[0] DepoMed, Inc. Reports Second Quarter Results; Metformin GR and Ciprofloxacin GR Clinical Advancements and $12.3 Million Financing Highlight Quarter.

Business Editors/Health & Medical Writers

MENLO PARK, Calif.--(BW HealthWire)--Aug. 14, 2001

DepoMed, Inc. (AMEX:DMI) today announced a net loss of $4,934,000, or $0.56 per share, for the quarter ended June 30, 2001, compared to a net loss of $2,179,000, or $0.33 per share, for the quarter ended June 30, 2000. Cash and investment balances at June 30, 2001 were approximately $11,218,000.

For the second quarter of 2001, the Company reported revenues of $838,000, compared to $586,000 for the same period of 2000. The increase in revenue is primarily due to amounts earned under an interim feasibility agreement with an undisclosed New York Stock Exchange listed pharmaceutical company. Research and development expense for the quarter ended June 30, 2001 was $4,192,000 compared to $1,716,000 during the quarter ended June 30, 2000. The increase was primarily due to expenses for clinical trials with DepoMed proprietary products, including Phase II and Phase III trials with Metformin GR(TM), a once-daily metformin product for Type II diabetes that uses the Company's proprietary gastric retention technology.

During the second quarter, DepoMed completed a financing of $12.3 million. The financing consisted of the sale of 2.91 million shares of common stock and warrants to purchase 1.45 million shares to new and existing investors, led by Easton Hunt Capital Partners, L.P. and OrbiMed Advisors. Other investors included S Squared Technology Corp. and Special Situations Funds. In April 2001, the Company also announced that GATX Ventures, Inc. would provide up to $2 million in financing for the purchase of laboratory equipment and the completion of DepoMed's Menlo Park facilities including the Company's clinical scale cGMP manufacturing laboratory.

"This quarter's financing puts DepoMed in a comfortable position from a balance sheet perspective. With this cash on hand, we have sufficient funds to continue our clinical work as well as enter into further collaborations," commented John F. Hamilton, DepoMed's chief financial officer.

In the second quarter, the Company began a Phase III clinical trial for Metformin GR. The Phase III trial will be held at 60 sites throughout the United States. Later in the second quarter, final data from the 163-patient Phase II trial was announced. The analysis of the trial data confirmed interim findings indicating the safety, efficacy and improved tolerability of the product.

Additionally, a recent study sponsored by the National Institute of Health and the American Diabetes Foundation found that taking Metformin showed a 31% reduction in the risk of developing diabetes. This was the first time that Metformin has been shown to be effective in preventing the onset of the disease.

"This may effectively expand the market for oral glycemic agents, including our Metformin GR, to include prevention of diabetes in high-risk individuals. Of course, we would have to seek approval from the FDA, but the potential is very exciting," said John W. Fara, Ph.D., DepoMed's chairman, president and CEO.

"With our Metformin GR product in Phase III trials and our Ciprofloxacin GR product about to enter Phase II trials, we are continuing to move closer to our goal of commercializing DepoMed's proprietary products," said Fara. "Our cash plus our expanding pipeline put us in a position of strength as we evaluate potential marketing partners for Metformin GR."

Ciprofloxacin GR(TM), the Company's other lead product, is scheduled to begin Phase II clinical trials in the third quarter of 2001. DepoMed's once-daily formulation was found to have comparable bioavailability and had a significantly extended blood plasma concentration profile compared with CIPRO(R), which is taken two times per day. The Phase I human trial compared the internally developed, Ciprofloxacin GR with the currently marketed immediate release CIPRO(R). CIPRO is a registered trademark of Bayer AG.

DepoMed's Gastric Retention (GR) System is a patented oral drug delivery technology designed specifically for drugs preferentially absorbed high in the gastrointestinal tract. Using normal physiological processes by which the stomach retains large objects for further digestion, the GR System swells following ingestion and is retained in the stomach for a number of hours, while it continuously releases the incorporated drug at a controlled rate to absorption sites in the upper intestinal tract. The controlled release of the drug at the preferred absorption site optimizes delivery of the drug and potentially maximizes its therapeutic benefits. Upon completion of drug delivery, the GR System dissolves and is completely and safely eliminated through the intestine.

DepoMed, Inc., a development stage company, is applying its innovative oral drug delivery systems to the development of novel oral products and improved formulations of existing oral drugs. In addition to developing products jointly with other companies, DepoMed is developing its own line of proprietary products based on off-patent and over-the-counter drugs. Additional information about DepoMed may be found at the company's web site at http://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, the results of research and development efforts, the results of pre-clinical and clinical testing, the effect of regulation by the FDA and other agencies, the impact of competitive products, disputes arising from collaborative arrangements, product development, commercialization and technological difficulties, and other risks detailed in the Company's Securities and Exchange Commission filings.

