ANAHEIM, Calif., July 24, 2014 /PRNewswire/ -- Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR) today reported financial results for the second quarter ended June 30, 2014.
Three Months Ended 06/30/14 | Three Months Ended 06/30/13 | Percentage Change | |
GAAP Net Sales | $278.8 Million | $184.6 Million | 51% |
Non-GAAP Net Sales | $278.8 Million | $196.1 Million | 42% |
GAAP Diluted EPS | $1.54 | $1.12 | 37% |
Non-GAAP Diluted EPS | $1.85 | $1.35 | 37% |
Six Months Ended 06/30/14 | Six Months Ended 06/30/13 | Percentage Change | |
Net Sales | $505.9 Million | $319.7 Million | 58% |
Non-GAAP Net Sales | $505.9 Million | $331.2 Million | 53% |
GAAP Diluted EPS | $2.75 | $1.79 | 54% |
Non-GAAP Diluted EPS | $3.25 | $2.13 | 53% |
Net sales for the second quarter ended June 30, 2014 were $278.8 million, up 51% from $184.6 million in GAAP net sales and up 42% from $196.1 million in non-GAAP net sales in the second quarter of 2013. Net sales for H.P. Acthar® Gel (repository corticotropin injection) for the second quarter ended June 30, 2014 were $261.4 million, up 48% from $177.0 million in GAAP net sales and up 39% from $188.5 million in non-GAAP net sales in the second quarter of June 2013. The significant increase in net sales was driven by increased prescribing of Acthar by physicians for patients suffering from rheumatoid arthritis, systemic lupus erythematosus, dermatomyositis, polymyositis, nephrotic syndrome, multiple sclerosis exacerbations, infantile spasms and symptomatic sarcoidosis all FDA-approved indications for Acthar. BioVectra, the Company’s specialty manufacturing subsidiary, had net sales of $17.4 million in the second quarter of 2014, an increase of 131% from $7.5 million in the second quarter of 2013. This increase was driven by increased demand for BioVectra’s specialty pharmaceutical fermentation and synthetic manufacturing capabilities. GAAP earnings for the second quarter of 2014 were $1.54 per diluted common share, up 37% from the year ago quarter. Second quarter 2014 non-GAAP earnings per share were $1.85, an increase of 37% from the prior year period.
Net sales for the second quarter of 2013 included the effect of the Company’s decision to accrue, based on information received in the quarter, an incremental Medicaid rebate liability of $11.5 million related to Questcor’s 2001 entry into the Medicaid system subsequent to Questcor’s acquisition of Acthar in 2001.
Questcor shipped 8,850 vials of Acthar during the second quarter of 2014, which represents a new record for Acthar shipments in a quarter and an increase of 26% from the 7,050 vials shipped in the year ago quarter. Quarterly vial shipments are subject to significant variation due to several factors, including 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. The Company believes that investors should consider the Company’s results over several quarters when analyzing the Company’s performance.
“Acthar prescription activity accelerated in the quarter, resulting in record net sales and earnings,” said Don M. Bailey, President and CEO of Questcor. “Similar to 2013, Acthar prescription activity picked up significantly in the second quarter, led by growth in our rheumatology indications and a resurgence in prescriptions for nephrotic syndrome. In addition, BioVectra experienced significantly improved results and we are in the process of expanding BioVectra’s specialty fermentation capacity in order to meet the growing demand for their contract manufacturing services.”
To allow comparable analysis, the Company has defined “new paid” prescriptions in the below paragraphs to include prescriptions covered by commercial carriers, Medicare, Medicaid and Tricare in all periods regardless of the rebate percentage applicable in those periods. The numbers are based on internal company estimates.
“There were between 2,775 and 2,800 total new paid prescriptions for Acthar in the second quarter, an increase of approximately 23% compared with the second quarter of 2013 and an increase of 19% sequentially,” commented Steve Cartt, Chief Operating Officer of Questcor. “Of particular note, we continue to see increased prescribing of Acthar by rheumatologists as a result of our ongoing educational efforts in rheumatology that, until very recently, have focused primarily on dermatomyositis and polymyositis. For all combined FDA-approved rheumatology-related Acthar indications, pharmacies filled between 665 and 675 new paid Acthar prescriptions during the second quarter, more than double the 315 to 320 prescriptions filled in the year ago quarter and an increase of 16% sequentially. Rheumatology prescriptions now account for approximately one-third of our total Acthar business. Overall, we had a strong second quarter, and we are seeing similar trends in the first few weeks of the current quarter.”
