Questcore’s search for new drugs and markets

10 Jan

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Questcore is a pharmaceutical company with quality products and financial management.

Of the numerous pharmaceutical names presenting at the JP Morgan Healthcare Conference this year, Questcore stands out because it successfully targets a niche market. Its balance sheets are healthy too: its operating income in Q3 2012 was $83.4m, up from $33.6m for Q3 of 2011; and its gross profit increased by a bigger margin, from $59.8m in 2011 to $140.3 m this year.

It specialises in autoimmunodeficiency syndromes like lupus erythematosus, MS and kidney malfunctions. Its flagship product Acthar is used to treat MS relapses and a rare form of childhood epilepsy known as Infantile Spasms. Although it describes its penetration of the market for alternative MS relapse treatments as “modest”, it could prove a better option than steroids, whose negative side effects include osteoporosis, weight gain and diabetes.

Steroids are believed to work in MS patients as an anti-inflammatory for the nervous system, and by suppressing the immune system, preventing it from attacking the myelin in nerve sheaths. Acthar does the same essential jobs, by binding to melanocortin receptors, a type of G-protein coupled receptor. It connects to all five types of melanocortic receptor, which explains its variety of other uses.

At the moment Acthar is predominantly used as an alternative treatment for nephrotic syndrome (kidney damage leading to leakage of protein into urine) to prevent uremia, and to prevent the same idiopathic condition in lupus erythematosus.

Uremia occurs when toxic nitrogen compounds become accumulated in the blood, leading to dizziness, fatigue, swelling and further inability to filter waste products. Fluid, electrolyte, and hormone imbalances and metabolic abnormalities follow.

The drug works in this instance by inducing dieresis (mass discharge of urine), bonding to the melanocortic receptors (MC2R) in the cells of kidney podocytes, triggering the production of cortisol and other adrenal compounds.

Questcore reports a healthy uptake of its multi-purpose product. Since this time in 2010, the use of vials per quarter has more than doubled, with net sales per quarter showing a similar pattern of increase. In response it has rewarded loyal investors, paying a quarterly dividend of $0.20 per share. Furthermore, it has given $332m through share repurchases for 21.4m shares, an offer recently expanded to incorporate another 7m shares.

Strategic moves to consolidate its manufacturing base, and the trade secret of the drug’s components, concluded in the recent acquisition of the manufacturer of Acthar’s Active Pharmaceutical Ingredient (API). Gaining BioVectra released C$50m, with a further C$50m on the horizon if 3rd party manufacturing capabilities prove as profitable as hoped.

Questcore is taking a long-term perspective on further pharmaceutical innovation; since 2011, it increased R&D spending from $16.8m to $22.1m, and spending on clinical and preclinical studies from $34m to $65m.

Its spokesmen claimed they were “committed to… identifying and expanding Acthar’s therapeutic role in existing and new directions,” and to “creating long term value for shareholders.”

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