                             DEPOMED, INC.
                     (A Development Stage Company)

                       STATEMENTS OF OPERATIONS
                              (Unaudited)



                           Three Months               Six Months
                           Ended June 30,           Ended June 30,
                        2001          2000         2001        2000
                       --------------------      -------------------
Revenue:
 Collaborative
  agreements          $393,017     $     --     $671,272     $     --
 Collaborative
  agreements with
  affiliates           444,944      585,562      804,111      961,980
                     ---------     --------    ---------    ---------

Total revenue          837,961      585,562    1,475,383      961,980

Operating
 expenses:
Research and
 development         4,191,794    1,715,616    6,847,476    2,988,377
General and
 administrative        651,096      494,483    1,237,715      997,076
Purchase of
 in-process
 research
 and development            --           --           --           --
                     ---------    ---------   ----------   ----------

Total operating
 expenses            4,842,890    2,210,099    8,085,191    3,985,453
                    ----------   ----------   ----------   ----------

Loss from
 operations         (4,004,929)  (1,624,537)  (6,609,808)  (3,023,473)

Other income
 (expenses):
   Equity in loss
    of joint
    venture           (821,594)    (659,961)  (1,451,712)    (990,006)
   Interest income
    (expense), net    (107,282)     105,286      (62,135)     186,813

Total other income
 (expenses)           (928,876)    (554,675)  (1,513,847)    (803,193)

Net loss            (4,933,805)  (2,179,212)  (8,123,655)  (3,826,666)

Accretion of
 dividend
 on preferred stock   (224,000)    (210,000)    (444,000)    (371,000)
                    -----------  -----------   ----------    ---------
Net loss available
 to common
 shareholders      $(5,157,805) $(2,389,212)  $8,567,655) $(4,197,666)
                   ============ ============  =========== ============

Basic and diluted
 net loss per
 common share          $ (0.56)     $ (0.33)     $ (0.96)    $  (0.59)
                   ============ ============  =========== ============
Shares used in
 computing basic
 and diluted net
 loss per common
 share               9,161,338    7,189,363    8,891,127    7,110,870
                   =========== ============  ===========  ===========



                              Period From
                               Inception
                               (Aug. 7,
                                 1995)
                                  to
                               June 30,
                                 2001
                              ----------


Revenue:
 Collaborative
  agreements                   $2,494,359
 Collaborative
  agreements with
  affiliates                    2,558,554
                               ----------

Total revenue                   5,052,913

Operating
 expenses:
Research and
 development                   21,514,318
General and
 administrative                 8,610,849
Purchase of
 in-process
 research and
 development                      298,154
                                ---------
Total operating
 expenses                      30,423,321
                               ----------
Loss from
 operations                   (25,370,408)

Other income
 (expenses):
  Equity in loss
   of joint
   venture                    (15,654,339)
  Interest income
    (expense), net                899,806
                              ------------
Total other
 income
 (expenses)                   (14,754,533)

Net loss                      (40,124,941)

Accretion of
 dividend
 on preferred
 stock                         (1,251,000)
                            --------------
Net loss available
 to common
 shareholders               $ (41,375,941)
                            ==============


Basic and diluted net
 loss per common share

Shares used in computing
 basic and diluted net
 loss per common share


                             DEPOMED, INC.
                     (A Development Stage Company)

                            BALANCE SHEETS


                                          June 30,       December 31,
                                            2001             2000
                                         ----------      -----------
                                        (Unaudited)        (Note 1)

ASSETS
Current assets:

    Cash and cash
     equivalents                          $ 7,389,193    $  3,878,354
    Marketable securities                   3,829,190       2,620,525
    Accounts receivable                       321,272          21,775
    Receivable from joint
     venture                                  444,944         432,313

    Prepaid and other current
     assets
                                              133,360         168,666
                                         ------------    ------------
      Total current assets                 12,117,959       7,121,633

Property and equipment, net                 2,074,689       1,317,149
Other assets                                  294,033         293,756
                                         ------------    ------------
                                         $ 14,486,681    $  8,732,538
                                         ============    ============
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                       $  1,566,318    $    797,795
  Accrued compensation                        293,061         245,471
  Other accrued liabilities                    81,098         367,227
  Payable to joint venture                    821,594         684,328
  Capital lease obligation,
   current portion                             32,117          39,434
  Long-term debt, current
   portion                                    298,019         139,181
  Other current liabilities                    26,488         103,928
                                         ------------    ------------
     Total current liabilities              3,118,695       2,377,364

Capital lease obligation,
 non-current portion                            6,352          18,200
Long-term debt,
 non-current portion                          443,250         217,467
Promissory note from
 related party, non-current
 portion                                    2,933,015       1,533,342

Commitments

Shareholders' equity:
  Preferred stock, no par value;
  5,000,000 shares authorized;
  Series A convertible exchangeable
  preferred stock; 25,000 shares
  designated, 12,015 shares issued
  and outstanding at June 30, 2001
  and December 31, 2000                    13,266,000      12,822,000

  Common stock, no par value,
   25,000,000 shares authorized;
   11,526,835 and 8,617,913 shares
   issued and outstanding at
   June 30, 2001 and
   December 31, 2000,
   respectively                            36,099,690      24,600,567
  Deferred compensation                            --         (24,744)
  Deficit accumulated during
   the development stage                  (41,375,941)    (32,808,286)
  Accumulated other comprehensive
   loss                                        (4,380)         (3,372)
                                          ------------   -------------
     Total shareholders' equity             7,985,369       4,586,165
                                          ------------   -------------
                                         $ 14,486,681    $  8,732,538
                                         =============   =============

      Note 1: The balance sheet as of December 31, 2000 was derived from
the audited balance sheet included in the Company's 2000 Annual Report
on Form 10-K filed with the Securities and Exchange Commission.