Organization And Summary Of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2013 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Organization and Summary of Significant Accounting Policies | ' |
Organization and Summary of Significant Accounting Policies |
The Company |
Questcor is a biopharmaceutical company focused on the treatment of patients with serious, difficult-to-treat autoimmune and inflammatory disorders. We also supply specialty contract manufacturing services to the global pharmaceutical and biotechnology industry through our wholly-owned subsidiary, BioVectra Inc. Our primary product is H.P. Acthar® Gel (repository corticotropin injection), or Acthar, an injectable drug that is approved by the U.S. Food and Drug Administration, or FDA, for the treatment of 19 indications. Of these 19 FDA approved indications, for the year ended December 31, 2013, we generated substantially all of our net sales from the following indications: |
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• | Nephrotic Syndrome (NS): Acthar is indicated “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.” According to the National Kidney Foundation, nephrotic syndrome can result from several idiopathic type kidney disorders, including idiopathic membranous nephropathy, focal segmental glomerulosclerosis, IgA nephropathy and minimal change disease. Nephrotic syndrome can also occur due to lupus erythematosus. In this Form 10-K, the terms “nephrotic syndrome” and “NS” refer only to the proteinuria in nephrotic syndrome conditions that are covered by the Acthar label of approved indications. | | | | | | | | | | | |
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• | Rheumatology Related Conditions: Acthar is approved for the following rheumatology related conditions: (i) Collagen Diseases: Acthar is indicated "during an exacerbation or as maintenance therapy in selected cases of systemic lupus erythematosus, systemic dermatomyositis (polymyositis)" and (ii) Rheumatic Disorders: Acthar is indicated 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), and Ankylosing spondylitis." | | | | | | | | | | | |
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• | Multiple Sclerosis (MS): Acthar is indicated “for the treatment of acute exacerbations of multiple sclerosis in adults. Controlled clinical 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.” | | | | | | | | | | | |
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• | Infantile Spasms (IS): Acthar is indicated “as monotherapy for the treatment of infantile spasms in infants and children under 2 years of age.” | | | | | | | | | | | |
We continue to explore additional markets for other on-label indications. For example, in 2013 we initiated a pilot commercialization effort for Acthar for the treatment of respiratory manifestations of symptomatic sarcoidosis. In addition, we are exploring the possibility of pursuing FDA approval for indications not currently on the Acthar label that are related to the treatment of other serious, difficult-to-treat autoimmune and inflammatory disorders having high unmet medical need. |
In order to improve outcomes for patients with difficult-to-treat autoimmune and inflammatory disorders, we are expanding our research to better understand the mechanism(s) of action of Acthar as well as the pharmacology of Acthar across and within each indication. We are also conducting studies to expand our understanding of why Acthar acts differently than steroids and potentially other melanocortin peptides. |
Basis of Presentation |
The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. |
The financial statements of our subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities, historical exchange rates for shareholders' equity and weighted average exchange rates for operating results. Translation gains and losses are included in accumulated other comprehensive income in shareholders' equity. Foreign currency transaction gains and losses are included in the results of operations in our Consolidated Statements of Income and Comprehensive Income. |
Use of Estimates |
The preparation of financial statements in conformity with GAAP, requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Our significant estimates include our estimates for sales-related reserves, valuation and impairment of intangibles and goodwill, deferred tax assets and tax liabilities, share-based compensation and estimating the fair value of our contingent consideration in conjunction with the acquisition of both BioVectra and Synacthen, among others. |
Reclassifications |
Certain comparative prior year amounts in the Consolidated Financial Statements and accompanying notes have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net income. |
Fair Value of Financial Instruments |
Our financial instruments include cash and cash equivalents, short-term investments, accounts receivable, accounts payable, dividends payable, accrued liabilities, current and long-term debt and derivatives (primarily associated with the contingent consideration in conjunction with the acquisition of Synacthen). We believe that the fair value of these financial instruments approximate the reported carrying amounts. |
