##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (MARK ONE)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 FOR THE TRANSITION PERIOD FROM TO
 COMMISSION FILE NUMBER: 001-14758
 QUESTCOR PHARMACEUTICALS, INC.
 (Exact name of Registrant as specified in its charter)
 CALIFORNIA
    
    33-0476164(State or other jurisdiction
    
    (I.R.S. Employer ofof incorporation or organization)
    
    Identification No.)
 3260 Whipple Road
Union City, CA 94587-1217
(Address of Principal Executive Offices)
 REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 400-0700
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



QUESTCOR PHARMACEUTICALS, INC.
 FORM 10-Q
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    3Item 1 Financial Statements and Notes (Unaudited)
    
    
    3Consolidated Balance Sheets  June 30, 2009 and December 31, 2008
    
    
    3Consolidated Statements of Income  for the three and six months ended June 30, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows  for the six months ended June 30, 2009 and 2008
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4 Controls and Procedures
    
    
    28PART II. OTHER INFORMATION
    
    
    29Item 1 Legal Proceedings
    
    
    29Item 1A Risk Factors
    
    
    29Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3 Defaults Upon Senior Securities
    
    
    31Item 4 Submission of Matters to a Vote of Security Holders
    
    
    31Item 5 Other Information
    
    
    31Item 6 Exhibits
    
    
    32Signatures
    
    
    33EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 QUESTCOR PHARMACEUTICALS, INC.
 
 CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,793
    
    
    $
    13,282Short-term investments
    
    
    45,818
    
    
    
    42,169Total cash, cash equivalents and short-term investments
    
    
    69,611
    
    
    
    55,451Accounts receivable, net of allowance for doubtful accounts of $0 and $62 at
June 30, 2009 and December 31, 2008, respectively
    
    
    12,044
    
    
    
    10,418Inventories, net
    
    
    2,486
    
    
    
    2,459Prepaid income taxes
    
    
    
    
    
    
    3,316Prepaid expenses and other current assets
    
    
    1,046
    
    
    
    1,101Deferred tax assets
    
    
    6,203
    
    
    
    6,252Total current assets
    
    
    91,390
    
    
    
    78,997Property and equipment, net
    
    
    432
    
    
    
    450Purchased technology, net
    
    
    3,521
    
    
    
    3,669Goodwill
    
    
    299
    
    
    
    299Deposits and other assets
    
    
    710
    
    
    
    710Deferred tax assets
    
    
    5,021
    
    
    
    5,021Total assets
    
    $
    101,373
    
    
    $
    89,146LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,659
    
    
    $
    4,302Accrued compensation
    
    
    1,635
    
    
    
    1,896Sales-related reserves
    
    
    11,107
    
    
    
    11,825Income taxes payable
    
    
    526
    
    
    
    Other accrued liabilities
    
    
    1,297
    
    
    
    1,702Total current liabilities
    
    
    24,224
    
    
    
    19,725Lease termination and deferred rent liabilities and other non-current liabilities
    
    
    1,382
    
    
    
    1,529Total liabilities
    
    
    25,606
    
    
    
    21,254Shareholders equity:Preferred stock, no par value, 7,500,000 shares authorized; none outstanding
    
    
    
    
    
    
    Common stock, no par value, 105,000,000 shares authorized; 63,826,499 and
65,970,653 shares issued and outstanding at June 30, 2009 and December 31,
2008, respectively
    
    
    75,105
    
    
    
    84,028Retained earnings (accumulated deficit)
    
    
    580
    
    
    
    (16,405
    )Accumulated other comprehensive income
    
    
    82
    
    
    
    269Total shareholders equity
    
    
    75,767
    
    
    
    67,892Total liabilities and shareholders equity
    
    $
    101,373
    
    
    $
    89,146
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QUESTCOR PHARMACEUTICALS, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    25,266
    
    
    $
    24,898
    
    
    $
    48,564
    
    
    $
    44,030Cost of sales (exclusive of amortization of purchased technology)
    
    
    1,603
    
    
    
    2,190
    
    
    
    3,113
    
    
    
    3,509Gross profit
    
    
    23,663
    
    
    
    22,708
    
    
    
    45,451
    
    
    
    40,521Operating expenses:Selling, general and administrative
    
    
    7,180
    
    
    
    4,855
    
    
    
