Questcor Reports Third Quarter Financial Results
-Net Sales up 91% from Third Quarter 2010 to $59.8 Million- -Net Income per
Diluted Share of $0.35, up 94% from Third Quarter 2010- -886 Paid Acthar
Prescriptions for MS, up 174% from Third Quarter 2010- -60 Paid Nephrotic
Syndrome Prescriptions, NS Sales Force Expansion Completed- -Forbes ranks
Questcor #1 in Annual America's Best Small Company Report-
ANAHEIM, Calif., Oct. 25, 2011 /PRNewswire via COMTEX/ -- Questcor
Pharmaceuticals, Inc. (QCOR) today reported record net sales of $59.8 million for
its third quarter ended September 30, 2011, a 91% increase from $31.3 million in
the year ago quarter. Net income for the quarter was up 98% from the year ago
quarter to $22.9 million or $0.35 per diluted share.
A 174% year-over-year increase in the number of paid H.P. Acthar? Gel (Acthar)
prescriptions for the treatment of multiple sclerosis (MS) exacerbations led to
increased shipments of Acthar vials. Paid Acthar prescriptions for the treatment
of nephrotic syndrome (NS) increased to 60 during the quarter, up from 45 in the
second quarter and eight in the third quarter of 2010. In addition, at 112, paid
Acthar prescriptions for the treatment of infantile spasms (IS) were at the
highest quarterly level since the third quarter of 2008.
"Questcor's strategy to sell more Acthar continues to generate increasing net
sales and earnings," said Don M. Bailey, President and CEO of Questcor. "Our
commercial organization is steadily expanding the number of neurologists,
nephrologists, and child neurologists prescribing Acthar. We believe Acthar has
the potential to benefit many more MS, NS, IS and possibly lupus patients in the
future."
"Our 77 person Specialty Sales Force continues to drive expanded usage of Acthar
as second-line therapy for MS exacerbations, a key Acthar market," commented
Steve Cartt, Executive Vice President and Chief Business Officer. "Furthermore,
during the third quarter we completed the expansion of our Nephrology Sales Force
from 5 to 28 representatives, with all new personnel being fully trained and
making initial sales calls by October 1st. Despite the inherent disruption
involved with this expansion, paid nephrotic syndrome Acthar prescriptions
increased during the quarter. September was a particularly strong month for both
MS and NS sales."
"In addition, new data on Acthar will be presented in November at the American
Society of Nephrology Annual Meeting. This data will provide further insight into
the immune-modulating and other therapeutic properties of Acthar specifically
relating to kidney disease. Our emerging understanding of the apparent
immune-modulating properties of Acthar encourages us to investigate the
potentially broader therapeutic applications of Acthar in other inflammatory and
autoimmune diseases, some of which are already on the product label for Acthar,"
added Mr. Cartt.
GAAP and Non-GAAP Net Income
GAAP net income for the third quarter of 2011 was $22.9 million or $0.35 per
diluted common share, including non-cash expenses totaling $1.5 million, or $0.02
per diluted share. Net income for the third quarter of 2010 was $11.5 million, or
$0.18 per diluted common share.
Non-GAAP net income for the quarter ended September 30, 2011 was $24.3 million,
or $0.37 per diluted common share. Non-GAAP net income for the year ago quarter
was $12.2 million, or $0.19 per diluted common share.
The Company believes it is important to share these 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.
Shipped Acthar Vial and Prescription Trend Information
During the third quarter of 2011, Questcor shipped 2,910 vials of Acthar, up 54%
compared to 1,890 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, and the timing
of when these orders are received and filled can significantly affect net sales
and net income in any particular quarter. For example, the Company filled an
order from its distributor on both the first day and the last day of the third
quarter of 2011. Had either of these orders fallen outside of the third quarter,
our vials shipped for the third quarter would have been lower. For this reason,
as well as other factors causing quarter-to-quarter variability in Questcor's
operating results, the Company believes that investors should consider the
Company's results over several quarters when analyzing the Company's performance.
"As a result of our specialty distribution model, we do not have complete
information on the number of Acthar vials in the sales channel, which consists
mainly of vials at our distributor and vials at about a dozen specialty
pharmacies," said Mike Mulroy, the Company's Chief Financial Officer. "Based on
the information available to us, we believe that there is typically channel
inventory representing between two and three weeks of sales in the channel on any
given date. While we began the third quarter of 2011 with below average channel
inventory and ended the quarter with above average channel inventory, we believe
that both the beginning and ending inventory levels for the third quarter of 2011
were within this normal two to three week range for inventory in the sales
channel."