Cash Equivalents and Short-Term Investments |
We consider highly liquid investments with maturities from the date of purchase of three months or less to be cash equivalents. We classify available-for-sale debt instruments with maturities at the date of purchase greater than three months as short-term investments. |
We carry available-for-sale securities at fair value, with the unrealized gains and losses, if any, reported in a separate component of shareholders’ equity. If we deem the decline in value to be other-than-temporary and we intend to sell such securities before their full cost can be recovered, we write down such securities to fair value and we charge the loss to net realized losses on investments. We use significant judgment in the determination of when an other-than-temporary decline in value has occurred. We evaluate our investment securities for other-than-temporary declines based on quantitative and qualitative factors. As of December 31, 2013 none of our investments had an other-than-temporary decline in valuation, and no other-than-temporary losses were recognized during the years ended December 31, 2013, 2012 and 2011. We base the cost of securities sold on the specific identification method. We include realized gains and losses, if any, in the accompanying Consolidated Statements of Income and Comprehensive Income, in Interest and other (expense) income, net. |
Concentration of Risk |
Financial instruments that subject us to a significant concentration of credit risk principally consist of cash and cash equivalents, short-term investments and accounts receivable. We invest our cash in high credit quality government and corporate debt instruments and believe the financial risks associated with these instruments are minimal. |
Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. Beginning January 1, 2013, all of our non-interest bearing cash balances were insured up to $250,000 per depositor at each financial institution. |
We extend credit to our specialty distributor, which accounts for approximately 95% of our gross product sales and 92% of our accounts receivable. We have not experienced material credit losses on our customer accounts. |
The relative share of our accounts receivable and gross product sales are as follows: |
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| | Years Ended | | | | | | |
December 31, | | | | | | |
% of Accounts Receivable | | 2013 | | 2012 | | | | | | |
Specialty distributor | | 92 | % | | 100 | % | | | | | | |
Other customers | | 8 | % | | — | % | | | | | | |
| | 100 | % | | 100 | % | | | | | | |
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| | Years Ended December 31, | | | |
% of Gross Product Sales | | 2013 | | 2012 | | 2011 | | | |
Specialty distributor | | 95 | % | | 100 | % | | 100 | % | | | |
Other customers | | 5 | % | | — | % | | — | % | | | |
| | 100 | % | | 100 | % | | 100 | % | | | |
Inventories |
We state inventories, net of allowances, at the lower of cost or market value. For our Acthar product, cost is determined by the first-in, first-out method. For our production materials and supplies, work-in-process and finished goods at our contract manufacturer, cost is determined on an average cost basis. |
We review inventory periodically for slow-moving or obsolete status. We adjust our inventory if we do not expect to recover the cost of inventory. We would record a reserve to adjust inventory to its net realizable value when any of the following occur: (i) a product is close to expiration and we do not expect it to be sold, (ii) a product has reached its expiration date or (iii) we do not expect a product to be saleable. In determining the reserves for these products, we consider factors such as the amount of inventory on hand and its remaining shelf life, and current and expected market conditions, including management forecasts and levels of competition. We have evaluated the current level of inventory considering historical trends and other factors, and based on our evaluation, have recorded adjustments to reflect inventory at its net realizable value. These adjustments are estimates, which could vary significantly from actual results if future economic conditions, customer demand, competition or other relevant factors differ from expectations. These estimates require us to assess the future demand for our products in order to categorize the status of such inventory items as slow-moving, obsolete or in excess-of-need. These future estimates are subject to the ongoing accuracy of our forecasts of market conditions, industry trends, competition and other factors. Differences between our estimated reserves and actual inventory adjustments have been immaterial, and we account for such adjustments in the current period as a change in estimate. |
Property and Equipment |
