QUESTCOR PHARMACEUTICALS INC 
By ANAHEIM, Calif., April 24, 2012 /PRNewswire/ -- Questcor Pharmaceuticals, Inc. (Nasdaq: QCOR) today reported financial results for the first quarter ended March 31, 2012. Net sales for the first quarter were $96.0 million, reflecting expanded physician usage of H.P. Acthar® Gel (Acthar) for treating serious, difficult-to- treat medical conditions. Net sales in the first quarter 2011 were $36.8 million.
GAAP net income for the first quarter of 2012 was $38.5 million or $0.58 per diluted common share. GAAP net income for the first quarter of 2011 was $11.2 million, or $0.17 per diluted common share. Non-GAAP net income for the quarter ended March 31, 2012 was $40.6 million or $0.61 per diluted common share excluding non-cash share-based compensation, depreciation and amortization expense and tax adjustments. Non-GAAP net income for the year ago quarter was $12.8 million, or $0.20 per diluted common share. Questcor repurchased 798,285 shares of its common stock during the first quarter 2012, at an average price of $36.31 per share.
During the first quarter of 2012, Questcor shipped 4,111 vials of Acthar, compared to 2,010 vials in the year ago quarter. The Company's quarterly vial shipments continue to be subject to significant variation due to the size and timing of individual orders received from Questcor's distributor. The timing of when these orders are received and filled can significantly affect net sales and net income in any particular quarter. For example, on the last day of the first quarter of 2012, Questcor filled an order for 180 vials. This shipment favorably impacted net sales by approximately $4 million and earnings per share by approximately four cents for the period. Due to this final order in the quarter, first quarter-ending channel inventory appears to be higher than the level at the end of the fourth quarter of 2011, and higher than the range of channel inventory over the past several quarters. The Company believes that investors should consider the Company's results over several quarters when analyzing the Company's performance.
Acthar Label Information
The product label for Acthar includes 19 FDA-approved indications. Substantially all of the Company's net sales currently result from Acthar prescriptions for the on-label indications of:
-- Nephrotic Syndrome (NS): "to induce a diuresis or a remission of
proteinuria in the nephrotic syndrome without uremia of the idiopathic
type or that due to lupus erythematosus." NS can result from several
underlying conditions, and prescribing physicians indicate that Acthar
is most commonly being prescribed for patients who suffer from NS due to
idiopathic membranous nephropathy, focal segmental glomerulosclerosis
(FSGS), IgA nephropathy, minimal change disease and lupus nephritis.
-- Multiple Sclerosis (MS): "for the treatment of acute exacerbations of
multiple sclerosis in adults. Clinical controlled trials have shown
H.P. Acthar Gel to be effective in speeding the resolution of acute
exacerbations of multiple sclerosis. However, there is no evidence that
it affects the ultimate outcome or natural history of the disease." When
Acthar is used, it is typically prescribed as second line treatment for
patients with MS exacerbations.
-- Infantile Spasms (IS): "as monotherapy for the treatment of infantile
spasms in infants and children under 2 years of age."
Questcor expects to initiate a commercial effort in rheumatology in late 2012, since Acthar is approved for the following rheumatology-related conditions:
-- Collagen Diseases: "during an exacerbation or as maintenance therapy in
selected cases of: systemic lupus erythematosus, systemic
dermatomyositis (polymyositis)."
-- Rheumatic Disorders: "as adjunctive therapy for short-term
administration (to tide the patient over an acute episode or
exacerbation) in: Psoriatic arthritis, Rheumatoid arthritis, including
juvenile rheumatoid arthritis (selected cases may require low-dose
maintenance therapy), Ankylosing spondylitis."
"While our substantial NS commercial effort only began in the fourth quarter of 2011, the value of NS shipped prescriptions now exceeds that of MS," said Don M. Bailey, President and CEO of Questcor. "This faster-than-expected NS growth drove us to further expand the NS commercial effort prior to the additional expansion of our MS commercial team. At the same time, we continue to increase our investment in efforts to learn about the possible therapeutic applications of Acthar in other inflammatory and autoimmune diseases as well as increase investments in our management systems, internal control, and compliance infrastructure."
