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  • Questcor Thoughts On Competition From A Generic 2 comments
    Oct 18, 2012 6:09 PM | about stocks: MNK

    These are some notes and ramblings from my research. I haven't completed all my research, or compiled all that I do have, so there may be some inaccuracies. For that reason, I do not warrant any of it as accurate, and I do welcome comments.

    I did want to share it with everyone though, as it may be helpful, or I may have someone with more background, that provides better insight or corrections.

    I have researched the company that is contracted to manufacture Acthar for Questcor (QCOR). I have also researched the make up of Acthar, from what is available, and using textbooks to fill in some gaps.

    From a therapeutic perspective, Acthar is an easy drug to understand, considering it contains 2 hormones that are rather well know. The caveat to that, is the newer research has started to uncover additional ways it affects the immuno-suppression system. So, it's not just your basic endocrine chapter of information.

    From a manufacturing perspective. A generic would need to contract with a high tech Bio manufacturer, as purified ACTH requires quite a bit.

    One of Citron's claims, that the drug was shelved based on it's usefulness is inaccurate. The previous company used Bovine, and as we all remember, there was a mad cow problem for a while, starting in the late 90s. Aventis had the manufacturing done, where mad cow was a problem. Questcor's manufacturer is up in Canada, and they use Pig.

    For those that don't know, ACTH is created using animal pituitary glands. Those are hanging from the infidibulum (a little stalk), in your brain.

    Acthar also contains joining and other peptides. That's where the 'secret ingredients', if you want to call them that, reside. They know how the ACTH and LH are connected, and what other peptides they are using for purposes like probably increasing cell uptake (via receptors), etc, etc.

    The synthetic ACTH, used in Europe, only has 24 of the 39 amino acids. It is claimed that those are the only 24 that are functional. However, as I stated before, the newer research (like what will be presented at Kidney Week), is finding newer ways that the hormone ACTH interacts. So, 15 less amino's may make a difference, at least for some indications like NS.

    It's also interesting to note, that the Synthetic is not approved in all other countries abroad. Some only allow it for adrenal insufficiency testing, and others only for Veterinary use.

    While my previous statement 'newer ways of the drug interacting' may sound like it plays into some of Citron's claims, it really doesn't. These new interactions, are also the same interactions that the ACTH your body is constantly creating (half life of 10 minutes in your body), interact. So, this is literally new Human Anatomy information too.

    With all that in mind, it may be feasible to bring a generic to market but I tend to agree with Questcor and other investors. Barriers are:
    - R&D costs
    - FDA testing, and we all know how fast that is
    - Contracting with a manufacturer that has the right facilities
    - Time Premium Decay

    The last one is probably the most important. By the time another company has spent millions to get a generic approved, Questcor's costs will probably have gone down with volume. They are actively pursuing other indications, and not only the price, but the acceptability of price will be better. For example, it may end up on Tier 2 of UNH's policy, based on cost.

    There are calculations out there, StreetSweeper even uses a standard calculation in their hatchet piece, that determine whether another Pharma should look into pursuing a generic.

    Right now, it may look enticing from the price perspective, as Citron and SW claim, but for small current population groups being treated, well that is a risky proposition. Are you really going to spend millions and millions just to grab 200 NS patients of market share?

    Again, by the time it may be feasible for a generic, it still won't be worth it because the price will be lower, and Questcor will still be a very profitable, growing company, on much larger volume.

    Disclosure: I am long QCOR.

    Stocks: MNK
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  • Michael Fuller
    , contributor
    Comments (298) | Send Message
     
    Author’s reply » PS. If anyone else is working on researching debunking the generic claim by Citron, please contact me. I would be open to sharing my notes, and collaborating.

     

    Thank you,

     

    Mike
    18 Oct 2012, 06:17 PM Reply Like
  • jerry parker
    , contributor
    Comments (81) | Send Message
     
    Josh at Lazard has done some very good work on this, part of his mini-series over the past several months. I think if you quantified some of the costs/time of developing a synthetic and generic, and also how cost/difficult it would be to prove that it's SUPERIOR and/or absolutely identical(impossible) to currently approved acthar gel, that would go a long ways of helping smart people realize that it's a negative ROI - and that it'd be cheaper to just buy the entire QCOR company.
    Said another way, no company's going to spend $250M USD to come up w/ an FDA approved drug to compete against Acthar gel and then destroy the market by selling it for 90% less current price. Any company who is capable of pursuing it would rather spend the investment/time pursuing a $3-5B soon to be off-patent drug rather than the risk of trying to pursue Acthar gel.
    18 Oct 2012, 08:13 PM Reply Like
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