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Questcor's Earnings Rise in Q4

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Questcor Pharmaceuticals Inc. reported fourth-quarter 2013 earnings per share of $1.53, up from the year-ago earnings of $1.03 per share. Excluding share based compensation expense and onetime items, earnings stood at $1.67 per share. The Zacks Consensus Estimate was $1.65.

Fourth-quarter 2013 revenues climbed 51% to $242.9 million but missed the Zacks Consensus Estimate of $248 million.

Quarter In Detail

The higher revenues were driven by increased use of H.P. Acthar Gel in patients suffering from dermatomyositis, polymyositis, rheumatoid arthritis, and systemic lupus erythematosus.

Strong performance of H.P. Acthar Gel in the nephrotic syndrome (NS), multiple sclerosis (MS) relapses and infantile spasms (IS) indications also contributed to the substantial growth in revenues.

We note that Acthar, an injectable drug, has been approved by the U.S. Food and Drug Administration for as many as 19 indications. Questcor shipped 8,100 vials of Acthar during the fourth quarter of 2013, up 28.0% year over year.

In the reported quarter, Acthar’s new paid prescriptions were about 2,450 to 2,500, up 30% from the year-ago quarter. Acthar’s new paid prescriptions for the treatment of MS relapse came in at 1,345 to 1,355 prescriptions, reflecting a 9% year-over-year improvement. 25% of Acthar’s business comes from MS relapse prescriptions while rheumatology prescriptions now account for nearly 30% of the total Acthar business.

Research and development (R&D) expenses were $19.6 million in the reported quarter, up 61.7% year over year. The rise in expenses was driven by the company’s efforts to develop its pipeline. General and administrative expenses came in at $15.3 million, up 36.9% and selling and marketing expenses were $38.8 million, up 17.6%.

Questcor is also evaluating Acthar for amyotrophic lateral sclerosis (phase II), acute respiratory distress syndrome (phase II to begin shortly), diabetic nephropathy (phase II- enrolment), idiopathic membranous nephropathy (phase IV) and lupus (phase IV).

We remind investors that Questcor acquired development and commercialization rights to Synacthen and Synacthen Depot from Novartis (NVS - Free Report) in Jun 2013.

Full Year Details

Sales in 2013 totaled $798.9 million, up 56.7% from the 2012 level, driven by increased focus on rheumatology-related indications. Earnings per share came in at $5.02, up from $3.15 in 2012. Excluding share based compensation expense and onetime items, earnings were $5.48 per share.  The Zacks Consensus was $5.23.

Our Take

Although Questcor’s fourth-quarter results failed to meet our expectations, we are encouraged by rising demand for Acthar. Questcor’s growth is expected to be driven by increased penetration of Acthar in current markets, expansion into additional on-label markets, and globalization of Synacthen and Acthar.

Shares were down 5.28% following the release of the fourth-quarter results. Questcor carries a Zacks Rank #3 (Hold). Currently, companies like Shire (SHPG - Free Report) and Auxilium Pharmaceuticals, Inc. look more attractive with a Zacks Rank #1 (Buy).

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