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Questcor Reports Solid Fourth Quarter Results

UNION CITY, Calif., March 1 /PRNewswire-FirstCall/ -- Questcor Pharmaceuticals, Inc. (Nasdaq: QCOR) today reported financial results for the fourth quarter and year ended December 31, 2009.   The Company's financial performance in the fourth quarter of 2009 was driven primarily by:

  • a 223% increase in the number of new paid Acthar commercial prescriptions for the treatment of multiple sclerosis (MS) exacerbations versus the fourth quarter of 2008,
  • a sequential 56% increase in new paid Acthar commercial prescriptions for the treatment of infantile spasms (IS), and
  • lower sequential Medicaid usage.  

In addition to the financial improvement in the quarter, the Company also received an encouraging initial set of Acthar prescriptions for the treatment of nephrotic syndrome (NS). Also, during the fourth quarter, the FDA accepted for review Questcor's supplemental New Drug Application (sNDA) filing which seeks approval for an indication for Acthar in the treatment of IS.

Net sales totaled $25.9 million for the quarter ended December 31, 2009 compared to $13.9 million for the quarter ended September 30, 2009, and $27.0 million for the fourth quarter of 2008.  Net income for the fourth quarter of 2009 was $8.4 million, or $0.13 per diluted common share compared to $1.2 million, or $0.02 per diluted common share for the third quarter of 2009, and $16.2 million, or $0.24 per diluted common share for the fourth quarter of 2008.  An additional $1.2 million in sales reserves was recorded during the fourth quarter of 2009 for retroactive Tricare rebates. Significantly higher sales reserves adjustments reduced net sales and operating income for the third quarter of 2009 by $4.6 million.  Tax benefits resulting from the reversal of a valuation allowance positively affected net income in the fourth quarter of 2008 by $4.4 million.

Net sales totaled $88.3 million for the year ended December 31, 2009, compared with $95.2 million for 2008. Net income for 2009 was $26.6 million, or $0.40 per diluted common share compared with net income applicable to common shareholders of $35.3 million, or $0.49 per diluted common share for 2008. The 2008 earnings were impacted by a one-time net tax benefit of $5.2 million and a deemed dividend of $5.3 million.

"We are making excellent progress on all of Questcor's top priorities," said Don M. Bailey, President and CEO.  "Our fourth quarter financial performance improved significantly on a sequential basis.  Questcor's sales in the MS market showed marked growth and there are preliminary indications that Acthar may also begin to be adopted in the NS market, which is much larger than either the IS or MS markets.  In addition, IS prescriptions and payer mix both improved during the fourth quarter from a very weak third quarter.  To date, we are seeing little or no impact on Acthar sales in the IS market from the September 2009 introduction of Sabril (vigabatrin)."

IS, MS, and NS Sales

During the fourth quarter of 2009, Questcor shipped 1,626 vials of Acthar compared to third quarter 2009 shipments of 1,354 vials and fourth quarter 2008 shipments of 1,510 vials. 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 historic trends in payer mix for new Acthar prescriptions based on data it receives from its reimbursement support center.  Questcor estimates that approximately 90% of new Acthar prescriptions are processed by this support center, but that very few refill prescriptions are processed at this center.  The following tables show the number of prescriptions shipped by payer category for each of three therapeutic areas for those new prescriptions processed by the Questcor support center:

