ANAHEIM, Calif., Oct. 25, 2011 /PRNewswire/ -- Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR) today reported record net sales of $59.8 million for its third quarter ended September 30, 2011, a 91% increase from $31.3 million in the year ago quarter. Net income for the quarter was up 98% from the year ago quarter to $22.9 million or $0.35 per diluted share.
A 174% year-over-year increase in the number of paid H.P. Acthar® Gel (Acthar) prescriptions for the treatment of multiple sclerosis (MS) exacerbations led to increased shipments of Acthar vials. Paid Acthar prescriptions for the treatment of nephrotic syndrome (NS) increased to 60 during the quarter, up from 45 in the second quarter and eight in the third quarter of 2010. In addition, at 112, paid Acthar prescriptions for the treatment of infantile spasms (IS) were at the highest quarterly level since the third quarter of 2008.
"Questcor's strategy to sell more Acthar continues to generate increasing net sales and earnings," said Don M. Bailey, President and CEO of Questcor. "Our commercial organization is steadily expanding the number of neurologists, nephrologists, and child neurologists prescribing Acthar. We believe Acthar has the potential to benefit many more MS, NS, IS and possibly lupus patients in the future."
"Our 77 person Specialty Sales Force continues to drive expanded usage of Acthar as second-line therapy for MS exacerbations, a key Acthar market," commented Steve Cartt, Executive Vice President and Chief Business Officer. "Furthermore, during the third quarter we completed the expansion of our Nephrology Sales Force from 5 to 28 representatives, with all new personnel being fully trained and making initial sales calls by October 1st. Despite the inherent disruption involved with this expansion, paid nephrotic syndrome Acthar prescriptions increased durio treat on-label indications associated with NS, and our ability to develop other therapeutic uses for Acthar including SLE;
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.
85,834Cost of sales (exclusive of amortization of purchased technology)3,7182,2928,4466,290Gross profit56,10328,982134,18879,544Operating expenses:Selling and marketing13,7337,67839,73120,356General and administrative4,3142,21711,9777,886Research and development4,1762,17811,0487,868Depreciation and amortization280137751392Impairment of goodwill——299—Total operating expenses22,50312,21063,80636,502Income from operations33,60016,77270,38243,042Interest and other income, net98171482386Income before income taxes33,69816,94370,86443,428Income tax expense10,8465,42322,91414,774Net income$
28,654Net income per share:Basic$
0.45Shares used in computing net income per share:Basic62,49262,10562,24962,019Diluted66,02364,81565,68564,292Reconciliation of Non-GAAP Adjusted Financial DisclosureAdjusted net income applicable to common shareholders
$52,314$30,731Share-based compensation expense
(1,845)Depreciation and amortization expense
(232)Impairment of goodwill
—Net income applicable to common shareholders – GAAP
$28,654Adjusted net income per share applicable to common shareholders - basic
$ 0.50Share-based compensation expense
(0.03)Depreciation and amortization expense
(0.00)Impairment of goodwill
(0.00)Net income per share applicable to common shareholders – basic
$ 0.46Adjusted net income per share applicable to common shareholders – diluted
$ 0.48Share-based compensation expense
(0.03)Depreciation and amortization expense
(0.00)Impairment of goodwill
(0.00)Net income per share applicable to common shareholders – diluted
$ 0.45Net income per share applicable to common shareholders – basic and diluted may not foot due to rounding.
