Glumetza 500 mg Supply Resumed

Santarus, Inc. (SNTS - Snapshot Report) and Depomed, Inc. (DEPO - Analyst Report) recently announced that they have resumed supply of their type II diabetes product, Glumetza 500 mg.

Product Recalled in June 2010

In June 2010, Depomed had announced a voluntary recall of 52 lots due to the presence of certain substance in bottles containing Glumetza 500 mg. Although the 1000 mg dosage of Glumetza was not included in the product recall, the resumption of supply of the 500 mg dosage is a major positive for Santarus. Prior to the product recall, the 500 mg version accounted for 60% of Glumetza net sales.

Santarus has a co-promotion agreement with Depomed for Glumetza in the US. With the genericization of Zegerid, Santarus has shifted most of its promotional focus to Glumetza. We are positive on the co-promotion agreement as it not only provides Santarus with an additional source of revenue; it also expands the company’s reach into the growing type II diabetes market by using the existing infrastructure.

Neutral on Santarus

We currently have a Neutral recommendation on Santarus, which is supported by a Zacks #3 Rank (short-term “Hold” rating). Now that Zegerid is facing generic competition, the company has shifted its focus to Glumetza and its pipeline candidates. The company also implemented a restructuring initiative and entered into agreements to expand its product portfolio. While we are pleased with the company’s attempt to expand its portfolio, we remain concerned about its foray into new therapeutic areas. We expect investor focus to remain on the company’s progress with its pipeline.

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