    14,433
    
    
    
    9,921Research and development
    
    
    2,320
    
    
    
    3,555
    
    
    
    4,776
    
    
    
    5,526Depreciation and amortization
    
    
    118
    
    
    
    123
    
    
    
    236
    
    
    
    245Total operating expenses
    
    
    9,618
    
    
    
    8,533
    
    
    
    19,445
    
    
    
    15,692Income from operations
    
    
    14,045
    
    
    
    14,175
    
    
    
    26,006
    
    
    
    24,829Other income:Interest income
    
    
    197
    
    
    
    244
    
    
    
    464
    
    
    
    608Other income, net
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    11Gain on sale of product rights
    
    
    200
    
    
    
    
    
    
    
    225
    
    
    
    Total other income
    
    
    397
    
    
    
    244
    
    
    
    690
    
    
    
    619Income before income taxes
    
    
    14,442
    
    
    
    14,419
    
    
    
    26,696
    
    
    
    25,448Income tax expense
    
    
    5,131
    
    
    
    5,625
    
    
    
    9,711
    
    
    
    10,113Net income
    
    
    9,311
    
    
    
    8,794
    
    
    
    16,985
    
    
    
    15,335Deemed dividend on Series A preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,267Net income applicable to common shareholders
    
    $
    9,311
    
    
    $
    8,794
    
    
    $
    16,985
    
    
    $
    10,068Net income per share applicable to common shareholders:Basic
    
    $
    0.14
    
    
    $
    0.13
    
    
    $
    0.26
    
    
    $
    0.14Diluted
    
    $
    0.14
    
    
    $
    0.12
    
    
    $
    0.25
    
    
    $
    0.14Shares used in computing net income per share applicable to common
shareholders:Basic
    
    
    64,218
    
    
    
    69,205
    
    
    
    64,854
    
    
    
    69,576Diluted
    
    
    66,325
    
    
    
    72,889
    
    
    
    67,140
    
    
    
    73,496
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QUESTCOR PHARMACEUTICALS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
 Six Months EndedJune 30,2009
    
    
    2008OPERATING ACTIVITIESNet income
    
    $
    16,985
    
    
    $
    15,335Adjustments to reconcile net income to net cash provided by operating activities:Share-based compensation expense
    
    
    1,718
    
    
    
    3,088Deferred income taxes
    
    
    
    
    
    
    6,354Amortization of investments
    
    
    16
    
    
    
    (354
    )Depreciation and amortization
    
    
    236
    
    
    
    244Gain on sale of product rights
    
    
    (225
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,626
    )
    
    
    2,052Inventories
    
    
    (27
    )
    
    
    (81
    )Prepaid income taxes
    
    
    3,316
    
    
    
    Prepaid expenses and other current assets
    
    
    55
    
    
    
    215Accounts payable
    
    
    5,357
    
    
    
    1,192Accrued compensation
    
    
    (261
    )
    
    
    (972
    )Sales-related reserves
    
    
    (718
    )
    
    
    4,226Income taxes payable
    
    
    526
    
    
    
    (1,330
    )Other accrued liabilities
    
    
    (405
    )
    
    
    84Other non-current liabilities
    
    
    (147
    )
    
    
    (198
    )Net cash flows provided by operating activities
    
    
    24,800
    
    
    
    29,855INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (71
    )
    
    
    (17
    )Purchase of short-term investments
    
    
    (34,951
    )
    
    
    (31,714
    )Proceeds from the sale and maturities of short-term investments
    
    
    31,150
    
    
    
    27,886Net proceeds from sale of product rights
    
    
    225
    
    
    
    Changes in deposits and other assets
    
    
    
    
    
    
    34Net cash flows used in investing activities
    
    
    (3,647
    )
    
    
    (3,811
    )FINANCING ACTIVITIESIssuance of common stock, net
    
    
    547
    
    
    
    671Repurchase of common stock
    
    
    (11,189
    )
    
    
    (11,830
    )Repurchase of Series A preferred stock
    
    
    
    
    
    
    (10,348
    )Net cash flows used in financing activities
    
    
    (10,642
    )
    
    
    (21,507
    )Increase in cash and cash equivalents
    
    
    10,511
    
    
    
    4,537Cash and cash equivalents at beginning of period
    
    
    13,282
    
    
    