Use of Non-GAAP Financial Measures
Our "non-GAAP adjusted net income" excludes the following items from GAAP net income:
41,508Short-term investments68,60373,324Total cash, cash equivalents and short-term investments165,705114,832Accounts receivable, net of allowances of $69 and $25 at September 30, 2011 and December 31, 2010, respectively28,21511,128Inventories, net of allowances of $158 at both September 30, 2011 and December 31, 2010, respectively5,3133,726Prepaid income taxes5683,532Prepaid expenses and other current assets2,8001,864Deferred tax assets8,0608,417Total current assets210,661143,499Property and equipment, net1,801872Purchased technology, net2,8533,074Goodwill—299Deposits and other assets5665Deferred tax assets4,1844,184Total assets$
151,993LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable$
3,869Accrued compensation7,6584,158Sales-related reserves31,23921,511Other accrued liabilities2,8331,973Total current liabilities46,69231,511Lease termination, deferred rent and other non-current liabilities274355Total liabilities46,96631,866Shareholders' equity:Preferred stock, no par value, 7,500,000 shares authorized; none outstanding——Common stock, no par value, 105,000,000 shares authorized, 62,726,468 and 62,418,464 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively79,42274,809Retained earnings93,24545,295Accumulated other comprehensive income(78
)23Total shareholders' equity172,589120,127Total liabilities and shareholders' equity$
151,993Nine Months EndedSeptember 30,20112010OPERATING ACTIVITIESNet income$
28,654Adjustments to reconcile net income to net cash provided by operating activities:Share-based compensation expense5,4062,795Deferred income taxes35746Amortization of investments874516Depreciation and amortization751392Impairment of goodwill299—Loss on disposal of property and equipment11—Changes in operating assets and liabilities:Accounts receivable(17,087)908Inventories(1,587)128Prepaid income taxes2,964—Prepaid expenses and other current assets(936)(953)Accounts payable1,093(4,557)Accrued compensation3,500888Sales-related reserves9,7287,180Income taxes payable—(477)Other accrued liabilities86088Other non-current liabilities(81)(628)Net cash flows provided by operating activities54,10234,980INVESTING ACTIVITIESPurchase of property and equipment(1,470)(347)Purchase of short-term investments(84,125)(89,992)Proceeds from maturities of short-term investments87,87153,715Deposits and other assets9—Net cash flows provided by / (used in) investing activities2,285(36,624)FINANCING ACTIVITIESIncome tax benefit realized from share-based compensation plans6,889352Issuance of common stock, net3,7711,085Repurchase of common stock(11,453)—Net cash flows (used in) / provided by financing activities(793)1,437Increase (decrease) in cash and cash equivalents55,594(207)Cash and cash equivalents at beginning of period41,50845,829Cash and cash equivalents at end of period$
45,622Supplemental Disclosures of Cash Flow Information:Cash paid for interest$
3Cash paid for income taxes$
14,560 ng the quarter. September was a particularly strong month for both MS and NS sales."
"In addition, new data on Acthar will be presented in November at the American Society of Nephrology Annual Meeting. This data will provide further insight into the immune-modulating and other therapeutic properties of Acthar specifically relating to kidney disease. Our emerging understanding of the apparent immune-modulating properties of Acthar encourages us to investigate the potentially broader therapeutic applications of Acthar in other inflammatory and autoimmune diseases, some of which are already on the product label for Acthar," added Mr. Cartt.
GAAP and Non-GAAP Net Income GAAP net income for the third quarter of 2011 was $22.9 million or $0.35 per diluted common share, including non-cash expenses totaling $1.5 million, or $0.02 per diluted share. Net income for the third quarter of 2010 was $11.5 million, or $0.18 per diluted common share.
Non-GAAP net income for the quarter ended September 30, 2011 was $24.3 million, or $0.37 per diluted common share. Non-GAAP net income for the year ago quarter was $12.2 million, or $0.19 per diluted common share.
The Company believes it is important to share these non-GAAP financial metrics with shareholders as these metrics may better represent the ongoing economics of the business and reflect how we manage the business. Accordingly, management believes investors' understanding of the Company's financial performance is enhanced as a result of our disclosing these non-GAAP financial metrics. Non-GAAP net income should not be viewed in isolation, or as a substitute for, or as superior to, reported GAAP net income. The reconciliation between GAAP and Non-GAAP net income is provided with the financial tables included with this release.
