Depomed Inc (NASDAQ:DEPO) is looking to cut 40% of its staff as it shops around its best-selling drug and shuts down its current headquarters, all in an effort to reduce costs and stem the losses it has experienced over the year. The Depomed layoffs in 2018 will be a result of a weak performance by the company this year, with poor showings in its most recent quarterly report and revenue declines year-over-year.
The specialty pharmaceutical company is also ridding itself of its best-selling drug by moving the “Nucynta” sales rights and dealing them to Collegium Pharmaceutical Inc (NASDAQ:COLL). Meanwhile, pharma layoffs in 2018 will be off to a rough start as the company seeks to restructure itself and implement cost-cutting measures.
The Depomed layoffs are connected to Nucynta, as the company claims that it will be able to significantly reduce its costs and workforce once the drug is dealt away. The Newark-based pharma company is also looking to relocate to a cheaper location than its current facility.
“As we are executing on our new strategy, we needed to right-size the organization,” Depomed President and CEO Arthur Higgins said in a press release. “Taking these steps, in terms of headcount reductions and office relocation, will provide additional financial and strategic benefit.”
The overall move will see the company shrink. Nucynta accounted for $183.3 million in sales or about 58% of the company’s product sales through the first nine months of this year.
Part of the reason that the company is selling off its most popular product is due to the increased pressure from regulators that pharma companies are facing in the wake of the ongoing opioid crisis that is battering America.
“Given the dynamics in the opioid market, we concluded that a broader portfolio of products would more effectively compete and meet the needs of patients, physicians, and payors,” Higgins said.
Depomed to Make Job Cuts and Relocate as Part of $80mn Cost-Cutting Measures
The sale of the drug combined with the Depomed job cuts and headquarters relocation will result in about $80.0 million in savings on an annualized basis. The company is trying to pare itself down to a more manageable and less costly level.
When all is said and done following the Depomed cost-cutting measures, the company will have about 70 employees still with it.
The Depomed layoffs and headquarter move are all expected to take place in mid-2018.
Depomed’s 3rd Quarterly Sales Declined Year-Over-Year in 2017
The company has been suffering through several quarters of poor results. The Depomed revenue declines show that the company’s total revenue shot down from $110,524 in 2016 to $95,413 in 2017 during the third quarter.
The Depomed quarterly losses didn’t stop there, however. The company has seen a quarterly net loss of $16.0 million.
The stock market has also not been kind to Depomed; in October 2016, the stock value was worth well over three-times its current price compared to today.
“Less than a year after hedge fund coup, East Bay drug maker cuts jobs, looks to move HQ,” San Francisco Business Times, December 4, 2017.
“Depomed Announces Third Quarter 2017 Financial Results,” Depomed, November 7, 2017.
“East Bay drugmaker Depomed plans to cut staff by 40 percent, move from Newark following new deal,” The Mercury News, December 4, 2017.