We record property and equipment at cost. We depreciate equipment and furniture using the straight-line method over their estimated useful lives (generally three to seven years) and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. We amortize equipment acquired under capital leases over the estimated useful life of the assets and include such amortization in depreciation expense. |
Goodwill and Intangible Assets |
We determine the estimated fair values of goodwill and intangible assets with definite and/or indefinite lives based on valuations performed at the time of their acquisition in accordance with FASB ASC 350. Such valuations utilize forecasted financial information. In addition, certain amounts paid to third parties, such as our In Process R&D asset related to the acquisition of Synacthen, are capitalized and included in intangible assets on the accompanying consolidated balance sheets. |
Goodwill and indefinite-lived intangibles are tested for impairment annually and in interim periods if certain events occur indicating the fair value may be below its carrying value using a two-step process. The first step is to identify a potential impairment, and the second step measures the amount of the impairment loss, if any. Goodwill is impaired if the carrying amount of a reporting unit’s goodwill exceeds its estimated fair value. We performed our annual goodwill and indefinite-lived impairment assessment as of December 31, 2013, noting no impairment. |
Definite lived intangibles are amortized on an accelerated or straight-line basis over their estimated useful life. This determination is made based on the specific asset and the timing of recoverability from expected future cash flows. |
We review the carrying value of our definite-lived intangibles and long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable. These assets are impaired when undiscounted expected future cash flows are less than the carrying value. Our judgments related to the expected useful lives of definite-lived intangibles and long-lived assets and our ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as ongoing maintenance and improvements of the assets, changes in economic conditions, our ability to successfully launch products, and changes in operating performance. In addition, we regularly evaluate our long-lived assets and may accelerate depreciation over the revised useful life if the asset has limited future value. During the years ended December 31, 2013, 2012 and 2011, we recorded impairment charges for purchased technology and goodwill of $0.7 million, $1.0 million and $0.3 million, respectively. |
As this process involves management making certain estimates and because these estimates form the basis of the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates. We will continue to assess the carrying value of our goodwill, intangible assets and long-lived assets in accordance with applicable accounting guidance. |
Income Taxes |
We account for income taxes under the provisions of Accounting Standards Codification 740, “Income Taxes”, or ASC 740. We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. |
As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating our tax exposure under the most current tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. |
We regularly assess the likelihood that we will be able to recover our deferred tax assets, which is ultimately dependent on us generating future taxable income. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If it is not considered “more likely than not” that we will recover our deferred tax assets, we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. Changes in the valuation allowance based on our assessment will result in an income tax benefit if the valuation allowance is decreased and an income tax expense if the valuation allowance is increased. |
As of December 31, 2013, we have recorded a liability for unrecognized tax benefits of $1.3 million related to various federal and state income tax matters. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of tax expense. As of December 31, 2013 and 2012, our accrual for interest and penalties on any unrecognized tax benefits was $78,000 and $106,000, respectively. We expect unrecognized tax benefits to decrease by approximately $0.5 million over the next 12 months as a result of the settlement of an IRS examination. |
Revenue Recognition |
We recognize revenue in accordance with Accounting Standards Codification 605, “Revenue Recognition-Products,” or ASC 605. Pursuant to ASC 605, we recognize revenue when we have persuasive evidence that an arrangement, agreement or contract exists, when each of the following three criteria are satisfied: (i) title for our product and risk of loss have passed to our customer, (ii) the price we charge for our product is fixed or is readily determinable, and (iii) we are reasonably assured of collecting the amounts owed under the resulting receivable. We do not require collateral from our customers. |
