Depomed Dives on Drug Marketing Dispute

MENLO PARK, Calif. ( TheStreet) -- Someone knew the bad news about Depomed ( DEPO).

Shares of the small drug maker fell 22.5% to $5.10 Tuesday night after the small drug maker disclosed a potentially damaging contract dispute with Abbott Labs ( ABT) over the marketing of a shingles drug.

The selling of Depomed shares Tuesday, however, started well before the company's announcement soon after the close of trading. Depomed's stock price fell throughout Tuesday regular session and closed down 8% on extra heavy volume despite the absence of news.

Depomed claims Abbott Labs is reneging on a contractual obligation to sell the shingles nerve pain drug DM-1796 across North America if approved by U.S. regulators later this month. Depomed developed DM-1796 and sold the marketing rights to Solvay Pharmaceuticals, which was subsequently acquired by Abbott.

"We are perplexed by Abbott's reluctance to adhere to their contract obligations given the in-depth market research previously undertaken regarding this product.," said Depomed CEO Carl Welzel, in a statement. "We are disappointed that the product does not appear to fit into the Abbott commercial portfolio and that they have chosen to contest what we believe are clear and unambiguous contractual terms."

Depomed plans to take Abbott to mediation in order to enforce the DM-1796 contract, the company said.

"Abbott has complied and will continue to comply with the terms of our agreement with Depomed," said Abbott spokesperson Adelle Infante.

The U.S. Food and Drug Administration is expected to issue an approval decision on DM-1796 by Jan. 30, Depomed said. DM-1796 is a once-daily formulation of the generic nerve pain drug gabapentin.

--Written by Adam Feuerstein in Boston.

>To contact the writer of this article, click here: Adam Feuerstein.

>To follow the writer on Twitter, go to http://twitter.com/adamfeuerstein.

>To submit a news tip, send an email to: tips@thestreet.com.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

More from Stocks

Stocks Trade Lower as Optimism Wanes Over China Trade Talks

Stocks Trade Lower as Optimism Wanes Over China Trade Talks

Did Trump Just Torpedo the Stock Market Again?

Did Trump Just Torpedo the Stock Market Again?

10 Questions for PayPal Ahead of Its Big Investor Day

10 Questions for PayPal Ahead of Its Big Investor Day

Trump, China Trade, Target and Las Vegas Casinos - 5 Things You Must Know

Trump, China Trade, Target and Las Vegas Casinos - 5 Things You Must Know

9 Stocks Goldman Sachs Thinks Will Blow Wall Street's Performance Away in 2019

9 Stocks Goldman Sachs Thinks Will Blow Wall Street's Performance Away in 2019