    15,939Cash and cash equivalents at end of period
    
    $
    23,793
    
    
    $
    20,476
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QUESTCOR PHARMACEUTICALS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 1. ORGANIZATION AND BASIS OF PRESENTATION
 Organization
 ® ®
  Basis of Presentation
   2. REVENUE RECOGNITION
  6




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a)
    
    The estimated liability included in sales-related reserves as of the end of a period is
comprised of the estimated rebate units associated with end user demand data during the
period, the estimated rebate units associated with estimated inventory in the distribution
channel as of the end of the period, and the estimated rebate units, if any, associated with
prior rebate periods.
 b)
    
    In order to assess current and future rates of Medicaid utilization, the Company analyzes
inventory levels received from a third party, CuraScript SD, and patient prescription data
received from a third party, CuraScript SP.
  7




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June 30,
    
    
    December 31,2009
    
    
    2008Medicaid rebates
    
    $
    10,857
    
    
    $
    11,406Government chargebacks
    
    
    145
    
    
    
    164Product returns
    
    
    105
    
    
    
    255$
    11,107
    
    
    $
    11,825
 3. SHARE-BASED COMPENSATION
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Selling, general and administrative
    
    $
    518
    
    
    $
    859
    
    
    $
    1,385
    
    
    $
    2,502Research and development
    
    
    168
    
    
    
    286
    
    
    
    319
    
    
    
    520Total
    
    $
    686
    
    
    $
    1,145
    
    
    $
    1,704
    
    
    $
    3,022
 4. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gain
    
    
    (Loss)
    
    
    Fair ValueJune 30, 2009Cash equivalents
    
    $
    12,884
    
    
    $
    
    
    
    $
    
    
    
    $
    12,884Short-term investments:Commercial paper
    
    $
    21,159
    
    
    $
    81
    
    
    $
    
    
    
    $
    21,240Government-sponsored enterprises
    
    
    20,815
    
    
    
    11
    
    
    
    
    
    
    
    20,826Municipal bonds
    
    
    3,712
    
    
    
    40
    
    
    
    
    
    
    
    3,752$
    45,686
    
    
    $
    132
    
    
    $
    
    
    
    $
    45,818December 31, 2008Cash equivalents
    
    $
    10,293
    
    
    $
    
    
    
    $
    
    
    
    $
    10,293Short-term investments:Commercial paper
    
    $
    7,830
    
    
    $
    59
    
    
    $
    
    
    
    $
    7,889Governmentsponsored enterprises
    
    
    30,309
    
    
    
    210
    
    
    
    
    
    
    
    30,519Municipal bonds
    
    
    3,762
    
    
    
    
    
    
    
    (1
    )
    
    
    3,761$
    41,901
    
    
    $
    269
    
    
    $
    (1
    )
    
    $
    42,169
  Amortized
    
    
    Estimated FairCost
    
    
    ValueDue in one year or less
    
    $
    57,025
    
    
    $
    57,136Due after one through two years
    
    
    1,545
    
    
    
    1,566Total available-for-sale securities
    
    $
    58,570
    
    
    $
    58,702
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Fair Value
 Fair Value Measurements
   Cash equivalents:
 Short-term available-for-sale investments at fair value
  Basis of Fair Value MeasurementsQuoted prices
    
    
    Significantin active
    
    
    other
    
    
    SignificantBalance at
    
    
    markets for
    
    
    observable
    
    
    unobservableJune 30,
    
    
    identical items
    
    
    inputs
    
    
    inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Money market funds
    
    $
    12,884
    
    
    $
    12,884
    
    
    $
    
    
    
    
    Commercial paper
    
    
    21,240
    
    
    
    
    
    
    
    21,240
    
    
    
    Government-sponsored enterprises
    
    
    20,826
    
    
    
    
    
    
    
    20,826
    
    
    
    Municipal bonds
    
    
    3,752
    
    
    
    
    
    
    
    3,752
    
    
    
    $
    58,702
    
    
    $
    12,884
    
    
    $
    45,818
    
    
    
    
 9




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10




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5. INVENTORIES
  June 30,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    2,182
    
    
    $
    2,056Work-in-process
    
    
    162
    
    
    
    Finished goods
    
    
    188
    
    
    
    432Less allowance for excess and obsolete inventories
    
    
    (46
    )
    
