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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-66843
PROSPECTUS
DEPOMED, INC.
1,000,000 Shares of Common Stock
83,338 Shares of Common Stock Issuable upon Exercise of Warrants
________
These shares may be offered and sold from time to time by certain security
holders of the company identified in this prospectus. See "Selling Security
Holders." The selling security holders acquired 1,000,000 of the shares in
connection with a Common Stock Purchase Agreement, dated February 23, 1998,
among the company and certain selling security holders. 83,338 of the shares
are issuable upon exercise of warrants to purchase common stock issued by the
company in an April 1997 note and warrant financing ("bridge warrants"). The
selling security holders will receive all of the proceeds from the sale of the
shares and will pay all underwriting discounts and selling commissions, if any,
applicable to the sale of the shares. We will pay the expenses of registration
of the sale of the shares.
On November 19, 1998, DepoMed had 6,463,438 shares of its common stock and
1,200,000 publicly-traded common stock purchase warrants issued and outstanding.
On November 9, 1998, our common stock began trading on the American Stock
Exchange under the symbol "DMI" and our common stock purchase warrants began
trading on the American Stock Exchange under the symbol "DMI/WS". Prior to
November 9, 1998, our common stock and redeemable warrants traded on the Nasdaq
SmallCap Market. On November 19, 1998, the last reported sale price of the
common stock on the American Stock Exchange was $7.88 per share and the last
reported sale price of the common stock purchase warrants was $3.38 per warrant.
Beginning on page 4, we have listed several "RISK FACTORS" which you should
consider. You should read the entire prospectus carefully before you make your
investment decision.
_______________________
The Securities and Exchange Commission and state regulatory authorities have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
________________________
The Date of this Prospectus is November 20, 1998
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling security holders are offering to
sell, and seeking offers to buy, shares of DepoMed common stock only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale of the shares.
In this prospectus, the "company," the "Registrant," "DepoMed," "we," "us,"
and "our" refer to DepoMed, Inc.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and other
documents with the Securities and Exchange Commission (the "SEC"). You may read
and copy any document we file at the SEC's public reference room at Judiciary
Plaza Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You
should call 1-800-SEC-0330 for more information on the public reference room.
The SEC maintains an internet site at http://www.sec.gov where certain
information regarding issuers (including DepoMed) may be found.
This prospectus is part of a registration statement that we filed with the SEC
(Registration No. 66843). The registration statement contains more information
than this prospectus regarding DepoMed and its common stock, including certain
exhibits and schedules. You can get a copy of the registration statement from
the SEC at the address listed above or from its internet site.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate" into this prospectus information we file
with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information may include documents filed after the date of this
prospectus which update and supersede the information you read in this
prospectus. We incorporate by reference the documents listed below, except to
the extent information in those documents is different from the information
contained in this prospectus, and all future documents filed with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
we terminate the offering of these shares.
<TABLE>
<CAPTION>
SEC Filing
(File No. 001-13111 Period/Filing Date
------------------- ------------------
<S> <C>
Annual Report on Form 10-KSB Year ended December 31, 1997
Quarterly Reports on Form 10-QSB Quarter ended March 31, 1998
Quarter ended June 30, 1998
Quarter ended September 30, 1998
Registration Statement on Form 8-A describing Filed on November 6, 1998
the common stock
Form 8-K Filed on November 10, 1998
</TABLE>
You may request a copy of these documents, at no cost, by writing to:
DepoMed, Inc.
366 Lakeside Drive
Foster City, California 94404
Attention: Investor Relations Department
Telephone: (650)513-0990.
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FORWARD-LOOKING INFORMATION
Statements made in this prospectus or in the documents incorporated by
reference herein that are not statements of historical fact are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). A number of risks and uncertainties,
including those discussed under the caption "Risk Factors" below and the
documents incorporated by reference herein could affect such forward-looking
statements and could cause actual results to differ materially from the
statements made.
ABOUT THE COMPANY
We are a development stage company engaged in the development of new and
proprietary oral drug delivery technologies. We have developed two types of
oral drug delivery systems, the Gastric Retention System and the Reduced
Irritation System (the "DepoMed Systems"). The Gastric Retention System is
designed to be retained in the stomach for an extended period of time while it
delivers the incorporated drug or drugs, and the Reduced Irritation System is
designed to reduce the gastrointestinal irritation that is a side effect of many
orally administered drugs. In addition, the DepoMed Systems are designed to
provide continuous, controlled delivery of an incorporated drug.
