’re running at a little over 150 million a year of EBITDA today. And so I get the sort of total secured debt to EBITDA of 3.8. I get net secured debt to EBITDA of 2.6, which is a quite a manageable leverage ratio and I think we can take that up substantially. When I look at next year, when I look at the April timeframe, when we intend to pay down 100 million of the secured debt. Net secured debt of less than 375 million against an EBITDA run rate at that time, which should be more robust than where we are today. I get net secured debt to EBITDA at 2 or less next year on those numbers.

Got it, and Augie, just to be clear the focus is on late-stage pipeline as opposed to assets existing on the market that you are looking to acquire and perhaps reposition, but we should be thinking about pipeline, growing the out late-stage pipeline?

Well, it is actually both Randall, it is the -- as it has been with the additional flexibility of look at something late-stage pipeline. So the primary focus is still for look at things that are marketed that we believe, if not the profile that we want and have the length of exclusivity that will give us a return on the growth.

Got it.

So that still remains one.

Thank you. Our next question comes from Ken Trbovich with Janney.

A couple of quick ones, I know obviously the NUCYNTA launch thus far seems to be going well, but I was wondering if you folks have done any sort of testing around of the awareness of the last indication for NUCYNTA ER in the diabetic peripheral neuropathy? Just in terms of where it was at the time you were looking at acquiring it and perhaps maybe where it is or where you think it should be going forward?

So Ken it is still very-very early stages there. I can tell you the two messages that we heard from the podium, not just in our session but elsewhere at PAINWeek a couple of months ago was one, physicians did not know that there was an approved neuropathic indication for NUCYNTA ER. They just had really zero awareness and this is a pain conference. And the second was around the dosing levels, that I mentioned earlier. So it really is just -- it has been virtually zero and I think it’s just starting to come up now so I think we’ve got a long way to go on that but that also creates a big opportunity.

And then obviously the strength of the results and the strength of the early performance with NUCYNTA has certainly has contributed to the revised guidance for this year. I was wondering if you might tease us with an expectation around when you might give guidance for ’16. Is JPMorgan too early or too late? Certainly I think I understand the concerns perhaps with this being early in the launch or the re-launch of NUCYNTA, but clearly it seems as though the traction there and the other products are performing nicely as well?

Yes Ken normally we would do that on our year-end earnings call. Although we will consider doing it earlier this year, we just haven't determined exactly when.

Our next question is from John Gordon with Deltec Asset Management.

My questions mainly relate to sort of salesforce marketing related to NUCYNTA. And as the first matter, Jim, you have done a substantial amount of hiring in terms of raising the number of salespeople that are marketing NUCYNTA from when you took over the product. Has effectively that squad been sufficiently sort of vetted and battle-tested so that they're -- the current composition is the one that you feel really comfortable with, or is there a longer-term gestation process to figure out exactly who should be covering what territories?

Well John, one -- thanks one that we certainly think that we vetted well when we brought people in -- there was a group that actually had been selling NUCYNTA before with quintiles that we brought onboard. So on that group we actually had direct experience in seeing what they were able to accomplish under the contract with J&J and then beyond that we have brought in a very experienced group we had over 3,000 people apply for the 130 or so jobs that we had open, and I was just a tremendous candidate pool as with anything. I mean we continually evaluate, because we’ve got standards and expectations of performance and so while we are early in that launch piece, we certainly also watch how people are doing and to make sure that they are pulling their weight and that they are there, and they are winners that we want on the team.

And then just related to what they actually are doing, there had been some mention raised in months past about the number of products that the salesforce was going to be marketing, and making sure there is a proper ratio between people and what they were interfacing with, with the doctor community about. Can you just discuss where that stands?

Yes. From the beginning John, we designed it so that no one was selling more than three products, so that they could have appropriate breadth of the physician but also the depth on each of the product, so we do have within our salesforce, we have a group that focuses primarily on pain specialist and a group that focuses primarily on neurologist and the difference being that while everyone sells NUCYNTA and Gralise the group going to pain specialists that also has some orthopods in there also sell Zipsor and the group going to neurologists sells Cambia. So nobody sells more than three and it allows them to stay both expert and focused.

And then just a last question on this dosing component of your four P’s, proper dosing. Given that you're dealing with an opioid, how easy is it to just point out to the doctors, well, in fact all of our trials were done at X dosage and so therefore you ought to be prescribing at X dosage, as opposed to sort of trying to do what would be the minimally effective amount? I mean can you go through the sort of verbal process of addressing that point with the doctors?

