Anaheim-based Questcor Pharmaceuticals Inc. has used one major drug to fire up revenue growth.
The drug maker ranked No. 1 on the list of fastest-growing large public companies based in Orange County (see large-companies list, page 46). Its revenue shot up 333% in the 12 months ended June 30 to $620.6 million from $143.4 million for the 12-month period ended in June 2011.
Questcor’s primary drug is H.P. Acthar Gel. Acthar, which is injectable, is primarily used for treating kidney disorder nephrotic syndrome, as well as multiple sclerosis flare-ups, rheumatoid diseases and infantile spasms, a rare form of epilepsy.
The company’s revenue growth has come in the midst of quite a few gyrations with its stock. Its shares fell as much as 14% in after-hours trading on Oct. 29 after it acknowledged during its third-quarter earnings call that a U.S. Justice Department investigation into promotional practices for Acthar that started last year was widening with participation from a pair of U.S. attorneys offices and the Los Angeles office of the Securities and Exchange Commission.
Questcor said it was cooperating with the investigation but “consistent with [its] previously announced policy” would not take questions about “potential or pending government investigations.”
The drug maker’s dip came in spite of third-quarter results that exceeded analyst expectations.
Questcor’s third-quarter revenue totaled $236.3 million, up 68% from 2012’s third quarter. Wall Street had expected revenue of $199.7 million.
Profit came in at $94.4 million, up 69% from the year-ago quarter and above analysts’ forecast of $80.1 million.
Sales in rheumatology, neurology and nephrology exhibited growth year-over-year, Chief Executive Don Bailey said in a statement.
“This quarter’s performance was primarily driven by a continued increase in Acthar usage among both rheumatologists and nephrologists,” he said.
The slide last week didn’t erase much larger gains racked up by Questcor this year. Its shares are up 136% since the start of the year, with a recent market value of about $3.62 billion.
Other Uses
Questcor is continuing to explore other uses for Acthar. It said last month that it would start a second-phase study of the safety and efficacy of Acthar for patients who have acute respiratory distress syndrome, which is a life-threatening lung condition.
It is also going to do a second-phase study of Acthar for amyotrophic lateral sclerosis, a neuromuscular disease that killed New York Yankees legend Lou Gehrig.
Questcor has made deals to diversify in recent months.
The company said in June that it would pay Switzerland-based Novartis AG at least $135 million for an inflammatory and autoimmune disease drug.
Synacthen and Synacthen Depot have been approved in 40 overseas markets for a variety of diseases, including ulcerative colitis. They are not yet approved in the U.S.
Questcor gained “an initial international presence in over three dozen markets” through buying Synacthen, Bailey said at the time of the deal’s announcement, adding that the new drug “helps clarify potential for Acthar outside of the United States.”
Synacthen and Synacthen Depot strengthen Questcor’s business through the acquisition of an additional melanocortin peptide with characteristics different from and complementary to Acthar, Bailey said.
Analysts gave Questcor a thumbs-up for the Synacthen deal.
“With this smart acquisition, [Questcor] shores up any immediate concerns over a potential competitor entering the market,” said Jim Molloy, who follows Questcor for Philadelphia-based Janney Montgomery Scott.
Molloy added in a research note that any potential competitive threat from Synacthen was “absorbed and eliminated” by Questcor’s buy.
The Synacthen news sent Questcor’s shares up 22% on June 11, the day it was announced.
Questcor is optimistic about Synacthen:
“Like Acthar was when we first acquired [it] in 2001, Synacthen has been a severely neglected product for many, many years and we look forward to both re-energizing it outside the U.S. and hopefully someday may see it available to American patients for the first time,” said Steve Cartt, Questcor’s chief commercial officer, on the earnings call.
Besides Synacthen, Questcor’s future will be driven by increased penetration of Acthar, developing new uses and markets “and the appropriate deployment of cash that we believe will be generated by these activities,” Bailey said.
Bailey, in an earlier letter to Questcor shareholders, said the company “now has the financial and scientific resources to pursue our own internal research programs.”
Questcor also made a production channel move, buying Canadian contract manufacturer BioVectra Inc. in January for $51 million, with another $51 million in potential milestone payments. Questcor and BioVectra had worked on making Acthar for some 10 years.
Bailey also said that Questcor believed insurance coverage for Acthar—something that has affected its stock in the past—continues to remain favorable when Acthar’s prescribed for uses for patients “in need of an additional FDA-approved treatment alternative.”
Questcor is winning some fans among stock bloggers—a group that has largely savaged it in recent years, particularly short-sellers.
Last month, the Seeking Alpha investor website ran a piece by former E.F. Hutton & Co. and Shearson Lehman employee “EXPstocktrader” contending that the company is “setting up for a significant upswing in share price.”
The article broke down several reasons why Questcor “will maintain its … robust revenue growth,” including international expansion, Synacthen and research for Acthar.
