The Numbers Are In: Bay Area's Depomed Reveals 328 Job Cuts in WARN Notice
Depomed filed notice with the State of California, indicating it planned to lay off 328 staffers starting Feb. 4, 2018 through the end of 2018.
The filing stated, in part, “All the positions referenced in this letter will be eliminated at the Newark (Calif.) location and throughout the U.S.”
The company’s sales department will take the brunt of the layoffs, losing 235 jobs. In addition, approximately 22 district managers and top-level regional executives will lose their jobs. According to the letter, about 60 different job categories will be affected.
Depomed focuses on drugs for pain and other central nervous system conditions. Its top-selling drug is Nucynta.
The company swapped out its management team in March after a battle with investors. Arthur Higgins, formerly chief executive officer of Bayer Healthcare took the top spot as Depomed’s president and chief executive.
Earlier this month, the company indicated it planned to lay off 40 percent of staff and move its headquarters from the Bay Area to an unidentified location in the Midwest or East Coast. This followed a deal with Collegium Pharmaceutical to commercialize Nucynta. With Collegium taking over the commercialization of the drug, Depomed will not require the same level of sales staffing, and it will also require a smaller headquarters as well. In an announcement at the time, the company said the relocation will take place in the middle of 2018 and save Depomed about $10 million annually.
“We are looking at locations that will provide us with improved access to top-tier pharmaceutical talent that will build Depomed into a leading specialty pharmaceutical company,” said Higgins in a statement at the time. “I would like to sincerely thank all of the employees impacted by this restructuring for their dedicated and loyal service to Depomed.”
Depomed handed off the commercialization to Collegium for two formulations of Nucynta, an extended release and an immediate release version. Depomed receives royalties on all sales of Nucynta, and in the first four years, will receive a minimum royalty of $135 million annually. The company acquired the U.S. rights to the drug from Janssen Pharmaceuticals a Johnson & Johnson company, in 2015 for $1.05 billion.
Much of the changes are related to an overall restructuring of the company to focus on its Neurology and Specialty businesses. “Taking these steps, in terms of headcount reductions and office relocation, will provide additional financial and strategic benefits,” said Higgins, reported The Mercury News.
The investor battles were with Jeffrey Smith, managing member of hedge fund Starboard Value LP. Starboard began a battle to oust Depomed’s board as early as April 2016, and took a 9.8 percent stake in the company. When Depomed, under its management team led by James Schoeneck, made a hostile takeover attempt of Horizon Pharma. Starboard said it did not approve of the company’s governance and expressed concerns about Depomed’s capital allocation.
The activist hedge fund is noted for this approach, which it used with Darden Restaurants in 2014. It was semi-successful in a similar attempt with Yahoo.
In the case of Depomed, it was successful, replacing Schoeneck with Higgins. In addition, Higgins, William McKee, former chief financial officer of Barr Pharmaceuticals and Gavin Molinelli, a partner at Starboard Value LP, joined the company’s board of directors. They replaced Samuel Saks and David Zenoff, who resigned from the board.