Questcor Pharmaceuticals, Inc., headquartered in Hayward, CA, is a specialty pharmaceutical company serving the needs of the acute care and critical care hospital markets. The Company has an extensive pipeline of pharmaceuticals, including four currently marketed acute care products, two late stage critical care drugs currently under clinical development, another Phase III medication already being marketed abroad, and several mid and early stage research developments. Trading on the AMEX under the symbol QSC since its formation through a merger between RiboGene, Inc. and Cypros Pharmaceutical Corporation in November 1999, Questcor has emerged as a well-balanced, fully-integrated pharmaceutical company within the small-cap arena.

Capitalizing on its diversified product pipeline, Questcor's business model provides great potential for rapid growth and at the same time preserves the Company's stability and continuity. The funding for focused development and clinical trials of products in Questcor's proprietary acute and critical care portfolio is continuously supplemented by revenues from products already marketed and distributed directly to hospitals by the Company's in-house sales force or through marketing alliances with leading pharmaceutical companies. In addition, the Company engages in co-development partnerships in order to further mitigate the risks and reduce costs. This year the Company has licensed certain components of its earlier stage antiinfective research technology to Dainippon Pharmaceutical Co. Ltd. in Osaka, Japan and Rigel Pharmaceuticals, Inc. of South San Francisco, generating immediate revenue, as well as rights to future milestone and royalty payments. The creative strategic management of its family of products allows Questcor to enhance shareholder value by concentrating on development of most advanced and lucrative drugs, significantly reducing its burn rate and still maintaining tremendous growth prospects for future products.

Questcor's impressive drug pipeline includes numerous acute and critical care pharmaceuticals, some with multiple applications, which face limited competition in the marketplace and often warrant expedited approval consideration by FDA.

GLOFIL & INULIN Glofil and Inulin allow the direct measurement of glomerular filtration rate (GFR), a diagnostic parameter of kidney function that can be utilized to detect disorders such as polcystic kidney disease. Currently, there are over 2 million creatinine tests performed each year to determine GFR, but these measures are indirect and have been shown to be inaccurate. Glofil is a far more accurate and reliable test for kidney function. The approved and marketed Glofil technology reduces the test procedure time from 24 to 3 hours and significantly improves accuracy. With these attributes, Glofil should gain a powerful position in the market of kidney function testing, the diseases of which cost the U.S. economy over 12 billion per year.

ETHAMOLIN® Ethamolin addresses the problem of bleeding esophageal varices, a condition which occurs in cases of advanced liver disease in which hepatic veins become distended, swollen due to internal pressure and may burst. Ethamolin is a potentially life-saving drug, and is the only product on the market approved for this purpose.

DERMAFLO(TM) LINE Questcor has exclusive worldwide rights to a patented Dermaflo technology, a solid phase system with potential multiple applications that allow continuous topical release of a particular incorporated drug. Currently, the Dermaflo technology has been marketed as Neoflo(TM), which delivers the triple antibiotic Neosporin® for general wound care in the form of a bandage. Questcor is selling to NutraMax an over-the-counter private label version of Neoflo. NutraMax's channels include numerous retail pharmacies, including Wal-Mart and Kmart. market of approximately $60 million annually in the U.S.

EMITASOL® Currently in Phase III clinical trials, Emitasol is an intranasally administered formulation of metaclopramide intended for treating gastroparesis (stomach paralysis), a prevalent gastrointestinal disorder in diabetic patients, and the syndrome known as delayed onset emesis, or vomiting and nausea, that is frequently associated with chemotherapy. Questcor has partnered with Roberts Pharmaceutical Corp., a subsidiary of Shire Pharmaceuticals, Inc., to co-develop the patented product for North America. As part of the license agreement, Questcor will receive up to $10 million milestone payment upon FDA approval, anticipated in 2002, as well as royalty payments of 12.5% on sales. Roberts Pharmaceutical's public statements suggest initial annual sales of $25-40 million in the first and second years, and up to $70 million annually thereafter. However, this estimate only includes the delayed onset emesis market, in which out of 1.4 million cancer cases reported each year, 60% are treated with chemotherapy and well over 80% of patients experience symptoms treatable with Emitasol, which is expected to sell for about $100 per treatment. In addition, out of the approximately 8 million reported cases of diabetes in the US, up to 50% experience symptoms or evidence of gastroparesis, which creates a much higher revenue potential for the product. Currently, the gastroparesis target market is in the $1 billion range. In addition, the Company distributes Emitasol abroad under licensing agreements in several countries, including Italy, where it is marketed under the brand name Pramidin®, by Crinos Industria Farmacobiologica, SpA, in Chile by Laboratorios Silesia and throughout Eastern Europe by CSC Pharmaceuticals of Vienna, Austria. The management is negotiating additional agreements covering Australia, New Zealand and Southeast Asia.