In the U.S., our exclusive customer for Acthar is a specialty distributor. For our sales to this specialty distributor, a sale of Acthar occurs when the specialty distributor accepts a shipment of Acthar based on its order of Acthar from our exclusive agent for commercial shipment of Acthar to the specialty distributor. We sell Acthar at a discount from our list price to the specialty distributor, which then sells Acthar primarily to approximately 12 specialty pharmacy companies and many hospitals. |
We provide free vials of Acthar, to support a patient assistance program administered by a third party administrator. We do not recognize any revenue or net sales from this program. |
Separately, we make charitable contributions, in dollars, to independent third-party charitable organizations which administer co-pay assistance programs. |
International sales of our products are immaterial. |
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Net Sales |
The following table sets forth our net sales for the years ended December 31, 2013, 2012 and 2011, respectively (in thousands): |
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| | Years Ended December 31, |
| | 2013 | | 2012 | | 2011 |
Total pharmaceutical gross sales | | $ | 825,710 | | | $ | 582,097 | | | $ | 268,827 | |
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Sales reserves | | 64,363 | | | 72,805 | | | 50,658 | |
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Total pharmaceutical net sales | | 761,347 | | | 509,292 | | | 218,169 | |
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Total contract manufacturing net sales | | 37,582 | | | — | | | — | |
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Total net sales | | $ | 798,929 | | | $ | 509,292 | | | $ | 218,169 | |
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We record net sales after establishing reserves for the following: |
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i. | Medicaid rebates; | | | | | | | | | | | |
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ii. | TRICARE retail program rebates; | | | | | | | | | | | |
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iii. | Medicare Part D Coverage Gap Discount Program rebates; | | | | | | | | | | | |
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iv. | Chargebacks due to other government programs; | | | | | | | | | | | |
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v. | Questcor-sponsored co-pay assistance programs; | | | | | | | | | | | |
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vi. | Exchanges, which have historically been immaterial; and | | | | | | | | | | | |
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vii. | Other deductions such as payment discounts. | | | | | | | | | | | |
We currently provide our products to Medicaid participants under an agreement with CMS. Under this agreement, states are eligible to receive rebates from us for Medicaid patients in accordance with CMS regulations. States have historically provided us with rebate invoices for their Medicaid Fee for Service reimbursements between 60 and 90 days after the end of the calendar quarter in which our products were provided. Certain states are taking longer to submit complete rebate invoices for the Medicaid Managed Care utilization that became rebate eligible on March 23, 2010, as a result of the enactment of the Health Care Reform Acts. |
Significant judgment is inherent in the selection of assumptions and the interpretation of historical experience as well as the identification of external and internal factors affecting the determination of our reserves for Medicaid rebates and other government program rebates and chargebacks. We believe that the assumptions used to determine these sales reserves are reasonable considering known facts and circumstances. However, our Medicaid rebates and other government program rebates and chargebacks could materially differ from our reserve amounts because of unanticipated changes in prescription trends or patterns in the states' submissions of Medicaid claims, adjustments to the amount of product in the distribution channel, or if our estimates of the number of Medicaid patients with IS, MS, NS and rheumatology related-conditions are incorrect. We have greater visibility on the future submission of Medicaid claims and the amount of product in the distribution channel for Acthar distributed to certain specialty pharmacies than we have with respect to Acthar distributed through other specialty pharmacies. If actual Medicaid rebates, or other government program rebates and chargebacks are materially different from our estimates, we would account for such differences as a change in estimate in the period in which they become known. If actual future payments for such reserves exceed the estimates we made at the time of sale, our consolidated financial position, results of operations and cash flows may be negatively impacted. |
The following table summarizes the activity in the account for sales-related reserves for Medicaid rebates (in thousands): |
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| | Years Ended December 31, |
| | 2013 | | 2012 | | 2011 |
Balance at January 1 | | $ | 33,921 | | | $ | 29,874 | | | $ | 17,384 | |
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Actual Medicaid rebate payments for sales made in prior year | | (22,891 | ) | | (18,449 | ) | | (9,104 | ) |
