Questcor Reports Third Quarter Financial Results - Net Sales and EPS Increase Over 65% Compared to Prior Year - - Vial Shipments up 45% Over Prior Year - - Record MS Prescriptions; Rheumatology Largest Growth Contributor - PR Newswire ANAHEIM, Calif., Oct. 29, 2013 ANAHEIM, Calif., Oct. 29, 2013 /PRNewswire/ --Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR) today reported financial results for the third quarter and nine months ended September 30, 2013. Three Months Ended Three Months Percentage Change 09/30/13 Ended 09/30/12 Net Sales $236.3 Million $140.3 Million 68% GAAP Diluted EPS $1.52 $0.91 67% Non-GAAP Diluted $1.68 $0.97 73% EPS Nine Months Ended Nine Months Ended Percentage Change 09/30/13 09/30/12 GAAP Net Sales $556.0 Million $348.8 Million 59% Non-GAAP Net Sales $567.5 Million $348.8 Million 63% GAAP Diluted EPS $3.32 $2.12 57% Non-GAAP Diluted $3.82 $2.25 70% EPS Net sales for the third quarter ended September 30, 2013 were $236.3 million, up 68 percent from $140.3 million in the third quarter of 2012. The increase was driven by the expanded usage of H.P. Acthar^® Gel (repository corticotropin injection) in multiple therapeutic areas. The most significant increase in net sales was driven by rheumatologists prescribing Acthar for patients suffering from dermatomyositis, polymyositis, rheumatoid arthritis, and systemic lupus erythematosus. The increase in net sales was also driven by the continued prescribing of Acthar by nephrologists in the treatment of nephrotic syndrome (NS) and by neurologists in the treatment of multiple sclerosis (MS) relapses and infantile spasms (IS). BioVectra, the company's specialty manufacturing subsidiary, acquired in January 2013, had net sales of $9.0 million in the third quarter of 2013. GAAP earnings for the third quarter of 2013 were $1.52 per diluted common share, up 67 percent from $0.91 per diluted common share in the third quarter of 2012. Questcor shipped 8,132 vials of Acthar during the third quarter of 2013, up 45 percent compared to 5,590 vials in the year ago quarter. As the Company has previously disclosed, quarterly vial shipments are subject to significant variation due to 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. "Our net sales continued to expand with rheumatology, neurology, and nephrology exhibiting growth year-over-year," said Don M. Bailey, President and CEO of Questcor. "This quarter's performance was primarily driven by a continued increase in Acthar usage among both rheumatologists and nephrologists. Additionally, there was a record number of paid prescriptions for MS relapse during the quarter. The overall increased use of Acthar to treat a wide variety of patients encourages us to further increase our R&D investment and has specifically led to the initiation of two new phase II studies this year in Amyotrophic Lateral Sclerosis (ALS) and Acute Respiratory Distress Syndrome (ARDS). We also continue to build the body of evidence for Acthar in current and potential new indications through our investment in company-sponsored studies and our support of investigator-initiated studies. A significant focus of these efforts is on developing a better general understanding of melanocortin biology, which could significantly influence our long term R&D strategy for both Acthar and our newest compound Synacthen." "As Questcor's annualized sales approach the $1 billion mark, we believe we have established a strong foundation for growth and remain excited about our future prospects," continued Mr. Bailey. "Our future will be driven by four areas: increased penetration of Acthar in current markets and expansion into additional on-label markets, globalization of Synacthen and Acthar, development of new indications and markets, and the appropriate deployment of cash that we believe will be generated from these activities." "New paid prescriptions for Acthar were strong across all of our markets, totaling approximately 2,450 to 2,500 in the third quarter, about a 30% increase from a year ago," commented Steve Cartt, Chief Operating Officer of Questcor. "We continue to experience a strong early level of prescribing of Acthar in the rheumatology-related indications dermatomyositis, polymyositis, lupus and rheumatoid arthritis. There were 450 to 460 new paid Acthar prescriptions for these FDA-approved rheumatology indications during the