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Questcor Pharmaceuticals, Inc (NASDAQ:QCOR)

Q2 2009 Earnings Call

July 29, 2009 04:30 PM ET

Executives

Doug Shirk - EVC Group

Don M. Bailey - President and Chief Executive Officer

Steve Cartt - Executive Vice President, Corporate Development

Gary Sawka - Senior Vice President of Finance and Chief Financial Officer

Analysts

Yale Gen - Maxim Group

John Newman - Oppenheimer

Carmen Lee - Greencoast Capital Partners

Frank DeRenzo - Signalen

Operator

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Questcor Pharmaceuticals' 2009 Second Quarter Financial Results Conference Call. At this time all participants' lines have been placed in a listen-only mode.

Following today's presentation, instructions will be given for the question-and-answer session. As reminder today's teleconference presentation is been recorded July 29, 2009. Before I begin today's presentation, I'd like to turn the conference over to Doug Shirk with the EVC Group. Please go ahead sir.

Doug Shirk

Thank you, Andrew and good afternoon everyone. Thank you for joining us today for the Questcor Pharmaceuticals' second quarter conference call. This afternoon when the market closed, Questcor issued a second quarter financial results.

The release is posted on the company's website at www.questcor.com. In addition, we've arranged for a taped replay of this call, which will be available approximately one hour after call's conclusion and will remain available for seven days. The operator will provide the replay instructions at the end of the call.

The call is being broadcast live today July 29, 2009. To access the webcast go to Questcor's website at www.questcor.com. Before we get started I'd like to remind you during the course of this conference call, the company will make projections about the forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC including without limitation the Company's Form 10-Q and 10-K, which identifies the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements.

With that I'd turn the call over to Don Bailey, President and Chief Executive Officer of Questcor Pharmaceuticals.

Don M. Bailey

Good afternoon everyone. Thank you for joining us today for review of our business and financial accomplishments for the second quarter of 2009. With me today are Steve Cartt, our Executive Vice President and Gary Sawka, our CFO.

After my opening remarks, Steve will discuss our ongoing efforts.

Operator

Ladies and gentlemen, please continue to stand-by, we are experiencing technical difficulties. Please do not connect, the conference will resume momentarily.

Please continue to stand-by. Your conference will begin shortly. Thank you for your patience.

Thank you. Ladies and gentlemen, please continue to stand-by as we attempt to assemble all parties for the conference continuation. Once again, ladies and gentlemen, please continue to stand-by and do not disconnect your lines.

Don M. Bailey

Good afternoon everyone. I apologize apparently, we got disconnected, I'm not sure how. This is Don Bailey. We're not sure where we dropped off, so we'll skip that short reading of the standard comments on...

Operator

Ladies and gentlemen, please continue to stand-by. We aer experiencing technical difficulties, please do not disconnect, you'll hear music as we re-assemble all parties.

Don M. Bailey

Okay. This is Don Bailey. This is our third try here. So good afternoon everyone. Thank you for joining us today to review our business and financial accomplishments for the second quarter 2009. Steve Cartt, our EVP and Gary Sawka, CFO are with me.

After my opening remarks, Steve will discuss our ongoing efforts to expand the use of Acthar in approved disease indications. And Gary will review financial highlights for the quarter. And I'll provide an outlook for the remainder of the year.

One of our key goals during 2009 is to expand the number of patients treated by Acthar for MS exacerbation. We have found that patients, who can't tolerate other treatment for MS exacerbations or who don't respond to other treatments may benefit from Acthar.

This segment represents about 10% of the total MS patient population. To help these select patients, we have implemented a direct sales campaign to doctors to expand the number of prescriptions written for Acthar for MS exacerbation treatment. So far the results are very encouraging and we gave some numbers in the press release.

Steve will provide some further color on our MS efforts in a minute. During the second quarter, prescriptions for Acthar to treat patients diagnosed with infantile spasms or IS illustrated the quarterly variability that we have seen for the last several years. This variability is due to the very small patient population as only 2000 infants are diagnosed each year with IS.

In the second quarter, IS sales were 10% lower than in the first quarter, yet our total net sales stayed strong due to the growth in MS sales. The positive trends for MS sales even with the decline in IS prescriptions led to a total of 1564 vials of Acthar shipped during the quarter and to 25 million in net sales.

