2014

Questcor Reports Second Quarter Financial Results -Net Sales and EPS More Than Double from Year Ago Quarter-

-Sales Force Expansions Nearly Complete--Rheumatology Pilot Underway-

-Conference Call and Webcast Today at 4:30 p.m. ET, 1:30 p.m. PT-

ANAHEIM, Calif., July 24, 2012 /PRNewswire/ -- Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR) today reported financial results for the second quarter and six months ended June 30, 2012. 


Three Months

Ended 6/30/12

Three Months

Ended 6/30/11

Percentage

Change

Net Sales

$112.5 Million

$46.0 Million

145%

GAAP Net Income

$41.5 Million

$13.9 Million

199%

GAAP EPS

$0.65

$0.21

210%

Non-GAAP EPS

$0.69

$0.23

200%

 


Six Months

Ended 6/30/12

Six Months

Ended 6/30/11

Percentage

Change

Net Sales

$208.4 Million

$82.8 Million

152%

GAAP Net Income

$80.0 Million

$25.1 Million

219%

GAAP EPS

$1.23

$0.38

224%

Non-GAAP EPS

$1.29

$0.43

200%

Net sales for the second quarter were $112.5 million, reflecting expanded physician usage of H.P. Acthar® Gel (repository corticotropin injection) in the treatment of serious, difficult-to-treat autoimmune and inflammatory disorders, most notably idiopathic nephrotic syndrome and MS exacerbations.  Net sales in the second quarter 2011 were $46.0 million

GAAP net income for the second quarter was $41.5 million or $0.65 per diluted common share, compared to $13.9 million, or $0.21 per diluted common share for last year's comparable quarter.  Non-GAAP net income for the quarter ended June 30, 2012 was $44.2 million or $0.69 per diluted common share. Non-GAAP net income excludes non-cash share-based compensation expense and depreciation and amortization expense. Non-GAAP net income for the year ago quarter was $15.2 million, or $0.23 per diluted common share.

The Company used $156.1 million in cash to repurchase 3,730,069 shares of its common stock in open market transactions, at an average price of $41.85 per share, during the second quarter. Shares outstanding were 59.7 million at June 30, 2012 and 62.3 million at June 30, 2011.

Questcor shipped 4,710 vials of Acthar during the second quarter 2012, up 94% compared to 2,430 vials in the year ago quarter.  Quarterly vial shipments are 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.  Channel inventory at the end of the second quarter appears to be in the normal range. At the end of the first quarter 2012, channel inventory was higher than normal. Questcor believes that investors should consider the Company's results over several quarters when analyzing its performance. 

"In the second quarter, we surpassed $100 million in quarterly net sales for the first time in our history," said Don M. Bailey, President and CEO of Questcor.  "Our strong financial results were driven by increasing usage of Acthar among nephrologists and neurologists.  With the expansion of our Nephrology Sales Force now complete, the expansion of our Neurology Sales Force nearing completion, and the initial detailing effort of a small sales force in Rheumatology just getting started, we are optimistic about the potential for Acthar to help an increasing number of patients with serious, difficult-to-treat autoimmune and inflammatory disorders. We also continue to support our free drug program and have provided free drug with a commercial value of over $183 million to patients and hospitals through these programs since September 2007."

"We completed the expansion of our Nephrology Sales Force to 58 from 28 representatives during the second quarter, with all of the new representatives trained and in the field by early June," noted Steve Cartt, Chief Operating Officer.  "At the same time, we expect the expansion of our Neurology Sales Force to 107 from 77 representatives to be complete in August.  In addition, our Rheumatology pilot effort is off to an encouraging start focusing on dermatomyositis (polymyositis). We expect to see the benefit from these three sales forces during the remainder of this year and into 2013."

Year-to-Date Financial Results

Net sales for the first six months of 2012 were $208.4 million, compared to $82.8 million in the first six months of 2011.  GAAP Net income for the first six months of 2012 was $80.0 million, or $1.23 per diluted common share, and compared with $25.1 million, or $0.38 per diluted common share, for the comparable period of 2011.  Non-GAAP net income for the six months ended June 30, 2012 was $84.5 million or $1.29 per diluted common share excluding non-cash share-based compensation expense and depreciation and amortization expense.  Non-GAAP net income for the comparable period of 2011 was $28.0 million, or $0.43 per diluted common share. 