third quarter, up about 43% from the second quarter. Notably, in only our second full quarter of promotion to rheumatologists, rheumatology prescriptions already account for nearly a quarter of total Acthar business." Mr. Cartt continued, "There were also 370 to 380 new paid prescriptions for NS in the quarter, up about 7% year-over-year. NS prescriptions currently account for about one third of our Acthar business. Particularly encouraging was the record level of Acthar prescriptions for the treatment of MS relapse, despite this being one of our more mature markets. During the third quarter there were 1,370 to 1,400 new paid prescriptions for MS relapse patients, up about 4% year-over-year. MS relapse prescriptions currently represent between 25% and 30% of our Acthar business. New paid prescriptions for IS were also up, reaching 225 to 230, an increase of 33% year-over-year." "We have recently begun hiring personnel for our initial effort to educate pulmonologists about Acthar in the treatment of respiratory manifestations of symptomatic sarcoidosis, an orphan inflammatory disease with high unmet medical need for which Acthar is FDA-approved. We expect to complete building this pilot sales team of 5-10 sales reps and initiate sales calls on this new Acthar physician audience by the end of the fourth quarter," concluded Mr. Cartt. The Company believes that insurance coverage for Acthar continues to remain favorable, when Acthar is prescribed for indications for patients in need of an additional FDA-approved treatment alternative. To allow comparable analysis, the Company has defined "new paid" prescriptions in the above 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 and do not include prescriptions filled through the Company's free drug program, administered by the National Organization for Rare Disorders. Year-to-Date Financial Results Net sales for the first nine months of 2013 were $556.0 million, with BioVectra contributing $24.9 million. Net sales in the first nine months of 2012 were $348.8 million. GAAP earnings for the first nine months of 2013 were $3.32 per diluted common share, compared to $2.12 per diluted common share for the comparable period of 2012. Research and Development Progress Research and development (R&D) investment increased 114% to $17.1 million in the three months ended September 30, 2013, as compared to $8.0 million for the year ago period. R&D investments were $40.1 million for the first nine months of 2013, as compared to $22.1 million for the year ago period. The increased R&D investment reflects the Company's efforts to further clarify the potential immune-modulating properties of Acthar and Synacthen and identify mechanisms of action applicable to other inflammatory and auto-immune diseases with high unmet medical need. The Company is also identifying new patient populations in which to evaluate Acthar and Synacthen through clinical studies. Questcor is funding research and development, both in-house and through independent physician sponsored studies, for the following: Label Enhancement Programs: oAcute Respiratory Distress Syndrome (ARDS): The Company announced on October 22, 2013 that it will commence a Phase 2 study to explore the efficacy and safety 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. oAmyotrophic Lateral Sclerosis (ALS): Patient recruitment continues at thirteen U.S. clinical sites 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. oDiabetic 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. Research Regarding Approved Indications: oIdiopathic 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. oLupus: Enrollment continues in a company-sponsored multi-site Phase 4 company-sponsored clinical trial to evaluate the efficacy and safety of daily Acthar administration over a 6-month period in patients with persistently active lupus. Planning activities related to the initial evaluation of a select grouping of potential Synacthen indications are in progress. Questcor will provide further updates on this development program in future communications. Cash, Share Repurchase Program and Dividends As of October 25, 2013, Questcor had cash, cash equivalents and short-term investments of $324 million, including restricted cash of $75 million set aside to secure certain post-closing payment obligations related to Questcor's acquisition of