ANAHEIM, Calif., July 24, 2014 /PRNewswire/ -- Questcor
Pharmaceuticals, Inc. (NASDAQ: QCOR) today reported financial
results for the second quarter ended June
30, 2014.
|
Three
Months Ended 06/30/14
|
Three
Months Ended 06/30/13
|
Percentage
Change
|
GAAP Net
Sales
|
$278.8
Million
|
$184.6
Million
|
51%
|
Non-GAAP Net
Sales
|
$278.8
Million
|
$196.1
Million
|
42%
|
GAAP Diluted
EPS
|
$1.54
|
$1.12
|
37%
|
Non-GAAP Diluted
EPS
|
$1.85
|
$1.35
|
37%
|
|
Six
Months Ended 06/30/14
|
Six
Months Ended 06/30/13
|
Percentage
Change
|
Net Sales
|
$505.9
Million
|
$319.7
Million
|
58%
|
Non-GAAP Net
Sales
|
$505.9
Million
|
$331.2
Million
|
53%
|
GAAP Diluted
EPS
|
$2.75
|
$1.79
|
54%
|
Non-GAAP Diluted
EPS
|
$3.25
|
$2.13
|
53%
|
Net sales for the second quarter ended June 30, 2014 were $278.8
million, up 51% from $184.6
million in GAAP net sales and up 42% from $196.1 million in non-GAAP net sales in the
second quarter of 2013. Net sales for H.P. Acthar®
Gel (repository corticotropin injection) for the second quarter
ended June 30, 2014 were $261.4 million, up 48% from $177.0 million in GAAP net sales and up 39% from
$188.5 million in non-GAAP net sales
in the second quarter of June 2013. The significant increase
in net sales was driven by increased prescribing of Acthar by
physicians for patients suffering from rheumatoid arthritis,
systemic lupus erythematosus, dermatomyositis, polymyositis,
nephrotic syndrome, multiple sclerosis exacerbations, infantile
spasms and symptomatic sarcoidosis – all FDA-approved indications
for Acthar. BioVectra, the Company's specialty manufacturing
subsidiary, had net sales of $17.4
million in the second quarter of 2014, an increase of 131%
from $7.5 million in the second
quarter of 2013. This increase was driven by increased demand
for BioVectra's specialty pharmaceutical fermentation and synthetic
manufacturing capabilities. GAAP earnings for the second
quarter of 2014 were $1.54 per
diluted common share, up 37% from the year ago quarter.
Second quarter 2014 non-GAAP earnings per share were
$1.85, an increase of 37% from the
prior year period.
Net sales for the second quarter of 2013 included the effect of
the Company's decision to accrue, based on information received in
the quarter, an incremental Medicaid rebate liability of
$11.5 million related to Questcor's
2001 entry into the Medicaid system subsequent to Questcor's
acquisition of Acthar in 2001.
Questcor shipped 8,850 vials of Acthar during the second quarter
of 2014, which represents a new record for Acthar shipments in a
quarter and an increase of 26% from the 7,050 vials shipped in the
year ago quarter. Quarterly vial shipments are subject to
significant variation due to several factors, including the size
and timing of individual orders received from Questcor's
distributor. The timing of when these orders are received and
filled can significantly affect net sales and net income in any
particular quarter. The Company believes that investors
should consider the Company's results over several quarters when
analyzing the Company's performance.
"Acthar prescription activity accelerated in the quarter,
resulting in record net sales and earnings," said Don M. Bailey, President and CEO of Questcor.
"Similar to 2013, Acthar prescription activity picked up
significantly in the second quarter, led by growth in our
rheumatology indications and a resurgence in prescriptions for
nephrotic syndrome. In addition, BioVectra experienced
significantly improved results and we are in the process of
expanding BioVectra's specialty fermentation capacity in order to
meet the growing demand for their contract manufacturing
services."
To allow comparable analysis, the Company has defined "new paid"
prescriptions in the below paragraphs to include prescriptions
covered by commercial carriers, Medicare, Medicaid and Tricare in
all periods regardless of the rebate percentage applicable in those
periods. The numbers are based on internal company estimates.
"There were between 2,775 and 2,800 total new paid prescriptions
for Acthar in the second quarter, an increase of approximately 23%
compared with the second quarter of 2013 and an increase of 19%
sequentially," commented Steve
Cartt, Chief Operating Officer of Questcor. "Of
particular note, we continue to see increased prescribing of Acthar
by rheumatologists as a result of our ongoing educational efforts
in rheumatology that, until very recently, have focused primarily
on dermatomyositis and polymyositis. For all combined
FDA-approved rheumatology-related Acthar indications, pharmacies
filled between 665 and 675 new paid Acthar prescriptions during the
second quarter, more than double the 315 to 320 prescriptions
filled in the year ago quarter and an increase of 16% sequentially.
