Questcor Pharmaceuticals, Inc. (Headquarters) Reports Fourth Quarter and Full Year 2011 Financial Results

ANAHEIM, Calif., Feb. 22, 2012 /PRNewswire/ -- Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR) today reported financial results for the fourth quarter and full year ended December 31, 2011.

Net sales for the fourth quarter were $75.5 million, reflecting continued physician acceptance of H.P. Acthar® Gel (Acthar) for treating serious, difficult-to-treat medical conditions. Net sales in the fourth quarter 2010 were $29.3 million.

GAAP net income for the fourth quarter of 2011 was $31.6 million or $0.48 per diluted common share. GAAP net income for the fourth quarter of 2010 was $6.4 million, or $0.10 per diluted common share. Non-GAAP net income (which excludes non-cash share-based compensation expense, depreciation and amortization expense, tax adjustments and a goodwill impairment charge) for the quarter ended December 31, 2011 was $31.6 million or $0.47 per diluted common share. Non-GAAP net income for the year ago quarter was $8.0 million, or $0.12 per diluted common share.

For the year ended December 31, 2011, net sales totaled $218.2 million, compared to $115.1 million in the prior year. GAAP net income for the year ended December 31, 2011 was $79.6 million or $1.21 per diluted share, compared to GAAP net income of $35.1 million or $0.54 per diluted share for the year ended December 31, 2010. Non-GAAP net income was $84.0 million or $1.27 per diluted share for the year ended December 31, 2011, compared to non-GAAP net income of $39.0 million or $0.60 per diluted share for the year ended December 31, 2010.

"Net sales growth in the fourth quarter was driven by the increasing numbers of physicians who are recognizing the potential for Acthar to help patients with MS and NS," said Don M. Bailey, President and CEO of Questcor. "We are particularly encouraged by the growing number of physicians who recognize the therapeutic value of Acthar in their practices, especially for those patients who have not adequately responded to other treatments. At the same time, we are continuing to build our understanding of the potential immune-modulating properties of Acthar, and are considering how best to study the broader possible therapeutic applications in other inflammatory and autoimmune diseases, many of which are already in the list of approved indications on the Acthar label."

"The planned expansion of our nephrology sales force from 28 to 58 representatives is underway and should be completed during the second quarter, ahead of our original schedule," noted Steve Cartt, Chief Operating Officer. "We are also planning to increase the number of neurology representatives after the nephrology expansion is complete. Furthermore, a possible pilot commercial effort in rheumatology is being carefully considered for the fourth quarter of this year."

"Paid prescriptions in IS were higher in the fourth quarter, reflecting a growing recognition of the important role of Acthar in treating this devastating condition. As announced yesterday, we were pleased to accept the award from the Child Neurology Foundation (CNF) for outstanding corporate responsibility and leadership, and have further increased our funding to CNF so that they can continue their important research and education efforts related to childhood neurological conditions like IS," added Mr. Cartt.

"Our scientific research and investments continue to expand. In addition to our ongoing studies in NS and MS, we are planning new efforts in Lupus, Diabetic Nephropathy and other auto-immune and inflammatory conditions with unmet medical need," commented Dr. David Young, Chief Scientific Officer. "We have also increased our investigation into better understanding how Acthar works and how its biological activity differs from that of corticosteriods such as methylprednisolone and prednisone."

The Company continues to invest in its management systems and infrastructure, including those related to scientific research, medical affairs, and compliance. Last week, Questcor announced the appointment of Scott Whitcup, M.D., Chief Scientific Officer of Allergan, Inc., to Questcor's Board of Directors. Also, the Company has recently promoted:

-Steve Cartt to Chief Operating Officer
-Dave Medeiros to Executive Vice President and Chief Technical Officer
-Eldon Mayer to Senior Vice President of Commercial Operations
-Ray Furey to Vice President, Compliance and Chief Compliance Officer
-Gary Hogge, PhD, to Vice President, Medical Affairs.

In addition, Questcor has recently hired Darlene Romine as Vice President, Sales Operations.

"These promotions and additions reflect the expanded needs of Questcor as our sales and headcount have grown and are expected to continue to increase," noted Don Bailey. "I want to congratulate all of these executives on their well-deserved promotions."

Acthar Label Information

The label for Acthar was modernized in October 2010 and has 19 approved indications. Substantially all of the Company's net sales result from prescriptions written by physicians for the following on-label indications for Acthar:

• 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." Typically Acthar is used as second line treatment for patients with MS exacerbations.
• 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 used in patients who suffer from NS due to idiopathic membranous nephropathy, focal segmental glomerulosclerosis (FSGS), IgA nephropathy, minimal change disease and lupus.
• Infantile Spasms (IS): "as monotherapy for the treatment of infantile spasms in infants and children under 2 years of age."

The Company is currently planning to explore the potential initiation of a commercial effort in rheumatology in late 2012, as Acthar is approved for the following rheumatology-related conditions:

• 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."

Shipped Acthar Vial and Prescription Trend Information

During the fourth quarter of 2011, Questcor shipped 3,360 vials of Acthar, compared to 1,680 vials in the year ago quarter. For the full year of 2011, Questcor shipped 10,710 vials of Acthar compared to 6,696 vials in 2010. 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. Fourth quarter-ending inventory levels in the channel appear to have remained relatively unchanged compared to the levels at the end of the third quarter of 2011. The Company believes that investors should consider the Company's results over several quarters when analyzing the Company's performance.

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 the prescriptions written for Acthar within each of its current three key therapeutic areas, MS, NS, and IS, Questcor has grouped prescriptions processed by its reimbursement center into two groups -- "Paid" and "Fully Rebated." "Paid" prescriptions include those prescriptions for which Questcor retains its full selling price for Acthar, as well as Tricare prescriptions that subject Questcor to a rebate obligation of up to 24% of its selling price. "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 January 1, 2010 greater than) Questcor's selling price. 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:

• Commercial--For all time periods.
• Tricare--For 2010 and 2011, 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: