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Questcor Pharmaceuticals, Inc. (QCOR)

The 31st Annual J.P. Morgan Healthcare Conference Call

January 10, 2013 12 PM ET


Steve Cartt – COO


Dewey Steadman – JP Morgan


Dewey Steadman – JP Morgan

Hi, good morning. I’m Dewey Steadman with the pharmaceuticals team here at JP Morgan, and we’d like to welcome Questcor to the 31st Annual JP Morgan Healthcare Conference. And with Questcor today, we have Steve Cartt, the Chief Operating Officer of Questcor. And just as a side note, we will not have a breakout session following this presentation. Thank you.

Steve Cartt

Thanks Dewey, and good morning, everybody. So, you could read our Safe Harbor statement at your leisure here. Questcor, for those of you who are not as familiar with the story, is a biopharmaceutical company focused on the treatment of patients with serious, difficult-to-treat autoimmune and inflammatory disorders.

We have an extensive label of 19 approved indications on Acthar Gel, which is our flagship product. Our key therapeutic areas are nephrotic syndrome, relapses and multiple sclerosis, infantile spasms, which is a very rare and highly refractory form of childhood epilepsy, and two very rare and related neuromuscular disorders, dermatomyositis and polymyositis. We believe that on our label of 19 approved indications that there are significant areas of unmet need and large growth potential.

Our strategy is to continue to expand awareness of Acthar and the appropriate use of Acthar in key specialties of nephrology and neurology, as well as develop fully our rheumatology indications, which we have several, and our other on-label indications. We’re also beginning to look at possible future new indications for Acthar, but that’s very early stage. As far as financials go, we’re profitable, have strong positive cash flow and a strong balance sheet.

This just highlights again our key areas of commercial focus right now out of our 19 indications nephrotic syndrome, MS relapses, IS and the rheumatology conditions. So, Acthar usage has been expanding rapidly over the last couple of years. This shows our vial shipments per quarter. We had a pretty sustained upward growth curve since the fourth quarter of 2010.

And accordingly, net sales have been growing rapidly and consistently as well, up through third quarter of 2012 here. And we just put out an 8-K yesterday indicating we hit yet another record in terms of vial shipments for the fourth quarter, and we’ll be coming out with net sales numbers and EPS next month on our earnings call.

So, this is our estimated allocation of net sales by therapeutic area. Nephrotic syndrome appears to be in the lead now; in terms of overall net sales, was somewhere around the range of 45% to 47% of our net sales. MS relapse is slightly below that now, and infantile spasms is around the 9% to 10% range. There is a high Medicaid reimbursement component of IS, which lowers that, so that’s why it’s down around that range; and then other prescriptions other – prescriptions for other indications are around 3%.

So, we have a stable reimbursement environment for Acthar. It’s typically used in a secondary position by most doctors. They usually reserve it for when another FDA-approved treatment alternative is needed, usually after first-line, sometimes after second-line, and it’s virtually always used in serious, difficult-to-treat medical conditions

Coverage decisions, as we’ve mentioned quite a bit over the years, are determined really on a case-by-case basis based on the individual merits of the case, the patient’s condition, the disease severity and the patient’s treatment history. We’ve had a consistent level of insurance coverage over the last few years. For this drug, prior authorizations are the norm. They’re not the exception; they’re definitely the norm. And each prescription is closely scrutinized, and that has been the case and that continues to be the case.

And as our revenues have grown, we’ve actively sought to expand our research efforts and we now have 65 clinical and preclinical studies, both internal projects and outside independent research programs that we’re funding. That’s a significant increase over 2010, 2011; and accordingly, our R&D spend is up significantly as well. Probably be close to a double this year over 2011, and in 2013, we expect it to expand more as well.

So I’ll step through quickly each of the indications that are our primary focus of our commercial efforts. Nephrotic syndrome is a kidney disorder characterized by excessive spilling of protein from the kidneys into the urine, which is referred to as proteinuria. It’s caused by a number of underlying kidney disorders, inter idiopathic membranous nephropathy, FSGS, IgA nephropathy, and there are a couple other smaller ones.

These conditions, if not properly treated, can result in end-stage renal disease and the patients typically end up on dialysis or having a transplant. There’s significant unmet need here. There are very few treatment options, and Acthar is indicated in nephrotic syndrome in these patients; and the last bullet outlines the specific indication we have.

So in MS relapse, MS is a neurodegenerative disease occurring in an estimated 400,000 Americans, and we estimate there are about 100,000 relapses or more per year in the U.S. And relapses can range from mild to severe and cause a constellation of symptoms, including tingling and numbness in the extremities, loss of sensation, loss of vision and difficulty walking among other things, pain for example.

And the research that’s out there indicates that relapses have a measurable and sustained effect on disability in MS patients. So, it’s important to treat them. And Acthar is indicated for the treatment of acute exacerbations or relapses of MS in adults. It’s typically employed in a secondary position. Doctors will usually use steroids first, and if the patient is in need of a second treatment alternative, they’ll often go to Acthar.

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