    Multiple Sclerosis New Prescriptions
                    Paid/Commercial     Medicaid       Tricare/VA
                    ---------------     --------       ----------
    Q108                   24               5               0
    Q208                   35               1               0
    Q308                   50               5               1
    Q408                   66               3               2
    Total 2008            175              14               3
    Q109                   78               5               3
    Q209                  125              11               6
    Q309                  141              14               5
    Q409                  213              10               5
    Total 2009            557              40              19
    Infantile Spasms New Prescriptions
                    Paid/Commercial     Medicaid       Tricare/VA
                    ---------------     --------       ----------
    Q108                   98              38               2
    Q208                  114              47               3
    Q308                  113              67               3
    Q408                  103              56               3
    Total 2008            428             208              11
    Q109                  104              70               5
    Q209                   93              63               5
    Q309                   61              55               3
    Q409                   95              40               5
    Total 2009            353             228              18
    Nephrotic Syndrome New Prescriptions
                    Paid/Commercial     Medicaid       Tricare/VA
                    ---------------     --------       ----------
    Q109                    1               0               0
    Q209                    3               0               1
    Q309                    2               0               0
    Q409                   14               2               1
    Total 2009             20               2               2
    Note: Historical trend information is not necessarily indicative of 
    future results.  The total number of vials associated with an individual 
    prescription varies by the condition being treated and by patient.

"As the above tables illustrate, our efforts in MS continue to show that the use of Acthar is expanding," commented Steve Cartt, Executive Vice President.  "Our initiatives to educate MS specialists about the treatment benefits of Acthar have resulted in a tripling in MS prescriptions year over year."

"In addition, spontaneous IS prescriptions during the fourth quarter rebounded to 140 new paid prescriptions from a low level of 119 in the third quarter," noted Mr. Cartt.   "If we are able to receive approval from the FDA to market Acthar for the treatment of IS, we may be able to expand our sales in this therapeutic area."

"The modest set of prescriptions for NS in the fourth quarter was an unexpected development at this stage in our efforts to generate sales in this market," added Mr. Cartt.  "NS is a devastating kidney disorder which leads to end-stage renal disease (ESRD).  NS is an on-label indication for Acthar and we are working to generate more clinical data to further support the effectiveness of Acthar in the treatment of this disease."

Sales Reserves—Medicaid, Tricare and VA Adjustments

As required by federal regulations, the Company provides rebates to state Medicaid programs for Acthar dispensed to Medicaid patients.  The Medicaid rebate portion of sales reserves for the fourth quarter of 2009 was $8.4 million or 22% of 2009 fourth quarter gross sales.  While total new commercially paid Acthar prescriptions for the treatment of IS processed through the Company's reimbursement support center increased to 95 in the fourth quarter from 61 in the third quarter, the number of Medicaid-reimbursed IS prescriptions dropped 27% sequentially.  

The Department of Defense (DOD) operates a prescription drug program through its Tricare Management Administration (Tricare).  As a result of uncertainties in an on-going dispute between the pharmaceutical industry and the DOD over Tricare rebate regulations, Questcor recorded a sales reserve related to a portion of Tricare-claimed rebates during the third quarter of 2009.  Due to recent developments in that dispute, Questcor recorded an additional $1.2 million in sales reserves during the fourth quarter of 2009 for the remaining potential Tricare-claimed rebates. Effective January 1, 2010, Questcor established new prices for Acthar purchased by Tricare and Veterans Administration (VA) medical centers.  Additionally, Questcor has removed uncertainty regarding Tricare rebate liabilities going forward.   The new agreement with Tricare does not diminish Questcor's rights in regards to the fully reserved 2008-2009 liability. Any sales in 2010 to Tricare or the VA will represent an increase from the negligible net sales to these customers in 2009.

Regulatory Activity

Acthar is currently approved in the U.S. for the treatment of MS exacerbations, nephrotic syndrome and many other conditions.  Acthar is not approved in the U.S. for the treatment of IS, a potentially life-threatening disorder that typically begins in the first year of life.  However, pursuant to guidelines published by the American Academy of Neurology and the Child Neurology Society, many child neurologists use Acthar to treat infants afflicted with IS.

On December 23, 2009 the FDA accepted for review Questcor's supplemental New Drug Application (sNDA) seeking approval to market Acthar for the treatment of infantile spasms.   The FDA has notified Questcor that an Advisory Committee Meeting of independent experts will be held to discuss the approval and use of Acthar in infantile spasms.  The FDA has also notified Questcor that it has set a PDUFA goal date of June 11, 2010, but there is no assurance that this date will not be delayed.  Approval of the IS indication would allow Questcor to promote the use of Acthar in treating IS to child neurologists.  