As with the growth in MS, we estimate -- and with the growth in MS, we estimate that MS sales are up to approximately one-third of our total net sales with about 60% of our sales for IS, the remaining 5 or 7% or more are for other conditions including opsoclonus myoclonus, nephrotic syndrome and occasionally prescriptions for other diseases where the use of Prednisone has not been effected.

I'd like to now to now turn the call over to Steve for more discussion about our MS strategy as well as to evaluate and update on our FDA work and programs to better understand the therapeutics benefit of Acthar for other applications.

Steve Cartt

Thanks, Don and good afternoon everyone. As Don mentioned, our expanded selling effort in the MS market is generating positive momentum.

As discussed in our last call, commercial efforts in the first quarter focused on hiring and training additional sales personnel bringing our total number of sales reps up to 30. All 30 were onboard and fully trained by the end of March and we kicked off our expanded selling effort into the MS market at a very beginning of second quarter.

While we have only just begin this expanded selling effort, we are already pleased with the trends we are seeing. We shipped a total of 141 paid prescriptions to MS patients in the second quarter, an increase of 64% compared to the first quarter of 2009 and an increase of 281% compared to the second quarter of last year.

We achieved this increase almost entirely through our direct selling efforts and only yesterday launched a significant marketing effort to support and compliment our sales force. We look forward to seeing the results of all of our increased sales activities, as we progress through the rest of 2009 and into 2010.

Future Acthar's recent MS growth trends almost half of Acthar prescription and one-third of our net sale are now coming from the use of Acthar to treat MS exacerbations. And since it is an increasingly important part of Questcor's business, I'd like to take a minute to provide investors with a bit more information about multiple sclerosis and how Acthar currently fits in to the treatment picture.

The National MS Society estimates that they are that more than 400,000 people in United States have MS that approximately 85% of these patients having the relapsing remitting form of MS. It is in relapsing remitting MS, where exacerbation also refers to as relapses typically occur.

Usually these patients only experience an exacerbation every one to two years, but in some cases they occur more frequently. An exacerbation is a sudden appearance or worsening of one or more symptoms of multiple sclerosis such as difficulty walking or blurred vision that lasts for atleast 24 hours and sometimes can last for weeks or even months.

Many MS specialists believe that if left untreated, exacerbations can significantly contribute to increased long-term disability. Because of the relatively large number of MS patients neurologists, who treat MS can have many patients at the same time that would benefit from the use of Acthar.

Acthar is positioned with these doctors as an effective treatment option for select patients those who do not respond adequately to or cannot tolerate IV steroids. IV steroids are the typical first line agent for MS exacerbation. Response from neurologists to dis-positioning of the Acthar has been favorable.

With our expanded sales team and new marketing efforts, we are now beginning to make in roads with an increasing number of neurologists, who specialize in treating MS patients. We will be focusing on further expanding the use of Acthar by these neurologists as well as increasing the overall Acthar prescriber base in MS in the coming month.

There is one additional point investors should understand regarding our expanding MS business. As compared to the young children with IS being treated with Acthar, far more MS patients are covered by private insurance rather than being enrolled in State Medicaid Programs. In fact, we currently estimated that fewer than 10% of MS patients being prescribed Acthar are covered by Medicaid compared to a much larger percentage of children being treated with Acthar for IS.

As discussed on previous calls, Questcor looses significant dollars each on most Medicaid patients, who use Acthar due to the substantial rebates, we pay back to the Medicaid system. Because of this the growth of our MS business has the potential to decrease the level of rebates we pay as a percentage of our overall growth sales.

Turning to IS, a very small number of babies approximately 2000 per year in United States suffer from infantile spasms. Infantile spasm is considered by the medical community to be a neurological emergency and these very young patients need immediate decisive treatment. Although a majority of our revenue is generated from sales of Acthar to treat infantile spasms, Acthar is not yet approved for this indication.

However, based on guidelines published jointly by the American Academy of Neurology and the Child Neurology Society and endorsed by the American Epilepsy Society, many physicians regularly choose to prescribe Acthar for the patients with IS.