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 monitors trends in payer mix and areas of therapeutic use for new Acthar prescriptions based on data 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 Acthar prescriptions within each of its current three key therapeutic areas, Questcor is providing quarterly prescription information for the time period January 1, 2010 through June 30, 2012.  Prescriptions processed by the Company's reimbursement center are segmented into one of 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 $7,341 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

   Q2-12

314

24

338

          

Multiple Sclerosis (and related conditions) New Rxs


Paid

Year-Over-Year
Growth in Paid Rx

Fully Rebated

Total

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

   Q2-12

1,110

48%

41

1,151

 

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

   Q2-12

96

73

169

* 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.

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."

Acthar is also 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."

Share Repurchase Program

The Company used $156.1 million in cash to repurchase 3,730,069 shares of its common stock in open market transactions, at an average price of $41.85 per share, during the second quarter.  As of June 30, 2012, Questcor had 59.7 million shares of common stock outstanding, with 4.7 million shares remaining under its current common stock repurchase program.

As of July 20, 2012, Questcor's cash, cash equivalents and short-term investments totaled $129.0 million, and its accounts receivable totaled $53.8 million

Sales Reserves

Questcor's sales reserves during the quarter ended June 30, 2012, including the Company's reserves for Medicaid rebates, represented 14.6% of gross sales of $131.7 million, or $19.2 million of sales reserves.  During the year ago quarter, Questcor's sales reserves, including the Company's reserves for Medicaid rebates, represented 23.5% of gross sales of $60.1 million.  The decrease in the reserve percentage from the year ago was primarily due to  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. 

Non-GAAP Financial Measures

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 the disclosure of 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.

Conference Call and Webcast

The Company will host a conference call and slide presentation via webcast today, July 24, 2012, at 4:30 p.m. ET/ 1:30 p.m. PT.  The call can be accessed three ways:

  • By webcast: At Questcor's investor relations website: http://ir.questcor.com/.
  • By telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the U.S. is 877-941-9205. For participants outside the U.S., the dial-in number is 480-629-9819.
  • By audio replay: A replay of the conference call will be available for seven business days following conclusion of the live call.  The dial-in number for U.S. participants is 800-406-7325. For participants outside the U.S., the replay dial-in number is 303-590-3030. The replay access code for all callers is 4550797#.

About Questcor 

Questcor Pharmaceuticals, Inc. is a biopharmaceutical company focused on the treatment of patients with serious, difficult-to-treat autoimmune and inflammatory disorders.  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 has launched a pilot effort in rheumatology, as Acthar is approved for several rheumatology-related conditions including Dermatomyositis, Polymyositis, Lupus 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 Rheumatology, 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 sales forces, 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


Six Months Ended



June 30,


June 30,



2012


2011


2012


2011

Revenue








Net sales

$

112,452


$

45,980


$

208,421


$

82,813

Cost of sales (exclusive of amortization of purchased technology)

6,379


2,856


11,900


4,728

Gross profit

106,073


43,124


196,521


78,085

Operating expenses:








Selling and marketing

27,609


14,746


49,324


25,998

General and administrative

8,647


3,791


14,089


7,663

Research and development

8,485


3,891


14,150


6,872

Depreciation and amortization

321


273


612


471

Impairment of goodwill




299

Total operating expenses

45,062


22,701


78,175


41,303

Income from operations

61,011


20,423


118,346


36,782

Interest and other income, net

218


120


434


384

Income before income taxes

61,229


20,543


118,780


37,166

Income tax expense

19,724


6,669


38,732


12,068

Net income

$

41,505


$

13,874


$

80,048


$

25,098

Change in unrealized gains or losses on available-for-sale securities, net of related tax effects of ($5) for both the three months ended June 30, 2012 and 2011, respectively, and $25 and $1 for the six months ended June 30, 2012 and 2011, respectively.

(9)


(10)


52


1

Comprehensive income

$

41,496


$

13,864


$

80,100


$

25,099









Net income per share:








Basic

$

0.68


$

0.22


$

1.28


$

0.40

Diluted

$

0.65


$

0.21


$

1.23


$

0.38

Shares used in computing net income per share:








Basic

61,112


62,034


62,308


62,126

Diluted

64,113


65,464


65,305


65,483









Reconciliation of Non-GAAP Adjusted Financial Disclosure








Adjusted net income

$              44,244


$              15,217


$              84,514


$              27,999

Share-based compensation expense (1)

(2,521)


(1,159)


(4,054)


(2,381)

Depreciation and amortization expense (2)

(218)


(184)


(412)