Shipped Acthar Vial and Prescription Trend InformationDuring the third quarter of 2011, Questcor shipped 2,910 vials of Acthar, up 54% compared to 1,890 vials in the year ago quarter. The Company's quarterly vial shipments continue to be subject to significant variation due to the size and timing of individual orders received from Questcor's distributor, and the timing of when these orders are received and filled can significantly affect net sales and net income in any particular quarter. For example, the Company filled an order from its distributor on both the first day and the last day of the third quarter of 2011. Had either of these orders fallen outside of the third quarter, our vials shipped for the third quarter would have been lower. For this reason, as well as other factors causing quarter-to-quarter variability in Questcor's operating results, the Company believes that investors should consider the Company's results over several quarters when analyzing the Company's performance.
"As a result of our specialty distribution model, we do not have complete information on the number of Acthar vials in the sales channel, which consists mainly of vials at our distributor and vials at about a dozen specialty pharmacies," said Mike Mulroy, the Company's Chief Financial Officer. "Based on the information available to us, we believe that there is typically channel inventory representing between two and three weeks of sales in the channel on any given date. While we began the third quarter of 2011 with below average channel inventory and ended the quarter with above average channel inventory, we believe that both the beginning and ending inventory levels for the third quarter of 2011 were within this normal two to three week range for inventory in the sales channel."
Because Acthar prescriptions are filled at specialty pharmacies, the Company does not receive complete information regarding either the number of prescriptions or the number of vials by therapeutic area for all of the patients being treated with Acthar. However, Questcor is able to monitor trends in payer mix and areas of therapeutic use for new Acthar prescriptions based on data it receives from its reimbursement support center. Questcor estimates that over 90% of new Acthar prescriptions are processed by this support center, but believes that very few refill prescriptions are processed there.
In an effort to help investors better understand historical trends in sales of Acthar for each of its current three key therapeutic uses, acute exacerbations of MS, NS, and IS, Questcor has grouped new prescriptions processed by its reimbursement center into two groups -- "Paid" and "Fully Rebated." "Paid" prescriptions include those prescriptions for which Questcor retains the full selling price for Acthar, as well as Tricare prescriptions that receive up to a 24% rebate. "Fully Rebated" prescriptions are those for which Questcor can identify that it has recorded a rebate liability approximately equal to or, for periods prior to the third quarter of 2010, greater than the price charged to its distributor. From time to time during the past several years, the rebate liability for some government insurance programs has shifted between these two categories. Therefore, the prescriptions that fall into the "Paid" and "Fully Rebated" categories have also shifted over time as follows:
"Paid" prescriptions (Rxs) include all prescriptions in the following payer categories:
"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": Multiple Sclerosis Exacerbations (and related conditions) New RxsPaid
Growth in Paid Rx
Sequential Growth in Paid Rx
9321/1 to 9/30, 2011
2,298Nephrotic Syndrome (and related conditions) New RxsPaid
621/1 to 9/30, 2011
130Infantile Spasms (and related conditions) New RxsPaid
1811/1 to 9/30, 2011
(1) Because the March 2010 health care legislation made Medicaid Managed Care Organization (MCO) prescriptions rebate eligible effective March 23, 2010, a rebate liability for the MCO prescriptions estimated to be filled on or after March 23, 2010 has been accrued. The Company does not have the ability to accurately identify every Medicaid Managed Care prescription so it is possible that some prescriptions identified as "Paid" in the tables may subsequently be reclassified as "Fully Rebated."
(2) "Related Conditions" includes diagnoses that are either alternative descriptions of the medical condition or are closely related to the medical condition which is the focus of the table. For example, a prescription for "demyelinating disease of the central nervous system" would be included as an MS-related condition for purpose of this table. About 5% of the prescriptions in the tables are for related conditions.
(3) A new prescription may or may not represent a new patient or a new therapy for the patient receiving the prescription. Questcor uses business rules to determine whether a prescription should be classified as new for inclusion in this table. From time to time the Company may modify these rules which could cause some changes to the historic numbers in the tables above.
