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Executives

Doug Sherk – Investor Relations

Don Bailey – President and Chief Executive Officer

Steve Cartt – Chief Business Officer

Mike Mulroy – Chief Financial Officer

Analysts

Chris Holterhoff – Oppenheimer

Mario Corso – Caris & Company

Biren Amin – Jefferies & Company

Tim Chiang – CRT Capital Group

Yale Jen – Maxim Group

Jim Molloy – ThinkEquity

Patrick Glenn – Primarius Capital

Questcor Pharmaceuticals, Inc. (QCOR) Q3 2011 Earnings Conference Call October 25, 2011 4:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Questcor Third Quarter Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) Today’s conference is being recorded, October 25, 2011.

I would now like to turn the conference over to Doug Sherk. Please go ahead.

Doug Sherk – Investor Relations

Thank you, operator and good afternoon everyone. Thank you for joining us today on the Questcor Pharmaceuticals conference call to discuss the third quarter 2011 financial results. This afternoon at the market close, Questcor issued its third quarter earnings release, which is posted on the company’s website at www.questcor.com. This call is being broadcast live via webcast with an accompanying slide presentation. An archive of both will also be available at the Questcor’s website.

To access the webcast including the presentation slides and the archive go to Questcor’s website at www.questcor.com in the Investor Relations section under Events and Presentations. If you are listening via telephone to view the accompanying presentation slides, navigate to the live webcast as noted and choose the no audio slides-only option to view the slides in conjunction with the live conference call. There will be a taped replay of this call, which will be available approximately one hour after the call’s conclusion and will remain available for seven days. The operator will provide the replay instructions at the end of today’s call.

Before we get started, I would like to remind you that during the course of this conference call, the company will make projections and 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 Forms 10-K and 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements.

With that out of the way, let me turn the call over to now to Don Bailey, President and Chief Executive Officer of Questcor Pharmaceuticals.

Don Bailey – President and Chief Executive Officer

Thanks Doug. Good afternoon everyone. With me today are several other members of our management team, Steve Cartt, our Chief Business Officer and Mike Mulroy, our CFO will be making prepared remarks and others are here to answer questions.

The highlights for the third quarter of 2011 are on the screen if you are viewing the accompanying slide presentations. The highlights demonstrate that Questcor’s strategy to sell more Acthar continues to generate increasing revenue and earnings. Our commercial organization is steadily expanding to number of neurologists, nephrologists, and child neurologists prescribing Acthar. Acthar paid prescriptions in the MS market grew 174% over the third quarter of 2010 marking our 15th consecutive quarter of growing MS paid scripts.

During the quarter, we also completed the planned expansion of our nephrology sales force. Although our selling effort was somewhat disrupted by this expansion, paid Acthar prescriptions for nephrotic syndrome increased in the quarter over the second quarter. Our continued success in these key markets combined with solid IS paid scripts in the quarter led to increases in shipments of Acthar vials, increased net sales, higher operating margins, higher earnings, higher EPS, and most importantly, higher cash levels.

This chart on the screen now shows Acthar’s MS prescription growth on a quarterly basis. A key priority remains growing the use of Acthar in the treatment of MS exacerbations or relapses and this focus drove our year-over-year increase in the number of paid Acthar prescriptions for MS. In the third quarter of 2011, we had 886 paid MS scripts compared with 323 scripts a year ago. The major factors behind the increased prescriptions are positive outcomes and the increasing productivity of our larger MS commercial teams.

On to the chart, this chart shows the same MS paid prescription data on a monthly basis. You can see the MS script level during the third quarter increased each month of the quarter. We should also note that some months are sequentially down and some up over the longer history. But that overall trend is about 160% compounded annualized growth rate over four years.

So Acthar has shown rapid growth in the MS market this year. We believe we may still be early on in penetrating this market. We do not have definitive data on the total number of MS relapse patients for whom steroids are not returning them to an acceptable quality of life. But we believe there is ample room for growth for Acthar in this MS market. Based on the estimate of 200,000 relapse as annually in the US and the annualized third quarter prescription count of about 4000 Acthar MS prescriptions, we likely only have single-digit penetration of this market.

Let me turn to our efforts in building the use of Acthar to treat nephrotic syndrome. As I mentioned in the highlights, our records resulted in an increase in paid Acthar prescriptions for nephrotic syndrome in the third quarter despite the disruption caused by the nephrology sales force expansion.

Nephrotic syndrome is a kidney disorder characterized by a high level of protein in the urine, a condition called proteinuria. If not successfully treated, these patients are headed for end-stage renal disease, then to dialysis, where one’s life expectancy is about five years.

There is a significant unmet need, no standard of care in treatment, and the market side looks promising for Acthar and Questcor. This chart shows Acthar paid prescriptions for the last seven quarters for nephrotic syndrome. So, our prescription numbers in this area are small. Script growth is roughly tracking the pattern for MS three years ago. It’s important to note that each Acthar nephrotic syndrome script generates more net sales than NS due to the higher number of vials needs to complete the treatment for nephrotic syndrome.

We initiated our dedicated commercial effort for nephrotic syndrome in March of this year with a 5% sales and 1% marketing team. There has some traction in the first quarter with 80 new prescriptions and their efforts generated 45 new prescriptions in Q2. Based on this early success, we announced on our last earnings call conference call in July that we would expand our nephrology commercial effort in Q3. The portion of the new sales represented the finished training and we’re making sales cost during the later part of the quarter.

As a result, we ended up with 60 new paid Acthar prescriptions in the third quarter, about half of which came in September. We are very encouraged with these early results and so remainder of the new team completed training and began making sales calls at the beginning of October.

Now, I’ll turn the call over to Steve to provide some color regarding our commercial effort and then Mike will briefly discuss our financial performance. Then I’ll provide a few final remarks and then open up the call to your questions. Steve?

Steve Cartt – Chief Business Officer

Thanks, Don. As Don mentioned we shipped 886 paid Acthar prescriptions for the treatment of MS relapses during the third quarter of 2011. This was an increase of 174% over the year ago period. In addition to strong script growth, other positive trends in our MS business indicate that we are building momentum in this key Acthar market. More example, we are steadily expanding the number of both new and repeat Acthar prescribers and broadening participation across all regions of the country. The number of Acthar prescribers in MS is roughly 500, which is still a small fraction at the over 4000 neurologists in the U.S. currently being called on by our sales force.

So, it was around 3500 of our current sales target not yet prescribing. We clearly still have a lot of work to do and maximizing the full value of Acthar in the MS market. Naturally, we believe there are significant opportunities overtime to move many more neurologists to the Acthar prescriber camp. As a potentially interesting frame of reference, other MS drugs would have been actively promoted for several years eventually have reached a level of 6000 to 7000 prescribing doctors. So, based on this and other measures, we believe we still have quite a bit of room to grow Acthar in the MS market.

Now, I’ll discuss our progress in nephrology. During the third quarter, we completed the planned expansion of our dedicated sales force from 5 to 28 representatives and we added staff to both our marketing and reimbursement teams. We are thrilled with the caliber of personnel we were able to attract to Questcor in this expansion. All sales personnel have now been trained and are making sales calls. We were encouraged to see that paid Acthar nephrotic syndrome prescriptions increased during the quarter to 60. So, our team was able to overcome the disruption from all of the hiring and training activities involved in this expansion.

This next slide outlines where our two sales forces are announced spending their time. Our specialty sales force is primarily focused on making neurology calls with a very limited amount of activity now in child neurology. They are also now making some calls on nephrologists, but MS is their main focus. Our nephrology sales force on the other hand is 100% focused on the nephrology audience. As a result, we are now beginning to make calls on around 3,000 total nephrologists compared to only 400 prior to the recent expansion. We look forward to the team getting settled into their new territories and becoming fully productive selling Acthar and nephrology during 2012.

As a final note on our business trends in MS and nephrotic syndrome, September was a particularly strong month for both paid prescriptions in both MS and nephrotic syndrome with MS having a record month and nephrotic syndrome almost equaling the script count from July and August combined.

Turning now briefly to infantile spasms. There were total of 112 paid prescriptions for Acthar in the third quarter of 2011. This represents the highest quarterly prescription level reach for IS since the third quarter of 2008. It is important to remind everyone that historically we have seen significant quarter-to-quarter variability in paid IS prescriptions due to fluctuations in the incidents of this very rare disorder. Nevertheless, we are encouraged with the solid prescription levels we are seeing in this market.

