Questcor Reports First Quarter 2012 Financial Results
-Net Sales Grew to $96.0M vs. $36.8M in Q1 2011- -GAAP Net Income per Diluted
Share Grew to $0.58 vs. $0.17 in Year Ago Period- -Value of First Quarter paid NS
Prescriptions Exceeds MS Value- -Expansion of Both NS and MS Sales Forces Well
Ahead of Schedule- -Conference Call and Webcast Today at 4:30 p.m. ET, 1:30 p.m.
PT-
ANAHEIM, Calif., April 24, 2012 /PRNewswire via COMTEX/ -- Questcor
Pharmaceuticals, Inc. (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 *
PaidFully Rebated Total
2010
Q1-1011011
Q2-10415
Q3-10808
Q4-10707
Total 201030131
2011
Q1-1118119
Q2-1145449
Q3-1160262
Q4-1114619165
Total 201126926295
2012
Q1-1223814252
* 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
PaidYear-Over-YearFully Rebated Total
Growth in Paid Rx
2010
Q1-10231196%12243
Q2-10304145%24328
Q3-10323129%19342
Q4-1035466%24378
Total 2010 1,212 118%791,291
2011
Q1-11508120%49557
Q2-11751147%58809
Q3-11886174%46932
Q4-11945167%44989
Total 2011 3,090 155%1973,287
2012
Q1-121,000 97%511,051
Infantile Spasms (and related conditions) New Rxs**
PaidFully Rebated Total
2010
Q1-108948137
Q2-109566161
Q3-109278170
Q4-109168159
Total 2010367260627
2011
Q1-118971160
Q2-1110679185
Q3-1111269181
Q4-1112051171
Total 2011427270697
2012
Q1-1211271183
** 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 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
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 ir.questcor.com.
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 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 questcor.com or
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,
20122011
Revenue
Net sales$95,968$36,833
Cost of sales (exclusive of amortization of purchased technology)5,5201,872
Gross profit90,44834,961
Operating expenses:
Selling and marketing21,71611,252
General and administrative5,4413,873
Research and development5,6652,981
Depreciation and amortization291198
Impairment of goodwill--299
Total operating expenses33,11318,603
Income from operations57,33516,358
Interest and other income, net216265
Income before income taxes57,55116,623
Income tax expense19,0085,399
Net income$ 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:
Basic63,49162,219
Diluted66,47165,374
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:
Share-based compensation expense.
Depreciation and amortization expense
Tax adjustments primarily relate to write-off of 1997-2000 Federal R&D tax
credits.
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 investments160,064121,680
Total cash, cash equivalents and short-term investments223,655210,149
Accounts receivable, net of allowances for doubtful accounts of $0 at both March 31, 2012 and December 31, 2011, respectively41,35827,801
Inventories, net of allowances of $0 for both March 31, 2012 and December 31, 2011, respectively5,5245,226
Prepaid income taxes6,1806,940
Prepaid expenses and other current assets3,6633,391
Deferred tax assets12,02612,093
Total current assets292,406265,600
Property and equipment, net2,0561,970
Purchased technology, net2,7042,778
Deposits and other assets5256
Deferred tax assets5,4045,404
Total assets$ 302,622$275,808
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable$7,488$5,503
Accrued compensation5,07111,590
Sales-related reserves33,76534,119
Income taxes payable17,556--
Other accrued liabilities4,4964,509
Total current liabilities68,37655,721
Lease termination, deferred rent and other non-current liabilities141261
Total liabilities68,51755,982
Shareholders' equity:
Preferred stock, no par value, 7,500,000 shares authorized; none outstanding----
Common stock, no par value, 105,000,000 shares authorized, 63,024,541 and 63,645,781 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively 70,62194,976
Retained earnings163,429124,886
Accumulated other comprehensive income55(36)
Total shareholders' equity234,105219,826
Total liabilities and shareholders' equity$ 302,622$275,808
Questcor Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (In
thousands) (unaudited)
Three Months Ended March 31,
20122011
OPERATING ACTIVITIES
Net income$ 38,543$ 11,224
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense2,2961,812
Deferred income taxes6754
Amortization of investments546(111)
Depreciation and amortization290198
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 taxes760(337)
Prepaid expenses and other current assets(272)(215)
Accounts payable1,9851,177
Accrued compensation(6,519)(864)
Sales-related reserves(354)1,847
Income taxes payable17,5565,666
Other accrued liabilities(13)(938)
Other non-current liabilities(120)(176)
Net cash flows provided by operating activities40,91018,025
INVESTING ACTIVITIES
Purchase of property and equipment(302)(848)
Purchase of short-term investments(71,074)(21,866)
Proceeds from maturities of short-term investments32,23539,713
Deposits and other assets4--
Net cash flows (used in) / provided by investing activities(39,137)16,999
FINANCING ACTIVITIES
Income tax benefit realized from share-based compensation plans1,380212
Issuance of common stock, net956798
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 period88,46941,508
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 |
