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Questcor Pharmaceuticals, Inc. (QCOR)

Citi 2012 Global Health Care Conference

February 27, 2012 09:30 am ET

Executives

Don M. Bailey – President and Chief Executive Officer

Presentation

Don M. Bailey

Thank you. Good morning. I see the market’s now open. So, we will get started with Questcor here. You start with the market day. So, first, we have our standard – Safe Harbor statements have been updated, our 10-Q was filed last – 10-K was filed last week. So this Safe Harbor represents pretty much what’s in the new 10-K. Please read our risk carefully before investing, make sure you’re comfortable.

Questcor is a biopharmaceutical company. We have a product called Acthar. It’s principally represents all of our revenues. And Acthar is a drug that helps patients with difficult-to-treat medical conditions, typically conditions that have devastating outcomes. The drug is approved – Acthar is approved for 19 indications. The key revenue drivers currently are Multiple Sclerosis, the treatment of flares associated with Multiple Sclerosis and the treatment of patients with Nephrotic Syndrome. We also get sales from treating patients with the condition called Infantile Spasms. We will talk about each of those three between them; the market sizes here are in the low single-digit billions of dollars.

Our strategy is to continue to growth our sales in each of these three key markets, especially in the Multiple Sclerosis and Nephrotic Syndrome and to develop other on-label indications other these 19 on-label indications to try to grow sales in those markets. The company is profitable, cash flow positive. We have a little bit over $200 million in cash and we are debt free.

So let me walk through Multiple Sclerosis, Nephrotic Syndrome, Infantile Spasms, and then we’ll talk a little bit about a new on-label indication we will pursuing in the rheumatoid area.

Multiple Sclerosis is a neurodegenerative disorder. Acthar is approved for the treatment of acute relapses. Currently, the first-line treatment for patients who suffer from an exacerbation or relapse associated with Multiple Sclerosis. The first-line treatment is steroids, but many patients are not responsive to steroids, a little bit over a third of patients get better or get completely better, maybe only about a fourth get completely better back to their quality of life pre-flare. So there is at least quite a few patients who are potential Acthar candidates. There is almost a third of patients who have virtually no response to steroids or to get worse or have an adverse reaction. So there is a pretty good size market here for Acthar.

Our sales in terms of number of scripts are shown on this chart. So the script count – so these scripts here are new prescriptions that we receive at our reimbursement support center. And each of these bars is a quarters, so you can see here is about three years worth of data. And the script count has gradually grown over that time period. In the bottom part of the bars, we have the number of sales people – as we’ve increased a number of sales people and so for the last four – last year, we’ve had 77 sales people generating the script growth.

This chart is showing the same data on a monthly basis, and you see a nice up-tick over time. Sometimes sales go sideways for a little while and then they go up. It’s just a nature of the type of selling process we have here with selling Acthar into the MS market. So we are currently somewhere between 300 and 350 scripts a month or about a 1000 quarter, is the current run rate, which pushes at about 4,000 scripts a year. And we are looking at a MS patient population, that’s about 400,000 and maybe half of those patients have a flare every year. So out of 200,000 flares, Acthar is only treating 400,000 of those. If you compare that to the percentage numbers on the prior page, you can see there is probably still a lot of room to grow here.

Switching to Nephrotic Syndrome, Acthar has found a new home in treating the proteinuria levels of patients with Nephrotic Syndrome. So Nephrotic Syndrome is a kidney condition that’s characterized by a spilling of protein into the urine, and this is called proteinuria. And Acthar is approved for treating proteinuria and certain types of Nephrotic Syndrome, including idiopathic membranous nephropathy and other key one is called FSGS, those are probably the two key ones.

There is a significant unmet need here, patients who are on – who have Nephrotic Syndrome and don’t get successfully treated can end up an end-stage renal disease, needing a new kidney or they end up on dialysis, which is really not a good situation. So Acthar is a new therapy here for those patients in this category. There is no standard-of-care in treating proteinuria and Nephrotic Syndrome. So there is significant unmet need. And the goal here is straight forward. The goal of therapy is to reduce the levels of proteinuria in these patients.

We just got started during 2011 and trying to approach nephrologists to talk to them about Acthar. We hired a pilot sales force during the latter part of Q1, so about 12 months ago. And we had a little bit script growth in Q2 based just – with five sales people generated 45 scripts. So during Q3, we added another two dozen sales people. So we had 28 sales people making calls in Q4 and the script count jumped up to 146. So we are very pleased with that growth and we will talk about this just a little bit later, but we are going to expand the sales force again during Q1 and Q2.

Read the rest of this transcript for free on seekingalpha.com