Yes, John it’s not about just get up to this dose. It really is doing just what you said, finding what the dose is that's appropriate for that patient and NUCYNTA ER as an example is dose up at 50 milligram increments, so someone coming on to drug with sort of 50 milligrams twice a day, then if they don't have response in a short period of time, they would move to 100 and what we found was this wasn’t so much that people were not jumping to doses they should be, it was really that they weren’t making the second and third titration step, they were switching products instead of moving from 100 milligrams to 150 mm to 200. So we agree, with what you are saying there, which is this is a serious class of drug, it’s one that the physician needs to control tightly and with that thought there is an opportunity for the physician to continue to use the drug through a second and third titration step. So to move from 50 to 100 twice a day, if they are not getting relief move to 150, and eventually if needed to 200 is really what we’re talking about and that's what we mean when we say proper titration.

Yes. Okay. Jim, thank you so much. And it was obviously a spectacular quarter. Congratulations and keep it up.

The next question comes from Chiara Russo with Cantor.

Just I think two quick ones. The first one is, I know when you first acquired NUCYNTA you put the price increase on the drug. I mean, I was curious as to sort of where we are in terms of realization on that price increase?

Yes, Chiara we’ve mentioned this in some of our public presentations. I think we’re at about half of the realization from that price increase and just because of the way some of the managed care formularies work, a managed care pricing agreements work. We would next see some particularly after the first of the year, because some of the managed care contracts reset the baseline price.

Right.

That’s really what we are talking about. So of what we’ve taken we’ve seen about half of the realization. So even if we didn’t take a price increase the first quarter or next quarter, we would still expect to see our average selling price go up.

Okay. So it wasn’t as, for instance, like a rolling thing? It will just be sort of a hop or jump in the first quarter?

I think more of it will be on the first quarter just knowing how some of those arrangements work, where that’s one of the reset happens as you get into calendar year ’16.

And my last question, I know, if you will humor me. I was curious if there are any particular sort of dates or timeline that we as analysts should pay attention to in regards to that unsolicited acquisition bid?

I am going to turn that over to Matt.

Chiara on that one the next step would be to hear from Horizon as to when they would like to hold a meeting or meetings. So that presumably that will happen at some point in the not-too-distant future, and we will work kind of backwards from meeting date or dates the other upcoming event is November 19th, the hearing has been scheduled in court here in Santa Clara County. And there could be a decision after shortly after that hearing that may have some bearing on Horizon’s ability to continue with their bid.

And that’s -- the day was originally November 5th on that and the judge moved it back two weeks to November 19 and this is what Matt’s talking about, is the confidentiality suit that we filled against Horizon is in that litigation that will be in front of judge in about a week and a half.

Okay. All right. Great. Thank you, guys. Like I said, I thank you for humoring me, and great quarter.

[Operator Instructions] The next question comes from David Risinger with Morgan Stanley. Please go ahead.

I apologize if there’s any background noise. I just have two questions. The first is, Jim, I was hoping that you could talk about any formulary inflections coming in January, either positive or negative, if there are any. And then second, with respect to acquisitions, is there anything that you're close to, or any way that you would want to maybe provide a little bit more perspective on your ability to complete transactions in the near-term? Thank you.

So Dave, thanks. First on the formulary piece, we expect to see all the coverage that we have now continue into January ’16. Again most of those contracts are actually final at this point. The one that I’ve mentioned earlier with United Healthcare that was improved it actually when into effect on July 01, of ’15, so that will continue through. So we don’t expect to see any changes either way and we expect to be able to maintain that strong coverage that we have into 2016. With respect to the acquisition piece, I mean one of the things having been in this business for a long time is that a deal is not a deal until it is signed and the money changes hands. And so even if you’re close it doesn’t mean that you’ve got a deal coming anytime soon or that deal is going to happen. And the other piece is, that just by all the restrictions that are around is we really can’t comment if something was close, and as some people on this call have known and they’ve actually seen us on days or mornings before we’ve announced something. And so we have to do that just from a regulatory standpoint very close to the vest, and we do. So with that Augie anything you want to add around the financing piece? He’s actually shaking his head no. So I’m just going to leave it go with that. But we believe that we will do the financing as he said before.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Schoeneck for any closing remarks.

Thank you, operator. And I want to thank all of you for your continued interest in Depomed. We firmly believe that we will continue to build on our success and that our best years are still ahead. The dedicated employees here have had a track record that you’ve seen of building the business and creating value and we’ll continue to do that as our course goes forward and Depomed continues its ascent. So we thank you again and look forward to updating you in the future.