    
    (29
    )$
    2,486
    
    
    $
    2,459
 6. PURCHASED TECHNOLOGY
  7. COMMITMENTS, INDEMNIFICATIONS AND CONTINGENCIES
      8. NET INCOME PER SHARE
  11




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income applicable to common shareholders
    
    $
    9,311
    
    
    $
    8,794
    
    
    $
    16,985
    
    
    $
    10,068Shares used in computing net income per share
applicable to common shareholders:Basic
    
    
    64,218
    
    
    
    69,205
    
    
    
    64,854
    
    
    
    69,576Effect of dilutive potential common shares:Stock options
    
    
    2,093
    
    
    
    3,471
    
    
    
    2,271
    
    
    
    3,622Restricted stock
    
    
    14
    
    
    
    19
    
    
    
    15
    
    
    
    25Warrants
    
    
    
    
    
    
    194
    
    
    
    
    
    
    
    273Diluted
    
    
    66,325
    
    
    
    72,889
    
    
    
    67,140
    
    
    
    73,496Net income per share applicable to common shareholders:Basic
    
    $
    0.14
    
    
    $
    0.13
    
    
    $
    0.26
    
    
    $
    0.14Diluted
    
    $
    0.14
    
    
    $
    0.12
    
    
    $
    0.25
    
    
    $
    0.14
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Stock options
    
    
    2,391
    
    
    
    1,286
    
    
    
    2,369
    
    
    
    1,206Restricted stock
    
    
    39
    
    
    
    233
    
    
    
    20
    
    
    
    233Series A Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,156
 9. INCOME TAXES
  10. COMPREHENSIVE INCOME
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    9,311
    
    
    $
    8,794
    
    
    $
    16,985
    
    
    $
    10,068Change in
unrealized gains on
available-for-sale
securities, net of
related tax effects
    
    
    (81
    )
    
    
    (62
    )
    
    
    (187
    )
    
    
    (37
    )Comprehensive income
    
    $
    9,230
    
    
    $
    8,732
    
    
    $
    16,798
    
    
    $
    10,031
 12




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11. EQUITY TRANSACTIONS
   12. RECENTLY ISSUED ACCOUNTING STANDARDS
 The FASB Accounting Standards Codification
 Subsequent Events
 Recognition and Presentation of Other-Than-Temporary Impairments
 Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly
 Interim Disclosures about Fair
Value of Financial Instruments
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Effective Date of FASB Statement No. 157
 Business Combinations
 Accounting for Collaborative
Arrangements Related to the Development and Commercialization of Intellectual Property
 13. RELATED PARTY TRANSACTIONS
  
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
  14




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15




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Critical Accounting Policies
  Sales Reserves
   Product Returns
  Medicaid Rebates
  16




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a)
    
    The estimated liability included in sales-related reserves as of the end of a period is
comprised of the estimated rebate units associated with end user demand data during the
period, the estimated rebate units associated with estimated inventory in the distribution
channel as of the end of the period, and the estimated rebate units, if any, associated with
prior rebate periods.
 b)
    
    In order to assess current and future rates of Medicaid utilization, we analyze inventory
levels received from a third party, CuraScript SD, and patient prescription data received
from a third party, CuraScript SP.
  Government Chargebacks
   Co-Pay Assistance Programs
   June 30,
    
    
    December 31,2009
    
    
    2008Medicaid rebates
    
    $
    10,857
    
    
    $
    11,406Government chargebacks
    
    
    145
    
    
    
    164Product returns
    
    
    105
    
    
    
    255$
    11,107
    
    
    $
    11,825
 17




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Inventories
  Intangible and Long-Lived Assets
 Goodwill and Other Intangible
Assets Accounting for the Impairment or Disposal of Long-Lived Assets
 Share-Based Compensation Expense
   Lease Termination Liability
  18




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Accounting for a
Loss on a Sublease, an interpretation of FASB 13 and APB Opinion No. 30 Accounting
for the Loss on a Sublease Not Involving the Disposal of a Segment.
  Income Taxes
      19




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Results of Operations
 Three months ended June 30, 2009 compared to the three months ended June 30, 2008:
 Net Sales
 Three Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Net sales
    
    $
    25,266
    
    
    $
    24,898
    
    
    $
    368
    
    
    