Rheumatology prescriptions now account for approximately one-third
of our total Acthar business. Overall, we had a strong second
quarter, and we are seeing similar trends in the first few weeks of
the current quarter."
Mr. Cartt continued, "We have recently increased our promotional
emphasis within rheumatology on systemic lupus erythematosus due to
the recent publication in the journal LUPUS of an
independent investigator-initiated, 10-patient study of Acthar in
the treatment of lupus patients suffering from significant disease
activity. Rheumatologists and patient organizations tell us that
lupus patients have a significant need for new therapeutic options,
and we are excited about the potential for Acthar to help select
lupus patients in need of an additional FDA-approved treatment
alternative."
"In addition, our pilot effort focused on educating
pulmonologists about Acthar in the treatment of respiratory
manifestations of symptomatic sarcoidosis has generated a positive
response over the last few months, consistent with our previous
pilot detailing efforts in both nephrology and rheumatology.
Prescribing activity by pulmonologists has exceeded our
expectations since the pilot detailing effort began in February 2014, with approximately 40 to 45 new
paid prescriptions shipped by pharmacies in the second quarter. As
a result of these encouraging early results, we will be expanding
the pulmonology sales force from 7 to 35 Acthar representatives and
expect to complete this expansion by January
2015," concluded Mr. Cartt.
Pharmacies filled between 480 and 490 new paid prescriptions for
Nephrotic Syndrome (NS) in the quarter, an increase of about 20%
compared with the second quarter of 2013 and an increase of 37%
sequentially. Net sales resulting from NS prescriptions
currently account for approximately one-third of our total Acthar
business. During the second quarter, pharmacies filled between
1,350 and 1,360 new paid prescriptions for MS relapse patients as
well, representing an increase of about 5% compared with the second
quarter of 2013 and an increase of 18% sequentially. Net sales
generated from MS relapse prescriptions currently represent
approximately one-quarter of our total Acthar business. Lastly,
pharmacies filled between 215 and 220 new paid prescriptions for
Infantile Spasms during the quarter, compared to between 215 to 220
new paid prescriptions for Infantile Spasms in the year ago
quarter.
The Company believes that insurance coverage for Acthar
continues to remain favorable and relatively consistent. The
Company believes that reimbursement rates for Acthar have remained
favorable and relatively consistent in large part because Acthar is
generally reserved by physicians for patients with more severe
forms of the medical conditions for which the drug is being
prescribed, the patient has often not properly responded to other
therapies and Acthar is approved by the FDA for that difficult to
treat medical condition.
Year-to-Date Financial Results
Net sales for the first six months of 2014 were $505.9 million, with BioVectra contributing
$34.8 million. Net sales in the first
six months of 2013 were $319.7
million, with BioVectra contributing $15.9 million. On a non-GAAP basis, net sales for
the six months ended June 30, 2013
were $331.2 million. GAAP
earnings for the first six months of 2014 were $2.75 per diluted common share, compared to
$1.79 per diluted common share for
the comparable period of 2013. Non-GAAP earnings for the six months
ended June 30, 2014 were $3.25 per diluted common share excluding non-cash
share-based compensation expense, depreciation and amortization
expense, other non-cash expense related to the acquisitions of
BioVectra and Synacthen and Synacthen Depot, and
transaction-related expenses in connection with our pending merger
with Mallinckrodt public limited
company (NYSE: MNK). Non-GAAP earnings for the comparable period of
2013 were $2.13 per diluted common
share. The reconciliation between GAAP and non-GAAP financial
measures is provided with the financial tables included with this
release.
Research and Development Progress
Research and development (R&D) expense increased 80% to
$22.0 million in the three months
ended June 30, 2014, compared with
$12.2 million for the year ago
period. The increased R&D expense reflects the Company's
ongoing efforts to further build the body of clinical evidence for
Acthar, clarify the potential immune-modulating properties of
Acthar and Synacthen Depot, and identify mechanisms of action that
potentially could be applicable to other inflammatory and
auto-immune diseases with high unmet medical needs. R&D expense
in the second quarter of 2014 includes an upfront payment of
$3.3 million to a third party in
connection with a research and development agreement.
The Company is also identifying new patient populations in which
to evaluate both Acthar and Synacthen Depot through exploratory
clinical studies. Questcor is presently funding research and
development for Acthar in the following indications:
New Indications for Label Enhancement Programs:
- Amyotrophic Lateral Sclerosis (ALS): Patient enrollment
has been completed in a company-sponsored dose-ranging Phase 2
clinical trial to evaluate the safety and tolerability of Acthar in
patients with ALS, often referred to as Lou
Gehrig's disease. ALS is a life-threatening, progressive
neurodegenerative disease that affects nerve cells in the brain and
the spinal cord.
- Diabetic Nephropathy: Enrollment continues in a
company-sponsored Phase 2 trial to evaluate the efficacy and safety
of Acthar in patients with diabetic nephropathy, one of the most
common causes of end-stage renal disease in the United States.