"The expansion of our Nephrology Sales Force from 28 to 58 representatives will be completed by early June, well ahead of our original schedule," noted Steve Cartt, Chief Operating Officer. "In addition, we are also planning to add approximately 30 more representatives to our Neurology Sales Force, with hiring and training expected to be completed sometime in August. We believe these expansions will enable us to further broaden physician awareness of Acthar and its appropriate role in the treatment of both MS relapses and NS. Furthermore, we remain on track to initiate a pilot commercial effort in rheumatology by the end of this year."
"We have been expanding our scientific efforts and R&D investments in Acthar, and expect that we will continue to increase spending to support Questcor's future growth," commented Dr. David Young, Chief Scientific Officer. "Currently, we are funding more than 40 pre-clinical or clinical studies and we have increased our investigation into better understanding how Acthar works and its other potential applications."
Shipped Acthar Vial and Prescription Trend Information
Because Acthar prescriptions are filled at specialty pharmacies, the Company does not receive complete information regarding either the number of prescriptions or the number of vials by therapeutic area for all of the patients being treated with Acthar. However, Questcor is able to monitor trends in payer mix and areas of therapeutic use for new Acthar prescriptions based on data it receives from its reimbursement support center. Questcor estimates that over 90% of new Acthar prescriptions are processed by this support center, but believes that very few refill prescriptions are processed there.
In an effort to help investors better understand historical trends in the prescriptions written for Acthar within each of its current three key therapeutic areas, NS, MS, and IS, Questcor is providing quarterly prescription information for the time period January 1 2010 through March 31, 2012. We grouped prescriptions processed by its reimbursement center into two groups -- "Paid" and "Fully Rebated."
"Paid" prescriptions (Rxs) include all prescriptions in the following payer categories:
-- Commercial
-- Tricare--Questcor has a per vial rebate obligation of approximately
$8,500 in 2012 and approximately 25% of the price of Acthar for 2010 and
2011.
-- Medicaid Managed Care--For Q1 2010 through March 22, 2010 (see Note 1
below the tables).
"Fully Rebated" prescriptions (Rxs) include:
-- Those reimbursed by fee-for-service Medicaid insurance and other state
programs eligible for full rebates as Medicaid Waivers Programs.
-- Medicaid Managed Care--For all time periods beginning March 23, 2010
(see Note 1 below the tables).
The following tables show, for each of the three key Acthar therapeutic uses, the number of new prescriptions shipped grouped into "Paid" and "Fully Rebated":
Nephrotic Syndrome (and related conditions) New Rxs *
----------------------------------------------------
Paid Fully Rebated Total
---- ------------- -----
2010
----
Q1-10 11 0 11
----- --- --- ---
Q2-10 4 1 5
----- --- --- ---
Q3-10 8 0 8
----- --- --- ---
Q4-10 7 0 7
----- --- --- ---
Total 2010 30 1 31
---------- --- --- ---
2011
----
Q1-11 18 1 19
----- --- --- ---
Q2-11 45 4 49
----- --- --- ---
Q3-11 60 2 62
----- --- --- ---
Q4-11 146 19 165
----- --- --- ---
Total 2011 269 26 295
---------- --- --- ---
2012
----
Q1-12 238 14 252
----- --- --- ---
* Questcor commenced a pilot commercial effort in NS in the second quarter of 2011 and an expanded effort in the fourth quarter of 2011.