Actual Medicaid rebate payments for sales made in current year | | (19,333 | ) | | (35,709 | ) | | (24,887 | ) |
Current Medicaid rebate provision for sales made in prior year | | 11,500 | | | 1,153 | | | 8 | |
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Current Medicaid rebate provision for sales made in current year | | 27,784 | | | 57,052 | | | 46,473 | |
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Balance at December 31 | | $ | 30,981 | | | $ | 33,921 | | | $ | 29,874 | |
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Total Sales-related Reserves |
At December 31, 2013 and 2012 sales-related reserves included in the accompanying Consolidated Balance Sheets were as follows (in thousands): |
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| | Years Ended December 31, | | | | |
| | 2013 | | 2012 | | | | |
Medicaid rebates | | $ | 30,981 | | | $ | 33,921 | | | | | |
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Other rebates, chargebacks and discounts | | 4,389 | | | 3,455 | | | | | |
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Total | | $ | 35,370 | | | $ | 37,376 | | | | | |
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Product Exchanges |
Acthar has a shelf life of 18 months from the date of manufacture. We authorize Acthar exchanges for expiring and expired product in accordance with our stated return policy, which allows the specialty distributor we work with to return product within one month of its expiration date and for a period up to three months after such product has reached its expiration date. Product exchanges have been insignificant since we began utilizing the services of a specialty distributor to distribute Acthar. |
Share-Based Compensation |
We recognize compensation expense for all share-based awards made to employees and directors. The fair value of share-based awards is estimated at grant date using an option pricing model and the portion that is ultimately expected to vest is recognized as compensation cost over either (1) the requisite service period or (2) the performance period. |
Since share-based compensation is recognized only for those awards that are ultimately expected to vest, we have applied an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. These estimates will be revised, if necessary, in future periods if actual forfeitures differ from estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs. |
We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards. The determination of fair value using the Black-Scholes option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option behaviors. We estimate the expected term based on the contractual term of the awards and employees' exercise and expected post-vesting termination behavior. |
We use the intrinsic method to account for restricted stock awards. The restricted stock awards are valued based on the closing stock price on the date of grant and amortized ratably over the life of the award. |
Additionally, we are required to disclose in our consolidated statements of cash flows the income tax effects resulting from share-based payment arrangements. We adopted the simplified method to calculate the beginning balance of the additional paid-in capital, or APIC, pool of excess tax benefits, and to determine the subsequent effect on the APIC pool and consolidated statements of cash flows of the tax effects of employee share-based compensation awards. |
At December 31, 2013, there was $25.8 million of total unrecognized compensation cost related to unvested restricted stock awards and restricted stock units and $20.4 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a remaining weighted average vesting period of approximately 2.2 years. |
Our share-based compensation plans are discussed further in Note 6. Preferred Stock and Shareholders’ Equity. |
Stock Repurchases |
We account for common stock repurchases by charging the cost of shares acquired to the common stock account in the Consolidated Statements of Shareholders’ Equity. |
Net Income Per Share |
Basic net income per share applicable to common shareholders is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and common equivalents shares, such as stock options and restricted stock outstanding during the period. Diluted earnings for our common shareholders per common stock considers the impact of potentially dilutive securities and excludes the impact of potential common shares related to our stock options and restricted stock in periods in which the option exercise or conversion price is greater than the average market price of our common stock during the period. |
The following table presents the amounts used in computing basic and diluted net income per share applicable to common shareholders for the years ended December 31, 2013, 2012 and 2011 and the effect of dilutive potential common shares on the number of shares used in computing dilutive net income per share applicable to common shareholders. Diluted potential common shares resulting from the assumed exercise of outstanding stock options and restricted stock are determined based on the treasury stock method (in thousands, except per share amounts). |