During the second quarter, we shift 161 paid prescriptions for IS, which compares to 178 in the first quarter. As Don mentioned we believe that this fiscal decline is due to quarterly variability resulting from the very small patient population. This type of quarter-to-quarter variability has been the norm for Acthar in IS for the past several years.

IS prescriptions during the second quarter of 2009 tended toward the lower end of the quarterly range seen since September 2007. We continue to find no evidence that child neurologists are in anyway changing their use of Acthar in the treatment of IS.

Insurance coverage of Acthar remains excellent with about 95% of kid cases covered. For the remainder of patients, those few whose insurance does not cover the cost of Acthar and those who are uninsured response to the Acthar Patient Assistance Program, which is operated by the National Organization for Rare Disorders.

In fact, today Questcor has provided free drug with commercial value of over $32 million with this program and other patient oriented support programs since September 2007.

I will now turn to a brief update in the progress of our supplemental New Drug Application or sNDA for Acthar in the treatment of IS.

In May, we were informed by the FDA that for sNDA to be considered a complete submission we must perform additional statistical analysis relating to data from one secondary study within the filing and then must provides this data and results of the analysis to the FDA.

We are currently conducting that additional analysis and we'll provide all requested information to the FDA as soon as possible. We're also actively funding both clinical and pre-clinical research evaluating Acthar in a number of therapeutic areas with high unmet medical needs. Including these efforts are projects to better understand IS and how it can be optimally treated, studies exploring new ways to potentially employ Acthar in the management of MS patients, basic research to further define the mechanisms of action for Acthar and MS, and clinical or preclinical studies exploring the use of Acthar in a variety of kidney disorders.

We are also in the process of prioritizing several additional diseases and disorders having high unmet medical need, where Acthar may have potential as a therapeutic agent. We plan to begin providing more details on these efforts as we move into 2010.

Patient enrolment continued during the second quarter in two studies using Acthar, the treatment of product syndrome, a kidney disorder characterized by excessive urinary protein loss and another serious complication that can result in end stage urinal diseases. The product syndrome is an on label indication for Acthar. The company has also recently approved funding for two additional studies evaluating Acthar in the treatment of patients with nephrotic syndrome.

We are currently funding a total of 18 clinical and preclinical studies and at developing a better understanding of Acthar's true therapeutic potential across a variety of diseases and disorders.

As a result we have already exceeded our goal for the year of funding 14 new exploratory studies as interest among researchers in studying Acthar and a variety of disease states appears to be greater than we initially expected. We also have additional intriguing proposals for new research projects that we are currently evaluating for potential funding.

Our ability to fund all this important research is a direct result of the continued widespread of Acthar in IS and as Acthar is expanding usage and treating MS exacerbations.

On a final note, we recently launched the new corporate website to provide comprehensive information about Acthar and Questcor to patients, physicians and investors alike. This complements our Acthar website, which is focused on providing specific details on how to order the drug and get support for working with insurance plans that help insured coverage. We invite you to come and browse these websites sometime when you have a few minutes to spare.

And With that I'd like to turn the call over to Gary Sawka, our CFO to review the financial highlights for the quarter.

Gary Sawka

Thanks, Steve. Given that Don an Steve have touched on the revenue side of our financial performance, today I'd like to focus my comments on some of our other financial highlights during the quarter and the first half for the year. Net income for the second quarter was $9.3 million or $0.14 per diluted common share.

On the expense side of ledger, we've been very vigilant of managing our expenses especially with the increased investments in our MS program. During the quarter, our total operating expenses were $9.6 million including the R&D expenses to support the expanded clinical program, Steve just reviewed.

This is approximately 13% more than we spent on operating expenses during the second quarter of 2008. We generated $12.4 million in cash from operation during the second quarter bringing our total cash generated in the first six months of 2009 to $24.8 million.

In an effort to return some of this free cash flow to shareholders, we used approximately $11.2 million to repurchase 2.3 million common shares outstanding. Also to continue our ability to generate value to shareholders, our Board of Directors increased our common share repurchase program authorization to 13.5 million shares.

As of June 30, we have a total of 7.6 million shares authorized under our open market repurchase program and 63.8 million common shares outstanding. Cash, cash equivalents and short-term investments as of yesterday totaled $71.5 million.