CYTOPROTECTANTS Questcor's research efforts concentrate to a large extent on development of drugs called cytoprotectants, which prevent body cells from experiencing injury or death during ischemic conditions. Ischemia is characterized by a lack of glucose and oxygen usually resulting from a decrease in blood flow. Glucose and oxygen starvation lead to depletion of adenosine triphosphate (ATP), a fuel needed to perform any cell activity, which in turn causes the death of cells. Ischemia can be considered the number one cause of death, as it precipitates all heart attacks and strokes. CordoxTM and CeresineTM are two drugs that use different cell processes to effectively increase the levels of ATP in an ischemic event. Several applications of these drugs have been granted an expedited development status by the Food and Drug Administration (FDA), reserved for drugs, which treat life-threatening or severely debilitating diseases and for which there is no other adequate therapy. Ceresine, which can be used for brain related ischemic episodes such as stroke and closed head injury, is currently undergoing testing at the University of Florida in Gainsville and at the University of California in San Diego for the treatment of congenital lactic acidosis (CLA), a unique chronic condition affecting about 5,000 children domestically, which has been granted an orphan status resulting in tax advantages and seven years of marketing exclusivity to the first licensed agent. The Company is currently focusing on the ability of Cordox to improve the biochemical and physical characteristics of stored human red blood cells, in collaboration with the Hoxworth Blood Center at the University of Cincinnati in Ohio. The Company expects to complete the in-vitro clinical testing and file with the FDA before the end of 2001 and, assuming an expedited review, market the product as a blood preservative the year after. Cordox is expected to increase the shelf-life of blood from the current maximum level of 42 days to 8-10 weeks, significantly expanding storage possibilities for transfusions, which exceed 23 million units of blood components every year in the U.S. alone. Other applications for Cordox include reduction of complications during coronary bypass surgery and treatment for the sickle cell disease, a unique red blood cell condition which has also been granted an orphan status. The Company also has two promising Phase II clinical products, Migrastat® for migraine headache and Hypnostat® for insomnia.

Although the pharmaceutical industry is highly competitive and dominated by larger companies, Questcor's unique product family provides excellent positioning for the Company. By pursuing products that have no substitutes, such as Ceresine, Cordox or Ethamolin, products that exhibit a clear competitive advantage, such as Emitasol or Glofil, and technologies with wide applications, such as Dermaflo, Questcor is effectively competing with other pharmaceutical firms in the market. Such careful product management and marketing strategies will likely result in high market penetration. Other growing pharmaceutical companies with different Phase III and/or market-ready products include Vical, Inc., Alkermes, Inc. and ImClone Systems, Inc.

MANAGEMENT The well-balanced leadership of the Company abounds in entrepreneurial spirit, technical expertise and significant managerial and industry experience. Charles J. Casamento, President, CEO and Chairman of the Board, has held various management positions at such renowned industry firms as Genzyme Corporation, American Hospital Supply, Johnson & Johnson, Hoffmann-LaRoche, Inc. and Sandoz, Inc. Subsequently, he co-founded and led as CEO Interneuron Pharmaceuticals, Inc., a biopharmaceutical company (NASDAQ: IPIC), which achieved a market cap of $1.6 billion under his leadership. Mr. Casamento joined RiboGene in 1993 as CEO and President and was instrumental in spearheading the merger with Cypros Pharmaceutical, which closed in late 1999, resulting in the formation of Questcor. The Company's key technical processes are directed by Jonathan C. Goldsmith, M.D., VP of Clinical Research and Regulatory Affairs. Prior to his work within the pharmaceutical industry he had a twenty-year career in academic medicine which encompassed basic and clinical research. Previously, Dr. Goldsmith directed research at Centeon, LLC, a biopharmaceutical company involved in the development and marketing of plasma derivatives and recombinant coagulation products and was VP of Clinical Affairs with Alpha Therapeutic Corp., the U.S. subsidiary of Yoshitomi Pharmaceutical Industries, Inc., a large multinational pharmaceutical company headquartered in Japan. Hans P. Schmid is VP of Finance & Administration and Chief Financial Officer. Prior to joining Questcor Mr. Schmid held executive positions at Oread, Inc., a contract drug development and pharmaceutical manufacturing company from Palo Alto, California, Roche Bioscience, a division of Hoffmann-LaRoche and Syntex Pharmaceuticals. Kenneth Greathouse, VP of Marketing & Sales held executive marketing positions at Boron LePore and Elan Corp., PLC (NYSE: ELN), and has 18 additional years of experience at Lederle Laboratories, a division of American Home Products Corporation (NYSE: AHP).

Questcor has cash, cash equivalents and short-term investments of approximately $10 million, which will support aggressive marketing efforts of the four approved acute care products, as well as expedient progress through the pipeline of its major drug candidates in development. Intensified marketing of Ethamolin, Glofil and Neoflo, along with the launch of Sildaflo scheduled within the next 6 months, as well as license cashflow from its antiinfective research technology, should contribute to immediate revenue growth. Overall, the current QSC stock price does not reflect the future value of the impressive pipeline of drug candidates in development, the pharmaceutical value of the products currently marketed, and the experience value of the Company's management team. Shareholder value should be enhanced in the near term from increased revenues and in the intermediate term from progress in drug developments. Given the strong balance sheet, significant cash reserves, growing revenue stream and impressive management talent and track record, QCS shares represent a strong buy opportunity for aggressive long-term investors who can withstand the risks associated with a micro-cap company and the volatile nature of the biotech sector. We believe the post valuation of the combined company is very attractive.


Alan Stone, Managing Director

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