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 sales of
Acthar for each of its current three key therapeutic uses, acute exacerbations of
MS, NS, and IS, Questcor has grouped new prescriptions processed by its
reimbursement center into two groups -- "Paid" and "Fully Rebated." "Paid"
prescriptions include those prescriptions for which Questcor retains the full
selling price for Acthar, as well as Tricare prescriptions that receive up to a
24% rebate. "Fully Rebated" prescriptions are those for which Questcor can
identify that it has recorded a rebate liability approximately equal to or, for
periods prior to the third quarter of 2010, greater than the price charged to its
distributor. From time to time during the past several years, the rebate
liability for some government insurance programs has shifted between these two
categories. Therefore, the prescriptions that fall into the "Paid" and "Fully
Rebated" categories have also shifted over time as follows:
"Paid" prescriptions (Rxs) include all prescriptions in the following payer
categories:
Commercial--For all time periods.
Tricare--For 2008, 2010, and 2011, but not 2009.
Medicaid Managed Care--For all time periods 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 for all time periods.
Tricare--For 2009.
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":
Multiple Sclerosis Exacerbations (and related conditions) New Rxs
----------------------------------------------------------------------------------------------------
PaidYear-Over-YearSequential Growth in Paid Rx Fully Rebated Total
Growth in Paid Rx
---------- ----------------- ---------------------------- ------------- ----------
2008
-----------------
Q1-0824529
----------------- ----------------------- ----------
Q2-083546%136
----------------- -------------------------------------- ------------- ----------
Q3-085146%556
----------------- -------------------------------------- ------------- ----------
Q4-086935%473
----------------- -------------------------------------- ------------- ----------
Total 200817915194
----------------- ----------------------- ----------
2009
-----------------
Q1-0978225%13%886
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Q2-09124254%59%17141
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Q3-09141176%14%20161
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Q4-09213209%51%15228
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Total 2009556211%60616
----------------- ---------- ------------------------------ ----------
2010
-----------------
Q1-10231196%8%12243
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Q2-10304145%32%24328
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Q3-10323129%6%19342
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Q4-1035466%10%24378
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Total 20101,212118%791,291
----------------- ---------- ------------------------------ ----------
2011
-----------------
Q1-11508120%44%49557
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Q2-11751147%48%58809
----------------- ---------- ----------------- ---------------------------- ------------- ----------
Q3-11886174%18%46932
----------------- ---------- ----------------- ---------------------------- ------------- ----------
1/1 to 9/30, 2011 2,145150%1532,298
----------------- ---------- ------------------------------ ----------
Nephrotic Syndrome (and related conditions) New Rxs
---------------------------------------------------------
PaidFully Rebated Total
------------ ------------- ------------
2010
-----------------
Q1-1011011
----------------- ------------ ------------- ------------
Q2-10415
----------------- ------------ ------------- ------------
Q3-10808
----------------- ------------ ------------- ------------
Q4-10707
----------------- ------------ ------------- ------------
Total 201030131
----------------- ------------ ------------- ------------
2011
-----------------
Q1-1118119
----------------- ------------ ------------- ------------
Q2-1145449
----------------- ------------ ------------- ------------
Q3-1160262
----------------- ------------ ------------- ------------
1/1 to 9/30, 2011 1237130
----------------- ------------ ------------- ------------
Infantile Spasms (and related conditions) New Rxs
---------------------------------------------------------
PaidFully Rebated Total
------------ ------------- ------------
2009
-----------------
Q1-0910475179
----------------- ------------ ------------- ------------
Q2-099168159
----------------- ------------ ------------- ------------
Q3-096058118
----------------- ------------ ------------- ------------
Q4-099445139
----------------- ------------ ------------- ------------
Total 2009349246595
----------------- ------------ ------------- ------------
2010
-----------------
Q1-108948137
----------------- ------------ ------------- ------------
Q2-109566161
----------------- ------------ ------------- ------------
Q3-109278170
----------------- ------------ ------------- ------------
Q4-109168159
----------------- ------------ ------------- ------------
Total 2010367260627
----------------- ------------ ------------- ------------
2011
-----------------
Q1-118971160
----------------- ------------ ------------- ------------
Q2-1110679185
----------------- ------------ ------------- ------------
Q3-1111269181
----------------- ------------ ------------- ------------
1/1 to 9/30, 2011 307219526
----------------- ------------ ------------- ------------
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 alternative
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 new 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 classified as new for inclusion 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 October 21, 2011, Questcor's cash, cash equivalents and short-term
investments totaled $180 million.
