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Questcor Pharmaceuticals, Inc. (QCOR)

Q3 2012 Earnings Call

October 23, 2012 4:30 PM ET

Executives

Doug Sherk – IR

Don Bailey – President and CEO

Steve Cartt – COO

Mike Mulroy – SVP, CFO, General Counsel and Corporate Secretary

Analysts

Steve Byrne – Bank of America

Joshua Schimmer – Lazard Capital

Chris Holterhoff – Oppenheimer & Co

Yale Jen – ROTH Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to your Questcor Pharmaceutical’s Q3 2012 Earnings Conference.

(Operator Instructions)

But later, we will conduct a question-and-answer session, which instructions will be given at that time. (Operator Instructions) And as a reminder, today’s conference is being recorded.

And now I would like to introduce your host for today, Doug Sherk. Doug, please go ahead.

Doug Sherk

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for the Questcor Pharmaceutical’s conference call to discuss the third quarter 2012 financial results. This afternoon after the market closed, Questcor issued its third quarter earnings release, which is posted on the company’s website at www.questcor.com. The company has also filed its third quarter Form 10-Q.

Today’s call is also being webcast and a slide presentation will accompany managements’ remarks. To access both the webcast and the presentation slides, go to Questcor’s website at www.questcor.com, click the Investor Relations link, and then click on Events & Presentations.

If you’re listening via telephone today, to review the accompanying presentation in conjunction with the call, navigate to the live webcast on the Event page. Then choose the audio/slides-only option.

Additionally, there’ll be a taped replay of this call, which will be available approximately one hour after the call’s conclusion and will remain available for seven days. The operator will provide the replay instruction at the end of today’s call.

Before we get started, I’d like to remind you that during the course of this call, management will make projections and forward-looking statements regarding future events. We encourage you to review the company’s past and future filings with the SEC, including without limitation the company’s Forms 10-K and 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements.

As previously disclosed in the company’s SEC filings, these factors include the following: Questcor’s reliance on Acthar for substantially all of its net sales and profits; Questcor’s ability to comply with federal and state regulations, including regulations relating to pharmaceuticals and marketing practices; and Questcor possibly being affected by lower reimbursement levels from third-party payers.

Also as discussed in the company’s earnings release today, the company has been publicly disclosing on Form 8-K certain operating metrics on a monthly basis for the past several months. Sales have reached a level where the company believes that the more traditional approach of providing financial information and related analysis of results on a quarterly basis is appropriate. And the company expects to return to a quarterly public filing approach going forward.

Lastly, given management’s schedule today, we’ve allocated 45 minutes for this call. We’ll take as many questions as time allows.

Now, I’d like to turn the call over to Don Bailey, President and Chief Executive Officer of Questcor Pharmaceuticals.

Don Bailey

Thanks, Doug. Good afternoon, everyone. With me today are Steve Cartt, our Chief Operating Officer; and Mike Mulroy, Chief Financial Officer. They will each be making prepared remarks.

Questcor’s financial results were driven by the increasing acceptance and expanding usage of Acthar among healthcare providers as an FDA-approved treatment alternative for patients with infantile spasms, idiopathic types of nephrotic syndrome, MS relapses, and several rheumatology-related conditions. Growth in prescriptions for nephrotic syndrome and MS relapses drove the sales increase we experienced during the third quarter. Recall that we entered the nephrology market last year, and seeing the significant commercial opportunity, we expanded the nephrology sales force to 58 representatives in June.

We believe Acthar’s therapeutic usefulness in nephrotic syndrome, the devastating nature of this disease and the lack of other approved therapies have contributed to the growth in this area of the business. Paid MS prescriptions also increased in the third quarter when compared to the year-ago quarter. We also completed an expansion of the neurology sales force during the quarter. Regarding our newest market opportunity in rheumatology, we are encouraged by the early positive signs we are seeing from our pilot commercial effort. Because of its possible broad immunomodulating mechanism of action, Acthar has the potential to help patients suffering from any of the serious rheumatology-related disorders addressed by the FDA-approved indications specified on the Acthar label.

The overall growth in Acthar prescriptions has led to consistent growth in vials shipped. In the third quarter, we shipped 5,590 vials of Acthar. This, of course, has in turn driven the increase in net sales.

Now, I’d like to turn the call over to Steve Cartt, our Chief Operating Officer, who will provide more detail on our operating highlights during the third quarter. He will also update you on the business’ performance during the first three weeks of October. Steve?

Steve Cartt

Thanks, Don, and good afternoon, everyone. I’ll first review quarterly paid prescriptions. The chart on the screen shows nephrotic syndrome prescription growth for Acthar on a quarterly basis over the last two years. New paid nephrotic syndrome prescriptions grew to 335 in third quarter 2012, reflecting the rapid growth in this area of our business.

We initiated the nephrology pilot selling effort late in the first quarter of 2011 and have since expanded the sales force twice because of faster-than-expected Acthar prescription growth in this market. As Don noted, we completed our second nephrology expansion to 58 reps in June. As I mentioned, this sales team generated 335 new paid Acthar prescriptions in the third quarter, so we are having some early success, but it’s important to remember that our efforts in this market are still relatively new.

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