At this time, I'd like thank you turn the call back over to Don to provide guidance for the remainder of the year.

Don M. Bailey

Thanks, Gary. We continued to execute on our Acthar-centric strategy with momentum building in MS and clinical studies advancing in a timely manner.

Looking ahead for the rest of 2009, we expect an increasing percentage of our net sales to confirm our efforts in MS as we now have 30 sales reps on board dedicated to these efforts. And now we have rolled out a new marketing campaign for MS selling on the concept of 'select Acthar for select patients.'

We've updated the other guidance we've provided earlier this year in this afternoon's release. A particular note is that our operating expenses are expected to only reach to 40 to $45 million level in 2009. This includes Questcor's investment in Acthar R&D are between 10 million to $12 million for the year.

In addition, we will report our progress on our regulatory filing for IS as developments merit and we expect to see results from the first of the nephrotic syndrome trials in early 2010. And we will continue to invest important medical research in 2009 through the funding of approximately 20 new clinical and preclinical studies using Acthar to treat IS MS nephrotic syndrome and other therapeutics areas with significant unmet medical needs.

We continue to move in an agile but thorough manner as we determine new disease stage for Acthar may provide a new treatment alternative to patients. We look forward to keeping you apprised of our progress in the future.

Before opening the call to questions, I want to observe an important event in Questcor's 20 year history. After incurring $100 million of accumulated losses up through 2007, Questcor's cumulative retained earnings have now turned positive.

Andrew, you may now take questions.

Question-and-Answer Session

Operator

Thank you, management. (Operator Instructions). Our first question will come from the line of Yale Gen with Maxim Group. Please go ahead.

Yale Gen - Maxim Group

Hello, good afternoon and thanks for taking my question.

Don Bailey

Hey Yale.

Yale Gen - Maxim Group

The first question I have is just try to get a little bit more color on your sNDA filing, I know its in progress right now, but would you kind of characterize that sort of much more advanced or how do you see that?

Don Bailey

Well, we are making god progress. What we needed to do is obtain records for a certain number of patients, who started to trail but did not finish. Originally, these records were thought to be lost and recently they were found.

So that data is being processed and analyzed and a new statistical plan has been written, statistical analysis plan has been written and that analysis is being conducted pretty soon here. Once that's finished, then we have to reflect the results of that analysis through the entirety of 20 to 30,000 page documents. And then that will be republished and resubmitted to the FDA.

Yale Gen - Maxim Group

Would you try to give any timelines for that accrual or you will prefer not provide it right now?

Don Bailey

It's very difficult because the timing will be driven over by exactly what the analysis says.

Yale Gen - Maxim Group

Okay. Great. The second question I have is that there are some question charters regarding whether as you already submitted sNDA for Acthar, do you need to also submit anything regarding the risk management type of programs to that or that was irrelevant?

Don Bailey

So far there has been no discussion of RM's program; risk management program with the FDA. We have no idea whether that would happen or not.

Acthar has been approved for over 50 years and has a -- therefore, has a 50 year plus track record. The safety profile is extremely well known for infantile spasms. It's extremely well known for general -- in general and the side effects of Acthar seem to be the same whether it's a pretty much whether it's children or adults.

So at this time its unknowable about whether we would be required to have a RM's program, but we certainly haven't been required to have one for anything up to now.

Yale Gen - Maxim Group

But if you think it might be requested, then would you at least thinking of preparing that one, if sure that to be the case?

Don Bailey

We certainly would engage in that interaction with the FDA sure.

Yale Gen - Maxim Group

Okay. And the last question I have is that you recently announced, had a press release indicated that company will team up with the Children Neurology Foundation to launch your IS awareness next week. Given that it is possible one of your competitors come backs on the potential region market possibly this year. If should that be happening that since you cannot promote Acthar directly, what you think the benefit would be in terms of participating in this events?

Don Bailey

I'll let Steve address that question.

Steve Cartt

Hey Yale. We think there is a lot of benefit overall for the medical community and obviously for IS patients to begin this effort. This year, we had a number of discussions with the Child Neurology Foundation and then they believe that IS is often under diagnostic mist or there is delays in diagnosis, so anything we can do to help them to get the word out of that IS and earlier diagnosis and treatment, that will provide definite benefits to the patients.

