Questcor Reports Third Quarter Financial Results
ANAHEIM, Calif., Oct. 23, 2012 /PRNewswire via COMTEX/ -- Questcor
Pharmaceuticals, Inc. (QCOR) today reported financial results for the third
quarter and nine months ended September 30, 2012.
Three Months Ended 9/30/12 Three Months Ended 9/30/11 Percentage Change
Net Sales$140.3 Million$59.8 Million135%
GAAP Diluted EPS$0.91$0.35160%
Non-GAAP Diluted EPS $0.97$0.37162%
Nine months Ended 9/30/12
Nine months Ended 9/30/11
Percentage Change
Net Sales
$348.8 Million
$142.6 Million
145%
GAAP Diluted EPS
$2.12
$0.73
190%
Non-GAAP Diluted EPS
$2.25
$0.80
181%
Net sales for the third quarter were $140.3 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.
Net sales in the third quarter of 2011 were $59.8 million.
GAAP earnings for the third quarter were $0.91 per diluted share, compared to
$0.35 per diluted common share for last year's comparable quarter. Non-GAAP
earnings for the quarter ended September 30, 2012 were $0.97 per diluted common
share. Non-GAAP earnings exclude non-cash share-based compensation expense,
impairment of purchased technology and goodwill, and depreciation and
amortization expense. Non-GAAP earnings for the year ago quarter were $0.37 per
diluted common share.
Questcor shipped 5,590 vials of Acthar during the third quarter 2012, up 92
percent compared to 2,910 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 third quarter appeared to
be within the normal historical range. Questcor believes that investors should
consider the Company's results over several quarters when analyzing its
performance.
"Overall, our commercial expansion effort continued to show progress during the
third quarter," said Don M. Bailey, President and CEO of Questcor. "Health care
providers are expanding their usage of Acthar as an FDA-approved treatment
alternative for patients with idiopathic types of nephrotic syndrome, MS relapses
and rheumatology related conditions. We also continue to support patients
suffering from infantile spasms."
"Based on information available as of this release, patients with serious,
difficult-to-treat medical conditions addressed by Acthar on-label indications
have continued to have access to Acthar through commercial insurance, Medicare,
Medicaid and other government programs, as well as through our free drug program
for uninsured patients," noted Steve Cartt, Chief Operating Officer of Questcor.
"Acthar is most commonly prescribed by physicians as an appropriate treatment
alternative for patients in whom first-line therapies have not provided the
intended treatment outcome and an additional FDA-approved treatment alternative
is needed. For such patients, insurance coverage for Acthar continued to remain
favorable."
Year-to-Date Financial Results
Net sales for the first nine months of 2012 were $348.8 million, compared to
$142.6 million in the first nine months of 2011. GAAP earnings for the first nine
months of 2012 were $2.12 per diluted common share, compared with $0.73 per
diluted common share for the comparable period of 2011. Non-GAAP earnings for the
nine months ended September 30, 2012 were $2.25 per diluted common share,
excluding non-cash share-based compensation expense and depreciation and
amortization expense. Non-GAAP earnings for the comparable period of 2011 were
$0.80 per diluted common share.
Shipped Acthar Vial and Prescription Trend Information
The Company has been publicly disclosing on Form 8-K shipped vial and
prescription trend information on a monthly basis for the past several months.
Sales have reached a level where the Company believes that the more traditional
approach of providing financial information and related analysis of results on a
quarterly basis is appropriate, and the Company expects to return to a quarterly
public filing approach going forward.
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 percent 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 September 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 rebates as Medicaid waiver 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
PaidFullyTotal
Rebated
2010
Q1-1011011
Q2-10415
Q3-10808
Q4-10707
Total 2010 30131
2011
Q1-1118119
Q2-1145449
Q3-1160262
Q4-1114619165
Total 2011 26926295
2012
Q1-1223814252
Q2-1231424338
Q3-1233517352
Multiple Sclerosis (and related conditions) New Rxs
PaidYear-Over-YearFullyTotal
Growth in Paid Rx Rebated
2010
Q1-10231196%12243
Q2-10304145%24328
Q3-10323129%19342
Q4-1035466%24378
Total 20101,212118%791,291
2011
Q1-11508120%49557
Q2-11751147%58809
Q3-11886174%46932
Q4-11945167%44989
Total 20113,090155%1973,287
2012
Q1-121,00097%511,051
Q2-121,11048%411,151
Q3-121,29146%491,340
Infantile Spasms (and related conditions) New Rxs*
PaidFullyTotal
Rebated
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
Q2-129673169
Q3-1210270172
* Questcor commenced commercial efforts in IS in the fourth quarter of 2010.
