Questcor Pharmaceuticals, Inc. (



Q1 2011 Earnings Call Transcript

April 26, 2011 4:30 pm ET


Dough Sherk - IR, EVC Group

Don Bailey – President and CEO

Steve Cartt -Chief Business Officer

Mike Mulroy – CFO

Kirsten Fereday – Director of Business Analytics and Evaluations


Tim Chiang – CRT Capital

John Newman – Citadel Securities

Chris Holterhoff – Oppenheimer & Co

Biren Amin – WJB Capital

Yale Jen – Maxim Group

John Paffendorf – Morgan Stanly

Brian Delaney – EnTrust Capital

Patrick Lin – Primarius Capital



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Ladies and gentlemen, thank you for standing by. Welcome to the Questcor first quarter 2011 financial results conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded Tuesday, April 26 of 2011. I will hand over the conference to Mr. Doug Sherk. Please go ahead sir.

Dough Sherk

Thank you,



Good afternoon everyone. Thank you for joining us today on the Questcor Pharmaceutical’s conference call to discuss the first quarter 2011 financial results. This afternoon at the market close, Questcor issued its first quarter earnings release, which is posted on the Company’s web site at

. In addition, we’ve arranged for 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 instructions at the end of today’s call. The call is being broadcast live via webcast and an archive will also be available. To access the webcast and archive go to Questcor’s web site.

Before we get started, I’d like to remind you that during the course of this conference call, the Company 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.

With that, let me turn the call over to Don Bailey, President and Chief Executive Officer of Questcor Pharmaceuticals.

Don Bailey

Thanks, Doug, and good afternoon, everyone. With me today are several other members of our management team. Three of them will be making prepared remarks, Steve Cartt, our Chief Business Officer; Mike Mulroy, our CFO; and Kirsten Fereday, our Director of Business Analytics and Evaluations.

In summary, we are off to a very good start this year as we continued to execute our straightforward strategy to sell more Acthar. Our decision to expand the MS sales force is clearly paying off. Also, our nephrotic syndrome sales force is having some early success. Net sales and vials shipped set new records in the first quarter. Operating income was 45% of net sales above the 40% level we consider a long-term objective.

The first batch of Medicaid managed fair bills arrived in March and were lower than expected. So we have slightly reduced the reserves for those states and we repurchased almost $1 million shares of Questcor stock in the quarter. After making some comments about our MS and nephrotic syndrome business, I will turn the call over to Steve and he will provide some color regarding sales, then, Mike will briefly discuss our financial performance and Kirsten will update you on our reserves for Medicaid rebates, afterwards we will open up the call to your questions.

Our record quarterly performance was propelled by a sharp increase in paid MS prescriptions. January, February MS sales ran slightly higher than the Q4 run rate, but in March, new MS prescriptions grew dramatically and this momentum has continued into April. We believe this MS sales performance reflects the strong underlying demand for Acthar. This growth in demand is being driven by the increasing productivity of our expanded sales force.

We believe net sales in the MS market are now about 60% of total Acthar net sales. Throughout the rest of this year, MS sales should continue to grow as a percentage of total Acthar sales, as our commercial team gains more experience selling Acthar to neurologists. We believe that there are many more MS patients who may benefit from Acthar, with only 500 neurologists currently prescribing Acthar, we have a lot of work still to do and a lot of room to grow.

Moving on to NS, our 5% dedicated sales team hit the street in early March. Their efforts contributed to a good quarter for NS sales, and like with MS, this momentum has continued into April. Steve will provide more information in a few minutes about our plans to expand this nephrotic syndrome selling effort. Also in March, the first clinical dataset supporting the use of Acthar in the treatment of nephrotic syndrome was published in a peer-reviewed journal.

This study will help our sales team and their efforts to get the word out to nephrologists about using Acthar to treat NS. In parallel with this NS selling effort we plan to broaden the clinical research on how Acthar benefits patients with NS. In April, we hired a Clinical Research Organization or CRO, to oversee a Phase IV dose ranging clinical trial designed to evaluate Acthar in treating nephrotic syndrome associated with idiopathic membranous nephropathy.

This kidney disorder has few therapeutic alternatives and has a significant unmet medical need.

Turning briefly to IS, infantile spasms, during the first quarter of 2011, we sold a total of 89 paid non-Medicaid commercial prescriptions for Acthar in IS. Therefore IS sales were within this normal quarterly sales range. Now I would like to turn the call over to Steve Cartt. Steve?

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