Switching gears to the subject of new scientific data, several Acthar-related abstracts will be presented in November at the Annual Meeting of the American Society of Nephrology or ASN held this year in Philadelphia. These abstracts are available on ASN’s website www.asn-online.org. The new data provides further insight into the immune modulating and other therapeutic properties of Acthar specifically relating to kidney disease.

We believe the availability of this data provides further evidence for the direct action of Acthar on kidney disease. And importantly, the first three abstracts shown may specifically enhance our near-term selling efforts in nephrology. Our emerging understanding of the apparent immune modulating properties of Acthar is also beginning to encourage us to investigate the potentially broader therapeutic applications of Acthar in other inflammatory and autoimmune diseases, many of which are already on the product label for Acthar.

We expect that some investors and research analysts may attend ASN. If you will be attending, please contract Greg Gin from EVC, so that we can arrange some time for each of you to talk with our executives and staff who will be at the conference.

So, let’s summarize, MS prescription growth for Acthar remained strong during the quarter and we believe that our market penetration here is still fairly low. Our recently expanded nephrology sales force already appears to be gaining traction. And as a result, we believe that this therapeutic area can develop into a significant market for Acthar. And as a final note, our IS business remain solid as well.

And Mike Mulroy, our CFO will discuss our financial results. Mike?

Mike Mulroy – Chief Financial Officer

Thanks, Steve. For the third quarter of 2011, we shipped 2,910 vials, up 54% from the third quarter last year. Medicaid and other reserves in the period were in the normal range and our historic period reserve continues to appear to be adequate. But these reserves are dropping as a percentage of growth sales, because MS and nephrotic syndrome experience a lower portion of Medicaid covered lives and the high percentage of IS patients in Medicaid. If MS and Nephrotic syndrome continue to grow much faster than IS we expect the sales reserve percentage to drop further.

Net sales increased 91% from the year ago period to $59.8 million. Gross profit margin in the second quarter was 94%. Operating expenses were $22.5 million basically flat from the prior quarter.

Operating expenses in the third quarter came in below our expectations due primarily to lower than expected number of marketing programs in the quarter and lower R&D expenses. We expect operating expenses to be approximately 20% higher in the fourth quarter as the new nephrology sales team will be in place for the entire quarter and there are many medical conferences such as ECTRIMS, ASN, CNS, and AES in the fourth quarter and R&D expenses are expected to increase.

We also discussed channel inventory in our earnings release. We sold Acthar to a single customer, CuraScript which then distributes the vials to about a dozen specialty pharmacy companies, one of which is owned by CuraScript. We received channel inventory information for product sold by our distributor and its specialty pharmacy company, but not the other specialty pharmacy companies.

While we do not have complete visibility on channel inventory, based on the information we do receive, we believe channel inventory typically runs between two to three weeks of sale. For the third quarter of 2011, we entered the quarter with below average channel inventory and finished the quarter with above average channel inventory, but both of those level were within Acthar’s normal range of channel inventory.

On a GAAP basis, net income for the quarter rose 98% from the same period one year ago to $22.9 million or $0.35 per share. Non-GAAP net income was $24.3 million or $0.37 per diluted common share. We continue to generate strong free cash flows. Operating cash flow in the quarter was $32 million driven primarily by net income, and increases in income tax payable on sales related reserves liability, offset by an increase in the accounts receivable.

As of October 21, Questcor’s cash, cash equivalent and short-term investments totaled $180 million. Return on equity was 57.9% in the third quarter. We did not repurchase any shares in the third quarter, remain committed to returning cash to shareholders. We have returned $78.5 million through share repurchases under this program since the beginning of 2008, representing approximately 40% of our operating cash flow over that period.

Now, I’ll turn the call back to Don.

Don Bailey – President and Chief Executive Officer

Thanks Mike. To review, the third quarter 2011 performance demonstrates that we are continuing to deliver on our strategy to sell more Acthar in our key markets MS, nephrotic syndrome, and IS.

