Questcor Announces Financial Results for First Quarter 2005.UNION CITY, Calif. -- Questcor Pharmaceuticals, Inc. (AMEX AMEX See: American Stock Exchange :QSC QSC Quality Service Communications (Cologne, Germany) QSC Quilter Sound Company (QSC Audio Products Inc.) QSC Queens Surface Corporation QSC Low-Traffic Ship (radiotelegraphy) ), a specialty pharmaceutical company that develops and commercializes novel therapeutics for the treatment of neurological disorders This is a list of major and frequently observed neurological disorders (e.g. Alzheimer's disease), symptoms (e.g.back pain), signs (e.g. aphasia) and syndromes (e.g. Aicardi syndrome). , announced today financial results for the quarter ended March 31, 2005. Financial Results for the Quarter Ended March 31, 2005 --Net income for the first quarter of 2005 was $153,000, compared to net income of $270,000 in the first quarter of 2004 and net income of $511,000 in the fourth quarter of 2004. Net income for the first quarter of 2005 was lower than those prior periods due primarily to $211,000 in severance related costs for sales managers and $38,000 in costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. which was not renewed on the Company's Carlsbad, California Carlsbad is a coastal resort-town in northern San Diego County, California. According to the state Department of Finance, the city had a total population of 90,271 in 2003. building. --Net loss applicable to common shareholders for the first quarter of 2005 was $99,000, compared to net income applicable to common shareholders of $98,000 in the first quarter of 2004 and net income applicable to common shareholders of $343,000 in the fourth quarter of 2004. Net loss applicable to common shareholders for the first quarter of 2005 includes an $84,000 non-cash deemed dividend on the Company's Series B Preferred Stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , which resulted from the extension of the expiration date Expiration Date The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. Notes: The expiration date for all listed stock options in the U.S. on warrants issued in connection with the Series B Preferred Stock. --Operating expenses in the first quarter of 2005 were lower than the first quarter of 2004. Spending was lower in most expense categories, and significantly lower in spending on marketing programs and the H.P. Acthar(R) Gel manufacturing site transfer expenses. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were also lower as compared to the fourth quarter of 2004, due to lower site transfer expenses and the inclusion in the fourth quarter of expense related to the write-off of goodwill. --Total revenue for the first quarter of 2005 was $4,498,000, a decrease of 13% from total revenue of $5,148,000 in the first quarter of 2004 and a 15% decrease from total revenue of $5,297,000 in the fourth quarter of 2004. Gross product sales were slightly higher in the first quarter of 2005 compared with the first quarter of 2004. Increased reserves for Medicaid rebates and for returns under Questcor's credit memoranda policy, which was initiated in the second quarter of 2004, contributed to lower net product sales and total revenue in the first quarter of 2005 as compared with the first quarter of 2004. "Strong net product sales of Acthar and lower operating costs operating costs npl → gastos mpl operacionales contributed to Questcor achieving net income, before dividends and non-cash deemed dividend related to the Series B Preferred Stock, in the first quarter of 2005," stated James L. Fares, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "In addition, we reported positive EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the quarter, and we ended the quarter with a cash position of $8.2 million. Due to our cash position, we were able to improve our capital structure by retiring all our convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. in cash in April 2005. This reduction in debt allowed us to avoid dilution to our shareholders. We also reached agreement with our Series B preferred shareholders during the first quarter to eliminate cash payments of the quarterly dividend through the quarter ending December 31, 2005." "In April 2005, we announced our new business strategy and therapeutic focus, which includes the development and commercialization of products that treat diseases of the central nervous system. Our goal is to license and acquire products in neurology and to build a development pipeline and do so without further dilution to our shareholders. We plan to fund these activities through the divestment of non-core assets and existing cash flow. We believe we are well-positioned to focus our resources on the implementation of this new business strategy," Mr. Fares said. Revenue Trends Questcor's three principal products are H.P. Acthar(R) Gel, Nascobal(R) and Ethamolin(R). First quarter net product sales of Acthar decreased slightly as compared to the fourth quarter of 2004, as the increase experienced in Acthar sales volume was not sustained beyond February 2005. Net product sales of Nascobal in the first quarter decreased as compared to the previous quarter. The Company believes this to be primarily a result of a reduction of inventories held by its wholesaler customers and partly a result of lower demand. These decreases were partially offset by first quarter Ethamolin sales which increased substantially over the previous quarter. First quarter net product sales do not include approximately $550,000 in orders for Acthar, Nascobal and Ethamolin, which were received in March 2005 and shipped in April 2005. The Company has initiated a policy to limit inventory levels