We're definitely supportive of all these initiatives that Chile Neurology Foundation have and this is I think a good way for us to support them in this initiative.

Yale Gen - Maxim Group

And just going through a one last question in the nephrology syndrome study that you mentioned that study you may see the outcomes in the first half of next year? Would you possibly see one study or possibly two studies? Is there an outcome from one or two studies?

Steve Cartt

Yeah, we could potentially see some interim results for one or above or even possibly a third. It all depends on how rapidly the recruitment is. So we're cautiously optimistic. We'll see some results in the first half of the year.

And at this point, it seems like a good timeline. It may take a little longer for the full study to be completed. We expect to at least see some interim data.

Yale Gen - Maxim Group

Okay. Great and congrats on the very encouraging quarters.

Don Bailey

Thank you.

Operator

Thank you. Our next question comes from line of John Newman with Oppenheimer. Please go ahead.

John Newman - Oppenheimer

Hi. Guys. Thanks for taking the question. It seems like going forward, most of the growth for Acthar will be coming from MS, you described the market quite interest on the call. My first question is where you ultimately see Acthar going there in terms of total penetration in to those patients?

And then secondly, just a follow-up question on the sNDA filing for infantile spasms, I know you don't want to give time but is this something that we should expect to see before the end or the fourth quarter? So I was just to trying to get a sense as to when we might see potential FDA action for infantile spasms next?

Don Bailey

Okay. Well, let me answer the sNDA question and then I'll let Steve answer the MS market penetration question. I can assure you that we are working as hard as we can and this finishing will happen as quickly as we possibly can. It's just a sizeable document. There is nothing too complicated that what we're trying to do, especially compared to what we've done in the past.

So certainly, we would expect to get it in this year, just exactly what month and day we can get in, I just -- I can't commit to that.

John Newman - Oppenheimer

Sure.

Don Bailey

Steve?

Steve Cartt

Yeah. John, thanks for the question on MS penetration. So even with the growth we've seen, it's still very early obviously in the expanded effort, we only have a quarter under our belt right now but even with that growth and prescriptions, we're still only penetrating a very, very small percentage of MS patients, who have exacerbations and furthermore, only a very small fraction of MS specialist are currently prescribing Acthar. So we see and maybe less than 10% are prescribing it to any extent at this time. So we see that as all upside.

It will take time longer time for some doctors than others to come around to the Acthar but it's really a matter of delivering the sales calls, providing the data that we have and reinforcing the positioning through the product, which has been received very favorably overall.

And overtime, we think we will continue to continue to chip away at those current non-prescribes and add them into the Acthar column.

Don Bailey

John, I'd like to add just a little bit here. We have said that the MS segment that we're looking at, this refractory segment is $400 million or larger. If one-third of our sales in the quarter were for MS that puts our annual run rate at about $30 million, which is only 8% of this segment that we basically think we have to ourselves.

And that segment could be even larger. And we are doing that with a sales force that's only been on the job for three months without a marketing campaign. So we have added the marketing campaign, which we think should be quite positive.

And we are going to start looking for the rest of the sales force. We need an additional eight people. And so we have authorized management to start looking selectively for those additional eight people. But we are feeling very good about the expansion of our expansion opportunity here.

John Newman - Oppenheimer

Great. And of the 10% of MS patients that are considered factor your failures, do you what percentage of those patients are treated with IV methylprednisolone since it seems like often times, patients get the IV methylprednisolone and it doesn't work and then something like Acthar would be a good alternative?

Don Bailey

Yeah, while most of them are treated with IV methylprednisolone, there's a small percentage that are treated with oral steroids like Prednisone, but most are treated first line with IV. And the patients we're targeting for Acthar are those that either fail, they don't fully respond to IV methylprednisolone or there are some patients that don't tolerate it.

It's a very, very high dose of the steroids and some patients have pretty significant side effects. So we're going after those two results. So a small number usually seen in diabetic patients or others that have a core bean as access, Acthar is a good option there.

So we're very carefully painting the appropriate patient picture for the doctors and based on the research we've done, it is in around the 10% range with MS patients.

John Newman - Oppenheimer

Okay. Great. Thank you.