    1
    %
       20




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Cost of Sales and Gross Profit
 Three Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Cost of sales
    
    $
    1,603
    
    
    $
    2,190
    
    
    $
    (587
    )
    
    
    (27
    )%Gross profit
    
    $
    23,663
    
    
    $
    22,708
    
    
    $
    955
    
    
    
    4
    %Gross margin
    
    
    94
    %
    
    
    91
    %
  Selling, General and Administrative
 Three Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Selling, general and administrative expense
    
    $
    7,180
    
    
    $
    4,855
    
    
    $
    2,325
    
    
    
    48
    %
     Research and Development
 Three Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Research and development
    
    $
    2,320
    
    
    $
    3,555
    
    
    $
    (1,235
    )
    
    
    (35
    )%
  22




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##### Table of Contents



Depreciation and Amortization
 Three Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Depreciation and amortization
    
    $
    118
    
    
    $
    123
    
    
    $
    (5
    )
    
    
    (4
    )%
  Total Other Income
 Three Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Total other income
    
    $
    397
    
    
    $
    244
    
    
    $
    153
    
    
    
    63
    %
  Income Before Income Taxes and Income Tax Expense
 Three Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Income before income taxes
    
    $
    14,442
    
    
    $
    14,419
    
    
    $
    23
    
    
    
    0.2
    %Income tax expense
    
    $
    5,131
    
    
    $
    5,625
    
    
    $
    (494
    )
    
    
    (9
    )%
  23




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##### Table of Contents



Net Income and Net Income Applicable to Common Shareholders
 Three Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Net income and net income applicable to common shareholders
    
    $
    9,311
    
    
    $
    8,794
    
    
    $
    517
    
    
    
    6
    %
  Six months ended June 30, 2009 compared to the six months ended June 30, 2008:
 Net Sales
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Net sales
    
    $
    48,564
    
    
    $
    44,030
    
    
    $
    4,534
    
    
    
    10
    %
     24




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##### Table of Contents



Cost of Sales and Gross Profit
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Cost of sales
    
    $
    3,113
    
    
    $
    3,509
    
    
    $
    (396
    )
    
    
    (11
    )%Gross profit
    
    $
    45,451
    
    
    $
    40,521
    
    
    $
    4,930
    
    
    
    12
    %Gross margin
    
    
    94
    %
    
    
    92
    %
  Selling, General and Administrative
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Selling, general and administrative expense
    
    $
    14,433
    
    
    $
    9,921
    
    
    $
    4,512
    
    
    
    45
    %
     Research and Development
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Research and development
    
    $
    4,776
    
    
    $
    5,526
    
    
    $
    (750
    )
    
    
    (14
    )%
  25




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##### Table of Contents



Depreciation and Amortization
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Depreciation and amortization
    
    $
    236
    
    
    $
    245
    
    
    $
    (9
    )
    
    
    (4
    )%
  Total Other Income
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Total other income
    
    $
    690
    
    
    $
    619
    
    
    $
    71
    
    
    
    11
    %
  Income Before Income Taxes and Income Tax Expense
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Income before income taxes
    
    $
    26,696
    
    
    $
    25,448
    
    
    $
    1,248
    
    
    
    5
    %Income tax expense
    
    $
    9,711
    
    
    $
    10,113
    
    
    $
    (402
    )
    
    
    (4
    )%
  26




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##### Table of Contents



Net Income
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Net income
    
    $
    16,985
    
    
    $
    15,335
    
    
    $
    1,650
    
    
    
    11
    %
  Series A Preferred Stock Dividend
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Deemed dividend on Series A Preferred Stock
    
    $
    
    
    
    $
    5,267
    
    
    $
    (5,267
    )
    
    
    (100
    )%
  Net Income Applicable to Common Shareholders
 Six Months EndedJune 30,
    
    Increase/
    
    %2009
    
    2008
    
    (Decrease)
    
    Change(in $000s)Net income applicable to common shareholders
    
    $
    16,985
    
    
    $
    10,068
    
    
    $
    6,917
    
    
    
    69
    %
  Liquidity and Capital Resources
    27




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##### Table of Contents



Recently Issued Accounting Standards
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
     28




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
    
    the Companys ability to continue to successfully implement its Acthar-centric business
strategy, including its expansion in the MS marketplace;
 
    
    the Companys ability to manage its sales force expansion;
 