- Acute Respiratory Distress Syndrome (ARDS): Site
selection has been initiated for a Phase 2 study to explore the
safety and efficacy of Acthar in patients with ARDS. ARDS is an
acute life threatening lung condition that can result from
pulmonary and non-pulmonary infections or a multitude of other
serious conditions.
Clinical Trials Supporting Approved Indications:
- Idiopathic Membranous Nephropathy: Enrollment continues
in a company-sponsored Phase 4 trial in idiopathic membranous
nephropathy. Patients enrolled in this study are refractory, or
non-responsive, to current standard therapies or have relapsed
after partial remission on current standard therapies. (NOTE:
for clarity, this trial is separate and distinct from the
independent investigator-initiated study in idiopathic membranous
nephropathy patients discussed in Questcor's April 21, 2014 press release.)
- Lupus: Enrollment continues in a company-sponsored
multi-site Phase 4 clinical trial to evaluate the efficacy and
safety of daily Acthar administration during a 6-month period in
patients with persistently active lupus.
Preclinical work related to the evaluation of a select group of
potential Synacthen Depot indications is in process.
Cash and Dividends
Cash flow from operations was $99
million during the second quarter of 2014 compared to
$82 million during the second quarter
of 2013. As of July 18, 2014,
Questcor had cash, cash equivalents and short-term investments of
$474.6 million, including
$75 million in restricted cash to
secure certain post-closing payment obligations related to
Questcor's acquisition of Synacthen and Synacthen Depot.
On July 8, 2014, Questcor paid its
second quarter dividend of $0.30 per
share to shareholders of record at the close of business on
July 1, 2014.
Definitive Merger Agreement with Mallinckrodt
On April 7, 2014, Questcor
announced that it had entered into a definitive merger agreement
under which Mallinckrodt public limited
company will acquire Questcor in a transaction valued, based on the
closing price of Mallinckrodt common
stock on July 18, 2014, at
approximately $6.3 billion. Under the
terms of the transaction, Questcor shareholders will receive
$30.00 per share in cash and 0.897
Mallinckrodt shares for each share of
Questcor common stock they own, which, based on the closing price
of Mallinckrodt common stock on
July 18, 2014, is $97.37 per share. Following completion of
the merger, Mallinckrodt shareholders
will own approximately 50.5% and former Questcor shareholders will
own approximately 49.5% of the combined company's stock (calculated
on a fully diluted basis using the treasury stock method).
Mallinckrodt has filed with the SEC a
registration statement on Form S-4 containing a joint proxy
statement of Mallinckrodt and Questcor
that also constitutes a prospectus of Mallinckrodt. The SEC declared the registration
statement effective on July 11, 2014
and the Company commenced mailing of the definitive joint
proxy/prospectus to its shareholders on July
14, 2014. The merger, which is subject to the approval of
the shareholders of both companies, is currently expected to be
completed in August 2014. In light of
the pending transaction, Questcor has suspended conducting
quarterly conference calls.
Acthar Label Information
The product label for Acthar includes 19 FDA-approved
indications. Substantially all of the Company's net sales currently
result from Acthar prescriptions for the following on-label
indications:
- Nephrotic Syndrome (NS): "to induce a diuresis or a
remission of proteinuria in the nephrotic syndrome without uremia
of the idiopathic type or that due to lupus erythematosus." NS can
result from several underlying conditions, and prescribing
physicians indicate that Acthar is most commonly being prescribed
for patients who have proteinuria and suffer from NS due to
idiopathic membranous nephropathy, focal segmental
glomerulosclerosis (FSGS), IgA nephropathy, minimal change disease
and lupus nephritis.
- Rheumatology Related Conditions: Acthar is
approved for the following rheumatology related conditions: (i)
Collagen Diseases: Acthar is indicated "during an exacerbation or
as maintenance therapy in selected cases of systemic lupus
erythematosus, systemic dermatomyositis (polymyositis)" and (ii)
Rheumatic Disorders: Acthar is indicated as "adjunctive therapy for
short-term administration (to tide the patient over an acute
episode or exacerbation) in: Psoriatic arthritis, Rheumatoid
arthritis, including juvenile rheumatoid arthritis (selected cases
may require low-dose maintenance therapy), Ankylosing
spondylitis."
- Multiple Sclerosis (MS): "for the treatment of acute
exacerbations of multiple sclerosis in adults. Clinical controlled
trials have shown H.P. Acthar Gel to be effective in speeding the
resolution of acute exacerbations of multiple sclerosis. However,
there is no evidence that it affects the ultimate outcome or
natural history of the disease." When Acthar is used, it is
typically prescribed as second line treatment for patients with MS
exacerbations.
- Infantile Spasms (IS): "as monotherapy for the treatment
of infantile spasms in infants and children under 2 years of
age."
