Questcor Pharmaceuticals, Inc. (Headquarters) Reports Third Quarter Financial Results

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 during 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 Information

During 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:

• Commercial--For all time periods.
• Tricare--For 2008, 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:

• 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":