Multiple Sclerosis (and related conditions) New Rxs
Paid Year- Fully
Over- Rebated
Year Total
Growth in
Paid Rx
---------
2010
----
Q1-10 231 196% 12 243
----- --- --- --- ---
Q2-10 304 145% 24 328
----- --- --- --- ---
Q3-10 323 129% 19 342
----- --- --- --- ---
Q4-10 354 66% 24 378
----- --- --- --- ---
Total 2010 1,212 118% 79 1,291
---------- ----- --- --- -----
2011
----
Q1-11 508 120% 49 557
----- --- --- --- ---
Q2-11 751 147% 58 809
----- --- --- --- ---
Q3-11 886 174% 46 932
----- --- --- --- ---
Q4-11 945 167% 44 989
----- --- --- --- ---
Total 2011 3,090 155% 197 3,287
---------- ----- --- --- -----
2012
----
Q1-12 1,000 97% 51 1,051
----- ----- --- --- -----
Infantile Spasms (and related conditions) New Rxs**
--------------------------------------------------
Paid Fully Rebated Total
---- ------------- -----
2010
----
Q1-10 89 48 137
----- --- --- ---
Q2-10 95 66 161
----- --- --- ---
Q3-10 92 78 170
----- --- --- ---
Q4-10 91 68 159
----- --- --- ---
Total 2010 367 260 627
---------- --- --- ---
2011
----
Q1-11 89 71 160
----- --- --- ---
Q2-11 106 79 185
----- --- --- ---
Q3-11 112 69 181
----- --- --- ---
Q4-11 120 51 171
----- --- --- ---
Total 2011 427 270 697
---------- --- --- ---
2012
----
Q1-12 112 71 183
----- --- --- ---
** Questcor commenced commercial efforts in IS in the fourth quarter of 2010.
Notes:
(1) Because the March 2010 health care legislation made Medicaid Managed Care Organization (MCO) prescriptions rebate eligible effective March 23, 2010, a rebate liability for the MCO prescriptions estimated to be filled on or after March 23, 2010 has been accrued. The Company does not have the ability to accurately identify every Medicaid Managed Care prescription so it is possible that some prescriptions identified as "Paid" in the tables may subsequently be reclassified as "Fully Rebated."
(2) "Related Conditions" includes diagnoses that are either alternate descriptions of the medical condition or are closely related to the medical condition which is the focus of the table. For example, a prescription for "demyelinating disease of the central nervous system" would be included as an MS-related condition for purpose of this table. About 5% of the prescriptions in the tables are for related conditions.
(3) A prescription may or may not represent a new patient or a new therapy for the patient receiving the prescription. Questcor uses business rules to determine whether a prescription should be included in this table. From time to time the Company may modify these rules which could cause some changes to the historic numbers in the tables above.
(4) Historical trend information is not necessarily indicative of future results. Additionally, paid prescriptions should not be viewed as predictive of Questcor's net sales due to a variety of factors, including changes in the number of vials used in connection with each prescription.
Cash and Share Repurchase Program
As of April 20, 2012, Questcor's cash, cash equivalents and short-term investments totaled $248 million, and its accounts receivable totaled $37 million. The Company used $29.0 million in cash to repurchase 798,285 shares during the first quarter. As of March 31, 2012, Questcor had 63.0 million shares of common stock outstanding, with 3.5 million shares remaining under its common stock repurchase program.
Sales Reserves
Questcor's sales reserves during the quarter ended March 31, 2012, including the Company's reserves for Medicaid rebates, represented 14% of gross sales of $111.3 million.
As required by federal regulations, Questcor provides rebates to state Medicaid programs for Acthar dispensed to Medicaid patients covered under Medicaid rebate-eligible insurance plans. Since the Company does not receive rebate claims from the various state Medicaid agencies until well after the close of the quarter in which the underlying sales of vials to its distributor took place, the Company establishes reserves for expected rebate claims on a quarterly basis. As a result of the new Federal health care related legislation, for periods after March 23, 2010, the Company has also included in this reserve an estimate for the liability due to states related to prescriptions of Acthar for patients covered under state Medicaid Managed Care Organizations (Medicaid MCO), which prescriptions were not previously rebate eligible.
Questcor experienced a decrease in sales reserves as a percentage of gross sales during the first quarter of 2012, compared to the first quarter of 2011. The principal reasons for this decrease were (1) an increase in the percentage of total Acthar prescriptions written to treat adults suffering from MS and NS relative to the percentage used to treat infants suffering from IS, as there is a very high percentage of infants enrolled in Medicaid, and (2) an increase in the number of IS prescriptions being fulfilled through either the Acthar free drug program administered by the National Organization for Rare Disorders or the Company's hospital sample vial program. Since September 2007, Questcor has provided free drug with a commercial value of over $150 million to patients through these programs.