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RISK FACTORS
You should consider carefully the following risk factors, along with the other
information contained or incorporated by reference in this prospectus, in
deciding whether to invest in our securities. These factors, among others, may
cause actual results, events or performance to differ materially from those
expressed in any forward-looking statements we made in this prospectus.
Early Stage of Development; Limited Revenues. We are at an early stage of
development. Accordingly, our business is subject to all of the business risks
associated with a new enterprise, including:
. uncertainties regarding product development;
. lack of collaborative partnering relationships;
. lack of revenue and uncertainty regarding future revenues;
. limited financial and personnel resources; and
. lack of established credit facilities.
At September 30, 1998, we had an accumulated deficit of approximately $4.0
million. As we expand our research and development efforts, we anticipate that
we will continue to incur substantial operating losses for at least the next
several years. Therefore, we expect our cumulative losses to increase. To date,
we have had no revenues from product sales and only minimal revenues from our
collaborative research and development arrangements and feasibility studies. Our
success will depend on commercial sales of products that generate significant
revenues for us. We may not be able to achieve commercial sales of any revenue-
generating products.
Product Development Risks. Our research and development programs are at an
early stage. Pharmaceutical companies cannot incorporate the DepoMed Systems
into pharmaceutical products until we or our collaborative partners complete
substantial additional research and development on the DepoMed Systems. Even if
we or our collaborative partners develop the DepoMed Systems, they or products
using them:
. may not be offered for commercial sale; or
. may prove to have undesirable or unintended side effects that prevent or
limit their commercial use.
Before we or others make commercial sales of products using the DepoMed
Systems, we or our collaborative partners must:
. conduct clinical tests showing that these products are safe and
effective; and
. obtain regulatory approval.
This process involves substantial financial investment. Successful commercial
sales of any of these products requires:
. market acceptance;
. cost-effective commercial scale production; and
. reimbursement under private or governmental health plans.
We will have to curtail, redirect or eliminate our product development
programs if we or our collaborative partners find that:
. the DepoMed Systems prove to have unintended or undesirable side effects;
or
. products which appear promising in preclinical studies do not demonstrate
effectiveness in larger-scale clinical trials.
These events could have a material adverse effect on the company.
Need For Substantial Additional Funds. We anticipate that our existing capital
resources will permit us to meet our capital and operational requirements
through at least the end of 1999. However, we base this expectation on our
current operating plan which can change as a result of many factors.
Accordingly, we could require additional funding sooner than anticipated. Our
cash needs may also vary materially from our current expectations because of
numerous factors, including:
. results of research and development;
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. relationships with current and potential collaborative partners;
. changes in the focus and direction of our research and development
programs;
. technological advances; and
. results of clinical testing, requirements of the United States Food and
Drug Administration (the "FDA") and comparable foreign regulatory
agencies.
We will need substantial funds of our own or from third parties to:
. conduct research and development programs;
. conduct preclinical and clinical testing; and
. manufacture (or have manufactured) and market (or have marketed)
potential products using the DepoMed Systems.
Our existing capital resources will not be sufficient for us to operate until
we generate revenues sufficient to support our operations. We have limited
credit facilities and no other committed source of capital. We will have to
raise additional funds to continue our development programs. We may not be able
to raise such additional capital on favorable terms, or at all. If the company
raises additional capital by selling its equity or convertible debt securities,
the issuance of such securities could result in dilution to our shareholders.
If adequate funds are not available the company may have to:
. curtail operations significantly; or
. obtain funds through entering into collaboration agreements on
unattractive terms.
If we are not able to raise capital, we will be materially adversely effected.
Dependence on and Need for Collaborative Partners. We have generated all of
our revenues through collaborative arrangements with pharmaceutical and
biotechnology companies. Our strategy for research, development, clinical
testing, manufacturing and commercial sale of products using the DepoMed Systems
requires that we maintain our current collaborative arrangements and enter into
additional collaborative arrangements. The success of collaborative
arrangements requires that the company's present and future collaborative
partners:
. perform their obligations as expected; and
. devote sufficient resources to the development, clinical testing and
marketing of products developed under collaborations.