Previously, the FDA granted Orphan Designation to Acthar for the treatment of IS.  As a result of this Orphan Designation, if Questcor is successful in obtaining FDA approval for the IS indication, Questcor believes that it will also qualify for a seven-year exclusivity period during which the FDA is prohibited from approving any other adrenocorticotropic hormone (ACTH) formulation for IS unless the other formulation is demonstrated to be clinically superior to Acthar.

Cash, Accounts Receivable and Share Repurchase Program

At February 26, 2010, Questcor's cash, cash equivalents and short-term investments totaled approximately $81 million, and accounts receivable totaled approximately $9 million.

During the fourth quarter, the Company repurchased 2.5 million shares of its common stock at a total cost of $9.9 million.  In the last two years, Questcor has spent $67.0 million for the repurchase of 14.5 million common and preferred shares.

As of December 31, 2009, Questcor had 61.7 million common shares outstanding, with 5.1 million shares remaining under its common share repurchase program.  

Conference Call Details

The Company will host a conference call today to discuss these results at 5:00 p.m. ET. Don Bailey, President and Chief Executive Officer; Steve Cartt, Executive Vice President and Chief Business Officer; Dr. David Young, Chief Scientific Officer; Dave Medeiros, Senior Vice President, Pharmaceutical Operations; Dr. Jason Zielonka, Senior Vice President and Chief Medical Officer; and Gary Sawka, Senior Vice President, Finance and Chief Financial Officer will host the call.

To participate in the live call by telephone, please dial 877-941-2928 from the U.S. or 480-629-9724 from outside the U.S. Participants are asked to call the above numbers 5-10 minutes prior to the starting time. The call will also be webcast live at 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 4221516#. An archived webcast will also be available at

About Questcor  

Questcor Pharmaceuticals, Inc. is a pharmaceutical company that markets H.P. Acthar® Gel (repository corticotropin injection). H.P. Acthar Gel ("Acthar") is an injectable drug that is approved for the treatment of certain disorders, including the treatment of exacerbations associated with multiple sclerosis ("MS") and to induce a diuresis or a remission of proteinuria in the nephrotic syndrome without uremia of the idiopathic type or that is due to lupus erythamatosus. In addition, Acthar is not indicated for, but is used in treating patients with infantile spasms ("IS"), a rare form of refractory childhood epilepsy, and opsoclonus myoclonus syndrome, a rare autoimmune-related childhood neurological disorder. For more information, please visit

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 "may," "will," "if," "should," "forecasts," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" 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:

  • Questcor's ability to continue to successfully implement its Acthar-centric business strategy, including its expansion in the MS marketplace;
  • FDA approval of and the market introduction of competitive products and our inability to market Acthar in IS prior to approval of IS as a labeled indication;
  • Questcor's ability to operate within an industry that is highly regulated at both the Federal and state level;
  • Regulatory changes or actions including Federal or State health care reform initiatives;
  • Questcor's ability to accurately forecast the demand for its  products;
  • The gross margin achieved from the sale of its products;
  • Questcor's ability to estimate the quantity of Acthar used by government entities and Medicaid-eligible patients;
  • That the actual amount of rebates and chargebacks related to the use of Acthar by government entities, including the Department of Defense Tricare network, and Medicaid-eligible patients may differ materially from Questcor's estimates; 
  • Questcor's expenses and other cash needs for upcoming periods;
  • The inventories carried by Questcor's distributors, specialty pharmacies and hospitals;
  • Volatility in Questcor's monthly and quarterly Acthar shipments and end-user demand;
  • Questcor's ability to obtain finished goods from its sole source contract manufacturers on a timely basis if at all;
  • Questcor's ability to attract and retain key management personnel;
  • Research and development risks, including risks associated with Questcor's sNDA for IS and its preliminary work in the area of nephrotic syndrome;
  • Uncertainties regarding Questcor's intellectual property;
  • The uncertainty of receiving required regulatory approvals in a timely way, or at all; and,
  • Questcor's ability to identify product acquisition candidates and consummate transactions on terms acceptable to the Company.
  • Other risks discussed in Questcor's annual report on Form 10-K for the year ended December 31, 2008 and other documents filed with the Securities and Exchange Commission.