Conference Call Details
The Company will host a conference call and slide presentation via webcast today, April 24, 2012, at 4:30 p.m. ET/ 1:30 p.m. PT, to discuss first quarter 2012 results.
To participate in the live call by telephone, please dial (877) 354-0215 for domestic participants and (253) 237-1173 for international participants. Participants are asked to call the above numbers 5-10 minutes prior to the start time. A listen-only webcast of the conference call including the presentation slides will be accessible in the "Investor Relations" section under "Events & Presentations" at http://ir.questcor.com/events.cfm. If listening via telephone, to view the accompanying presentation slides, navigate to the live webcast as noted above and choose the "No Audio -- Slides Only" option to view the slides in conjunction with the live conference call. Listeners should go to the website at least 15 minutes prior to the live conference call to install any necessary software.
An audio replay of the call will be available for 30 days following the call. This replay can be accessed by dialing (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, both using Conference ID # 70200329. An archived webcast will also be available at http://ir.questcor.com/events.cfm.
Use of Non-GAAP Net Income
The Company believes it is important to share non-GAAP financial metrics with shareholders as these metrics may better represent the ongoing economics of the business and reflect how we manage the business. Accordingly, management believes investors' understanding of the Company's financial performance is enhanced as a result of our disclosing these non-GAAP financial metrics. Non-GAAP net income should not be viewed in isolation, or as a substitute for, or as superior to, reported GAAP net income. The reconciliation between GAAP and Non-GAAP net income is provided with the financial tables included with this release.
About Questcor
Questcor Pharmaceuticals, Inc. is a biopharmaceutical company whose primary product helps patients with serious, difficult-to-treat medical conditions. Questcor's primary product is H.P. Acthar® Gel (repository corticotropin injection), an injectable drug that is approved by the FDA for the treatment of 19 indications. Of these 19 indications, Questcor currently generates substantially all of its net sales from three indications: the treatment of proteinuria in idiopathic types of nephrotic syndrome, the treatment of acute exacerbations of multiple sclerosis in adults, and the treatment of infantile spasms in children under two years of age. With respect to nephrotic syndrome, the FDA has approved Acthar to "induce a diuresis or a remission of proteinuria in the nephrotic syndrome without uremia of the idiopathic type or that due to lupus erythematosus." Questcor is also currently planning to explore the potential initiation of a commercial effort in rheumatology, as Acthar is approved for several rheumatology-related conditions including Lupus, Dermatomyositis, Polymyositis and Rheumatoid Arthritis. Questcor is also exploring the possibility of developing markets for other on-label indications and the possibility of pursuing FDA approval of additional indications not currently on the Acthar label where there is high unmet medical need. For more information about Questcor, please visit www.questcor.com.