Increased new, paid Acthar prescriptions especially in MS and nephortic syndrome led to increased sales levels combined with strong profit margins and substantial free cash flow. We are continuing to focus on MS and nephrotic syndrome sales. Our standard nephrology selling effort is underway and already has shown some encouraging early signs, and we are looking forward to new data on Acthar and the productive meeting at ASM.

Now, I have one piece of bad news, my cell phone is broken, so please e-mail me if you want to talk about the quarter or the future of Questcor and I will get back to you. In summary, based on our historical results and our market assessments we remain excited about Questcor’s prospect going forward and are committed to focusing on the Acthar growth opportunities.

Operator you may now open up the call for questions.

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen we will now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of Chris Holterhoff with Oppenheimer. Please go ahead.

Chris Holterhoff – Oppenheimer

Hi guys thanks for taking the questions and congrats on a great quarter. If you’d be willing to quantify or just comment on the level of impact during the quarter that we saw due to the temporary NS sales force disruption?

Don Bailey

Well, it’s really hard to quantify. Clearly, there was a disruption as we talked about in prior communications with shareholders. We definitely saw that during July sales drop up a little bit, scripts drop off little bit, so they picked up in August and picked up again in September. So, we think that disruption is behind us.

Chris Holterhoff – Oppenheimer

Okay. And regarding your NS sales force effort, do you have any updated thoughts about conducting a speaker series for NS similar to what you have done with MS?

Don Bailey

We are going to let Eldon Mayer, our Vice President of Commercial Operation to answer that question.

Eldon Mayer

Yeah, Chris, we have been actually conducting those at a very low level for sometime, but as you probably know the establishment and setting up of that flow speaker bureau takes some time. So, we are gradually accelerating that and it’s up in running now and we have a series of speakers who are available to help educate the nephrology community about Acthar and we have our sales force engaged in scheduling those programs.

Chris Holterhoff – Oppenheimer

Okay, thanks a lot for the questions. I’ll jump back in the queue.

Operator

Thank you. Our next question comes from the line of Mario Corso with Caris & Company. Please go ahead.

Mario Corso – Caris & Company

Yes, thanks. Congratulations on the great quarter. Couple of things on NS, I guess, number one is we think about the overall looking ahead to the fourth quarter. How are you guys thinking about selling days seasonality and so forth, I guess, with respect to the overall business? And then specific to NS, so if there were 30 or so prescriptions in the month of September, then obviously if we just straight line that in the fourth quarter we get into the range of 100 or so? And I am wondering within that strong September, if you can talk about how much of that increased productivity was due to newer reps as opposed to existing reps? Thanks a lot.

Don Bailey

Sure, Mario. So, let’s see, we got several things. First of all, there are probably fewer selling days in the fourth quarter due to holidays and that’s going to vary by specialty probably and the emergency of the condition being treated. So, MS, for example, IS is urgent, MS is pretty urgent, nephrotic syndrome is not urgent even though the patients headed for problems. So, we may see more of a slowdown in that area. And of course, we haven’t been through this before, so we don’t really know what to expect.

And I think just in general, we have to step back with nephrotic syndrome and realize with the very front edge of this program and we just have very little experience. And I think it’s little tricky to take one month and (indiscernible) at this point in time. It’s not unreasonable going to start, but I think we just have to allow ourselves to be ready for some variability. As far as who contributed in the quarter, I’ll let Steve Cartt answer that question.

Steve Cartt

Sure, Mario. I think the combination of some contribution from the four reps, because we had five before one was promoted into a manager position with the expansion. So, combination of the four reps that were remaining out of the five directionally outselling, now their individual territories were shrunk down to make way for the additional 24 reps. They were generating some prescriptions. There were few prescriptions that came from the activities of our specialty group as well and then some from the new group of 24 reps. So really kind of was across the board. We would expect going forward that the sales group that’s specific to nephrology is probably going to be driving the lion’s share of growth in NS for us.

Operator

Thank you. Our next question comes from the line of Biren Amin with Jefferies & Company. Please go ahead.

Biren Amin – Jefferies & Company

Hey guys, thanks for taking the questions. Couple of questions. I guess, first of all inventory level, I am calculating the inventory stocking at about $5.6 million in the quarter. Is that kind of a fair calculation?

