Drug maker Depomed is preparing to put itself up for sale, following calls from activist investor Starboard Value LP to explore such a move, just a year after it fought off a hostile acquisition bid, people familiar with the matter said.
Negotiations with potential buyers are expected to kick off shortly after Depomed receives a court decision clarifying the patent exclusivity of its biggest drug, Nucynta, an opiate used to treat severe, often chronic pain, the people said this week. The ruling is expected by the end of the month.
Depomed is working with investment bank Morgan Stanley, which last year helped the company defend itself against a $3 billion unsolicited stock-for-stock offer from Horizon Pharma.
The sources asked not to be identified because the sale process is confidential. Depomed and Morgan Stanley declined to comment.
In April, Starboard announced it had accumulated a stake of close to 10 percent in Depomed and published a letter calling for the company to explore a sale. The following month, Starboard said it planned to request a special meeting to oust Depomed's board. The hedge fund is entitled to set the date of the special meeting between Sept. 24 and Nov. 17.
Newark, California-based Depomed acquired Nucynta in early 2015 from Janssen Pharmaceuticals for just over $1 billion. Its plan was to use its large sales force to scale up Nucynta's revenue to more than $500 million by 2018.
In recent months, however, Nucynta's sales have lagged the company's expectations, partly because of increasing concern among health insurers about the addictive potential of opiate-based drugs.
Depomed is embroiled in a court battle with several generics manufacturers that could potentially extend the patent life for some versions of Nucynta to as late as 2029. Nucynta is expected to enjoy protection through at least 2023.
In its second-quarter earnings statement in August, Depomed, which has market capitalization of $1.3 billion, lowered its sales forecast for the year by around $20 million.
Horizon said in April it was not interested in revisiting a deal with Depomed. Earlier this week, Horizon agreed to acquire rare diseases drugmaker Raptor Pharmaceutical for around $800 million.