Non-GAAP Financial Measures
The Company believes it is important to share non-GAAP financial
measures with investors as these measures may better represent the
ongoing economics of the business and reflect how we manage the
business. Accordingly, management believes investors' understanding
of the Company's financial performance is enhanced as a result of
the disclosure of these non-GAAP financial measures. Non-GAAP
financial measures should not be viewed in isolation, or as a
substitute for, or as superior to, reported GAAP financial
measures. The reconciliation between GAAP and non-GAAP financial
measures are provided with the financial tables included with this
release.
About Questcor
Questcor Pharmaceuticals, Inc. is a biopharmaceutical company
focused on the treatment of patients with serious,
difficult-to-treat autoimmune and inflammatory disorders. Questcor
also provides specialty contract manufacturing services to the
global pharmaceutical industry through its wholly-owned subsidiary
BioVectra Inc. For more information about Questcor, please visit
www.questcor.com.
For more information, please visit www.questcor.com or
www.acthar.com.
|
|
QUESTCOR
PHARMACEUTICALS, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
(In thousands, except
net income per share data)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical net
sales
|
$
|
261,412
|
|
|
$
|
177,045
|
|
|
$
|
471,180
|
|
|
$
|
303,817
|
|
Contract
manufacturing net sales
|
17,418
|
|
|
7,528
|
|
|
$
|
34,754
|
|
|
$
|
15,885
|
|
Total net
sales
|
278,830
|
|
|
184,573
|
|
|
$
|
505,934
|
|
|
$
|
319,702
|
|
Cost of
sales
|
23,152
|
|
|
17,221
|
|
|
44,562
|
|
|
33,410
|
|
Gross
profit
|
255,678
|
|
|
167,352
|
|
|
461,372
|
|
|
286,292
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
marketing
|
56,792
|
|
|
37,900
|
|
|
103,859
|
|
|
73,362
|
|
General and
administrative
|
26,848
|
|
|
13,126
|
|
|
49,475
|
|
|
25,675
|
|
Research and
development
|
22,008
|
|
|
12,240
|
|
|
41,937
|
|
|
23,033
|
|
Depreciation and
amortization
|
1,065
|
|
|
1,014
|
|
|
2,092
|
|
|
2,084
|
|
Change in fair value
of contingent consideration
|
1,201
|
|
|
—
|
|
|
2,382
|
|
|
—
|
|
Impairment of
goodwill and intangibles
|
—
|
|
|
—
|
|
|
—
|
|
|
719
|
|
Total operating
expenses
|
107,914
|
|
|
64,280
|
|
|
199,745
|
|
|
124,873
|
|
Income from
operations
|
147,764
|
|
|
103,072
|
|
|
261,627
|
|
|
161,419
|
|
Interest and other
income (expense), net
|
(226)
|
|
|
20
|
|
|
(1,018)
|
|
|
(322)
|
|
Foreign currency
transaction gain (loss)
|
60
|
|
|
—
|
|
|
(94)
|
|
|
(488)
|
|
Income before income
taxes
|
147,598
|
|
|
103,092
|
|
|
260,515
|
|
|
160,609
|
|
Income tax
expense
|
51,162
|
|
|
33,969
|
|
|
89,769
|
|
|
52,424
|
|
Net income
|
$
|
96,436
|
|
|
$
|
69,123
|
|
|
$
|
170,746
|
|
|
$
|
108,185
|
|
Change in unrealized
gains or losses on available-for-sale securities, net of related
tax effects
|
31
|
|
|
(29)
|
|
|
37
|
|
|
(34)
|
|
Change in foreign
currency translation adjustments
|
1,479
|
|
|
(1,451)
|
|
|
242
|
|
|
(2,640)
|
|
Comprehensive
income
|
$
|
97,946
|
|
|
$
|
67,643
|
|
|
$
|
171,025
|
|
|
$
|
105,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.62
|
|
|
$
|
1.17
|
|
|
$
|
2.87
|
|
|
$
|
1.86
|
|
Diluted
|
$
|
1.54
|
|
|
$
|
1.12
|
|
|
$
|
2.75
|
|
|
$
|
1.79
|
|
Shares used in
computing net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
59,686
|
|
|
58,938
|
|
|
59,415
|
|
|
58,075
|
|
Diluted
|
62,451
|
|
|
61,498
|
|
|
62,172
|
|
|
60,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share of common stock
|
$
|
0.30
|
|
|
$
|
0.25
|
|
|
$
|
0.60