Don Bailey

Let’s see. So we did $60 million in the quarter, that’s $20 million a month. We think there is two to three weeks inventory in the channel. We shifted probably only two days of inventory, so that’s too high, that’s too high number, it’s probably much closer to $2 million or $3 million.

Biren Amin – Jefferies & Company

Okay. And with regards to refills related to nephrotic syndrome, how is the company following refills given an average prescription could be associated with about seven vials?

Don Bailey

Sure, let me answer that. First, let me just finish up on the inventory, we think the current level of inventory is in the normal range. So, we just lost in the last quarter, it’s a little high this quarter, but net-net, they are above the nominal range. So, we think that there is probably a $2 million to $3 million, $0.02 to $0.03 impact on Q3 from an inventory point of view and we are entering the fourth quarter slightly on the high side. So, as those are the questions, refills in nephrology sector, age-related disorder. So, the refills in nephrology again as Mike mentioned that we get data from CuraScript Pharmacy. And so everything we know about nephrology and refills is coming from that source. So, we don’t see a lot of data, because we are only seeing a portion of the NS sales and the NS sales are pretty small and not that many patients have been through six months of treatment.

But we are seeing a pattern, where patients if they take the drug, they are getting one or two, they are probably getting two vials in the beginning followed by some number of vials every month, one or two until they are done. Some patients stop early and we don’t know exactly why they stop early could be that they don’t like (indiscernible) or they have a side effect or something or so. Does that give you the answer you wanted?

Biren Amin – Jefferies & Company

Yeah. And with regards to the MS prescriptions, what percentage of scripts in the quarter were driven by the top 10 reps and also what percent were driven by the top 10 prescribers?

Don Bailey

We don’t actually have that exact information. I’d say it’s a normal distribution, I’d say what it was has been in the past. So, in the past about two thirds or three quarters of MS reps reached or exceeded their goals. And all of the staffs with respect to prescribers are improving whether no matter of how you are looking at it, when you look at a year-over-year the number of prescribers prescribing for the first time, number of prescribers, 10 or more, all those kind of staffs are roughly double or more. So, everything looks to be in the normal range with the distribution of doctors and reps.

Biren Amin – Jefferies & Company

All right, great. Thanks for taking my questions.

Operator

Thank you. Our next question comes from the line of Tim Chiang with CRT Capital Group. Please go ahead.

Tim Chiang – CRT Capital Group

Thanks. Don, can you comment about the average vial per script figure for each of the indication, that number remained pretty stable.

Don Bailey

Well, first of all, Tim again because we only get data from one pharmacy, our visibility into the average number of vials per script is limited – severely limited. Based on the limited information, we think the numbers that we given in the past are still the best numbers, nothing changed during the quarter, so it would be roughly 1.5 to 2 vials per MS approximately four vials maybe a little bit more for IS and 6.5 to 7 vials for nephrotic syndrome.

Tim Chiang – CRT Capital Group

Okay. And then may be just one follow-up, are you getting any sort of increased pushback from managed care with Acthar at this point or what sort of comments can you provide in terms of reimbursement at this point?

Don Bailey

Okay, we’ll have Steve to answer that question.

Steve Cartt

Yeah, hi Tim. It’s a very good question that something we’re constantly monitoring and working on, I think over-time payers have given a little more pushback and this is over the last two to three years. I think we have gotten increasingly good at targeting the right types of patients and ensuring that the offices are giving the proper documentation for why Acthar is appropriate therapy for those patients.

So, we are hitting the bull’s eye in terms of the patient population that we are driving prescriptions for and we are supporting the offices better. We are getting better working with the plans to our reimbursement hub. So, while the insurance companies have over time been a little more resistant, we have again increasingly improving our whole approach to targeting the right kind of patients and supporting the offices. So, overall, it’s kind of a draw between us and the payers and we expect that will be the case going forward. So overall, our coverage remains very, very high across all of our key therapeutic areas.

Tim Chiang – CRT Capital Group

Okay. I’ll just ask one follow-up and I won’t ask anymore questions, but you mentioned that the operating expenses are going to go up most likely around 20%. It seems like your SG&A costs were actually pretty flat Q3 versus Q2. Could you talk a little bit more about how the operating costs are going to ramp or they – is there a chance that it could exceed 20% growth in Q4 at this juncture?