Synacthen. There were no share repurchases during the third quarter of 2013 and Questcor had 6.3 million remaining authorized shares under the Company's existing common stock repurchase plan. Diluted shares outstanding at September 30, 2013 were 62.1 million shares. The Company announced on October 10, 2013 that its Board of Directors declared a quarterly cash dividend of $0.30 per share ($1.20 per share on an annual basis), reflecting a 5 cent or 20 percent increase over the previous quarter's dividend, and a 50 percent increase year over year. The dividend will be paid on or about October 30, 2013 to shareholders of record at the close of business on October 22, 2013. Questcor currently intends to pay regular quarterly cash dividends for the foreseeable future. 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 of: oNephrotic 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. oMultiple 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. oInfantile Spasms (IS): "as monotherapy for the treatment of infantile spasms in infants and children under 2 years of age." oCollagen Diseases: "during an exacerbation or as maintenance therapy in selected cases of: systemic lupus erythematosus, systemic dermatomyositis (polymyositis)." oRheumatic Disorders: "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." 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. Conference Call and Webcast Details The Company will host a conference call and slide presentation via webcast today, October 29, 2013, at 4:30 p.m. ET/ 1:30 p.m. PT. The call can be accessed three ways: oBy webcast: At Questcor's investor relations website, http://ir.questcor.com/. oBy telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the U.S. is (877) 354-0215. For participants outside the U.S., the dial-in number is (253) 237-1173. oBy audio replay: A replay of the conference call will be available for seven business days following conclusion of the live call. The telephone dial-in number for U.S. participants is (855) 859-2056. For participants outside the U.S., the replay dial-in number is (404) 537-3406. The replay access code for all callers is 76004546. 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. Questcor's primary product is H.P. Acthar® Gel (repository corticotropin injection), an injectable drug that is approved by the FDA for the treatment of 19 indications. Of these 19 indications, Questcor currently generates substantially all of its net sales from the following approved indications: the treatment of proteinuria in the nephrotic syndrome (NS) of the idiopathic type, the treatment of acute exacerbations of multiple sclerosis (MS) in adults, the treatment of certain rheumatology related conditions, and the treatment of infantile spasms (IS) in infants and children under two years of age. With respect to NS, the FDA has approved Acthar 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." Questcor has announced its intent to initiate a pilot commercialization effort for Acthar for the treatment of respiratory manifestations of symptomatic sarcoidosis. The FDA approved package insert for Acthar includes "symptomatic sarcoidosis" under the heading "Respiratory Diseases." Questcor is also exploring the possibility of developing markets for other on-label indications and the possibility of pursuing FDA approval of additional indications not currently on the Acthar label where there is high unmet medical need. Questcor also has agreed to acquire certain international rights for Synacthen® (tetracosactide) and Synacthen Depot®, and has licensed the right to develop and seek FDA approval for these products in the United States. For more information about Questcor, please visit www.questcor.com. Note: Except for the historical information contained herein, this press release contains forward-looking statements that have been made pursuant to the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "believes," "continue," "could," "ensuring," "estimates," "expects," "growth," "may," "momentum," "plans," "potential," "remain," "should," "start," "substantial," "sustainable" or "will" or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Factors that could cause or contribute to such differences include, but are not limited to, the following: oOur reliance on Acthar for substantially all of our net sales and profits; oReductions in