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
Reconciliation of
Non-GAAP Adjusted Financial Disclosure
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30,
|
June
30,
|
|
2014
|
2013
|
2014
|
2013
|
Adjusted net
income
|
$115,822
|
$83,323
|
$202,083
|
$128,987
|
Stock-based
Compensation (1)
|
(5,729)
|
(4,382)
|
(11,442)
|
(8,546)
|
Depreciation
& Amortization Expense, including impairment expense
(2)
|
(3,222)
|
(1,882)
|
(6,391)
|
(3,615)
|
Other non-cash
expense (income) related to acquisition of BioVectra (3)
|
(573)
|
(219)
|
(1,127)
|
(890)
|
Other non-cash
expense (income) related to acquisition of Synacthen (4)
|
(1,133)
|
0
|
(2,247)
|
0
|
Acquisition
related expenses (5)
|
(6,607)
|
0
|
(8,001)
|
0
|
Medicaid
adjustment for 2002 - 2009 (6)
|
0
|
(7,717)
|
0
|
(7,751)
|
Research and
development milestone (7)
|
(2,122)
|
0
|
(2,129)
|
0
|
Net income -
GAAP
|
$96,436
|
$69,123
|
$170,746
|
$108,185
|
|
|
|
|
|
Adjusted net income
per share - basic
|
$1.94
|
$1.41
|
$3.40
|
$2.22
|
Stock-based
Compensation (1)
|
(0.10)
|
(0.07)
|
(0.19)
|
(0.15)
|
Depreciation
& Amortization Expense, including impairment expense
(2)
|
(0.05)
|
(0.03)
|
(0.11)
|
(0.06)
|
Other non-cash
expense (income) related to acquisition of BioVectra (3)
|
(0.01)
|
(0.00)
|
(0.02)
|
(0.02)
|
Other non-cash
expense (income) related to acquisition of Synacthen (4)
|
(0.02)
|
—
|
(0.04)
|
—
|
Acquisition
related expenses (5)
|
(0.11)
|
—
|
(0.13)
|
—
|
Medicaid
adjustment for 2002 - 2009 (6)
|
—
|
(0.13)
|
—
|
(0.13)
|
Research and
development milestone (7)
|
(0.04)
|
—
|
(0.04)
|
—
|
Net income per share
- basic
|
$1.62
|
$1.17
|
$2.87
|
$1.86
|
|
|
|
|
|
Adjusted net income
per share - diluted
|
$1.85
|
$1.35
|
$3.25
|
$2.13
|
Stock-based
Compensation (1)
|
(0.09)
|
(0.07)
|
(0.18)
|
(0.14)
|
Depreciation
& Amortization Expense, including impairment expense
(2)
|
(0.05)
|
(0.03)
|
(0.10)
|
(0.06)
|
Other non-cash
expense (income) related to acquisition of BioVectra (3)
|
(0.01)
|
(0.00)
|
(0.02)
|
(0.01)
|
Other non-cash
expense (income) related to acquisition of Synacthen (4)
|
(0.02)
|
—
|
(0.04)
|
—
|
Acquisition
related expenses (5)
|
(0.11)
|
—
|
(0.13)
|
—
|
Medicaid
adjustment for 2002 - 2009 (6)
|
—
|
(0.13)
|
—
|
(0.13)
|
Research and
development milestone (7)
|
(0.03)
|
—
|
(0.03)
|
—
|
Net income per share
- diluted
|
$1.54
|
$1.12
|
$2.75
|
$1.79
|
|
|
|
|
|
Net sales -
Questcor
|
$261,412
|
$177,045
|
$471,180
|
$303,817
|
Net sales -
BioVectra
|
17,418
|
7,528
|
34,754
|
15,885
|
Consolidated net
sales
|
278,830
|
184,573
|
505,934
|
319,702
|
Medicaid
adjustment
|
0
|
11,500
|
0
|
11,500
|
Adjusted consolidated
net sales
|
$278,830
|
$196,073
|
$505,934
|
$331,202
|
|
|
|
|
|
|
Notes to
Reconciliation of Non-GAAP Adjusted Financial
Disclosure
|
|
Net income per share
– basic and diluted may not foot due to rounding.
|
Use of Non-GAAP
Financial Measures
|
Our "non-GAAP
adjusted net income" excludes the following items from GAAP net
income:
|
1. Share-based
compensation expense.
|
2. Depreciation and
amortization expense.
|
3. Other non-cash
expense (income) related to the acquisition of BioVectra, including
compensation expense associated with the BV agreement.
|
4. Other
non-cash expense (income) related to the acquisition of Synacthen
Depot, including net present value adjustment of the Synacthen
Depot liability.
|
5. Transaction
costs related to the pending merger with Mallinckrodt
plc.
|
6. Medicaid
adjustment for prior period 2002 – 2009.
|
7. Upfront payment to
a third party in connection with a research and development
agreement.