Don Bailey

I will let Mike Mulroy, wonderful CFO.

Mike Mulroy

So, as I mentioned we will have a full quarter of (indiscernible). We’ll also have expanded R&D costs as we move forward, continuing to move forward with our trial like this. G&A will fill in a bit in part just filling in some empty positions here at the company, but it will be scattered around the company. I think we are expecting higher expenses in Q3 and some of those expenses just didn’t have and some of them got pushed out. So, we will see a little bit of ketchup in Q4. That’s how we basically got to the 20%. On the last call, we talked about sequential growth in OpEx be 2 to 3 and then 3 to 4 with 10% from quarter to quarter to quarter. We are just going to see that. We expect to be a bit more lump in the Q4.

Tim Chiang – CRT Capital Group

Okay, great. Thanks so much. Great quarter.

Operator

Thank you. Our next question comes from the line of Yale Jen with Maxim Group. Please go ahead.

Yale Jen – Maxim Group

Good afternoon and congrats on the very good quarter.

Don Bailey

Thanks Yale.

Yale Jen – Maxim Group

Just one question a follow-up that the first question is could you give us some breakdown in terms of revenue for the L4 indication in NS, MS, IS and maybe others?

Don Bailey

Steve, you want to answer?

Steve Cartt

Sure. Hi Yale.

Yale Jen – Maxim Group

Hi, how are you?

Steve Cartt

Good questions. Good. We are always looking at those numbers, of course. Yeah, we currently in Q3 appear to be at a roughly $150 million run-rate in MS and NS it’s in the roughly $30 million annualized rate range. For IS, we seem to be kind of flat at around $45 million and we have the balances among other indications smattering of other scripts that we get. So, about 150 for MS, about 30 for NS, about 45 for IS.

Yale Jen – Maxim Group

Okay, great. Thanks a lot. And just a follow-up question is that you are going to present data in the ASM meetings, one of this data to be presented will evolve in the diabetic patients and do you have any thoughts in terms of giving that data, what kind of future development or thoughts you might have going forward? Thanks.

Steve Cartt

Sure. So, what Yale is referring to here is diabetic nephropathy.

Yale Jen – Maxim Group

Yes.

Steve Cartt

The use of Acthar in diabetic nephropathy. Diabetic nephropathy is not currently on Acthar’s label, but there is some interesting data that’s come out of a study that’s going to be presented at ASM that shows pretty good efficacy for Acthar and trading that condition. And so we are continuing to explore that particular therapeutic area. Right now, our priorities are within any indications, that’s all right there, but amongst the indications is that currently has been number one spot.

Yale Jen – Maxim Group

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Jim Molloy with ThinkEquity. Please go ahead.

Jim Molloy – ThinkEquity

Hey guys thanks for taking my question. I wanted to ask on the rebate rates, that came down across the board and all the groups pretty substantially percentage of prescription rebated. Can you talk to you how that number goes with that simply bounces around and who knows where to deal, are you guys getting better targeting the right patients that will get reimbursed. Can you talk a little bit about that going forward?

Don Bailey

Sure, so we find that the percentage utilization is generally fairly constant within each therapeutic area. So within infantile spasms approximately 40% to 45% of babies are covered by Medicaid within the adult population of for an MS and for nephrotic syndrome, they are in the 5% to 10%. So the reason that overall that number is dropping is because on a relative basis our IS business is growing slowly. But the MS and the nephrotic syndrome, the adult therapeutic areas those sales are growing rapidly. So it’s just a mix of sales that’s causing the Medicaid percentage to come down.

Jim Molloy – ThinkEquity

Okay thanks for that. And I guess a follow up question would be, I know that lupus is an area that you’re looking at, has there been any new data coming out or you are 1% working on that and talk a little bit how that’s striking and when that might go?

Don Bailey

I’ll let Steve Cartt answer that.

Steve Cartt

Yeah Jim, lupus is an area that’s very interesting to us. Obviously it’s on label we have three labeled indications for maintenance, lupus flares as well as lupus nephritis. We’re currently evaluating that market. I think there could be some potential there, but we have some more work to do. One of the steps is to get the first cohort patients on drug and we’re having some conversations with a small group of doctors that are interesting in doing that. So we hope to progress this evaluation over the next several months and we’ll be updating you guys further.

