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Questcor Pharmaceuticals Inc (QCOR), Biogen Idec Inc (BIIB): A Biotech Betting Everything on a Single Drug

Despite some negative news, mainly related to reimbursement issues and excess stock booking, Questcor Pharmaceuticals Inc (NASDAQ:QCOR) recently gained solid momentum due to a couple of factors.

Questcor Pharmaceuticals Inc (NASDAQ:QCOR)

One was the sales growth of Acthar Gel and the addition of BioVectra sales during Q1 2013. The other was the announcement of acquiring exclusive rights of Synacthen from Novartis AG (ADR) (NYSE:NVS). Both facts together made the stock go up 15% and more last week.

Acthar began as a therapy for Infantile Syndrome

Acthar was initially developed for Infantile Spasms, or IS, where it is the only available drug. Later, Acthar began to be marketed by the company for other diseases like Nephrotic Syndrome (NS), Multiple Sclerosis (MS), and various rheumatoid related diseases. In most of these therapeutic areas, there are much larger players who dominate the market.

Synergy with Novartis for Synacthen

Second, as for the synergy with Novartis AG (ADR) (NYSE:NVS) for Synacthen, Acthar is presently sold only in the U.S. Synacthen, however, is widely spread across the European market, but is yet to receive FDA approval to sell in the U.S. The product is mainly indicated for the treatment of rheumatoid diseases, ulcerative colitis, nephrotic syndrome, acute case of multiple sclerosis, and chronic skin diseases using steroids. So, buying a license for Synacthen works well for Questcor Pharmaceuticals Inc (NASDAQ:QCOR). It stops Synacthen from giving Acthar competition in the U.S.

BioVectra acquisition

Thirdly, there is the acquisition of BioVectra, which manufactures the active ingredient for Acthar, called an API. It is possible to sell the active ingredient directly into the market. So, by acquiring BioVectra, Questcor Pharmaceuticals Inc (NASDAQ:QCOR) is creating a partial monopoly in the market where it is the source of both Acthar and its active ingredient.

The diseases addressed by Acthar Gel

Funnily, Acthar makes more money in those therapeutic markets where it is not a major player, compared to in the IS market, where it is the only player. It makes only 10% of its revenue from IS, while it makes 50% from NS, 30% from MS, and 10% from rheumatology therapies. Of these, the MS market is the largest, with an estimated 2017 value of $16.6 billion. At present, Acthar has very small market shares in these larger areas.

Comparison of Acthar with other treatments

Corticosteroids are mostly recommended for the treatment of NS. The products are cheaper, but can’t be used with patients sensitive to steroids. Rituxan from Biogen Idec Inc (NASDAQ:BIIB) is one drug that can be used in steroid sensitive and resistant nephrotic syndrome.

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