|
|
|
QUESTCOR
PHARMACEUTICALS, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In thousands, except
share information)
|
(unaudited)
|
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
331,679
|
|
|
$
|
175,840
|
Short-term
investments
|
61,074
|
|
|
69,166
|
Total cash, cash
equivalents and short-term investments
|
392,753
|
|
|
245,006
|
Accounts receivable,
net of allowances for doubtful accounts of $408 and $475 at June
30, 2014 and December 31, 2013, respectively
|
106,954
|
|
|
87,069
|
Inventories, net of
allowances of $1,441 and $1,329 at June 30, 2014 and December 31,
2013, respectively
|
16,382
|
|
|
16,368
|
Restricted cash -
current portion
|
50,000
|
|
|
25,000
|
Prepaid income
taxes
|
9,970
|
|
|
—
|
Prepaid expenses and
other current assets
|
7,668
|
|
|
7,124
|
Deferred tax
assets
|
11,512
|
|
|
16,209
|
Total current
assets
|
595,239
|
|
|
396,776
|
Property and
equipment, net
|
36,409
|
|
|
31,733
|
Goodwill
|
20,527
|
|
|
20,464
|
In process R&D
asset
|
186,530
|
|
|
191,451
|
Intangibles and other
non current assets, net
|
28,589
|
|
|
30,131
|
Restricted
cash
|
25,000
|
|
|
50,000
|
Deposits and other
assets
|
134
|
|
|
389
|
Deferred tax
assets
|
15,410
|
|
|
15,410
|
Total
assets
|
$
|
907,838
|
|
|
$
|
736,354
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
37,264
|
|
|
$
|
14,302
|
Accrued
compensation
|
23,019
|
|
|
16,489
|
Sales-related
reserves
|
26,913
|
|
|
35,370
|
Accrued
royalties
|
46,398
|
|
|
35,163
|
Dividend
payable
|
18,426
|
|
|
18,093
|
Current portion of
contingent consideration associated with the acquisition of
BioVectra
|
4,124
|
|
|
4,238
|
Current portion of
non-contingent liability associated with the acquisition of
Synacthen and Synacthen Depot
|
23,810
|
|
|
24,398
|
Income taxes
payable
|
2,219
|
|
|
3,693
|
Current portion of
long-term debt
|
1,701
|
|
|
1,665
|
Other accrued
liabilities
|
3,860
|
|
|
7,159
|
Total current
liabilities
|
187,734
|
|
|
160,570
|
Long-term debt, less
current portion
|
13,181
|
|
|
13,998
|
Contingent
consideration associated with acquisition of BioVectra
|
30,642
|
|
|
33,224
|
Non-contingent
liability associated with the acquisition of Synacthen and
Synacthen Depot
|
22,675
|
|
|
45,378
|
In process R&D
liability
|
72,011
|
|
|
70,290
|
Non current deferred
tax liability
|
10,602
|
|
|
10,569
|
Other non current
liabilities
|
2,853
|
|
|
2,961
|
Total
liabilities
|
339,698
|
|
|
336,990
|
Shareholders'
equity:
|
|
|
|
|
Preferred stock, no
par value, 5,334,285 shares authorized; none outstanding
|
—
|
|
|
—
|
Common stock, no par
value, 105,000,000 shares authorized, 61,448,937 and 60,137,758
shares issued and outstanding at June 30, 2014 and
December 31, 2013, respectively
|
64,927
|
|
|
30,386
|
Retained
earnings
|
506,187
|
|
|
372,231
|
Accumulated other
comprehensive (loss) income
|
(2,974)
|
|
|
(3,253)
|
Total shareholders'
equity
|
568,140
|
|
|
399,364
|
Total liabilities and
shareholders' equity
|
$
|
907,838
|
|
|
$
|
736,354
|
|
|
QUESTCOR
PHARMACEUTICALS, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(unaudited)
|
|
|
Six Months
Ended
|
|
June
30,
|
|
2014
|
|
2013
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income
|
$
|
170,746
|
|
|
$
|
108,185
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Share-based
compensation expense
|
17,469
|
|
|
12,679
|
Deferred income
taxes
|
4,699
|
|
|
962
|
Amortization of
investments
|
521
|
|
|
245
|
Depreciation and
amortization
|
9,757
|
|
|
4,645
|
Impairment of
goodwill and intangibles
|
—
|
|
|
719
|
Loss on disposal of
property and equipment
|
—
|
|
|
95
|
Imputed interest for
contingent consideration and in-process R&D
|
2,382
|
|
|
588
|
Other compensation
expense
|
1,059
|
|
|
494
|
Changes in operating
assets and liabilities, net of business acquisition:
|
|
|
|
|
Accounts
receivable
|
(17,887)
|
|
|
(2,883)
|
Inventories
|
20
|
|
|
4,270
|
Prepaid income
taxes
|
(9,970)
|
|
|
—
|
Prepaid expenses and
other current assets
|
225
|
|
|
1,175
|
Accounts
payable
|
20,306
|
|
|
(2,569)
|
Accrued
compensation
|
6,530
|
|
|
(10,780)
|
Sales-related
reserves
|
(8,457)
|
|
|
(1,786)
|
Accrued
royalties
|
11,235
|
|
|
7,060
|
Income taxes
payable
|
(1,535)
|
|
|
(2,684)
|
Other accrued
liabilities
|
(1,714nn)
|
|
|
2,555
|
Other non-current
liabilities
|
45
|
|
|
21
|
Net cash flows
provided by operating activities
|
205,431
|
|
|
122,991
|
INVESTING
ACTIVITIES
|
|
|
|
|
Purchase of property
and equipment
|
(8,266)
|
|
|
(1,138)
|
Purchase of
short-term investments
|
(33,570)
|
|
|
(52,001)
|
Proceeds from
maturities of short-term investments
|
41,178
|
|
|
116,206
|
Acquisition of
BioVectra, net of cash acquired
|
—
|
|
|
(46,692)
|
Contingent