(4) Historical trend information is not necessarily indicative of future results. Additionally, paid prescriptions should not be viewed as predictive of Questcor's net sales due to a variety of factors, including changes in the number of vials used in connection with each prescription.
Cash and Share Repurchase Program As of October 21, 2011, Questcor's cash, cash equivalents and short-term investments totaled $180 million.
The Company did not repurchase any shares during the third quarter. As of September 30, 2011, Questcor had 62.7 million shares of common stock outstanding, with 4.3 million shares remaining under its common stock repurchase program.
Sales ReservesQuestcor's sales reserves during the quarter ended September 30, 2011, including the Company's reserves for Medicaid rebates, represented 19.2% of gross sales of $74.0 million.
As required by federal regulations, Questcor provides rebates to state Medicaid programs for Acthar dispensed to Medicaid patients covered under Medicaid rebate-eligible insurance plans. Since the Company does not receive rebate claims from the various state Medicaid agencies until well after the close of the quarter in which the underlying sales of vials to its distributor took place, the Company establishes reserves for expected rebate claims on a quarterly basis. As a result of the adoption of health care reform, for periods after March 23, 2010, the Company has also included in this reserve an estimate for the liability due to states related to prescriptions of Acthar for patients covered under state Medicaid Managed Care Organizations (Medicaid MCO), which prescriptions were not previously rebate eligible.
Conference Call Details The Company will host a conference call and slide presentation via webcast today, October 25, 2011 at 4:30 p.m. ET/ 1:30 p.m. PT, to discuss third quarter 2011 results. Don Bailey, President and Chief Executive Officer, and other members of the management team will host the call.
To participate in the live call by telephone, please dial 877-941-1465 for domestic participants and 480-629-9643 for international participants. Participants are asked to call the above numbers 5-10 minutes prior to the starting time. A real-time listen-only webcast of the conference call including the presentation slides will be accessible in the "Investor Relations" section under "Events & Presentations" at http://ir.questcor.com/events.cfm. If listening via telephone, to view the accompanying presentation slides, navigate to the live webcast as noted above and choose the "No Audio – Slides Only" option to view the slides in conjunction with the live conference call. Listeners should go to the website at least 15 minutes prior to the live conference call to install any necessary audio software.
An audio replay of the call will be available for 7 days following the call. This replay can be accessed by dialing 800-406-7325 for domestic callers and 303-590-3030 for international callers, both using passcode 4480054#. An archived webcast will also be available at http://ir.questcor.com/events.cfm.
About QuestcorQuestcor Pharmaceuticals, Inc. is a biopharmaceutical company whose primary product helps patients with serious, difficult-to-treat medical conditions. Questcor's primary product is H.P. Acthar® Gel (repository corticotropin injection), an injectable drug that is approved by the FDA for the treatment of 19 indications. Of these 19 indications, Questcor currently generates substantially all of its net sales from three indications: the treatment of acute exacerbations of multiple sclerosis in adults, the treatment of nephrotic syndrome, and the treatment of infantile spasms in children under two years of age. With respect to nephrotic syndrome, the FDA has approved Acthar to "induce a diuresis or a remission of proteinuria in the nephrotic syndrome without uremia of the idiopathic type or that due to lupus erythematosus." Questcor is also exploring the use of Acthar to treat systemic lupus erythematosus, or SLE, for which Acthar is approved as both a maintenance therapy and to treat exacerbations. Questcor is also exploring the possibility of developing markets for other on-label indications and the possibility of pursuing FDA approval of additional indications not currently on the Acthar label where there is high unmet medical need. In October 2011, Forbes magazine ranked Questcor number one in its annual rankings of America's Best Small Companies. For more information about Questcor, please visit 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:
|SOURCE Questcor Pharmaceuticals, Inc.|
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