The Company did not repurchase any shares during the third quarter. As of
September 30, 2011, Questcor had 62.7 million shares of common stock outstanding,
with 4.3 million shares remaining under its common stock repurchase program.
Sales Reserves
Questcor's sales reserves during the quarter ended September 30, 2011, including
the Company's reserves for Medicaid rebates, represented 19.2% of gross sales of
$74.0 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 adoption of health care reform, 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.
Conference Call Details
The Company will host a conference call and slide presentation via webcast today,
October 25, 2011 at 4:30 p.m. ET/ 1:30 p.m. PT, to discuss third quarter 2011
results. Don Bailey, President and Chief Executive Officer, and other members of
the management team will host the call.
To participate in the live call by telephone, please dial 877-941-1465 for
domestic participants and 480-629-9643 for international participants.
Participants are asked to call the above numbers 5-10 minutes prior to the
starting time. A real-time listen-only webcast of the conference call including
the presentation slides will be accessible in the "Investor Relations" section
under "Events & Presentations" at ir.questcor.com. 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 audio software.
An audio replay of the call will be available for 7 days following the call. This
replay can be accessed by dialing 800-406-7325 for domestic callers and
303-590-3030 for international callers, both using passcode 4480054#. An archived
webcast will also be available at ir.questcor.com.
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 acute
exacerbations of multiple sclerosis in adults, the treatment of nephrotic
syndrome, 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
exploring the use of Acthar to treat systemic lupus erythematosus, or SLE, for
which Acthar is approved as both a maintenance therapy and to treat
exacerbations. 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. In October 2011, Forbes magazine ranked Questcor number one
in its annual rankings of America's Best Small Companies. For more information
about Questcor, please visit 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 generate revenue from sales of Acthar to treat on-label
indications associated with NS, and our ability to develop other therapeutic uses
for Acthar including SLE;
Research and development risks, including risks associated with Questcor's work
in the area of NS and potential work in the area of SLE, and our reliance on
third-parties to conduct research and development and the ability of research and
development to generate successful results;
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 operate within an industry that is highly regulated at both the
Federal and state level;
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;
Our ability to maintain effective controls over financial reporting;
The risk of product liability lawsuits;
Unforeseen business interruptions;
Volatility in Questcor's monthly and quarterly Acthar shipments 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, 2010 as filed with the Securities and Exchange Commission, or SEC,
on February 23, 2011, our quarterly report on Form 10-Q for the quarter ended
June 30, 2011, as filed with the SEC on July 29, 2011, 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 questcor.com or
acthar.com.
Three Months EndedNine Months Ended
September 30,September 30,
-------------------------------------------------
2011201020112010
---------------------------------------------
Revenue
Net sales$59,821$31,274$142,634$85,834
Cost of sales (exclusive of amortization of purchased technology)3,7182,2928,4466,290
-----------------------------------------
Gross profit56,10328,982134,18879,544
Operating expenses:
Selling and marketing13,7337,67839,73120,356
General and administrative4,3142,21711,9777,886
Research and development4,1762,17811,0487,868
Depreciation and amortization280137751392
Impairment of goodwill----299--
-----------------------------------------
Total operating expenses22,50312,21063,80636,502
-----------------------------------------
Income from operations33,60016,77270,38243,042
Interest and other income, net98171482386
-----------------------------------------
Income before income taxes33,69816,94370,86443,428
Income tax expense10,8465,42322,91414,774
-----------------------------------------
Net income$22,852$11,520$47,950$28,654
Net income per share:
Basic$0.37$0.19$0.77$0.46
Diluted$0.35$0.18$0.73$0.45
Shares used in computing net income per share:
Basic62,49262,10562,24962,019
Diluted66,02364,81565,68564,292
Reconciliation of Non-GAAP Adjusted Financial Disclosure
Adjusted net income applicable to common shareholders$24,315$12,189 $52,314 $30,731
Share-based compensation expense(1,273)(603)(3,654) (1,845)
Depreciation and amortization expense(190)(66)(508)(232)
Impairment of goodwill----(202)--
Net income applicable to common shareholders - GAAP$22,852 $11,520 $47,950 $28,654
Adjusted net income per share applicable to common shareholders - basic$0.39$0.20 $0.84 $0.50
Share-based compensation expense(0.02)(0.01)(0.06)(0.03)
Depreciation and amortization expense(0.00)(0.00)(0.01)(0.00)
Impairment of goodwill(0.00)(0.00)(0.00)(0.00)
Net income per share applicable to common shareholders - basic$0.37$0.19 $0.77 $0.46
Adjusted net income per share applicable to common shareholders - diluted $0.37$0.19 $0.79 $0.48
Share-based compensation expense(0.02)(0.01)(0.06)(0.03)
Depreciation and amortization expense(0.00)(0.00)(0.01)(0.00)
Impairment of goodwill(0.00)(0.00)(0.00)(0.00)
Net income per share applicable to common shareholders - diluted$0.35$0.18 $0.73 $0.45
Net income per share applicable to common shareholders - 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:
Share-based compensation expense.