Don Bailey

I want to put this in perspective, so nephrotic syndrome we’re just now kind of building now, they sales force we just found that during the third quarter. We started looking in nephrotic syndrome more than three years ago and started talking to investors about that three years ago. And lupus is just at that starting point that nephrotic syndrome was three years ago. We hope to shorten the time period from this initial conversation to when we start to see revenue. But that’s where we are just to put it in perspective.

Jim Molloy – ThinkEquity

Okay, thanks for taking the question.

Operator

Thank you. Our next question comes from the line of Patrick Glenn with Primarius Capital. Please go ahead.

Patrick Glenn – Primarius Capital

Hi guys thanks for taking the call. I have two quick questions here. The first one is I know you have the sales force build up but can you expand a little bit about how things went in terms of, what went well and what still took or is taking time to tweak. What do you guys would like to improve upon. And then the second is usually just how to get a preview of where do you guys might be in terms of conferences coming up. You mentioned ASN, but is there any other conferences that would be great. Thank you.

Don Bailey

Okay. Well, I’ll set Steve up here to answer the first part of that question, by saying it’s hard not to see that early virtually everything went well. Especially, but there is always things to improve, but it’s hard to say, that anything really was off track too much, but I’ll ask Steve to come up with something, that this particular went particularly well.

Steve Cartt

Sure, I’ll let Eldon comment on the caliber of personnel that he would be able to bring on to his team on the nephrology sales force. But as far as the challenges we’re looking at we have but essentially a new team of reps, now most of them are experienced in nephrology, with a new team of reps, with a new drug in this new market of ours. So there is lot of new and covering prescriptions on the peer side as relatively near for them, they are used to covering scripts in MS and IS and now we have a new script that’s very valuable for nephrotic syndrome. That’s a little bit of news. So, there is a lot of new pieces coming together. So, that’s probably, that itself is our biggest challenge and also our biggest opportunity of course, but I’ll let Eldon comment on caliber of the folks we’ve been able to bring in.

Eldon Mayer

Yes, Steve. We’ve build our positions in nephrology. So we will speak about that, all 28 very quickly, there was a great deal of interest in Questcor. A lot of them, personally all of them had extensive experience in nephrology and we were able to really have our fix from a very high caliber and very experienced set of representative, so that’s one thing, The other thing I will add is that, as you may know selling Acthar is not a typical pharmaceutical sale. It’s a difficult, it can be difficult and a little more complicated, especially in the reimbursement side. So we’ve learned that and we’ve seen a more clear picture of the type of individual we need and I think we will be able to attract not only good people but the right kind of people that we need and I think that’s part of the reason why we are seeing some early, but promising results in people.

As far as the conferences go, we have kind of two sets of conferences. We have medical conferences and we have investor conferences. So, we will be at ASN in Philadelphia here second week of November, that’s the American Society of Nephrology. We will be at the Child Neurology Society Meeting, that’s actually starting, I think, tomorrow, the next day or this week then in later on in the quarter, there is AES, which is the American Epilepsy Society. So, that’s it on the business side.

On the investor side, we’ll be in San Francisco for CLFA. We will be in New York twice, once for Piper Jaffray and the other time for the Oppenheimer conference. We have marketing, investor marketing day set up in Atlanta in Philadelphia and I am sure we will do in New York. So, that’s the activity, Patrick.

Patrick Glenn – Primarius Capital

Terrific. Thanks and congrats again on the quarter.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of (indiscernible). Please go ahead.

Unidentified Analyst

Hi, thanks for the call. And I just have one question that’s actually kind of a related question to the nephrology new rep, I am just wondering if in addition to what you’ve already just answered the question whether or not there were, where did these people come from or they, I wasn’t quite sure from your response whether it was an internal transfer or they were coming from other companies. And if so can you elaborate a bit more on that. The second question is just more a question on the balance sheet account the sales related reserve. I was wondering if there is any lumpiness or any of the characteristics of the change in that account especially the respect for the idea you had the kind you had, very lumpy total large orders in the first and last day of the month, and whether or not it affected that account anyway relative to the prior quarter. That’s why I am going to go back because good news myself was working down, but the bad news is you might get some background noise?