Mr. Cartt continued, “We have recently increased our promotional emphasis within rheumatology on systemic lupus erythematosus due to the recent publication in the journal LUPUS of an independent investigator-initiated, 10-patient study of Acthar in the treatment of lupus patients suffering from significant disease activity. Rheumatologists and patient organizations tell us that lupus patients have a significant need for new therapeutic options, and we are excited about the potential for Acthar to help select lupus patients in need of an additional FDA-approved treatment alternative.”
“In addition, our pilot effort focused on educating pulmonologists about Acthar in the treatment of respiratory manifestations of symptomatic sarcoidosis has generated a positive response over the last few months, consistent with our previous pilot detailing efforts in both nephrology and rheumatology. Prescribing activity by pulmonologists has exceeded our expectations since the pilot detailing effort began in February 2014, with approximately 40 to 45 new paid prescriptions shipped by pharmacies in the second quarter. As a result of these encouraging early results, we will be expanding the pulmonology sales force from 7 to 35 Acthar representatives and expect to complete this expansion by January 2015,” concluded Mr. Cartt.
Pharmacies filled between 480 and 490 new paid prescriptions for Nephrotic Syndrome (NS) in the quarter, an increase of about 20% compared with the second quarter of 2013 and an increase of 37% sequentially. Net sales resulting from NS prescriptions currently account for approximately one-third of our total Acthar business. During the second quarter, pharmacies filled between 1,350 and 1,360 new paid prescriptions for MS relapse patients as well, representing an increase of about 5% compared with the second quarter of 2013 and an increase of 18% sequentially. Net sales generated from MS relapse prescriptions currently represent approximately one-quarter of our total Acthar business. Lastly, pharmacies filled between 215 and 220 new paid prescriptions for Infantile Spasms during the quarter, compared to between 215 to 220 new paid prescriptions for Infantile Spasms in the year ago quarter.
The Company believes that insurance coverage for Acthar continues to remain favorable and relatively consistent. The Company believes that reimbursement rates for Acthar have remained favorable and relatively consistent in large part because Acthar is generally reserved by physicians for patients with more severe forms of the medical conditions for which the drug is being prescribed, the patient has often not properly responded to other therapies and Acthar is approved by the FDA for that difficult to treat medical condition.
Year-to-Date Financial Results
Net sales for the first six months of 2014 were $505.9 million, with BioVectra contributing $34.8 million. Net sales in the first six months of 2013 were $319.7 million, with BioVectra contributing $15.9 million. On a non-GAAP basis, net sales for the six months ended June 30, 2013 were $331.2 million. GAAP earnings for the first six months of 2014 were $2.75 per diluted common share, compared to $1.79 per diluted common share for the comparable period of 2013. Non-GAAP earnings for the six months ended June 30, 2014 were $3.25 per diluted common share excluding non-cash share-based compensation expense, depreciation and amortization expense, other non-cash expense related to the acquisitions of BioVectra and Synacthen and Synacthen Depot, and transaction-related expenses in connection with our pending merger with Mallinckrodt public limited company (NYSE: MNK). Non-GAAP earnings for the comparable period of 2013 were $2.13 per diluted common share. The reconciliation between GAAP and non-GAAP financial measures is provided with the financial tables included with this release.
Research and Development Progress
Research and development (R&D) expense increased 80% to $22.0 million in the three months ended June 30, 2014, compared with $12.2 million for the year ago period. The increased R&D expense reflects the Company’s ongoing efforts to further build the body of clinical evidence for Acthar, clarify the potential immune-modulating properties of Acthar and Synacthen Depot, and identify mechanisms of action that potentially could be applicable to other inflammatory and auto-immune diseases with high unmet medical needs. R&D expense in the second quarter of 2014 includes an upfront payment of $3.3 million to a third party in connection with a research and development agreement.
The Company is also identifying new patient populations in which to evaluate both Acthar and Synacthen Depot through exploratory clinical studies. Questcor is presently funding research and development for Acthar in the following indications:
New Indications for Label Enhancement Programs:
- Amyotrophic Lateral Sclerosis (ALS): Patient enrollment has been completed in a company-sponsored dose-ranging Phase 2 clinical trial to evaluate the safety and tolerability of Acthar in patients with ALS, often referred to as Lou Gehrig’s disease. ALS is a life-threatening, progressive neurodegenerative disease that affects nerve cells in the brain and the spinal cord.