The company's collaborative partners may not continue to:
. fund their particular projects;
. perform their agreed-to obligations; or
. choose to develop or make commercial sales of products using the DepoMed
Systems.
For example, Bristol-Myers Squibb Company ("BMS") holds an option to license
the DepoMed Gastric Retention System for its product. The option expires in
April 1999. BMS has no obligation to exercise its option and may choose not to
exercise its option. In 1997, GalaGen Inc. ("GalaGen") chose not to enter into
a product development agreement with the company even though the results of a
feasibility study demonstrated the effectiveness of the Gastric Retention System
in protecting GalaGen's incorporated product.
Further, the company may not be able to enter into future collaborative
arrangements on acceptable terms. The following events could have a material
adverse effect on the company:
. any parallel development by a collaborative partner of competitive
technologies or products;
. arrangements with collaborative partners that limit or preclude the
company from developing products or technologies;
. premature termination of an agreement; or
. failure by a collaborative partner to devote sufficient resources to the
development or commercial sales of products using the DepoMed Systems.
Collaborative agreements are generally complex and may contain provisions
which give rise to disputes regarding the relative rights and obligations of the
parties. Any such dispute could delay collaborative research, development or
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commercialization of potential products, or could lead to lengthy, expensive
litigation or arbitration.
Fluctuations in Operating Results. The following factors will affect our
quarterly operating results and may result in a material adverse effect on the
price of our common stock and redeemable warrants:
. variations in revenues obtained from collaborative agreements, including
milestones, royalties, license fees and other contract revenues;
. the timing of any future product introductions by us or our collaborative
partners;
. market acceptance of the DepoMed Systems;
. regulatory actions;
. adoption of new technologies;
. the introduction of new products by our competitors;
. manufacturing costs and capabilities;
. changes in government funding; and
. third-party reimbursement policies.
Competition. Competition in pharmaceutical products and drug delivery systems
is intense. We expect competition to increase. Competing technologies or
products developed in the future may prove superior either generally or in
particular market segments to the DepoMed Systems or products using the DepoMed
Systems. These developments would make the DepoMed Systems or products using
them noncompetitive or obsolete.
All of our principal competitors have substantially greater financial,
marketing, personnel and research and development resources than us. In
addition, many of our potential collaborative partners have devoted, and
continue to devote, significant resources to the development of their own drug
delivery systems and technologies.
Government Regulation. Numerous governmental authorities in the United States
and other countries regulate our research and development activities and those
of our collaborative partners . Governmental approval is required of all
potential pharmaceutical products using the DepoMed Systems and the manufacture
and marketing of products using the DepoMed Systems prior to the commercial use
of those products. The regulatory process will take several years and require
substantial funds. If products using the DepoMed Systems do not receive the
required regulatory approvals or if such approvals are delayed, the company's
business would be materially adversely affected. The requisite regulatory
approvals may not be obtained without lengthy delays, if at all.
In the United States, the FDA rigorously regulates pharmaceutical products,
including any drugs using the DepoMed Systems. If a company fails to comply
with applicable requirements, the FDA or the courts may impose sanctions. These
sanctions may include civil penalties, criminal prosecution of the company or
its officers and employees, injunctions, product seizure or detention, product
recalls, total or partial suspension of production. The FDA may withdraw
approved applications or refuse to approve pending new drug applications,
premarket approval applications, or supplements to approved applications.
The company generally must conduct preclinical testing on laboratory animals
of new pharmaceutical products prior to commencement of clinical studies
involving humans. These studies evaluate the potential efficacy and safety of
the product. The company then submits the results of these studies to the FDA
as part of an investigational new drug application ("IND"), which must become
effective before beginning clinical testing in humans.
Typically, human clinical evaluation involves a time-consuming and costly three-
phase process:
. In Phase I, the company conducts clinical trials with a small number of
subjects to determine a drug's early safety profile and its
pharmacokinetic pattern.
. In Phase II, the company conducts clinical trials with groups of patients
afflicted with a specific disease in order to determine preliminary
effectiveness optimal dosages and further evidence of safety.
. In Phase III, the company conducts large-scale, multi-center, comparative
trials with patients afflicted with a target disease in order to provide
enough data to demonstrate the effectiveness and safety required by the
FDA prior to commercialization.