Don Bailey

Well, at least you have one. Thanks, thanks. And I hope well Lexus is doing well in Washington. So, most of the nephrotic syndrome people aren’t really, if not all of them came from current nephrology companies, one of them particularly was involved in a major merger, acquisition and so there were some disruption at that company and you were able to really the beneficiary of that. So we picked up a lot of the experienced people that had 5 to 10 years or even more experience with Genzyme. So, I think that answered that question pretty much, so sales related reserve.

Steve Cartt

Yeah, I wouldn’t say that the order at the end of the period really had any different effect than any other order. But on the top we talked in the past about under healthcare reform the Medicaid MCO population, which came in back in late March and we’ve yet to be build by several states if they continue to figure out how to put systems in place to get b bills out. So that reserve and we reserve for the sales quarterly, an element of that reserve just continues to build because it’s not being relieve by getting from bills from states. That’s the kind of one lumpy piece that we would expect to get build for at some point.

Operator

Thank you. Our next question comes from the line of Yale Jen with Maxim Group. Please go ahead.

Yale Jen – Maxim Group

Thanks for taking the follow-up question. Just briefly in terms of the nephrologist, what’s the current number of prescribing nephrologists for the Acthar?

Don Bailey

Well, let’s say, we had 60 prescriptions in the quarter plus that were paid and then some that were medicated and some that went out through our (indiscernible) programs and so there were over 60 prescribers in the quarter. So, roughly three quarters of the scripts were written by new prescribers and others were written by old prescribers.

Yale Jen – Maxim Group

Okay, great. Thanks a lot. And the last one is that, it seems that the IS overall both in the total script as well as the paid script has increased compared to last year and the prior few quarters and at least for this year so far. Is there more stabilized, not only more stabilized, but actually some sort of potential very flat growth in this space as well?

Don Bailey

I’ll let Steve take a shot and dwell in.

Steve Cartt

Yeah, Yale, we are scratching our heads a little bit looking at the trends there as well. The challenge that I asked is that there has been so much fluctuation quarter-to-quarter over a very long period of time. It’s hard to conclude anything unless you see a very long trend line. We are encouraged. The script results have been pretty solid over the last quarter or two and we like what we see. Whether or not that means it stabilized to the high end of the range, we don’t know. We are cautiously optimistic. There might be some modest growth potentially over long period, but that’s really not what’s going to be driving our growth curve. That’s going to be, at least how we are viewing it is more on the NS and the MS side.

Yale Jen – Maxim Group

Thanks a lot. I appreciate it.

Operator

Thank you. And our final question comes from the line of Jim Malloy with ThinkEquity. Please go ahead.

Jim Malloy – ThinkEquity

Hey, Yale. Grab my last question. Except for the MS team, any thoughts on expansion of that team going forward and timing on that?

Don Bailey

Sure. So, again I’ll let Steve get the final word in here.

Steve Cartt

Sure. Obviously with the previous expansions, they have been highly profitable for the company. So, I think our leaning is towards looking at should we do further expansions down the road. That’s something we are continually evaluating. I think Eldon and his team have done very, very well. The more reps we seem to give them the better they do. So, we like that kind of a pattern. And I think we are in the process of evaluating across all of our core therapeutic areas what kind of level of sales support is most appropriate. So, don’t have an answer for you right now, but we will be looking at it.

Jim Malloy – ThinkEquity

That makes sense. Thank you very much for taking the question.

Operator

Thank you. At this time, I’d like to turn the conference back to management for closing remarks.

Don Bailey – President and Chief Executive Officer

Okay. Well thanks for calling in and we look forward to speaking to you again in probably late February. And again if you have questions or further comments, please e-mail me so I can get back with you. Take care. Bye-bye.

Operator

Ladies and gentlemen, this concludes the Questcor third quarter conference call. If you would like to listen to a replay of today’s conference, please dial 1800-406-7325 or 303-590-3030 and enter the access code of 4480054 followed by the pound sign. Thank you for your participation. You may now disconnect.

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