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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
ChangeNet 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
ChangeNet 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 ResultsNet 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 InformationBecause 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:
"Fully Rebated" prescriptions (Rxs) include:
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
Total2010Q1-10
11
0
11Q2-10
4
1
5Q3-10
8
0
8Q4-10
7
0
7Total 2010
30
1
312011Q1-11
18
1
19Q2-11
45
4
49Q3-11
60
2
62Q4-11
146
19
165Total 2011
269
26
2952012Q1-12
238
14
252Q2-12
314
24
338Multiple Sclerosis (and related conditions) New RxsPaid
Year-Over-Year
Growth in Paid Rx
Fully Rebated
Total2010Q1-10
231
196%
12
243Q2-10
304
145%
24
328Q3-10
323
129%
19
342Q4-10
354
66%
24
378Total 2010
1,212
118%
79
1,2912011Q1-11
508
120%
49
557Q2-11
751
147%
58
809Q3-11
886
174%
46
932Q4-11
945
167%
44
989Total 2011
3,090
155%
197
3,2872012Q1-12
1,000
97%
51
1,051Q2-12
1,110
48%
41
1,151 Infantile Spasms (and related conditions) New Rxs*Paid
Fully Rebated
Total2010Q1-10
89
48
137Q2-10
95
66
161Q3-10
92
78
170Q4-10
91
68
159Total 2010
367
260
6272011Q1-11
89
71
160Q2-11
106
79
185Q3-11
112
69
181Q4-11
120
51
171Total 2011
427
270
6972012Q1-12
112
71
183Q2-12
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 InformationThe 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:
Acthar is also approved for the following rheumatology-related conditions:
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 ReservesQuestcor'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:
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:
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 EndedSix Months EndedJune 30,June 30,2012201120122011RevenueNet sales
$
112,452$
45,980$
208,421$
82,813Cost of sales (exclusive of amortization of purchased technology)
6,3792,85611,9004,728Gross profit
106,07343,124196,52178,085Operating expenses:Selling and marketing
27,60914,74649,32425,998General and administrative
8,6473,79114,0897,663Research and development
8,4853,89114,1506,872Depreciation and amortization
321273612471Impairment of goodwill
———299Total operating expenses
45,06222,70178,17541,303Income from operations
61,01120,423118,34636,782Interest and other income, net
218120434384Income before income taxes
61,22920,543118,78037,166Income tax expense
19,7246,66938,73212,068Net income
$
41,505$
13,874$
80,048$
25,098Change 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)521Comprehensive income
$
41,496$
13,864$
80,100$
25,099Net income per share:Basic
$
0.68$
0.22$
1.28$
0.40Diluted
$
0.65$
0.21$
1.23$
0.38Shares used in computing net income per share:Basic
61,11262,03462,30862,126Diluted
64,11365,46465,30565,483Reconciliation of Non-GAAP Adjusted Financial DisclosureAdjusted net income
$
44,244$
5,217$
84,514$
27,999Share-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$
3,874$
80,048$
25,098Adjusted net income per share – basic
$0.72$0.25$1.36$0.45Share-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
$
.68$
.22$
.28$
.40Adjusted net income per share – diluted
$0.69$0.23$1.29$0.43Share-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
$
.65$
.21$
.23$
.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:
- 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.
Questcor Pharmaceuticals, Inc.Consolidated Balance Sheets(In thousands, except share amounts)June 30,
2012December 31,
2011(unaudited)ASSETSCurrent assets:Cash and cash equivalents
$
36,662$
88,469Short-term investments
78,022121,680Total cash, cash equivalents and short-term investments
114,684210,149Accounts receivable, net of allowances for doubtful accounts of $0 at June 30, 2012 and December 31, 2011
46,67427,801Inventories, net of allowances of $0 at June 30, 2012 and December 31, 2011
6,4175,226Prepaid income taxes
3,9926,940Prepaid expenses and other current assets
3,0103,391Deferred tax assets
11,85912,093Total current assets
186,636265,600Property and equipment, net
2,0451,970Purchased technology, net
2,6292,778Deposits and other assets
5756Deferred tax assets
5,4045,404Total assets
$
196,771$
275,808LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable
$
12,283$
5,503Accrued compensation
11,48411,590Sales-related reserves
38,72434,119Other accrued liabilities
6,4444,509Total current liabilities
68,93555,721Lease termination, deferred rent and other non-current liabilities
40261Total liabilities
68,97555,982Shareholders' 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
21,97494,976Retained earnings
105,781124,886Accumulated other comprehensive income
41(36)Total shareholders' equity
127,796219,826Total liabilities and shareholders' equity
$
196,771$
275,808 Questcor Pharmaceuticals, Inc.Consolidated Statements of Cash Flows(In thousands)(unaudited)Six Months EndedJune 30,20122011OPERATING ACTIVITIESNet income
$
80,048$
25,098Adjustments to reconcile net income to net cash provided by operating activities:Share-based compensation expense
6,0143,528Deferred income taxes
234180Amortization of investments
928376Depreciation and amortization
612471Impairment of goodwill
—299Loss on disposal of property and equipment
1011Changes 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
381372Accounts payable
6,780(1,089)Accrued compensation
(106)1,112Sales-related reserves
4,6055,555Other accrued liabilities
1,935(387)Other non-current liabilities
(221)(163)Net cash flows provided by operating activities
84,10421,505INVESTING ACTIVITIESPurchase of property and equipment
(548)(1,393)Purchase of short-term investments
(96,631)(53,859)Proceeds from maturities of short-term investments
139,43862,960Deposits and other assets
(1)6Net cash flows provided by investing activities
42,2587,714FINANCING ACTIVITIESIncome tax benefit realized from share-based compensation plans
4,2613,735Issuance of common stock, net
2,6632,268Repurchase 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)23,769Cash and cash equivalents at beginning of period
88,46941,508Cash and cash equivalents at end of period$
36,662$
65,277Supplemental Disclosures of Cash Flow Information:Cash paid for interest
$
12$
7Cash paid for income taxes
$
31,285$
3,120
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