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The FDA closely monitors the progress of each phase of clinical testing. The
FDA may, at its discretion, re-evaluate, alter, suspend or terminate testing
based upon the data accumulated to that point and the FDA's assessment of the
risk/benefit ratio to patients.
The results of the preclinical and clinical testing are submitted to the FDA
in the form of a new drug application (an "NDA") for approval prior to
commercialization. In responding to an NDA, the FDA may grant marketing
approval, request additional information or deny the application. Failure to
receive approval for any products using the DepoMed Systems would have a
material adverse effect on the company.
Various FDA regulations apply to over-the-counter products that comply with
monographs issued by the FDA. These regulations include:
. current good manufacturing practices ("cGMP") requirements;
. general and specific over-the-counter labeling requirements (including
warning statements);
. advertising restrictions; and
. requirements regarding the safety and suitability of inactive
ingredients.
In addition, the FDA may inspect over-the-counter products and manufacturing
facilities. A failure to comply with applicable regulatory requirements may lead
to administrative or judicially imposed penalties. If an over-the-counter
product differs from the terms of a monograph, it will, in most cases, require
FDA approval of an NDA for the product to be marketed.
Foreign regulatory approval of a product must also be obtained prior to
marketing the product internationally. Foreign approval procedures vary from
country to country. The time required for approval may delay or prevent
marketing in certain countries. In certain instances the company or its
collaborative partners may seek approval to market and sell certain products
outside of the United States before submitting an application for United States
approval to the FDA. The clinical testing requirements and the time required to
obtain foreign regulatory approvals may differ from that required for FDA
approval. Although there is now a centralized European Union ("EU") approval
mechanism in place, each EU country may nonetheless impose its own procedures
and requirements. Many of these procedures and requirements are time-consuming
and expensive. Some EU countries require price approval as part of the
regulatory process. These constraints can cause substantial delays in obtaining
required approval from both the FDA and foreign regulatory authorities after the
relevant applications are filed, and approval in any single country may not
meaningfully indicate that another country will approve the product.
Manufacturing, Marketing and Sales. We do not have and do not intend to
establish in the foreseeable future internal manufacturing, marketing or sales
capabilities. Rather, we intend to use the facilities of our collaborative
partners or those of contract manufacturers to manufacture products using the
DepoMed Systems. Our dependence on third parties for the manufacture of products
using the DepoMed Systems may adversely affect our ability to develop and
deliver such products on a timely and competitive basis. There may not be
sufficient manufacturing capacity available to the company when, if ever, it is
ready to seek commercial sales of products using the DepoMed Systems. In
addition, we expect to rely on our collaborative partners or to develop
distributor arrangements to market and sell products using the DepoMed Systems.
The company may not be able to enter into manufacturing, marketing or sales
agreements on reasonable commercial terms, or at all, with third parties.
Failure to do so would have a material adverse effect on the company.
Applicable cGMP requirements and other rules and regulations prescribed by
foreign regulatory authorities will apply to the manufacture of products using
the DepoMed Systems. The company will depend on the manufacturers of products
using the DepoMed Systems to comply with cGMP and applicable foreign standards.
Any failure by a manufacturer of products using the DepoMed Systems to maintain
cGMP or comply with applicable foreign standards could delay or prevent their
commercial sale. This could have a material adverse effect on the company.
Patents and Proprietary Rights. Our success will depend in part on our ability
to obtain and maintain patent protection for our technologies and to preserve
our trade secrets. Our policy is to file patent applications in the United
States and foreign jurisdictions. We currently hold two issued United States and
two pending United States patent
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applications. We have applied for patents in numerous foreign countries. Some of
those countries have granted our applications and other applications are still
pending. Our patent applications may not be approved and any issued patents may
not provide competitive advantages for the DepoMed Systems or our technologies.
With respect to already issued patents and any patents which may issue from
our applications, there can be no assurance that claims allowed will be
sufficient to protect our technologies. The United States maintains patent
applications in secrecy until a patent issues. As a result, the company cannot
be certain that others have not filed patent applications for technology covered
by our pending applications or that the company was the first to file patent
applications for such technology. Competitors may have filed applications for,
or may have received patents and may obtain additional patents and proprietary
rights relating to, compounds or processes that may block our patent rights or
permit the competitors to compete without infringing the patent rights of the
company.