- Diabetic Nephropathy: Enrollment continues in a company-sponsored Phase 2 trial to evaluate the efficacy and safety of Acthar in patients with diabetic nephropathy, one of the most common causes of end-stage renal disease in the United States.
- Acute Respiratory Distress Syndrome (ARDS): Site selection has been initiated for a Phase 2 study to explore the safety and efficacy of Acthar in patients with ARDS. ARDS is an acute life threatening lung condition that can result from pulmonary and non-pulmonary infections or a multitude of other serious conditions.
Clinical Trials Supporting Approved Indications:
- Idiopathic Membranous Nephropathy: Enrollment continues in a company-sponsored Phase 4 trial in idiopathic membranous nephropathy. Patients enrolled in this study are refractory, or non-responsive, to current standard therapies or have relapsed after partial remission on current standard therapies. (NOTE: for clarity, this trial is separate and distinct from the independent investigator-initiated study in idiopathic membranous nephropathy patients discussed in Questcor’s April 21, 2014 press release.)
- Lupus: Enrollment continues in a company-sponsored multi-site Phase 4 clinical trial to evaluate the efficacy and safety of daily Acthar administration during a 6-month period in patients with persistently active lupus.
Preclinical work related to the evaluation of a select group of potential Synacthen Depot indications is in process.
Cash and Dividends
Cash flow from operations was $99 million during the second quarter of 2014 compared to $82 million during the second quarter of 2013. As of July 18, 2014, Questcor had cash, cash equivalents and short-term investments of $474.6 million, including $75 million in restricted cash to secure certain post-closing payment obligations related to Questcor’s acquisition of Synacthen and Synacthen Depot.
On July 8, 2014, Questcor paid its second quarter dividend of $0.30 per share to shareholders of record at the close of business on July 1, 2014.
Definitive Merger Agreement with Mallinckrodt
On April 7, 2014, Questcor announced that it had entered into a definitive merger agreement under which Mallinckrodt public limited company will acquire Questcor in a transaction valued, based on the closing price of Mallinckrodt common stock on July 18, 2014, at approximately $6.3 billion. Under the terms of the transaction, Questcor shareholders will receive $30.00 per share in cash and 0.897 Mallinckrodt shares for each share of Questcor common stock they own, which, based on the closing price of Mallinckrodt common stock on July 18, 2014, is $97.37 per share. Following completion of the merger, Mallinckrodt shareholders will own approximately 50.5% and former Questcor shareholders will own approximately 49.5% of the combined company’s stock (calculated on a fully diluted basis using the treasury stock method). Mallinckrodt has filed with the SEC a registration statement on Form S-4 containing a joint proxy statement of Mallinckrodt and Questcor that also constitutes a prospectus of Mallinckrodt. The SEC declared the registration statement effective on July 11, 2014 and the Company commenced mailing of the definitive joint proxy/prospectus to its shareholders on July 14, 2014. The merger, which is subject to the approval of the shareholders of both companies, is currently expected to be completed in August 2014. In light of the pending transaction, Questcor has suspended conducting quarterly conference calls.
Acthar Label Information
The product label for Acthar includes 19 FDA-approved indications. Substantially all of the Company’s net sales currently result from Acthar prescriptions for the following on-label indications:
- 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 prescribed for patients who have proteinuria and suffer from NS due to idiopathic membranous nephropathy, focal segmental glomerulosclerosis (FSGS), IgA nephropathy, minimal change disease and lupus nephritis.
- Rheumatology Related Conditions: Acthar is approved for the following rheumatology related conditions: (i) Collagen Diseases: Acthar is indicated “during an exacerbation or as maintenance therapy in selected cases of systemic lupus erythematosus, systemic dermatomyositis (polymyositis)” and (ii) Rheumatic Disorders: Acthar is indicated 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.”
- 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.” When Acthar is used, it is typically prescribed as second line treatment for patients with MS exacerbations.
- Infantile Spasms (IS): “as monotherapy for the treatment of infantile spasms in infants and children under 2 years of age.”
Non-GAAP Financial Measures
The Company believes it is important to share non-GAAP financial measures with investors as these measures 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 measures. Non-GAAP financial measures should not be viewed in isolation, or as a substitute for, or as superior to, reported GAAP financial measures. The reconciliation between GAAP and non-GAAP financial measures are provided with the financial tables included with this release.
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 also provides specialty contract manufacturing services to the global pharmaceutical industry through its wholly-owned subsidiary BioVectra Inc. For more information about Questcor, please visit www.questcor.com.
For more information, please visit www.questcor.com or www.acthar.com.
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