Depreciation and amortization expense
Impairment of goodwill related to the write-off of goodwill associated with an
acquisition transaction completed in 1999.
September 30,December 31,
20112010
--------------------------
ASSETS
Current assets:
Cash and cash equivalents$97,102$41,508
Short-term investments68,60373,324
------------------------
Total cash, cash equivalents and short-term investments165,705114,832
Accounts receivable, net of allowances of $69 and $25 at September 30, 2011 and December 31, 2010, respectively28,21511,128
Inventories, net of allowances of $158 at both September 30, 2011 and December 31, 2010, respectively5,3133,726
Prepaid income taxes5683,532
Prepaid expenses and other current assets2,8001,864
Deferred tax assets8,0608,417
------------------------
Total current assets210,661143,499
Property and equipment, net1,801872
Purchased technology, net2,8533,074
Goodwill--299
Deposits and other assets5665
Deferred tax assets4,1844,184
------------------------
Total assets$219,555$151,993
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable$4,962$3,869
Accrued compensation7,6584,158
Sales-related reserves31,23921,511
Other accrued liabilities2,8331,973
------------------------
Total current liabilities46,69231,511
Lease termination, deferred rent and other non-current liabilities274355
------------------------
Total liabilities46,96631,866
------------------------
Shareholders' equity:
Preferred stock, no par value, 7,500,000 shares authorized; none outstanding----
Common stock, no par value, 105,000,000 shares authorized, 62,726,468 and 62,418,464 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively79,42274,809
Retained earnings93,24545,295
Accumulated other comprehensive income(78)23
------------ ----------------
Total shareholders' equity172,589120,127
------------------------
Total liabilities and shareholders' equity$219,555$151,993
Nine Months Ended
September 30,
--------------------------
20112010
------------------------
OPERATING ACTIVITIES
Net income$47,950$28,654
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense5,4062,795
Deferred income taxes35746
Amortization of investments874516
Depreciation and amortization751392
Impairment of goodwill299--
Loss on disposal of property and equipment11--
Changes in operating assets and liabilities:
Accounts receivable(17,087)908
Inventories(1,587)128
Prepaid income taxes2,964--
Prepaid expenses and other current assets(936)(953)
Accounts payable1,093(4,557)
Accrued compensation3,500888
Sales-related reserves9,7287,180
Income taxes payable--(477)
Other accrued liabilities86088
Other non-current liabilities(81)(628)
----------------------
Net cash flows provided by operating activities54,10234,980
----------------------
INVESTING ACTIVITIES
Purchase of property and equipment(1,470)(347)
Purchase of short-term investments(84,125)(89,992)
Proceeds from maturities of short-term investments87,87153,715
Deposits and other assets9--
----------------------
Net cash flows provided by / (used in) investing activities2,285(36,624)
----------------------
FINANCING ACTIVITIES
Income tax benefit realized from share-based compensation plans6,889352
Issuance of common stock, net3,7711,085
Repurchase of common stock(11,453)--
----------------------
Net cash flows (used in) / provided by financing activities(793)1,437
----------------------
Increase (decrease) in cash and cash equivalents55,594(207)
Cash and cash equivalents at beginning of period41,50845,829
----------------------
Cash and cash equivalents at end of period$97,102$45,622
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest$11$3
Cash paid for income taxes$12,973$14,560
SOURCE Questcor Pharmaceuticals, Inc. |