In addition:
. any patents issued to the company may be challenged, invalidated or
circumvented; or
. the rights granted under the patents issued to the company may not
provide proprietary protection or commercial advantage to the company.
We also rely on trade secrets and proprietary know-how. We seek to protect
that information, in part, through entering into confidentiality agreements with
employees, consultants, collaborative partners and others before such persons or
entities have access to our proprietary trade secrets and know-how. These
confidentiality agreements may not be effective in certain cases, due to, among
other things, the lack of an adequate remedy for breach of an agreement or a
finding that an agreement is unenforceable. In addition, our trade secrets may
otherwise become known or be independently developed by competitors.
Our ability to develop our technologies and to make commercial sales of
products using our technologies also depends on not infringing others' patents.
We are not aware of any claim of patent infringement against us. However, if
claims concerning patents and proprietary technologies arise and are determined
adversely to the company, the claims could have a material adverse effect on the
company. Extensive litigation regarding patent and other intellectual property
rights is common in the pharmaceutical industry. We may need to engage in
litigation to enforce any patents issued or licensed to the company or to
determine the scope and validity of third-party proprietary rights. There can
be no assurance that our issued or licensed patents would be held valid by a
court of competent jurisdiction. Whether or not the outcome of litigation is
favorable to the company, the diversion of our financial and managerial
resources to such litigation could have a material adverse effect on the
company. We may also be required to participate in interference proceedings
declared by the United States Patent and Trademark Office for the purpose of
determining the priority of inventions in connection with the patent
applications of the company or other parties. Adverse determinations in
litigation or interference proceedings could require the company to seek
licenses (which may not be available on commercially reasonable terms) or
subject the company to significant liabilities to third parties. These events
could have a material adverse effect on the company.
Relationships of Advisors with other Entities. Two groups (the Policy
Advisory Board and Development Advisory Board) advise the company on business
and scientific issues and future opportunities. Certain members of our Policy
Advisory Board and Development Advisory Board work full-time for academic or
research institutions. Others act as consultants to other companies. In
addition, except for work performed specifically for and at the direction of the
company, any inventions or processes discovered by such persons will be their
own intellectual property or that of their institutions or other companies.
Further, invention assignment agreements signed by such persons in connection
with their relationships with the company may be subject to the rights of their
primary employers or other third parties with whom they have consulting
relationships. If the company desires access to inventions which are not its
property, the company will have to obtain licenses to such inventions from these
institutions or companies. The company may not be able to obtain these licenses
on commercially reasonable terms.
Healthcare Reform; Uncertain Availability of Healthcare Reimbursement. The
healthcare industry
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is changing rapidly as the public, government, medical professionals, third-
party payors and the pharmaceutical industry examine ways to contain or reduce
the cost of health care. Changes in the healthcare industry could impact our
business, particularly to the extent that the company develops the DepoMed
Systems for use in prescription drug applications.
Certain foreign governments regulate pricing or profitability of prescription
pharmaceuticals sold in their countries. There have been a number of federal
and state proposals to implement similar government control in the United
States, particularly with respect to Medicare payments. The company expects
that these proposals will continue to be advanced. In addition, downward
pressure on pharmaceutical pricing in the United States has increased due to an
enhanced emphasis on managed care. The company expects this pressure to
continue to increase. The company cannot predict whether any such legislative
or regulatory proposals will be adopted or the effect such proposals or managed
care efforts may have on its business. However, the announcement of such
proposals or efforts could have a material adverse effect on the company's
ability to raise capital. Further, the adoption of such proposals or efforts
would have a material adverse effect on the company and any prospective
collaborative partners.
Sales of products using the DepoMed Systems in domestic and foreign markets
will depend in part on the availability of reimbursement from third-party
payors, such as government health administration authorities and private health
insurers. Third-party payors are increasingly challenging the price and cost-
effectiveness of prescription pharmaceutical products. Significant uncertainty
exists as to the reimbursement status of newly approved healthcare products.
Accordingly, products using the DepoMed Systems may not be eligible for third-
party reimbursement at price levels sufficient for us or our collaborative
partners to realize appropriate returns on our investments in the DepoMed
Systems.