vials used per prescription resulting from changes in treatment regimens by physicians or patient compliance with physician recommendations; oOur ability to receive high reimbursement levels from third party payers; oThe complex nature of our manufacturing process and the potential for supply disruptions or other business disruptions; oThe lack of patent protection for Acthar; and the possible FDA approval and market introduction of competitive products; oOur ability to continue to generate revenue from sales of Acthar to treat on-label indications associated with NS, MS, IS or rheumatology-related conditions, and our ability to develop other therapeutic uses for Acthar; oResearch and development risks, including risks associated with Questcor's work in the area of NS and Lupus, efforts to develop and obtain FDA approval of Synacthen, our reliance on third-parties to conduct research and development, and the ability of research and development to generate successful results; oThe results of any pending or future litigation, investigations or claims, including government investigations and private securities litigation; oOur ability to comply with federal and state regulations, including regulations relating to pharmaceutical sales and marketing practices; oRegulatory changes or other policy actions by governmental authorities and other third parties in connection with U.S. health care reform or efforts to reduce federal and state government deficits; oAn increase in the proportion of our Acthar unit sales comprised of Medicaid-eligible patients and government entities; oOur ability to estimate reserves required for Acthar used by government entities and Medicaid-eligible patients and the impact that unforeseen invoicing of historical Medicaid prescriptions may have upon our results; oOur ability to effectively manage our growth, including the expansion of our sales forces, planned international expansion, and our reliance on key personnel; oOur ability to integrate the BioVectra business with our business and to manage, and grow, a contract manufacturing business; oOur ability to comply with foreign regulations related to the operation of BioVectra's business and the international sales of Synacthen; oThe impact to our business caused by economic conditions; oOur ability to protect our proprietary rights; oThe risk of product liability lawsuits; oOur ability to successfully enter into, and operate in, international markets; oThe risk of unfavorable changes in currency exchange rates; oUnforeseen business interruptions and security breaches; oVolatility in Questcor's Acthar shipments, estimated channel inventory, and end-user demand, as well as volatility in our stock price; oOur ability and willingness to continue to pay our quarterly dividend or make future increases in our quarterly dividend; and oOther risks discussed in Questcor's annual report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission, or SEC, on February 27, 2013, and other documents filed with the SEC. 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 of this release. 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 Nine Months Ended September30, September30, 2013 2012 2013 2012 Revenue Pharmaceutical net sales $ 227,296 $ 140,339 $ 531,113 $ 348,760 Contract manufacturing net 9,050 — 24,935 — sales Total net sales 236,346 140,339 556,048 348,760 Cost of sales (exclusive of amortization of purchased 20,034 7,499 53,444 19,399 technology and IPR&D asset) Gross profit 216,312 132,840 502,604 329,361 Operating expenses: Selling and marketing 40,710 31,763 114,072 81,087 General and administrative 15,428 8,333 41,103 22,422 Research and development 17,094 7,997 40,127 22,147 Depreciation and amortization 995 339 3,079 951 Impairment of purchased — 987 719 987 technology Total operating expenses 74,227 49,419 199,100 127,594 Income from operations 142,085 83,421 303,504 201,767 Interest and other (expense) (1,976) 102 (2,298) 536 income, net Foreign currency transaction — — (488) — loss Income before income taxes 140,109 83,523 300,718 202,303 Income tax expense 45,668 27,836 98,092 66,568 Net income $ 94,441 $ 55,687 $ 202,626 $ 135,735 Change in unrealized gains or losses on available-for-sale securities, net of related tax 932 13 (1,742) 90 effects and changes in foreign currency translation adjustments. Comprehensive income $ 