Rheumatology (and related conditions) New Rxs*
PaidFullyTotal
Rebated
2012
Q1-12101
Q2-12628
Q3-1238038
* Questcor commenced commercial efforts in rheumatology in the third quarter of
2012.
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
following 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."
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 and Cash Dividend
The Company used $58.1 million in cash to repurchase 1,484,300 shares of its
common stock in open market transactions, at an average price of $39.15 per
share, during the third quarter of 2012. On September 28, 2012, the Company
announced that its Board of Directors increased the Company's common stock
repurchase program authorization to 7 million shares. This authorization includes
the 3.2 million shares that were remaining under the prior authorization. Shares
outstanding were 58.5 million at September 30, 2012 and 62.7 million at September
30, 2011.
On September 28, 2012, the Company announced that its Board of Directors adopted
a policy to pay a regular quarterly dividend in such amounts as the Board of
Directors may determine from time to time. The Company's Board of Directors
declared an initial quarterly cash dividend of $0.20 per share to all
shareholders of record at the close of business on October 31, 2012, payable on
November 15, 2012. The Company has been notified that NASDAQ has established an
"ex-dividend" date for the Company's shares of common stock of October 29, 2012,
meaning that investors who purchase shares of our common stock on or after
October 29, 2012 would not be entitled to the dividend for which the record date
is October 31, 2012.
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 and Investor Communications
The Company will host a conference call and slide presentation via webcast today,
October 23, 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: 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) 354-0215. For participants outside the U.S.,
the dial-in number is (253) 237-1173.
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 (855) 859-2056. For participants outside the U.S., the replay
dial-in number is (404) 537-3406. The replay access code for all callers is
39696380.
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 the following
indications: the treatment of proteinuria in idiopathic types of nephrotic
syndrome, the treatment of acute exacerbations of multiple sclerosis in adults,
the treatment of infantile spasms in children under two years of age, and the
treatment of certain rheumatology-related conditions. 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," "remain,"
"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;
The results of any pending or future litigation, investigations or claims,
including with respect to the investigation by the United States Attorney's
Office for the Eastern District of Pennsylvania regarding the Company's
promotional 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 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 EndedNine Months Ended
September 30,September 30,
2012201120122011
Revenue
Net sales$140,339$59,821$348,760$142,634
Cost of sales (exclusive of amortization of purchased technology)7,4993,71819,3998,446
Gross profit132,84056,103329,361134,188
Operating expenses:
Selling and marketing31,76313,73381,08739,731
General and administrative8,3334,31422,42211,977
Research and development7,9974,17622,14711,048
Depreciation and amortization339280951751
Impairment of goodwill987-987299
Total operating expenses49,41922,503127,59463,806
Income from operations83,42133,600201,76770,382
Interest and other income, net10298536482
Income before income taxes83,52333,698202,30370,864
Income tax expense27,83610,84666,56822,914
Net income$55,687$22,852$135,735$47,950
Change in unrealized gains or losses on available-for-sale securities, net of related tax effects. 13(103)90(101)
Comprehensive income55,70022,749135,82547,849
Net income per share:
Basic$0.95$0.37$2.23$0.77
Diluted$0.91$0.35$2.12$0.73
Shares used in computing net income per share:
Basic58,65362,49260,99262,249
Diluted61,41766,02363,91465,685
Dividends declared per share of common stock$0.20 -$0.20 -
Reconciliation of Non-GAAP Adjusted Financial
Adjusted net income$59,427$24,315$143,943$52,314
Share-based compensation expense (1)(2,855)(1,273)(6,908)(3,654)
Depreciation and amortization expense (2)(226)(190)(638)(508)
Impairment of purchased technology and goodwill (3)(659)-(662)(202)
Net income - GAAP$55,687$22,852$135,735$47,950
Adjusted net income per share - basic$1.01 $0.39 $2.36 $0.84
Share-based compensation expense (1)(0.05)(0.02)(0.11)(0.06)
Depreciation and amortization expense (2)(0.00)(0.00)(0.01)(0.01)
Impairment of purchased technology and goodwill (3)(0.01)-(0.01)(0.00)
Net income per share - basic$0.95 $0.37 $2.23 $0.77
Adjusted net income per share - diluted$0.97 $0.37 $2.25 $0.80
Share-based compensation expense (1)(0.05)(0.02)(0.11)(0.06)
Depreciation and amortization expense (2)(0.00)(0.00)(0.01)(0.01)
Impairment of purchased technology and goodwill (3)(0.01)-(0.01)(0.00)
Net income per share - diluted$0.91 $0.35 $2.12 $0.73
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
Impairment of purchased technology related to our acquisition of Doral in 2012
and impairment of goodwill related to the write-off of goodwill associated with
an acquisition transaction completed in 1999 in 2011.