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 hereof or to reflect the occurrence of unanticipated events.

For more information, please visit or

                          Questcor Pharmaceuticals, Inc.
                         Consolidated Statements of Income
                     (In thousands, except per share amounts)
                                        Three Months Ended     Years Ended
                                            December 31,       December 31,
                                           --------------     --------------
                                           2009      2008     2009      2008
                                           ----      ----     ----      ----
    Net sales                            $25,905   $27,018  $88,320   $95,248
    Cost of sales (exclusive of
     amortization of purchased
     technology)                           1,898     1,858    7,017     7,304
                                           -----     -----    -----     -----
    Gross profit                          24,007    25,160   81,303    87,944
    Gross margin                             93%       93%      92%       92%
    Operating expenses:
      Selling, general and
       administrative                      7,841     5,075   29,950    19,247
      Research and development             2,662     2,511    9,653    10,614
      Depreciation and amortization          121       124      480       503
                                             ---       ---      ---       ---
    Total operating expenses              10,624     7,710   40,083    30,364
                                          ------     -----   ------    ------
    Income from operations                13,383    17,450   41,220    57,580
    Other income:
      Interest and other income, net         101       247      686     1,075
      Gain on sale of product rights           -        75      225        75
                                             ---       ---      ---       ---
         Total other income                  101       322      911     1,150
                                             ---       ---      ---     -----
    Income before income taxes            13,484    17,772   42,131    58,730
    Income tax expense                     5,063     1,530   15,502    18,198
                                           -----     -----   ------    ------
    Net income                             8,421    16,242   26,629    40,532
    Deemed dividend on Series A
     preferred stock                           -         -        -     5,267
                                             ---       ---      ---     -----
    Net income applicable to common
     shareholders                         $8,421   $16,242  $26,629   $35,265
                                          ======   =======  =======   =======
    Net income per share applicable
     to common shareholders:
      Basic                                $0.13     $0.25    $0.41     $0.52
                                           =====     =====    =====     =====
      Diluted                              $0.13     $0.24    $0.40     $0.49
                                           =====     =====    =====     =====
    Shares used in computing net
     income per share applicable to
     common shareholders:
      Basic                               63,086    65,135   64,196    67,761
                                          ======    ======   ======    ======
      Diluted                             64,783    68,345   66,257    71,350
                                          ======    ======   ======    ======
                          Questcor Pharmaceuticals, Inc.
                            Consolidated Balance Sheets
                       (In thousands, except share amounts)
                                                              December 31,
                                                           2009         2008
                                                           ----         ----
    Current assets:
      Cash and cash equivalents                          $45,829      $13,282
      Short-term investments                              29,878       42,169
                                                          ------       ------
        Total cash, cash equivalents and 
         short-term investments                           75,707       55,451
      Accounts receivable, net of allowance for
       doubtful accounts of $77 and $62 at
       December 31, 2009 and 2008, respectively           14,833       10,418
      Inventories, net                                     3,378        2,459
      Prepaid income taxes                                     -        3,316
      Prepaid expenses and other current assets            1,162        1,101
      Deferred tax assets                                  8,180        6,252
                                                           -----        -----
       Total current assets                              103,260       78,997
    Property and equipment, net                              407          450
    Purchased technology, net                              3,372        3,669
    Goodwill                                                 299          299
    Deposits and other assets                                710          710
    Deferred tax assets                                    3,392        5,021
                                                           -----        -----
       Total assets                                     $111,440      $89,146
                                                        ========      =======
    Current liabilities:
      Accounts payable                                   $12,921       $4,302
      Accrued compensation                                 2,140        1,896
      Sales-related reserves                              14,922       11,825