Operator

Thank you. Our next question will come from line of Carmen Lee with Greencoast Capital. Please go ahead.

Carmen Lee - Greencoast Capital Partners

Hi, congratulations on a good quarter. So I'm look at both recent 10-Q and 10-K. There is a rare item called amortization of the investment on the cash flow statements. Could you elaborate on item and explain where does the number come from?

Don Bailey

What line is that?

Carmen Lee - Greencoast Capital Partners

It's called amortization of investments in both 10-K and 10-Q. The number for '08 is $6 million, yes.

Don Bailey

$6 million?

Carmen Lee - Greencoast Capital Partners

456, yes.

Don Bailey

Did you find it? Do you know what it is? Frankly, I don't know what it is. Any more addition in the investments?

Carmen Lee - Greencoast Capital Partners

It's under depreciation.

Don Bailey

That is -- I think was that repurchase. Gary?

Gary Sawka

That is I she said the alignment, deferred income tax is $6 million.

Carmen Lee - Greencoast Capital Partners

Its 456 for '08 and 387 for '07. And you have that too in recent 10-Q.

Don Bailey

We have an amortization of investments in Doral. Doral is a product...

Carmen Lee - Greencoast Capital Partners

So is that included in depreciation and amortization?

Gary Sawka

That's the purchase technology. So we could follow-up with you want for more details on that now.

Carmen Lee - Greencoast Capital Partners

That will be great.

Don Bailey

Carmen, maybe you could just call Gary Sawka directly and he'll get you an answer.

Carmen Lee - Greencoast Capital Partners

Okay. Thanks. And for another question, so also once you said that gain on sale product rights in the last 10-Q. Could you comment on that? What kind of product rights you guys sell? Its 25.

Don Bailey

We have booked again back at two years ago on the sale of some of our products that had some potential contingency to it. And now the two years have passed, we felt that there was no longer any need to reserve an extra $200,000 there. So we reversed that reserve there. Therefore, gave us the gain for this quarter.

Carmen Lee - Greencoast Capital Partners

Okay, thank you. I have one more question and I'm going to get back to the queue. To my understanding, I mean how many shares still remaining in the share repurchase plan? And are you planning to do any major share purchasing in the coming quarter by any chance?

Don Bailey

We have 7.6 million shares remaining.

Carmen Lee - Greencoast Capital Partners

Okay.

Don Bailey

So we have lots of shares remaining. We just up the number of shares to 7.6 million are remaining.

Carmen Lee - Greencoast Capital Partners

Okay.

Don Bailey

And we've been very steadily purchasing during most of open periods.

Carmen Lee - Greencoast Capital Partners

Right.

Don Bailey

Naturally, we're price sensitive. And we can only purchase when we don't have any material information. So we will be in near if we can.

Carmen Lee - Greencoast Capital Partners

Is it okay if I ask one more question or?

Don Bailey

Go ahead.

Carmen Lee - Greencoast Capital Partners

Okay. Could you give me update on the legal proceedings from State of Missouri from CID?

Don Bailey

Yes, Missouri requested some information from us.

Carmen Lee - Greencoast Capital Partners

Yes.

Don Bailey

And we provided that and they have given us a couple of additional questions to answer and we are in the middle of getting that information to them.

Carmen Lee - Greencoast Capital Partners

Okay. Thank you.

Operator

Thank you. (Operator Instructions). We will take our next question from the line of Frank DeRenzo with Signalen. Please go ahead.

Frank DeRenzo - Signalen

Hi, just a few questions. One, you currently have 30 reps and you're looking to ramp that to 38. Do you have a sort of timeframe as far as how long that make take? Also, do you think the 38 will all be sufficient for MS across the country?

Steve Cartt

Yeah, Frank. This is Steve. The ramp-up of the additional aid will take place over the next few months. We're going to be very selective. What we found is they are skewing towards in terms of overall prescriptions in MS towards the higher productive territories and we want to find reps that kind of meet that profile and that reps that are doing really well at this point with the drug in MS.

So we're going to be very selective. Ideally find reps with MS selling background at the high level of performance. So it should be over the next few months. We're not going to rush into it and do it in the next two weeks. We will take our time.