Questcor Pharmaceuticals, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
September 30,December 31,
20122011
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$36,076$88,469
Short-term investments75,837121,680
Total cash, cash equivalents and short-term investments111,913210,149
Accounts receivable, net of allowances for doubtful accounts of $0 at September 30, 2012 and December 31, 201162,27927,801
Inventories, net of allowances of $0 at September 30, 2012 and December 31, 20117,1545,226
Prepaid income taxes1,4666,940
Prepaid expenses and other current assets5,3933,391
Deferred tax assets11,70612,093
Total current assets199,911265,600
Property and equipment, net1,8601,970
Purchased technology, net1,5682,778
Deposits and other assets7056
Deferred tax assets5,4045,404
Total assets$208,813$275,808
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable$11,594$5,503
Accrued compensation16,00211,590
Sales-related reserves38,38534,119
Dividend payable11,691--
Other accrued liabilities8,7094,509
Total current liabilities86,38155,721
Lease termination, deferred rent and other non-current liabilities2261
Total liabilities86,38355,982
Shareholders' equity:
Preferred stock, no par value, 5,334,285 shares authorized; none outstanding----
Common stock, no par value, 105,000,000 shares authorized, 58,451,435 and 63,645,781 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively26,62394,976
Retained earnings95,753124,886
Accumulated other comprehensive income (loss)54(36)
Total shareholders' equity122,430219,826
Total liabilities and shareholders' equity$208,813$275,808
Questcor Pharmaceuticals, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months Ended
September 30,
20122011
OPERATING ACTIVITIES
Net income$135,735$47,950
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense10,2955,406
Deferred income taxes387357
Amortization of investments1,185874
Depreciation and amortization951751
Impairment of purchased technology and goodwill987299
Loss on disposal of property and equipment3311
Changes in operating assets and liabilities:
Accounts receivable(34,478)(17,087)
Inventories(1,928)(1,587)
Prepaid income taxes5,4742,964
Prepaid expenses and other current assets(2,002)(936)
Accounts payable6,0911,093
Accrued compensation4,4123,500
Sales-related reserves4,2669,728
Other accrued liabilities4,200860
Other non-current liabilities(259)(81)
Net cash flows provided by operating activities135,34954,102
INVESTING ACTIVITIES
Purchase of property and equipment(651)(1,470)
Purchase of short-term investments(122,776)(84,125)
Proceeds from maturities of short-term investments167,52487,871
Deposits and other assets(14)9
Net cash flows provided by investing activities44,0832,285
FINANCING ACTIVITIES
Income tax benefit realized from share-based compensation plans6,6786,889
Issuance of common stock, net4,6983,771
Repurchase of common stock(243,201)(11,453)
Net cash flows used in financing activities(231,825)(793)
(Decrease) increase in cash and cash equivalents(52,39355,594
Cash and cash equivalents at beginning of period88,46941,508
Cash and cash equivalents at end of period$36,076$97,102
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest$17$11
Cash paid for income taxes$54,024$12,973
Non-Cash Financing Activities:
Dividend payable$11,691$--- |