    
    FDA approval of and the market introduction of competitive products and the Companys
inability to market Acthar in IS prior to approval of IS as a labeled indication;
 
    
    the Companys ability to operate within an industry that is highly regulated at both the
Federal and state level;
 
    
    regulatory changes or actions including Federal or State health care reform initiatives;
 
    
    the Companys ability to accurately forecast the demand for its products;
 
    
    the gross margin achieved from the sale of the Companys products;
 
    
    the Companys ability to estimate the quantity of Acthar used by government-supported
entities and Medicaid-eligible patients;
 
    
    the actual amount of rebates and chargebacks related to the use of Acthar by
government-supported entities and Medicaid-eligible patients may differ materially from the
Companys estimates;
 
    
    the expenses and other cash needs for upcoming periods;
 
    
    the inventories carried by the Companys distributors, specialty pharmacies and
hospitals;
 
    
    volatility in the Companys monthly and quarterly Acthar shipments and end-user demand;
 
    
    the Companys ability to obtain finished goods from its sole source contract
manufacturers on a timely basis if at all;
 
    
    the Companys ability to attract and retain key management personnel;
 
    
    the Companys ability to utilize its net operating loss carryforwards to reduce income
taxes on taxable income;
 
    
    research and development risks, including risks associated with the Companys sNDA for IS
and its preliminary work in the area of nephrotic syndrome;
 
    
    uncertainties regarding the Companys intellectual property;
 
    
    the uncertainty of receiving required regulatory approvals in a timely way, or at all;
and
 29




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##### Table of Contents




    
    uncertainties in the credit and capital markets and the impact a further deterioration of
these markets could have on the Companys investment portfolio.
  30




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Total Number
    
    
    Maximum NumberAverage
    
    
    Of Shares Purchased
    
    
    Of Shares That MayTotal Number
    
    
    Price
    
    
    as Part of
    
    
    Yet be Purchasedof Shares
    
    
    Paid per
    
    
    Publicly Announced
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    Plans or Programs
    
    
    ProgramsApril 1  April 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,164,200May 1  May 31, 2009
    
    
    983,700
    
    
    $
    4.27
    
    
    
    983,700
    
    
    
    7,680,500June 1  June 30, 2009
    
    
    50,000
    
    
    $
    4.27
    
    
    
    50,000
    
    
    
    7,630,500Total
    
    
    1,033,700
    
    
    $
    4.27
    
    
    
    1,033,700
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Election of Directors to hold office until the 2010 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
 Votes For
    
    Votes WithheldDon M. Bailey
    
    
    51,218,658
    
    
    
    1,672,371Neal C. Bradsher
    
    
    50,660,649
    
    
    
    2,230,380Stephen C. Farrell
    
    
    51,356,172
    
    
    
    1,534,857Virgil D. Thompson
    
    
    51,396,407
    
    
    
    1,494,622David Young
    
    
    51,407,194
    
    
    
    1,483,835
 2.
    
    Ratification of Odenberg Ullakko Muranishi & Co. LLP as the Companys independent
registered public accounting firm for the fiscal year ending December 31, 2009.
 For:
    
    
    52,768,046Against:
    
    
    89,322Abstain:
    
    
    33,661
 
 ITEM 5. OTHER INFORMATION
  31




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##### Table of Contents



ITEM 6. EXHIBITS
 Exhibit No
    
    Description31.1
    
    Certification pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 
 *
    
    These certifications are being furnished solely to accompany this quarterly report pursuant
to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the
Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of
Questcor Pharmaceuticals, Inc., whether made before or after the date hereof, regardless of
any general incorporation language in such filing. 32




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##### Table of Contents



SIGNATURES
  QUESTCOR PHARMACEUTICALS, INC.Date: August 7, 2009
    By:
    /s/ Don M. BaileyDon M. BaileyPresident and Chief Executive Officer By:
    /s/ Gary SawkaGary SawkaSenior Vice President, Finance and
Chief Financial Officer 33




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##### Table of Contents



Exhibit Index
 Exhibit No
    
    Description31.1
    
    Certification pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 
 *
    
    These certifications are being furnished solely to accompany this quarterly report pursuant
to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the
Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of
Questcor Pharmaceuticals, Inc., whether made before or after the date hereof, regardless of
any general incorporation language in such filing. 34