95,373 $ 55,700 $ 200,884 $ 135,825 Net income per share: Basic $ 1.60 $ 0.95 $ 3.47 $ 2.23 Diluted $ 1.52 $ 0.91 $ 3.32 $ 2.12 Shares used in computing net income per share: Basic 58,890 58,653 58,350 60,992 Diluted 62,084 61,417 61,119 63,914 Dividends declared per share $ — $ 0.20 $ 0.50 $ 0.20 of common stock Reconciliation of Non-GAAP Adjusted Financial Disclosure Three Months Ended Nine Months Ended September 30, September 30, 2013 2012 2013 2012 Adjusted net income $104,368 $59,427 $233,328 $143,943 Share-based compensation expense (1) (5,269) (2,855) (13,807) (6,908) Depreciation and amortization expense (2) (3,127) (226) (6,253) (638) Interest expense associated with (188) 0 (572) 0 contingent consideration (3) Interest expense associated with R&D liability in conjunction with acquisition (1,141) 0 (1,140) 0 of Synacthen (4) Compensation expense associated with BV (202) 0 (534) 0 Trust (5) Foreign currency transaction loss (6) 0 0 (329) 0 Medicaid adjustment for 2002 - 2009 (7) 0 0 (7,751) 0 BioVectra purchase price adjustment (8) 0 0 169 0 Impairment of purchased technology (9) 0 (659) (485) (662) Net income – GAAP $94,441 $55,687 $202,626 $135,735 Adjusted net income per share - basic $1.77 $1.01 $4.00 $2.36 Share-based compensation expense (1) (0.09) (0.05) (0.24) (0.11) Depreciation and amortization expense (2) (0.05) 0.00 (0.11) (0.01) Interest expense associated with 0.00 — (0.01) — contingent consideration (3) Interest expense associated with R&D liability in conjunction with acquisition (0.02) (0.02) of Synacthen (4) Compensation expense associated with BV 0.00 — (0.01) — Trust (5) Foreign currency transaction loss (6) — — (0.01) — Medicaid adjustment for 2002 - 2009 (7) — — (0.13) — BioVectra purchase price adjustment (8) — — 0.00 — Impairment of purchased technology (9) — (0.01) (0.01) (0.01) Net income per share – basic $1.60 $0.95 $3.47 $2.23 Adjusted net income per share - diluted $1.68 $0.97 $3.82 $2.25 Share-based compensation expense (1) (0.08) (0.05) (0.23) (0.11) Depreciation and amortization expense (2) (0.05) 0.00 (0.10) (0.01) Interest expense associated with 0.00 — (0.01) — contingent consideration (3) Interest expense associated with R&D liability in conjunction with acquisition (0.02) (0.02) of Synacthen (4) Compensation expense associated with BV 0.00 — (0.01) — Trust (5) Foreign currency transaction loss (6) — — (0.01) — Medicaid adjustment for 2002 - 2009 (7) — — (0.13) — BioVectra purchase price adjustment (8) — — 0.00 — Impairment of purchased technology (9) — (0.01) (0.01) (0.01) Net income per share – diluted $1.52 $0.91 $3.32 $2.12 Net sales – Questcor $227,296 $140,339 $531,113 $348,760 Net sales - BioVectra 9,050 0 24,935 0 Consolidated net sales 236,346 140,339 556,048 348,760 Medicaid adjustment 0 0 11,500 0 Adjusted consolidated net sales $236,346 $140,339 $567,548 $348,760 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, including amortization expense on our purchased intangibles. 3. Interest expense associated with the net present value adjustment on our contingent consideration. 4. Interest expense associated with the net present value adjustment on the R&D liability in conjunction with acquisition of Synacthen. 5. Compensation expense associated with the BV Trust agreement. 6. Foreign currency transaction loss. 7. Medicaid adjustment for prior period 2002 - 2009 8. BioVectra purchase price adjustment related to a labor rebate received in the second quarter 2013 9. Impairment of purchased technology related to our acquisition of Doral. QUESTCOR PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share information) (unaudited) September30, December31, 2013 2012 ASSETS Current assets: Cash and cash equivalents $ 190,845 $ 80,608 Short-term investments 15,282 74,705 Total cash, cash equivalents and short-term 206,127 155,313 investments Accounts receivable, net of allowances for doubtful accounts of $433 and $0 at September 30, 88,832 61,417 2013 and December 31, 2012, respectively Inventories, net of allowances of $1,393 and $52 at September 30, 2013 and December 31, 2012, 17,049 9,909 respectively Current portion of restricted cash 25,000 — Prepaid expenses and other current assets 5,127 4,900 Prepaid income taxes 2,741 — Deferred tax assets 3,460 5,737 Total current assets 348,336 237,276 Property and equipment, net 33,331 2,073 Purchased technology, net — 1,493 Goodwill 21,249 — Other Intangibles, net 32,049 — In process R&D asset, net 194,108 — Restricted cash, less current portion 50,000 — Deposits and other assets 1,033 70 Deferred tax assets 11,519 11,519 Total assets $ 691,625 $ 252,431 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 22,462 $ 13,069 Accrued compensation 14,115 21,300 Sales-related reserves 36,993 37,376 Accrued royalties 25,954 9,802 Current portion of contingent consideration in 4,486 — conjunction with acquisition of BioVectra Current portion of in process R&D liability in 25,000 — conjunction with acquisition of Synacthen Income taxes payable — 7,360 Current portion of long-term debt 1,713 — Other accrued liabilities 5,544 1,492 Total current liabilities 136,267 90,399 Long-term debt, less current portion 14,972 — Contingent consideration in conjunction with 26,466 — acquisition of BioVectra In process R&D liability in conjunction with 113,354 — acquisition of Synacthen Non current deferred tax liability 11,590 — Other non current liabilities 4,183 203 Total liabilities 306,832 90,602 Shareholders' equity: Preferred stock, no par value, 5,334,285 shares — — authorized; none outstanding Common stock, no par value, 105,000,000 shares authorized, 60,768,440 and 58,544,206 shares 67,913 15,938 issued and outstanding at September 30, 2013 and December31, 2012, respectively Retained earnings 318,582 145,851 Accumulated other comprehensive (loss) income (1,702) 40 Total shareholders' equity 384,793 161,829 Total liabilities and shareholders' equity $ 691,625 $ 252,431 QUESTCOR PHARMACEUTICALS, INC. CONDENSDED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Nine Months Ended September30, 2013 2012 OPERATING ACTIVITIES Net income $ 202,626 $ 135,735 Adjustments to reconcile net income to net cash provided by operating activities: Share-based compensation expense 20,485 10,295 Deferred income taxes 2,414 387 Amortization of investments 271 1,185 Depreciation and amortization 9,278 951 Impairment of purchased technology and goodwill 719 987 Loss on disposal of property and equipment 95 33 Imputed interest for contingent and in-process R&D 2,260 — Changes in operating assets and liabilities, net of business acquisition: Accounts receivable (20,947) (34,478) Inventories 4,260 (1,928) Prepaid income taxes (2,741) 5,474 Prepaid expenses and other current assets 299 (2,002) Accounts payable 7,480 6,091 Accrued compensation (7,185) 4,412 Accrued royalties 16,152 3,254 Sales-related reserves (383) 4,266 Income taxes payable (6,664) — Other accrued liabilities 3,424 946 Other non-current liabilities 4 (259) Net cash flows provided by operating activities 231,847 135,349 INVESTING ACTIVITIES Purchase of property and equipment (1,647) (651) Purchase of short-term investments (61,678) (122,776) Proceeds from maturities of short-term investments 120,807 167,524 Restricted cash associated with the acquisition of (75,000) — Synacthen Acquisition of BioVectra, net of cash acquired (46,692) — Acquisition of Synacthen (60,000) — Proceeds from sale of Doral 700 — Deposits and other assets 727 (14) Net cash flows (used in) / provided by investing (122,783) 44,083 activities FINANCING ACTIVITIES Repayment of funded long-term debt (925) — Repayment of other long-term debt (374) — Income tax benefit realized from share-based 15,412 6,678 compensation plans Dividends paid (29,895) — Issuance of common stock, net 16,078 4,698 Repurchase of common stock — (243,201) Net cash flows provided by / (used in) financing 296 (231,825) activities Effect of cash on changes in exchange rates 877 — Increase (decrease) in cash and cash equivalents 110,237 (52,393) Cash and cash equivalents at beginning of period 80,608 88,469 Cash and cash equivalents at end of period $ 190,845 $ 36,076 Supplemental Disclosures of Cash Flow Information: Cash paid for interest $ 554 $ 17 Cash paid for income taxes $ 89,765 $ 54,024 Supplemental Disclosures of Investing and Financing Activities: Dividend payable $ — $ 11,691 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 SOURCE Questcor Pharmaceuticals, Inc. Website: http://www.questcor.com Contact: EVC Group, Gregory Gin/Patty Eisenhaur, 646-445-4801/951-316-0577, or Doug Sherk, 415-652-9100, or Janine McCargo, 646-688-0425
Questcor Reports Third Quarter Financial Results
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