Note: Except for the historical information contained herein, this press release contains forward-looking statements that have been made pursuant to the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "believes," "continue," "could," "estimates," "expects," "growth," "may," "plans," "potential," "should," "substantial" or "will" or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Factors that could cause or contribute to such differences include, but are not limited to, the following:
-- Our reliance on Acthar for substantially all of our net sales and
profits;
-- Reductions in vials used per prescription resulting from changes in
treatment regimens by physicians or patient compliance with physician
recommendations;
-- The complex nature of our manufacturing process and the potential for
supply disruptions or other business disruptions;
-- The lack of patent protection for Acthar; and the possible FDA approval
and market introduction of competitive products;
-- Our ability to continue to generate revenue from sales of Acthar to
treat on-label indications associated with NS, and our ability to
develop other therapeutic uses for Acthar;
-- Research and development risks, including risks associated with
Questcor's work in the area of NS and potential work in the area of
Lupus, and our reliance on third-parties to conduct research and
development and the ability of research and development to generate
successful results;
-- Our ability to comply with federal and state regulations, including
regulations relating to pharmaceutical sales and marketing practices;
-- Regulatory changes or other policy actions by governmental authorities
and other third parties in connection with U.S. health care reform or
efforts to reduce federal and state government deficits;
-- Our ability to receive high reimbursement levels from third party
payers;
-- An increase in the proportion of our Acthar unit sales comprised of
Medicaid-eligible patients and government entities;
-- Our ability to estimate reserves required for Acthar used by government
entities and Medicaid-eligible patients and the impact that unforeseen
invoicing of historical Medicaid prescriptions may have upon our
results;
-- Our ability to effectively manage our growth, including the expansion of
our NS selling effort, and our reliance on key personnel;
-- The impact to our business caused by economic conditions;
-- Our ability to protect our proprietary rights;
-- The risk of product liability lawsuits;
-- Unforeseen business interruptions and security breaches;
-- Volatility in Questcor's monthly and quarterly Acthar shipments,
estimated channel inventory, and end-user demand, as well as volatility
in our stock price; and
-- Other risks discussed in Questcor's annual report on Form 10-K for the
year ended December 31, 2011 as filed with the Securities and Exchange
Commission, or SEC, on February 22, 2012, and other documents filed with
the SEC.
The risk factors and other information contained in these documents should be considered in evaluating Questcor's prospects and future financial performance.
Questcor undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date of this release.
For more information, please visit www.questcor.com or www.acthar.com.
QUESTCOR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
---------
2012 2011
---- ----
Revenue
-------
Net sales $95,968 $36,833
Cost of sales (exclusive of amortization of
purchased technology) 5,520 1,872
----- -----
Gross profit 90,448 34,961
Operating expenses:
Selling and marketing 21,716 11,252
General and administrative 5,441 3,873
Research and development 5,665 2,981
Depreciation and amortization 291 198
Impairment of goodwill - 299
--- ---
Total operating expenses 33,113 18,603
------ ------
Income from operations 57,335 16,358
Interest and other income, net 216 265
--- ---
Income before income taxes 57,551 16,623
Income tax expense 19,008 5,399
------ -----
Net income $38,543 $11,224
Changes in unrealized gains or losses on
available-for-sale securities, net of
related tax effects of $30 and ($33) for the
three months ended March 31, 2012 and 2011,
respectively 61 (68)
--- ---
Comprehensive income $38,604 $11,156
------- -------
Net income per share:
Basic $0.61 $0.18
===== =====
Diluted $0.58 $0.17
===== =====
Shares used in computing net income per share:
Basic 63,491 62,219
====== ======
Diluted 66,471 65,374
====== ======
Reconciliation of Non-GAAP Adjusted Financial
Disclosure
---------------------------------------------
Adjusted net income $40,610 $12,783
Share-based compensation expense (1) (1,550) (1,223)
Depreciation and amortization expense (2) (196) (134)
Tax adjustments (3) (321) -
----
Impairment of goodwill (4) - (202)
--- ----
Net income - GAAP $38,543 $11,224
======= =======
Adjusted net income per share - basic $0.64 $0.21
Share-based compensation expense (1) (0.02) (0.02)
Depreciation and amortization expense (2) (0.00) (0.00)
Tax adjustments (3) (0.01) (0.00)
----- -----
Impairment of goodwill (4) (0.00) (0.00)
----- -----
Net income per share - basic $0.61 $0.18
===== =====
Adjusted net income per share - diluted $0.61 $0.20
Share-based compensation expense (1) (0.02) (0.02)
Depreciation and amortization expense (2) (0.00) (0.00)
Tax adjustments (3) (0.00) (0.00)
----- -----
Impairment of goodwill (4) (0.00) (0.00)
----- -----
Net income per share - diluted $0.58 $0.17
===== =====
Net income per share - basic and diluted may not foot due to rounding.