of its products purchased by its wholesaler customers. The Company will periodically monitor wholesale inventory levels and may choose to defer sales in situations where it believes inventory levels are already adequate. The revenue from the orders shipped in April 2005, net of applicable sales reserves, will be included in the second quarter of 2005 net product sales. Expense Trends During the first quarter, Questcor initiated a number of cost reductions which resulted in total operating expenses for the first quarter of 2005 being lower than in the first quarter of 2004. The decline in expenses was a result of more focused spending on market research and marketing program expenses, a reduction in personnel, and lower Acthar manufacturing site transfer costs. These were partially offset by higher distribution expenses imposed by our wholesalers, severance costs relating to sales managers, and higher expense on subleased facilities. Operating expenses were also lower in the first quarter of 2005 than in the fourth quarter of 2004, principally as a result of lower site transfer costs and product stability testing Stability testing can refer to:
Outlook for 2005 In the remainder of 2005, Questcor expects to focus its sales and marketing efforts on promoting H.P. Acthar(R) Gel, as part of its new therapeutic focus on products that treat central nervous system (CNS See Continuous net settlement. CNS See continuous net settlement (CNS). ) diseases and disorders announced in April 2005. Over time, Questcor expects its new focus on Acthar in neurology, particularly with neurologists who treat multiple sclerosis, to have a positive impact on product sales. Questcor will also focus its resources on acquiring, licensing and developing products for central nervous system disorders Nervous system disorders A satisfactory classification of diseases of the nervous system should include not only the type of reaction (congenital malformation, infection, trauma, neoplasm, vascular diseases, and degenerative, metabolic, toxic, or deficiency . These activities are intended to be funded from the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of non-core assets and existing cash flow. Questcor also intends to continue controlling total operating expenses. In March 2005, Questcor restructured the dividends payable Dividends payable The declared dividend dollar amount that a company is obligated to pay. on its Series B Preferred Stock to eliminate the cash payments of quarterly dividends through the quarter ending December 31, 2005, and retired all $4.0 million of its convertible debentures in April 2005. Questcor expects these changes to allow it to implement its business strategy of developing and commercializing CNS products. Quarter Ended March 31, 2005 Conference Call Questcor will be hosting a conference call to discuss these results on Tuesday, May 10, 2005 at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). Please call the following numbers to participate: 800-741-6056 (domestic) or 706-679-3280 (international) and use conference ID number 5841049. Participants are asked to call the above numbers 5-10 minutes prior to the starting time Noun 1. starting time - the time at which something is supposed to begin; "they got an early start"; "she knew from the get-go that he was the man for her" commencement, get-go, offset, outset, showtime, start, kickoff, beginning, first . This call is being webcast by Thomson/CCBN and can be accessed at Questcor's website at www.questcor.com. The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.earnings.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. can access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com). A telephonic replay of this call will be available from 2:00 p.m. Eastern Time on Tuesday, May 10, 2005 through 11:59 p.m. Eastern Time on Tuesday, May 17, 2005. Please call 800-642-1687 (domestic) or 706-645-9291 (international) and use conference ID number 5841049. About Questcor Questcor Pharmaceuticals, Inc.(R) (AMEX:QSC) is a specialty pharmaceutical company that develops and commercializes novel therapeutics for the treatment of neurological disorders. Questcor currently markets four products in the U.S.: H.P. Acthar(R) Gel (repository corticotropin corticotropin (kôr'təkōtrōp`ən): see adrenocorticotropic hormone. injection), an injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. drug that is commonly used for certain neurological conditions Neurological conditions A condition that has its origin in some part of the patient's nervous system. Mentioned in: Pervasive Developmental Disorders ; Nascobal(R), the only prescription nasal gel formulation of Cyanocobalamin cyanocobalamin: see coenzyme; vitamin. USP USP - unique sales point (Vitamin B vitamin B n. 1. Vitamin B complex. 2. A member of the vitamin B complex, especially thiamine. vitamin B, vitamin B complex a group of water-soluble substances described separately. 