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| | Years Ended December 31, |
| | 2013 | | 2012 | | 2011 |
Net income applicable to common shareholders | | $ | 292,609 | | | $ | 197,675 | | | $ | 79,591 | |
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Shares used in computing net income per share applicable to common shareholders: | | | | | | |
Basic | | 58,616 | | | 60,243 | | | 62,498 | |
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Effect of dilutive potential common shares: | | | | | | |
Stock options | | 2,375 | | | 2,744 | | | 3,497 | |
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Restricted stock | | 456 | | | 58 | | | 15 | |
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Diluted | | 61,447 | | | 63,045 | | | 66,010 | |
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Net income per share applicable to common shareholders: | | | | | | |
Basic | | $ | 4.99 | | | $ | 3.28 | | | $ | 1.27 | |
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Diluted | | $ | 4.76 | | | $ | 3.14 | | | $ | 1.21 | |
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The following table presents the amounts excluded from the computation of diluted net income per share applicable to common shareholders for the years ended December 31, 2013, 2012 and 2011, as the inclusion of these securities would have been anti-dilutive (in thousands): |
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| | Years Ended December 31, | | | |
| | 2013 | | 2012 | | 2011 | | | |
Stock options | | 448 | | | 1,189 | | | 82 | | | | |
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Restricted stock awards | | 30 | | | — | | | — | | | | |
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Basic and diluted net income per share also takes into consideration the two-class method. Under the two-class method, undistributed net income is allocated to common stock and unvested participating securities based on their respective rights to share in dividends. We have determined that restricted stock awards represent participating securities and, therefore, require the use of the two-class method for the calculation of basic and diluted earnings per share. During the year ended December 31, 2013, we issued restricted stock units to certain employees under our 2006 Equity Incentive Plan. Because the holders of the restricted stock units will only receive dividends on restricted stock units that have vested prior to the Company declaring dividends, we have determined that the restricted stock units are non-participating securities and will not be included in our two-class method calculation. |
The following table sets forth the calculation of unallocated undistributed earnings, both basic and diluted, using the two-class method for amounts attributable to our common stock and our restricted stock awards (in thousands): |
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| | Years Ended December 31, |
| | 2013 | | 2012 | | 2011 |
Net income applicable to common shareholders | | $ | 292,609 | | | $ | 197,675 | | | $ | 79,591 | |
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Less: Dividends | | 66,229 | | | 23,682 | | | — | |
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Undistributed earnings | | $ | 226,380 | | | $ | 173,993 | | | $ | 79,591 | |
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Common stock undistributed earnings | | $ | 221,278 | | | $ | 173,325 | | | $ | 79,591 | |
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Unvested restricted stock award undistributed earnings | | 5,102 | | | 668 | | | — | |
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Total undistributed earnings | | $ | 226,380 | | | $ | 173,993 | | | $ | 79,591 | |
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Segment Information |
We have historically operated in one business segment. On January 18, 2013, we acquired 100% of the issued and outstanding shares of BioVectra Inc. We now manage our operations through two operating segments that are defined by our separate companies - Questcor Pharmaceuticals, Inc. and BioVectra. Each segment is operated as an independent business under its own management team, and has responsibility for its commercial activities, operations, and research and development activities related to its products. We intend to have BioVectra continue to operate independently under its existing management team for the foreseeable future. |
Questcor Pharmaceuticals is headquartered in Anaheim, California, and is a biopharmaceutical company focused on the treatment of patients with serious, difficult-to-treat autoimmune and inflammatory disorders. Questcor Pharmaceuticals' primary product is Acthar. Questcor Pharmaceuticals currently generates substantially all of its net sales from the use of Acthar in connection with the following: the treatment of proteinuria in idiopathic types of nephrotic syndrome, the treatment of acute exacerbations of multiple sclerosis in adults, the treatment of certain rheumatology-related conditions, and the treatment of infantile spasms in infants and children under two years of age. |
