Questcor Pharmaceuticals, Inc. (



Q3 2011 Earnings Conference Call

October 25, 2011 16:30 ET


Doug Sherk – Investor Relations

Don Bailey – President and Chief Executive Officer

Steve Cartt – Chief Business Officer

Mike Mulroy – Chief Financial Officer


Chris Holterhoff – Oppenheimer

Mario Corso – Caris & Company

Biren Amin – Jefferies & Company

Tim Chiang – CRT Capital Group

Yale Jen – Maxim Group

Jim Molloy – ThinkEquity

Patrick Glenn – Primarius Capital



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Ladies and gentlemen, thank you for standing by. Welcome to the Questcor Third Quarter Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) Today’s conference is being recorded, October 25, 2011.

I would now like to turn the conference over to Doug Sherk. Please go ahead.

Doug Sherk – Investor Relations

Thank you, operator and good afternoon everyone. Thank you for joining us today on the Questcor Pharmaceuticals conference call to discuss the third quarter 2011 financial results. This afternoon at the market close, Questcor issued its third quarter earnings release, which is posted on the company’s website at This call is being broadcast live via webcast with an accompanying slide presentation. An archive of both will also be available at the Questcor’s website.

To access the webcast including the presentation slides and the archive go to Questcor’s website at in the Investor Relations section under Events and Presentations. If you are listening via telephone to view the accompanying presentation slides, navigate to the live webcast as noted and choose the no audio slides-only option to view the slides in conjunction with the live conference call. There will 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 instructions at the end of today’s call.

Before we get started, I would 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 out of the way, let me turn the call over to now to Don Bailey, President and Chief Executive Officer of Questcor Pharmaceuticals.

Don Bailey – President and Chief Executive Officer

Thanks Doug. Good afternoon everyone. With me today are several other members of our management team, Steve Cartt, our Chief Business Officer and Mike Mulroy, our CFO will be making prepared remarks and others are here to answer questions.

The highlights for the third quarter of 2011 are on the screen if you are viewing the accompanying slide presentations. The highlights demonstrate that Questcor’s strategy to sell more Acthar continues to generate increasing revenue and earnings. Our commercial organization is steadily expanding to number of neurologists, nephrologists, and child neurologists prescribing Acthar. Acthar paid prescriptions in the MS market grew 174% over the third quarter of 2010 marking our 15th consecutive quarter of growing MS paid scripts.

During the quarter, we also completed the planned expansion of our nephrology sales force. Although our selling effort was somewhat disrupted by this expansion, paid Acthar prescriptions for nephrotic syndrome increased in the quarter over the second quarter. Our continued success in these key markets combined with solid IS paid scripts in the quarter led to increases in shipments of Acthar vials, increased net sales, higher operating margins, higher earnings, higher EPS, and most importantly, higher cash levels.

This chart on the screen now shows Acthar’s MS prescription growth on a quarterly basis. A key priority remains growing the use of Acthar in the treatment of MS exacerbations or relapses and this focus drove our year-over-year increase in the number of paid Acthar prescriptions for MS. In the third quarter of 2011, we had 886 paid MS scripts compared with 323 scripts a year ago. The major factors behind the increased prescriptions are positive outcomes and the increasing productivity of our larger MS commercial teams.

On to the chart, this chart shows the same MS paid prescription data on a monthly basis. You can see the MS script level during the third quarter increased each month of the quarter. We should also note that some months are sequentially down and some up over the longer history. But that overall trend is about 160% compounded annualized growth rate over four years.

So Acthar has shown rapid growth in the MS market this year. We believe we may still be early on in penetrating this market. We do not have definitive data on the total number of MS relapse patients for whom steroids are not returning them to an acceptable quality of life. But we believe there is ample room for growth for Acthar in this MS market. Based on the estimate of 200,000 relapse as annually in the US and the annualized third quarter prescription count of about 4000 Acthar MS prescriptions, we likely only have single-digit penetration of this market.

Let me turn to our efforts in building the use of Acthar to treat nephrotic syndrome. As I mentioned in the highlights, our records resulted in an increase in paid Acthar prescriptions for nephrotic syndrome in the third quarter despite the disruption caused by the nephrology sales force expansion.

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