Product Liability. Our business involves exposure to potential product
liability risks that are inherent in the production and manufacture of
pharmaceutical products. Any such claims could have a material adverse effect
on the company. We do not currently have any product liability insurance.
Although the company has applied for product liability insurance, there can be
no assurance that:
. the company will be able to obtain or maintain product liability
insurance on acceptable terms;
. the company will be able to secure increased coverage as the
commercialization of the DepoMed Systems proceeds; or
. any insurance will provide adequate protection against potential
liabilities.
Year 2000. Year 2000 ("Y2K") exposure is the result of computer programs using
two instead of four digits to represent the year. These computer programs may
erroneously interpret dates beyond the year 1999, which could cause system
failures or other computer errors, leading to disruptions in operations.
We have begun to develop a three-phase program to limit or eliminate Y2K
exposures. Phase I is to identify those systems, applications and third-party
relationships from which we have exposure to Y2K disruptions in operations.
Phase II is the development and implementation of action plans to achieve Y2K
compliance in all areas prior to the end of 1999. Also included in Phase II is
the development of contingency plans which would be implemented should Y2K
compliance not be achieved in order to minimize disruptions in operations.
Phase III is the final testing or equivalent certification of testing of each
major area of exposure to ensure compliance. We have not yet completed any of
these phases. We expect to complete all three phases by the end of 1999, though
we may not be successful in doing so.
We have identified three major areas which are critical for successful Y2K
compliance: Area 1, which includes financial, research and development and
administrative informational systems applications reliant on system software;
Area 2, which includes research, development and quality applications reliant on
computer programs embedded in microprocessors; and Area 3, which includes third-
party relationships which may be affected by Area 1 and 2 exposures which exist
in other companies.
With respect to Area 1, we are in the process of conducting an internal review
and contacting all software suppliers to determine major areas of Y2K exposure.
In research, development and quality applications (Area 2), we are working with
equipment manufacturers to identify our exposures. With respect to Area 3, we
plan to evaluate our reliance on third parties in order to determine
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whether their Y2K compliance will adequately assure our uninterrupted
operations. However, we may not complete these evalutions in time to limit or
elimate our Y2K exposure.
We have yet to complete Phase I or Phase II of our Y2K program with respect to
all three of the major areas. We rely on systems, applications and third-party
relationships which, if not Y2K compliant prior to the end of 1999, could have a
material adverse impact on the company. In addition, we may not complete Phase
II contingency planning in time to determine what action we would take in any of
the areas should Y2K compliance not be achievable in time.
Though we have not identified any costs related to replacement or remediation
and testing of our Area 1 computer information systems, those costs may be
significant. In addition, because we have not completed our Phase I and Phase
II evaluations, we have no basis for estimating the potential cost of our Y2K
compliance programs. However, those costs may also be significant.
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SELLING SECURITY HOLDERS
The following table sets forth the names of the selling security holders,
the number of shares of common stock owned beneficially by each selling
shareholder as of October 31, 1998 and the number of shares that may be offered
pursuant to this prospectus. This information is based upon information provided
by the selling security holders.