Use of Non-GAAP Financial Measures
Our "non-GAAP adjusted net income" excludes the following items from GAAP net income:
1. Share-based compensation expense. 2. Depreciation and amortization expense 3. Tax adjustments primarily relate to write-off of 1997-2000 Federal R&D tax credits. 4. Impairment of goodwill related to the write-off of goodwill associated with an acquisition transaction completed in 1999.Questcor Pharmaceuticals, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
March 31, December 31,2011
2012
----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $63,591 $88,469
Short-term investments 160,064 121,680
------- -------
Total cash, cash equivalents and short-term
investments 223,655 210,149
Accounts receivable, net of allowances for
doubtful accounts of $0 at both March 31,
2012 and December 31, 2011, respectively 41,358 27,801
Inventories, net of allowances of $0 for both
March 31, 2012 and December 31, 2011,
respectively 5,524 5,226
Prepaid income taxes 6,180 6,940
Prepaid expenses and other current assets 3,663 3,391
Deferred tax assets 12,026 12,093
------ ------
Total current assets 292,406 265,600
Property and equipment, net 2,056 1,970
Purchased technology, net 2,704 2,778
Deposits and other assets 52 56
Deferred tax assets 5,404 5,404
----- -----
Total assets $302,622 $275,808
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,488 $5,503
Accrued compensation 5,071 11,590
Sales-related reserves 33,765 34,119
Income taxes payable 17,556 -
Other accrued liabilities 4,496 4,509
----- -----
Total current liabilities 68,376 55,721
Lease termination, deferred rent and other
non-current liabilities 141 261
--- ---
Total liabilities 68,517 55,982
------ ------
Shareholders' equity:
Preferred stock, no par value, 7,500,000
shares authorized; none outstanding - -
Common stock, no par value, 105,000,000
shares authorized, 63,024,541 and 63,645,781
shares issued and outstanding at March 31,
2012 and December 31, 2011, respectively 70,621 94,976
Retained earnings 163,429 124,886
Accumulated other comprehensive income 55 (36)
--- ---
Total shareholders' equity 234,105 219,826
------- -------
Total liabilities and shareholders' equity $302,622 $275,808
======== ========
Questcor Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Three Months Ended March
31,
-------------------------
2012 2011
---- ----
OPERATING ACTIVITIES
Net income $38,543 $11,224
Adjustments to reconcile net income to net cash
provided by operating activities:
Share-based compensation expense 2,296 1,812
Deferred income taxes 67 54
Amortization of investments 546 (111)
Depreciation and amortization 290 198
Impairment of goodwill - 299
Loss on disposal of property and equipment - 11
Changes in operating assets and liabilities:
Accounts receivable (13,557) (1,205)
Inventories (298) (417)
Prepaid income taxes 760 (337)
Prepaid expenses and other current assets (272) (215)
Accounts payable 1,985 1,177
Accrued compensation (6,519) (864)
Sales-related reserves (354) 1,847
Income taxes payable 17,556 5,666
Other accrued liabilities (13) (938)
Other non-current liabilities (120) (176)
---- ----
Net cash flows provided by operating activities 40,910 18,025
------ ------
INVESTING ACTIVITIES
Purchase of property and equipment (302) (848)
Purchase of short-term investments (71,074) (21,866)
Proceeds from maturities of short-term
investments 32,235 39,713
Deposits and other assets 4 -
--- ---
Net cash flows (used in) /provided by investing
activities (39,137) 16,999
------- ------
FINANCING ACTIVITIES
Income tax benefit realized from share-based
compensation plans 1,380 212
Issuance of common stock, net 956 798
Repurchase of common stock (28,987) (11,453)
------- -------
Net cash flows used in financing activities (26,651) (10,443)
------- -------
(Decrease) increase in cash and cash equivalents (24,878) 24,581
Cash and cash equivalents at beginning of period 88,469 41,508
------ ------
Cash and cash equivalents at end of period $63,591 $66,089
======= =======
Supplemental Disclosures of Cash Flow
Information:
Cash paid for interest $7 $2
=== ===
Cash paid for income taxes $32 $70
=== ===
SOURCE Questcor Pharmaceuticals, Inc.