      Income taxes payable                                   477            -
      Other accrued liabilities                            1,751        1,702
                                                           -----        -----
       Total current liabilities                          32,211       19,725
    Lease termination and deferred rent
     liabilities and other non-current
     liabilities                                           1,226        1,529
                                                           -----        -----
           Total liabilities                              33,437       21,254
                                                          ------       ------
    Shareholders' equity:
      Preferred stock, no par value, 7,500,000
       shares authorized; none outstanding                     -            -
      Common stock, no par value, 105,000,000
       shares authorized; 61,726,609 and
       65,970,653 shares issued and outstanding
       at December 31, 2009 and 2008,
       respectively                                       67,793       84,028
      Retained earnings (accumulated deficit)             10,224      (16,405)
      Accumulated other comprehensive income
       (loss)                                                (14)         269
                                                             ---          ---
       Total shareholders' equity                         78,003       67,892
                                                          ------       ------
       Total liabilities and shareholders' equity       $111,440      $89,146
                                                        ========      =======
                           Questcor Pharmaceuticals, Inc.
                       Consolidated Statements of Cash Flows
                                  (In thousands)
                                                              Years Ended
                                                              December 31,
                                                            2009       2008
                                                            ----       ----
    Net income                                            $26,629    $40,532
    Adjustments to reconcile net income to net cash
     provided by operating activities:
      Share-based compensation expense                      3,066      4,119
      Deferred income taxes                                  (290)     4,649
      Amortization of investments                             181       (456)
      Depreciation and amortization                           480        503
      Gain on sale of product rights                         (225)       (75)
      Income tax benefit realized from share-based
       compensation plans                                     783      4,932
      Excess tax benefit from share-based compensation
       plans                                                 (743)    (4,841)
    Changes in operating assets and liabilities:
      Accounts receivable                                  (4,415)    13,221
      Inventories                                            (919)       (94)
      Prepaid income taxes                                  3,316     (3,316)
      Prepaid expenses and other current assets               (61)      (323)
      Accounts payable                                      8,619      2,525
      Accrued compensation                                    244        (49)
      Sales-related reserves                                3,097      3,649
      Income taxes payable                                    477     (1,330)
      Other accrued liabilities                                49        210
      Other non-current liabilities                          (303)      (347)
                                                             ----       ----
    Net cash flows provided by operating activities        39,985     63,509
                                                           ------     ------
    Purchase of property and equipment                       (140)      (133)
    Purchase of short-term investments                    (61,557)   (69,613)
    Proceeds from the sale and maturities of short-
     term investments                                      73,375     42,388
    Net proceeds from sale of product rights                  225         75
    Changes in deposits and other assets                        -         34
                                                              ---        ---
    Net cash flows provided by (used in) investing
     activities                                            11,903    (27,249)
                                                           ------    -------
    Issuance of common stock, net                           1,002      2,161
    Repurchase of common stock                            (21,086)   (35,571)
    Repurchase of Series A preferred stock                      -    (10,348)
    Excess tax benefit from share-based compensation
     plans                                                    743      4,841
                                                              ---      -----
    Net cash flows used in financing activities           (19,341)   (38,917)
                                                          -------    -------
    Increase (decrease) in cash and cash equivalents       32,547     (2,657)
    Cash and cash equivalents at beginning of year         13,282     15,939
                                                           ------     ------
    Cash and cash equivalents at end of year              $45,829    $13,282
                                                          =======    =======

SOURCE Questcor Pharmaceuticals, Inc.

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SOURCE Questcor Pharmaceuticals, Inc.
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