consideration payment related to BioVectra acquisition
|
(4,581)
|
|
|
—
|
Restricted cash
associated with the acquisition of Synacthen
|
—
|
|
|
(75,000)
|
Acquisition of
Synacthen
|
—
|
|
|
(60,000)
|
Annual cash payment
for Synacthen
|
(25,000)
|
|
|
—
|
Proceeds from sale of
Doral
|
—
|
|
|
700
|
Deposits and other
assets
|
766
|
|
|
—
|
Net cash flows used
in investing activities
|
(29,473)
|
|
|
(117,925)
|
FINANCING
ACTIVITIES
|
|
|
|
|
Repayment of funded
long-term debt
|
(591)
|
|
|
(613)
|
Repayment of other
long-term debt
|
(232)
|
|
|
(212)
|
Income tax benefit
realized from share-based compensation plans
|
17,699
|
|
|
5,173
|
Issuance of common
stock, net
|
1,519
|
|
|
6,943
|
Repurchase of common
stock
|
(2,146)
|
|
|
—
|
Dividends
paid
|
(36,457)
|
|
|
(14,887)
|
Net cash flows used
in financing activities
|
(20,208)
|
|
|
(3,596)
|
Effect of cash on
changes in exchange rates
|
89
|
|
|
(313)
|
Increase in cash
and cash equivalents
|
155,839
|
|
|
1,157
|
Cash and cash
equivalents at beginning of period
|
175,840
|
|
|
80,608
|
Cash and cash
equivalents at end of period
|
$
|
331,679
|
|
|
$
|
81,765
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
Cash paid for
interest
|
$
|
294
|
|
|
$
|
380
|
Cash paid for income
taxes
|
$
|
78,884
|
|
|
$
|
49,234
|
Supplemental
Disclosures of Investing and Financing Activities:
|
|
|
|
|
Dividend
payable
|
$
|
18,426
|
|
|
$
|
15,000
|
In conjunction
with the acquisition of BioVectra at January 18,
2013:
|
|
|
|
|
Incremental fair
value of assets acquired, net
|
|
|
|
$
|
80,698
|
Less: fair value of
contingent consideration
|
|
|
|
(30,383)
|
|
|
|
|
50,315
|
Loss on foreign
exchange rate
|
|
|
|
488
|
Total cash paid for
acquisition of BioVectra
|
|
|
|
$
|
50,803
|
|
|
|
|
|
|
Cautionary Statement Regarding Forward-Looking
Statements
Statements in this document that are not strictly historical,
including statements regarding the proposed acquisition, the
expected timetable for completing the transaction, future financial
and operating results, benefits and synergies of the transaction,
future opportunities for the combined businesses and any other
statements regarding events or developments that we believe or
anticipate will or may occur in the future, may be
"forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and involve a number of
risks and uncertainties. There are a number of important factors
that could cause actual events to differ materially from those
suggested or indicated by such forward-looking statements and you
should not place undue reliance on any such forward-looking
statements. These factors include risks and uncertainties related
to, among other things: general economic conditions and conditions
affecting the industries in which Mallinckrodt and Questcor operate; the commercial
success of Mallinckrodt's and
Questcor's products, including H.P. Acthar® Gel; Mallinckrodt's and Questcor's ability to protect
intellectual property rights; the parties' ability to satisfy the
merger agreement conditions and consummate the merger on the
anticipated timeline or at all; the availability of financing,
including the financing contemplated by the debt commitment letter,
on anticipated terms or at all; Mallinckrodt's ability to successfully integrate
Questcor's operations and employees with Mallinckrodt's existing business; the ability to
realize anticipated growth, synergies and cost savings; Questcor's
performance and maintenance of important business relationships;
the lack of patent protection for Acthar, and the possible United
States Food and Drug Administration ("FDA") approval and market
introduction of additional competitive products; Questcor's
reliance on Acthar for substantially all of its net sales and
profits; Questcor's ability to continue to generate revenue from
sales of Acthar to treat on-label indications associated with
nephrotic syndrome, multiple sclerosis, infantile spasms or
rheumatology-related conditions, and Questcor's ability to develop
other therapeutic uses for Acthar; volatility in Questcor's Acthar
shipments, estimated channel inventory, and end-user demand; an
increase in the proportion of Questcor's Acthar unit sales
comprised of Medicaid-eligible patients and government entities;
Questcor's research and development risks, including risks
associated with Questcor's work in the areas of nephrotic syndrome
and lupus and Questcor's efforts to develop and obtain FDA approval
of Synacthen™ Depot; Mallinckrodt's
ability to receive procurement and production quotas granted by the
U.S. Drug Enforcement Administration; Mallinckrodt's ability to obtain and/or timely
transport molybdenum-99 to its technetium-99m generator production
