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Questcor Pharmaceutical, Inc. (Carlsbad, CA) (QSC) Reports 2010 Financial Results


2/24/2011 7:44:34 AM

ANAHEIM, Calif., Feb. 23, 2011 /PRNewswire/ -- Questcor Pharmaceuticals, Inc. (Nasdaq: QCOR) today reported financial results for the full year and fourth quarter ended December 31, 2010.

For the year ended December 31, 2010, net sales increased 30.4 percent to a record $115.1 million from $88.3 million in the prior year. The Company's financial performance was driven by an increase in net sales for H.P. Acthar® Gel (Acthar), for the treatment of acute exacerbations of multiple sclerosis (MS). Full year 2010 net income was $35.1 million, or $0.54 per diluted common share. Net income for 2009 was $26.6 million, or $0.40 per diluted common share.

"Strong gains in MS prescriptions throughout 2010 drove record net sales for Acthar and Questcor," said Don M. Bailey, President and CEO of Questcor. "Our number one focus in 2010, as it will be again in 2011, was the growth of MS prescriptions for Acthar. In the fourth quarter, we expanded our MS sales force for the fourth time. Each of the previous expansions resulted in significantly increased sales. We expect MS sales to continue to grow in 2011."

"Also in the fourth quarter, the FDA approved our sNDA for infantile spasms (IS) and modernized the label for Acthar, so that the label now includes 19 approved indications. This development allowed us to begin promotion of Acthar in IS as well as for the on-label indications associated with nephrotic syndrome (NS)," added Mr. Bailey.

"Despite the disruption caused by doubling our sales force, new shipped MS Acthar prescriptions so far in the first quarter of 2011 are running slightly ahead of the pace in the fourth quarter and well ahead of the pace in the first quarter of 2010," continued Mr. Bailey. "Also in the first quarter we are initiating an in-depth commercial exploration of the on-label opportunity for Acthar in NS. In parallel with this NS selling effort, we are currently planning to commence company-sponsored, dose-response clinical trials of Acthar in the treatment of NS, specifically treatment-resistant idiopathic membranous nephropathy (on-label), and diabetic nephropathy (not-on label)."

Net sales increased 13.1 percent during the fourth quarter of 2010, to $29.3 million from $25.9 million in the fourth quarter of 2009. The Company often receives large orders from its exclusive distributor for Acthar; the timing of these orders at the end of any quarter can significantly affect net sales and net income in any particular quarter. For example, the Company filled an order for 90 vials on the last day of the third quarter of 2010 and received an order for 120 vials on the first day of the first quarter of 2011. 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 net sales and net income over several quarters when analyzing the Company's financial performance. Fourth quarter 2010 operating expenses increased by $4.6 million from the third quarter of 2010 due to the significant expansion of the MS sales force and costs associated with several major conferences and meetings held during the fourth quarter.

GAAP and Non-GAAP Net Income

Non-GAAP net income for the quarter ended December 31, 2010 was $8.0 million, or $0.12 per diluted common share. Questcor defines Non-GAAP net income as GAAP net income plus the after-tax impact of the following non-cash items:

  • Beginning in 2011, due to tax law changes, Questcor's California state income taxes will be significantly reduced. Therefore, the Company does not anticipate generating sufficient California state income to be able to utilize its California state net operating loss carry-forward (NOL). As a result, the Company must establish a valuation allowance with respect to this NOL. Questcor anticipates that this new tax law will result in a significantly reduced California tax liability in future periods.
  • Stock-based compensation expense.
  • Other non-cash expenses, including depreciation and amortization.

Non-GAAP net income for the quarter ended December 31, 2009 was $9.0 million, or $0.14 per diluted common share. On a GAAP basis, net income for the quarter ended December 31, 2010 was $6.4 million, or $0.10 per diluted common share, compared to $8.4 million and $0.13 per diluted common share for the fourth quarter of 2009. The reconciliation between GAAP and Non-GAAP net income is provided with the financial tables included with this release.

The Company believes it is important to share these non-GAAP financial measures with shareholders as they 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 measures. Non-GAAP net income should not be viewed in isolation, or as a substitute for, or as superior to, reported GAAP net income.

Cash

As of February 18, 2011, Questcor's cash, cash equivalents and short-term investments totaled $127 million. As of December 31, 2010, Questcor had 62.4 million shares of common stock outstanding.

Acthar Sales for MS, IS and NS

During the fourth quarter of 2010, Questcor shipped 1,680 vials of Acthar compared to 1,626 vials in the fourth quarter of 2009. For the full year of 2010, Questcor shipped 6,696 vials of Acthar compared to 5,973 vials in 2009. 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 order to help investors better understand historical trends in sales of Acthar for each of its three key therapeutic uses, acute exacerbations of MS, IS, and NS, 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 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 first quarter of 2010, greater than the price charged to its distributor. From time to time during the past two 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:

  • Commercial--For all time periods.
  • Tricare--For 2008 and 2010 (but not 2009).
  • Medicaid Managed Care--For all time periods 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 for all time periods.
  • Tricare--For 2009.
  • 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":

Multiple Sclerosis (and related conditions) New Rxs

2008

Paid

Fully Rebated

Total

Q1-08

24

5

29

Q2-08

35

1

36

Q3-08

51

5

56

Q4-08

69

4

73

Total 2008

179

15

194

2009




Q1-09

78

8

86

Q2-09

124

17

141

Q3-09

141

20

161

Q4-09

213

15

228

Total 2009

556

60

616

2010




Q1-10

231

12

243

Q2-10

304

24

328

Q3-10

323

19

342

Q4-10

354

24

378

Total 2010

1,212

79

1,291




Infantile Spasms (and related conditions) New Rxs

2008

Paid

Fully Rebated

Total

Q1-08

96

37

133

Q2-08

117

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