BioVectra is located in Prince Edward Island, Canada, operating from three facilities. BioVectra is a supplier of contract manufacturing services to the global pharmaceutical and biotechnology industry. BioVectra manufactures active pharmaceutical ingredients (API's), chemical intermediates, and bioprocessing reagents, and is our manufacturing partner for the API in our H.P. Acthar® Gel (repository corticotropin injection). BioVectra is proficient in synthetic organic chemistry, natural extraction of bioactive compounds, PEGylation and conjugation chemistry, and fermentation of chemical and biologic molecules. |
Segment results for net sales are presented in the same manner as we present our operations internally to make operating decisions and assess performance. Net income, which includes the negative impact of purchase price adjustments related to our January 18, 2013 acquisition of BioVectra, is the primary responsibility of segment operating management and therefore all activities remain in the segment in which incurred for performance assessment by our chief operating decision maker. |
Financial Information by Operating Segment. For the years ended December 31, 2013, 2012 and 2011, information regarding our net sales and net income for our operating segments is as follows (in millions): |
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| Questcor Pharmaceuticals | BioVectra | Intersegment Eliminations | Consolidated |
Net Sales | | | | |
For the year ended December 31, 2013 | $ | 761,347 | | $ | 39,944 | | $ | (2,362 | ) | $ | 798,929 | |
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For the year ended December 31, 2012 | $ | 509,292 | | $ | — | | $ | — | | $ | 509,292 | |
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For the year ended December 31, 2011 | $ | 218,169 | | $ | — | | $ | — | | $ | 218,169 | |
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Net Income | | | | |
For the year ended December 31, 2013 | $ | 293,999 | | $ | (158 | ) | $ | (1,232 | ) | $ | 292,609 | |
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For the year ended December 31, 2012 | $ | 197,675 | | $ | — | | $ | — | | $ | 197,675 | |
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For the year ended December 31, 2011 | $ | 79,591 | | $ | — | | $ | — | | $ | 79,591 | |
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As of December 31, 2013, 2012 and 2011, information regarding total assets for our operating segments is as follows (in millions): |
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| Questcor Pharmaceuticals | BioVectra | Intersegment Eliminations | Consolidated |
Total Assets | | | | |
31-Dec-13 | $ | 711,507 | | $ | 108,510 | | $ | (83,663 | ) | $ | 736,354 | |
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31-Dec-12 | $ | 252,431 | | $ | — | | $ | — | | $ | 252,431 | |
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31-Dec-11 | $ | 275,808 | | $ | — | | $ | — | | $ | 275,808 | |
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As of December 31, 2013, 2012 and 2011, information regarding capital expenditures for our operating segments is as follows (in millions): |
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| Questcor Pharmaceuticals | BioVectra | Intersegment Eliminations | Consolidated |
Capital expenditures | | | | |
31-Dec-13 | $ | 1,100 | | $ | 2,426 | | $ | 10 | | $ | 3,536 | |
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31-Dec-12 | $ | 1,065 | | $ | — | | $ | — | | $ | 1,065 | |
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31-Dec-11 | $ | 1,823 | | $ | — | | $ | — | | $ | 1,823 | |
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Geographic Information: The Company's geographic information for net sales to unaffiliated customers is shown below. The basis for determining net sales is the geographic location of the customer (in thousands): |
| | | |
| | | | | | | | | | | | |
| December 31, | | | |
| 2013 | 2012 | 2011 | | | |
Net Sales | | | | | | |
North America (1) | $ | 778,859 | | $ | 509,292 | | $ | 218,169 | | | | |
| | |
Europe | 13,780 | | — | | — | | | | |
| | |
Asia | 6,248 | | — | | — | | | | |
| | |
Other | 42 | | — | | — | | | | |
| | |
Total net sales | $ | 798,929 | | $ | 509,292 | | $ | 218,169 | | | | |
| | |
(1) Predominately located in the United States and Canada. |
Subsequent Events |
We evaluated subsequent events that have occurred after December 31, 2013, and through the issuance date, and determined that there were no events or transactions occurring during this reporting period that require recognition or disclosure in our consolidated financial statements. |
Recent Accounting Pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by the Company as of the specified effective date. We did not adopt any new accounting pronouncements during the year ended December 31, 2013 that had a material effect on our financial position or results of operations. |