<TABLE>
<CAPTION>
Common Stock Common Stock
Beneficially Owned Common Stock Beneficially Owned
Prior to Offering(1) be Sold After Offering(1)
------------------- ------------ -------------------
Selling Security Holder Number Percent Number Percent
- ----------------------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Aries Domestic Fund, L.P......................... 82,500 1.3% 82,500 -- --
Aries Trust...................................... 167,500 2.6 167,500 -- --
Harry J. Blumenthal, Jr. (2)..................... 4,167 * 4,167 -- --
Caxton International Limited..................... 119,750 1.9 113,750 6,000 *
Clearwater Fund IV, LLC.......................... 200,000 3.1 200,000 -- --
Collins Capital Diversified Fund, L.P............ 20,000 * 20,000 -- --
Jeffrey Davidovitz (2)........................... 4,167 * 4,167 -- --
Gross Foundation, Inc.(2)........................ 8,334 * 8,334 -- --
Jerry Heymann (2)................................ 6,250 * 6,250 -- --
Michael G. Jesselson Trust (2)................... 16,667 * 16,667 -- --
Theodore Kovaleff (2)............................ 10,084 * 2,084 8,000 *
Legion Strategies, Ltd........................... 64,000 1.0 60,000 4,000 *
Howard P. Milstein (2)........................... 16,667 * 16,667 -- --
Newcourt Ltd..................................... 50,000 * 50,000 -- --
Quantum Partners LDC............................. 175,000 2.7 175,000 -- --
Martin Sirotkin (3).............................. 21,167 * 4,167 17,000 *
Paul Sirotkin (4)................................ 78,334 1.2 8,334 70,000 1.1%
Melvin and Rona Sussman (2)...................... 8,334 * 8,334 -- --
Michael and Karla Vukelich (2)................... 4,500 * 4,167 333 *
White Rock Capital Management, L.P............... 11,250 * 11,250 -- --
White Rock Capital Offshore, Ltd................. 61,300 1.0 35,000 26,300 *
White Rock Capital Partners, L.P................. 85,000 1.3 85,000 -- --
TOTALS (5) 1,214,971 18.3 1,083,338 131,633 1.9
========= ========= =======
</TABLE>
________________________
(1) Applicable percentage of ownership is based on 6,463,468 shares of common
stock outstanding as of November 4, 1998.
(2) Consists of shares issuable upon exercise of warrants, all of which are
being offered pursuant to this prospectus.
(3) Includes 11,167 shares issuable upon exercise of warrants, 4,167 of which
are being offered pursuant to this prospectus.
(4) Includes 68,334 shares issuable upon exercise of warrants, 8,334 of which
are being offered pursuant to this prospectus.
(5) Includes 158,671 shares issuable upon exercise of warrants, 83,338 of
which are being offered pursuant to this prospectus.
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We have agreed to bear certain expenses (other than broker discounts and
commissions, if any) in connection with the registration statement.
PLAN OF DISTRIBUTION
All or a portion of the shares offered hereby by the selling security holders
may be delivered and/or sold in transactions from time to time on the over-the-
counter market, on the American Stock Exchange (or any other exchange on which
the shares may be listed), in negotiated transactions, or a combination of such
methods of sale, at market prices prevailing at the time, at prices related to
such prevailing prices or at negotiated prices and/or may also be used to cover
any short positions previously established. The selling security holders may
effect such transactions by selling to or through one or more broker-dealers,
and such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling security holders. The
selling security holders and any broker-dealers that participate in the
distribution may under certain circumstances be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by such
broker-dealers and any profits realized on the resale of shares by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
The selling security holders may agree to indemnify such broker-dealers against
certain liabilities, including liabilities under the Securities Act. In
addition, the company has agreed to indemnify the selling security holders with
respect to the shares offered hereby against certain liabilities, including,
without limitation, certain liabilities under the Securities Act, or, if such
indemnity is unavailable, to contribute toward amounts required to be paid in
respect of such liabilities.
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling security holders (and, if they act as agent for the
purchaser of such shares, from such purchaser). Broker-dealers may agree with
the selling security holders to sell a specified number of shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to
do so acting as agent for the selling security holders, to purchase as principal
any unsold shares at the price required to fulfill the broker-dealer commitment
to the selling security holders. Broker-dealers who acquire shares as principal
may thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares commissions computed as described above.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale of shares may not simultaneously
engage in market making activities with respect to the common stock of the
company for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, the selling
security holders will be subject to applicable provisions of the Exchange Act,
and the rules and regulations thereunder, including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales of
shares of the company's common stock by the selling security holders.
The selling security holders will pay all commissions, transfer taxes, and
other expenses associated with the sale of securities by them. The shares
offered hereby are being registered pursuant to contractual obligations of the
company, and the company has paid the expenses of the preparation of this
prospectus. We have not made any underwriting arrangements with respect to the
sale of shares offered hereby.
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by the
selling security holders.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for us by Heller
Ehrman White & McAuliffe, Palo Alto, California, counsel to the company. Julian
N. Stern, the Secretary of the company, is the owner of 83,333 shares of common
stock and is the sole stockholder and employee of a professional corporation
that is a partner of Heller Ehrman White & McAuliffe.
EXPERTS
The financial statements of DepoMed, Inc. which appear in its Annual Report
(Form 10-KSB) for the year ended December 31, 1997 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon and
included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
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