And that the 38, again we're not covering all of neurology, we are only focused on the MS specialists within neurology. So they're about 2500 of those. And we're going to focus on that group going forward with a 38 reps.

And that's a pretty good number for right now. We could always expand later if we see continued growth overtime. And of course the IS indication is another possibility for expansion. But for right now, we're pretty comfortable with 38.

Frank DeRenzo - Signalen

Okay. Also in the press release, you stated you shipped 1564 vials of Acthar. Do you have a vial breakdown, I know you gave breakdown on the scripts, but do you have a vial breakdown in MS and IS and other by chance?

Steve Cartt

We gave -- I gave an approximation in my talk, one-third MS, approximately 6% for IS and the other 5 to 7% is in this other category. When we ship vials to our distributor, there is a timing difference between those shipments and the end demand of course and there is with every company that's called inventory.

So there is not a direct -- we can't just directly count and plus, we don't see all the prescriptions. We see 60 to 70% of prescriptions.

Frank DeRenzo - Signalen

Just one final question, do you have any update on the New York attorney general situation?

Steve Cartt

The update there is exactly the same as Missouri, where we've received some additional questions that we're answering.

Frank DeRenzo - Signalen

Okay. Thanks.

Operator

Thank you. Our next question is a follow-up from Yale Gen. Please go ahead.

Yale Gen - Maxim Group

Hey, Don. This is just a sort of a macro kind of questions. Giving the current sort of healthcare reform and other, we don't know any sort of final shape and size for that. So far do you see at this moment do you see any potentially meaning impact particular in the IS side or its just way too early to do make any assessment?

Don Bailey

That's a very good question. We've done an extensive amount of work, working at the legislation, tracking it and with following what's going on in the press, plus we have some people in Washington, who are working for us as well.

And the bottom line is that any legislation that covers causes currently people who are uninsured to become insured should logically help our business, should improve our sales. Any legislation that increasing the cost of Medicaid or increasing rebates hurts our business.

And both the positive and the negative impacts right now, we estimate to be in the $5 million, maybe little more to 5, less than $10 million range on both the plus side and the minus side. And that's at the sales volume.

So we would -- we could see an impact of 5 to 10% of our current sales either on the plus side or the negative side or if everything went through, they would offset each other.

Yale Gen - Maxim Group

Okay. And so the increase of the sales from the IS, what was gross increases would you see that impact sort of diminishing and obviously we still don't know the exactly what that the impact will be?

Don Bailey

Well, it would diminish on a percentage basis, yes. On absolute dollar basis, it would grow slightly. But if our sales grew to 150 million and that sales growth was in MS then yes as a percentage it would it should help us more because there'll be more patients ensuring that the Medicaid impact of MS is much, much less than IS

Yale Gen - Maxim Group

Okay. Great. Thanks a lot.

Operator

Thank you. we have an additional follow-up question from the line of John Newman. Please go ahead.

John Newman - Oppenheimer

Hi, guys. Thanks for taking the question. Question for Steve, in terms of the new MS prescriptions that you are seeing, are you seeing more scripts from doctors that had not previously used the products to treat MS players versus doctors that had previously been using the product before the price increase?

Steve Cartt

Yeah. John, we're seeing a combination of both. We're seeing new prescribers, who have never used this coming into the next and writing their first prescription. We are also seeing an increase in prescriptions from the doctors who have been writing it over the last few months.

So it's kind of a -- It's not just an increase among current prescribers that will be one picture of it, but what we are seeing is that's why we are enthusiastic is that new prescribers are coming in and we're seeing good results there.

John Newman - Oppenheimer

Great. Thanks.

Operator

Thank you. Management, at this time we have no additional questions in the queue. And I'll turn the conference back to you at this time for any further remarks.

Don Bailey

Thank you, Andrew and thanks every body for attending and I'm sure some of you will call and follow-up and we'll answer your questions and talk to you next quarter. Bye-bye.

Operator

Thank you, management. Ladies and gentlemen, at this time we will conclude today's teleconference presentation. We do thank you for participation on the conference call.

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We thank you for your participation on today's conference. You may now disconnect and please have a pleasant afternoon.

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Source: Questcor Pharmaceuticals Q2 2009 Earnings Transcript
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