(318)

Impairment of goodwill (3)




(202)

Net income – GAAP

$              41,505


$              13,874


$              80,048


$              25,098










Adjusted net income per share – basic

$0.72


$0.25


$1.36


$0.45

Share-based compensation expense (1)

(0.04)


(0.02)


(0.07)


(0.04)

Depreciation and amortization expense (2)

(0.00)


(0.00)


(0.01)


(0.01)

Impairment of goodwill (3)




(0.00)

Net income per share – basic

$                  0.68


$                 0.22


$                  1.28


$                  0.40









Adjusted net income per share – diluted

$0.69


$0.23


$1.29


$0.43

Share-based compensation expense (1)

(0.04)


(0.02)


(0.06)


(0.04)

Depreciation and amortization expense (2)

(0.00)


(0.00)


(0.01)


(0.00)

Impairment of goodwill (3)








Net income per share – diluted

$                0.65


$                 0.21


$                     1.23


$                  0.38

 

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. 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)



June 30,
2012


December 31,
2011


(unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$

36,662


$

88,469

Short-term investments

78,022


121,680

Total cash, cash equivalents and short-term investments

114,684


210,149

Accounts receivable, net of allowances for doubtful accounts of $0 at June 30, 2012 and December 31, 2011

46,674


27,801

Inventories, net of allowances of $0 at June 30, 2012 and December 31, 2011

6,417


5,226

Prepaid income taxes

3,992


6,940

Prepaid expenses and other current assets

3,010


3,391

Deferred tax assets

11,859


12,093

Total current assets

186,636


265,600

Property and equipment, net

2,045


1,970

Purchased technology, net

2,629


2,778

Deposits and other assets

57


56

Deferred tax assets

5,404


5,404

Total assets

$

196,771


$

275,808

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

12,283


$

5,503

Accrued compensation

11,484


11,590

Sales-related reserves

38,724


34,119

Other accrued liabilities

6,444


4,509

Total current liabilities

68,935


55,721

Lease termination, deferred rent and other non-current liabilities

40


261

Total liabilities

68,975


55,982

Shareholders' equity:




Preferred stock, no par value, 5,334,285 shares authorized; none outstanding


Common stock, no par value, 105,000,000 shares authorized, 59,671,666 and 63,645,781 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

21,974


94,976

Retained earnings

105,781


124,886

Accumulated other comprehensive income

41


(36)

Total shareholders' equity

127,796


219,826

Total liabilities and shareholders' equity

$

196,771


$

275,808

 

Questcor Pharmaceuticals, Inc.


Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



Six Months Ended


June 30,


2012


2011

OPERATING ACTIVITIES




Net income

$

80,048


$

25,098

Adjustments to reconcile net income to net cash provided by operating activities:




Share-based compensation expense

6,014


3,528

Deferred income taxes

234


180

Amortization of investments

928


376

Depreciation and amortization

612


471

Impairment of goodwill


299

Loss on disposal of property and equipment

10


11

Changes in operating assets and liabilities:




Accounts receivable

(18,873)


(12,586)

Inventories

(1,191)


(272)

Prepaid income taxes

2,948


(1,000)

Prepaid expenses and other current assets

381


372

Accounts payable

6,780


(1,089)

Accrued compensation

(106)


1,112

Sales-related reserves

4,605


5,555

Other accrued liabilities

1,935


(387)

Other non-current liabilities

(221)


(163)

Net cash flows provided by operating activities

84,104


21,505

INVESTING ACTIVITIES




Purchase of property and equipment

(548)


(1,393)

Purchase of short-term investments

(96,631)


(53,859)

Proceeds from maturities of short-term investments

139,438


62,960

Deposits and other assets

(1)


6

Net cash flows provided by investing activities

42,258


7,714

FINANCING ACTIVITIES




Income tax benefit realized from share-based compensation plans

4,261


3,735

Issuance of common stock, net

2,663


2,268

Repurchase of common stock

(185,093)


(11,453)

Net cash flows used in financing activities

(178,169)


(5,450)

(Decrease) increase in cash and cash equivalents

(51,807)


23,769

Cash and cash equivalents at beginning of period

88,469


41,508

Cash and cash equivalents at end of period

$

36,662


$

65,277

Supplemental Disclosures of Cash Flow Information:




Cash paid for interest

$

12


$

7

Cash paid for income taxes

$

31,285


$

3,120

 

SOURCE Questcor Pharmaceuticals, Inc.



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