Another New Marketing Effort Spotlights Questcor's Long-Term Potential

| About: Mallinckrodt PLC (MNK)

By Jake King

Questcor (QCOR) is getting some love Thursday morning following an announcement that the company will be pursuing the commercialization of H.P. Acthar Gel in respiratory manifestations of sarcoidosis, building out a preliminary pulmonology sales force of 5-10 sales reps. Sarcoidosis is already included in Acthar's broad and FDA-approved label, and the expansion highlights the fact Questcor controls a lucrative product with significant potential for commercial expansion without further FDA approvals. Acthar Gel was originally approved in 1952, before the FDA required rigorous clinical testing, for more than 50 indications. In October of 2010 when the FDA approved Acthar for infantile spasms, the label was modernized to include 19 approved indications. Questcor currently markets the product for just five of those indications, not including the addition of pulmonary sarcoidosis. Logic suggests that Acthar works in this patient population (standard of care is corticosteroids), but the company made clear that this is a pilot effort that may not pan out. Thursday's news is a positive for QCOR's long-term growth, and we'll be looking for updates on sales and the size of this sales force in the new indication at the end of this year.

Sarcoidosis is a systemic inflammatory disease that involves the abnormal collection of chronic inflammatory cells, called granulomas, that often form as nodules in the lungs -- when they do, the disease is known as pulmonary sarcoidosis. The lungs can become stiff and may not be able to hold as much air as healthy lungs, and in the worst of cases, sarcoidosis causes the formation of scar tissue. Sarcoidosis, says Questcor, affects 150,000 Americans, and 90% of cases are pulmonary. The company anticipates hiring and training a pilot sales force for the indication in the third quarter, with sales calls beginning in the fourth quarter of 2013. If Acthar catches on in pulmonary sarcoidosis for steroid-intolerant/refractory patients, it will be entering a sizable market with significant implications for the top-line.

Acthar is truly a dream product for pharma. In-part because of its orphan designation for infantile spasms, Questcor charges $28,000 per vial of Acthar. And with a broad and largely untapped 19-indication label, Questcor has yet to take full advantage of its prescribing potential. We've expected continued growth of Questcor's marketing efforts given these untapped indications, hence our recommendation to buy QCOR last year when the stock took a major dive. The company is making a concerted effort to move Acthar into new landscapes, and we believe there's still considerable opportunity as Questcor goes after new indications. The company is even going after indications outside of the existing label; QCOR plans to begin a Phase II trial evaluating Acthar in Amyotrophic Lateral Sclerosis (ALS) soon, and enrollment continues in a Phase II trial to evaluate the efficacy and safety of Acthar in patients with diabetic nephropathy. Reimbursement concerns have proven unfounded since Aetna's announcement last year; the company nixed a potential competitor with the acquisition of Synacthen last month; and QCOR expects to pay a quarterly dividend and continues to buy back shares. Here's what we wrote in June, suggesting that QCOR is heading north of $50, and you can see our full assessments of Questcor by clicking here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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