12), that is approved for patients with B12 deficiency caused by malabsorptive disorders resulting from structural or functional damage, such as bariatric surgery Bariatric Surgery Definition Bariatric surgery promotes weight loss by changing the digestive system's anatomy, limiting the amount of food that can be eaten and digested. , Crohn's disease Crohn's disease: see colitis. and certain neurological conditions; Ethamolin(R) (Ethanolamine ethanolamine /eth·a·nol·amine/ (eth?ah-nol´ah-men) monoethanolamine. ethanolamine oleate Oleate oleate /ole·ate/ (o´le-at) 1. a salt, ester, or anion of oleic acid. 2. a solution of a substance in oleic acid; used as an ointment. o·le·ate n. 1. ), an injectable drug used to treat enlarged weakened blood vessels Blood vessels Tubular channels for blood transport, of which there are three principal types: arteries, capillaries, and veins. Only the larger arteries and veins in the body bear distinct names. at the entrance to the stomach that have recently bled, known as esophageal varices esophageal varices n. Longitudinal, superficial venous varices at the lower end of the esophagus that are prone to ulceration and massive bleeding. ; and Glofil-125(R), which is an injectable agent that assesses how well the kidney is working by measuring glomerular filtration rate glomerular filtration rate n. Abbr. GFR The volume of water filtered out of the plasma through glomerular capillary walls into Bowman's capsules per unit of time. , or kidney function. Note: Except for the historical information contained herein, this press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties. Such statements are subject to certain factors, which may cause Questcor's results to differ from those reported herein. Factors that may cause such differences include, but are not limited to, Questcor's ability to accurately forecast and create the demand for each of its products, the gross margins achieved from the sale of those products, Questcor's ability to enforce its exchange policy, the accuracy of the prescription data purchased from independent third parties by Questcor, the sell through by Questcor's distributors, the inventories carried by Questcor's distributors, and the expenses and other cash needs for the upcoming periods, Questcor's ability to obtain finished goods from its sole source contract manufacturers on a timely basis if at all, Questcor's need for additional funding, uncertainties regarding Questcor's intellectual property and other research, development, marketing and regulatory risks, and, to the ability of Questcor to implement its strategy and acquire products and, if acquired, to market them successfully as well as the risks discussed in Questcor's report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the calendar year ended December 31, 2004 and other documents filed with the Securities and Exchange Commission. The risk factors and other information contained in these documents should be considered in evaluating Questcor's prospects and future financial performance. Questcor undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Questcor Pharmaceuticals, Inc.
Selected Consolidated Balance Sheet Information
(In thousands)
March 31, December 31,
2005 2004 (1)
(unaudited)
Cash and cash equivalents $8,231 $8,729
Working capital(2) 3,301 5,082
Total assets 29,070 28,173
Preferred stock, Series A 5,081 5,081
Shareholders' equity 11,602 11,581
(1) Derived from audited financial statements.
(2) Working capital includes $4,000 and $3,897 ($4 million face
value, net of deemed discount) of convertible debentures due
April 15, 2005, as of March 31, 2005 and December 31, 2004,
respectively.
Questcor Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
-------------------
March 31,
----------
2005 2004
------ ------
Revenues:
Net product sales $ 4,498 $ 5,148
-------- --------
Total revenues 4,498 5,148
Operating costs and expenses:
Cost of product sales 748 856
Selling, general and administrative 2,618 3,028
Research and development 499 578
Depreciation and amortization 311 298
------- --------
Total operating costs and expenses 4,176 4,760
------- --------
Income from operations 322 388
Non-cash amortization of deemed discount
on convertible debentures (108) (131)
Interest income 35 11
Interest expense (139) (83)
Other income, net -- 3
Rental income, net 43 82
------- --------
Non-cash deemed dividend related to beneficial
conversion feature of Series B Preferred Stock 84 --
Dividends on Series B Preferred Stock 168 172
------- --------
Net income (loss) applicable to common shareholders $ (99) $ 98
======= =======
Net income (loss) per common share applicable to
common shareholders - basic and diluted $ 0.00 $ 0.00
======= =======
Weighted average shares of common stock outstanding
- basic and diluted 51,216 50,032
======= =======
In addition to disclosing financial results prepared in accordance with accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), Questcor is disclosing information regarding EBITDA, which is defined as earnings before net interest income (expense), taxes, depreciation and amortization, and non-cash amortization of deemed discount on convertible debentures. As required by the SEC concerning the use of non-GAAP measures, Questcor is providing the following reconciliation to net income, which is the most directly comparable GAAP measure. Questcor presents EBITDA because it is a common alternative measure of performance that is used by management as well as investors when analyzing the financial position and operating performance of the Company. As EBITDA is a non-GAAP financial measure, it should not be considered in isolation or as a substitute for net income or any other GAAP measure. Because all companies do not calculate EBITDA in the same manner, Questcor's definition of EBITDA may not be consistent with that of other companies.
Questcor Pharmaceuticals, Inc.
Reconciliation of GAAP Net Income to Non-GAAP EBITDA
(in thousands)
(unaudited)
Three Months Ended
-------------------------------------
March 31, December 31, March 31,
2005 2004 2004
--------- --------- ---------
GAAP net income $ 153 $ 511 $ 270
Adjustments:
Net interest expense 104 108 72
Depreciation and amortization 311 303 298
Non-cash amortization of
deemed discount on convertible
debentures 108 130 131
--------- --------- ---------
Non-GAAP EBITDA - Positive $ 676 $ 1,052 $ 771
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