facilities; customer concentration; cost-containment efforts of
customers, purchasing groups, third-party payors and governmental
organizations; Mallinckrodt's ability
to successfully develop or commercialize new products; competition;
Mallinckrodt's ability to achieve
anticipated benefits of price increases; Mallinckrodt's ability to integrate acquisitions of
technology, products and businesses generally; product liability
losses and other litigation liability; the reimbursement practices
of a small number of large public or private issuers; complex
reporting and payment obligations under healthcare rebate programs;
changes in laws and regulations; conducting business
internationally; foreign exchange rates; material health, safety
and environmental liabilities; litigation and violations;
information technology infrastructure; and restructuring
activities. Additional information regarding the factors that may
cause actual results to differ materially from these
forward-looking statements is available in (i) Mallinckrodt's SEC filings, including its Annual
Report on Form 10-K for the fiscal year ended September 27, 2013 and Quarterly Reports on Form
10-Q for the quarterly periods ended December 27, 2013 and March 28, 2014; (ii) the SEC filings of Cadence
Pharmaceuticals, Inc., which was acquired by Mallinckrodt on March 19,
2014, including its Annual Report on Form 10-K for the
fiscal year ended December 31, 2013;
and (iii) Questcor's SEC filings, including its Annual Report on
Form 10-K for the year ended December 31,
2013 (and the amendment thereto on Form 10-K/A), its
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2014 and its Current Report
on Form 8-K filed with the SEC on July 10,
2014. The forward-looking statements made herein speak only
as of the date hereof and none of Mallinckrodt, Questcor or any of their respective
affiliates assumes any obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events and developments or otherwise, except as required by
law.
Important Information for Investors and Shareholders
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. In connection with the
proposed transaction between Mallinckrodt and Questcor, Mallinckrodt has filed with the Securities and
Exchange Commission (the "SEC") a registration statement on Form
S-4 containing a joint proxy statement of Mallinckrodt and Questcor that also constitutes a
prospectus of Mallinckrodt. The
registration statement on Form S-4 was declared effective by the
SEC on July 11, 2014. Each of
Mallinckrodt and Questcor commenced
mailing the joint proxy statement/prospectus to its respective
shareholders on July 14, 2014.
INVESTORS AND SECURITY HOLDERS OF MALLINCKRODT AND QUESTCOR ARE
URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER
DOCUMENTS THAT HAVE BEEN OR WILL BE FILED WITH THE SEC CAREFULLY
AND IN THEIR ENTIRETY AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN
OR WILL CONTAIN IMPORTANT INFORMATION. Investors and security
holders can obtain free copies of the joint proxy
statement/prospectus, the registration statement and other
documents filed with the SEC by Mallinckrodt and Questcor through the website
maintained by the SEC at http://www.sec.gov. Copies of the
documents filed with the SEC by Mallinckrodt will be available free of charge on
Mallinckrodt's internet website at
www.mallinckrodt.com or by contacting Mallinckrodt's Investor Relations Department at
(314) 654-6650. Copies of the documents filed with the SEC by
Questcor will be available free of charge on Questcor's internet
website at www.questcor.com or by contacting Questcor's Investor
Relations Department at (714) 497-4899.
Participants in the Merger Solicitation
Mallinckrodt, Questcor, their
respective directors and certain of their executive officers and
employees may be considered participants in the solicitation of
proxies in connection with the proposed transaction. Information
regarding the persons who may, under the rules of the SEC, be
deemed participants in the solicitation of the Mallinckrodt and Questcor shareholders in
connection with the proposed merger and a description of their
direct and indirect interests, by security holdings or otherwise,
is set forth in the joint proxy statement/prospectus filed by
Questcor and Mallinckrodt with the SEC.
Information about the directors and executive officers of
Mallinckrodt is set forth in its proxy
statement for its 2014 annual general meeting of shareholders,
which was filed with the SEC on January 24,
2014 . Information about the directors and executive
officers of Questcor is set forth in its amendment to Annual Report
on Form 10-K/A, which was filed with the SEC on April 30, 2014.
SOURCE Questcor Pharmaceuticals, Inc.