By Keith Brown, Ph.D. and Andrew McDonald, Ph.D.
Questcor Pharmaceuticals (QCOR) recently received good news related to its flagship drug, H.P. Acthar Gel, an adrenocorticotropin hormone analogue. A new study conducted at the Keck School of Medicine at University of Southern California has found that Acthar Gel is beneficial as an add-on therapy for treatment of multiple sclerosis (MS) patients whose previous regimen has stopped working. The data was released by the American Academy of Neurology ahead of their 65th annual meeting in San Diego, CA from March 16th - 23rd, where the findings will be presented. Click here to view the abstract.
The open-label study recruited 23 participants with MS who were receiving ongoing beta-interferon treatment and have had at least one relapse or the presence of newly identified brain lesions. Participants were randomly assigned to pulse therapy each month for a year with either Acthar Gel (80 units IM once/day x 3 consecutive days) or methylprednisolone (MP, 1 gram IV x 1 dose), a common corticosteroid therapy for MS. Evaluations were performed every 3 months for 15 months by examiners who were blind to the patients' treatment regimen. Relapse rate was the primary outcome measure.
The study found that the cumulative relapse rate per patient in the Acthar Gel group was 0.08 compared to 0.8 with patients who took MP (p=0.03). Additionally, no patients in the Acthar Gel group had a psychiatric episode, while the methylprednisone group had a cumulative number of 0.55 psychiatric episodes per patient (p<0.0001). This data indicates that Acthar Gel has a superior clinical profile versus current standard of care for breakthrough MS.
Acthar Gel is approved by the FDA for the treatment of 19 different conditions, most notably infantile spasms, nephropathies and multiple sclerosis. While indicated for use in acute exacerbations of MS, Acthar Gel is typically relegated as an option to patients who fail or cannot tolerate corticosteroids, due to its hefty price tag. Payers have responded to the price by implementing restrictive prior authorization guidelines requiring the failure of corticosteroids before they will cover Acthar Gel. Last September, Aetna dropped coverage for all indications except infantile spasms, citing the high cost and lack of compelling data in MS. This decision triggered a temporary selloff by investors who worried that other payers would follow suit, causing a 55% drop in Questcor's stock price.
We note that Acthar Gel has proven superior to corticosteroids for the treatment of infantile spasm, but do date, we have not seen head-to-head data that proves the superiority of Acthar Gel for the treatment of MS breakthrough, until now. The positive head to head data from this study directly addresses concern over efficacy in this population, which may sway payers to reimburse this product.
Our expectation is that insurance providers will continue to search for excuses to manage the use of Acthar Gel, even in cases where MS patients have no other alternatives to manage their flares. Nevertheless, as we continue to see quarter over quarter, Athar Gel sales continue to grow due to the large number of patients in the various indications that fail or cannot tolerate IV steroids. As we have noted, Questcor is well positioned for continued growth in 2013.
Questcor is currently trading at $32.36 per share (58.5M shares) and as of December 31st the Company had $155MM of cash and cash equivalent (or $2.65 per share in cash), no debt, and an EV of $1.67B. Net sales of Acthar Gel were up 133% from $216MM in 2011 to $509MM in 2012. This precipitous rise is primarily attributed to increased use in the treatment of nephritic syndrome. Our expectation is that MS will continue to be a meaningful contributor and that rheumatology should see impressive growth, sending revenues even higher in 2013. We anticipate Questcor will continue to successfully diversify its sales in additional therapeutic areas and will return to a P/E of at least 15 in 2013, a conservative estimate, sending the stock price north of $60/share.
Additional disclosure: Business relationship disclosure: LifeSci Advisors is a healthcare advisory firm. This article was written by Keith Brown, one of our analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.