Synacthen has already been granted an Orphan designation, and in biotechnology, it needs nothing more in order to demand premium pricing. Synacthen is already being used to treat many of Questcor’s more lucrative indications in other countries. Therefore, Questcor might find it simple to boost the price of Synacthen, once it’s approved, and then use it as an alternative to Acthar in treating common diseases in which Acthar has no effect.
If Questcor’s plan is to eventually boost the price of Synacthen – based on its history I see no reason to believe that this is not their intention – then it seems logical that large pharma Novartis would want no part in the launch. A small royalty on inflated revenue would be more lucrative for the company versus marketing at just 3% the price of Acthar. At this point, it’s hard to say with certainty if Questcor will go this route – but with all things considered, it does seem like the only logical explanation for the acquisition.
Final thoughts
While Questcor Pharmaceuticals Inc (NASDAQ:QCOR)’s business practices may be frowned upon, they are not unheard of in biotechnology. As an investor, when you can find such a practice it is usually very rewarding.
Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ) has practiced the same strategy for the last five years, and during this period its stock has increased over 8,000%. Specifically, its drug Xyrem – which treats rare conditions – has seen a price hike of 220% since late 2008. Moreover, analysts expect another 70% boost by the end of 2014. However, there is a difference between it and Questcor: Jazz Pharmaceuticals actively markets 10 other drugs. Furthermore, Jazz has been lessening its dependence on Xyrem through acquisitions and pipeline growth; a practice that Questcor might need to explore.
While Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ) is playing the Questcor game (partially), they are nowhere near as good as Questcor. In history, there is perhaps no other company that has been as successful at boosting prices and maintaining insurance coverage. As a result, I find it hard to believe that Questcor’s strategy is not to try the same strategy with Synacthen, and to see if it can go two-for-two.
Brian Nichols has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article What Is the “True” Intention Behind This Market-Moving Drug Acquisition? originally appeared on Fool.com and is written by Brian Nichols.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
