Depomed, Inc. Takes Action To Support Momentum In ProQuin(R) XR Sales; Company Amends Marketing Agreement With Esprit Pharma, Inc.

MENLO PARK, Calif.--(BUSINESS WIRE)--July 24, 2006--Depomed, Inc. (NASDAQ:DEPO - News) announced today that it has amended its license agreement with Esprit Pharma for the marketing of ProQuin® XR. Under revised terms, Depomed has been granted co-promotion rights, which will enable Depomed to promote the product through its own sales force or through a contract sales organization or other third party. In addition, Depomed representatives will sit on a joint marketing team, which will review all promotional and marketing activities for ProQuin XR.

The amended agreement also provides for minimum detail obligations on the part of Esprit applicable through 2006, which had not been part of the original agreement. Depomed has also extended the due date for the $10 million license fee payable by Esprit until December 2006 rather than July 2006 to provide Esprit with financial flexibility for continued promotional emphasis on ProQuin XR.

"We continue to believe in the potential of ProQuin XR and have taken steps to be more active in the commercialization of the product," said John W. Fara, Ph.D., chairman, president and chief executive officer of Depomed. "As we move forward to further assist Esprit's commercialization efforts, we intend to begin discussions with potential sublicense partners over the next several months to expand and complement Esprit's sales force reach."

Carl Pelzel, executive vice president and chief operating officer of Depomed added, "In recent weeks, market penetration for ProQuin® XR has significantly improved as a result of our response to the market's demand for a 3-tablet blister pack, with prescriptions dramatically increasing from approximately 475 per week in early June to over 1100 by month end. Today's action is intended to help ensure continued momentum in the market adoption of ProQuin XR. While Esprit continues to be responsible for marketing expenses, we look forward to taking an active role in sales and marketing strategy through the joint marketing team. Additionally, the payment extension on the license fee will provide Esprit financial flexibility to continue to focus resources on the commercial success of ProQuin XR."

The amendment to the agreement also provides for royalties paid to Depomed for ProQuin XR sales in the fourth quarter of 2005, substantially all of which related to the initial stocking of the product, to be credited toward Esprit's $4.6 million minimum royalty obligation for 2006 sales. The credit will not exceed $2 million. Esprit's minimum royalty obligation in subsequent years remains at $5.0 million, and the royalty rate of 15 percent to 25 percent on ProQuin XR net sales was not changed. Esprit also remains obligated to pay Depomed a $10 million license fee in July 2007. Depomed and Esprit originally entered into their ProQuin XR license agreement granting Esprit U.S. marketing and distribution rights in July 2005. At that time, Esprit made a $30 million license fee payment to Depomed.

The parties' ProQuin XR co-promotion agreement grants Depomed co-promotion rights on up to 40,000 physicians not called upon by Esprit's sales force. The agreement does not obligate Depomed to co-promote ProQuin XR. The co-promotion agreement allows Depomed to exercise its co-promotion directly, through a contract sales organization or through other third parties. Depomed will receive a co-promotion fee of 18 percent on net sales, in addition to its royalty under the license agreement, based on sales generated by physicians called upon by Depomed's sales force. The co-promotion agreement has a four-year term.

About Depomed

Depomed, Inc. is a specialty pharmaceutical company utilizing its innovative AcuForm(TM) drug delivery technology to develop novel oral products and improved, extended release formulations of existing oral drugs. AcuForm-based products are designed to provide once daily administration and reduced side effects, improving patient convenience, compliance and pharmacokinetic profiles. ProQuin® XR (ciprofloxacin hydrochloride) once daily, extended-release tablets have been approved by the FDA for the treatment of uncomplicated urinary tract infections and are currently being marketed in the United States. In addition, once daily Glumetza(TM) for the treatment of Type II diabetes has been approved and is currently being marketed in Canada. The company is conducting a Phase III trial in postherpetic neuralgia with its product candidate, Gabapentin GR(TM). Additional information about Depomed may be found at its web site, www.depomedinc.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties including, but not limited to those related to ProQuin XR sales and marketing efforts; our co-promotion arrangement with Esprit; increases in sales of ProQuin XR; our research and development efforts, including pre-clinical and clinical testing; regulation by the FDA and other government agencies; the timing of regulatory applications and product launches; and other risks detailed in the company's Securities and Exchange Commission filings, including the company's Annual Report on Form 10-K and most recent Quarterly Report on form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Contact: Depomed, Inc. Sylvia Wheeler, 650-462-5900

Source: Depomed, Inc.

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