Questcor Pharmaceuticals (QCOR) - FDA notified 2nd PDUFA delay

QCOR surged in early trading, tapping $10.63 at one point (up ~9.5% from opening mark), in anticipation of FDA's drug approval.  The stock closed at $10.38 and shed 70% of the day's gain in after-hour trading with news of FDA's second delay in PDUFA action date.  Company press release halts major sell-off.

Just as health care providers and investors geared up to embrace FDA's approval of Questcor's infantile spasm drug, Acthar, another delay was dished out by the drug regulator 3 days before the scheduled action date.  Questcor informed the public about the status of their supplementary NDA (New Drug Application) today in its press release stating that 

the U.S. Food and Drug Administration (FDA) has informed Questcor that the FDA will require additional time beyond the current action date of September 11, 2010 to complete its review of Questcor's supplemental new drug application (sNDA) for H.P. Acthar Gel (repository corticotropin injection) in the treatment of infantile spasms (IS).

"We are pleased to be nearing the finish line and look forward to the FDA finalizing its review of our sNDA," indicated Don M. Bailey, Questcor's president and CEO, who remains optimistic about the status of review and reassured investors of a healthy balance sheet for the 3rd quarter of 2010.  Once again, the FDA never fails to surprise everyone last minute.

Satisfied with the early run-up, I exited all my positions at $10.58 just when the price started to dip down - 9% return in 8 days =)     

Questcor Pharmaceuticals (QCOR) - crossing the finish line in ~1 week

Questcor Pharmaceuticals (QCOR) is scheduled to hear from the FDA's decision regarding its infantile spasm drug, H.P Acthar Gel, on Sept 11, 2010 (since this falls on a Saturday, the announcement will be available most likely Friday or Monday).  An official stamp by the agency will allow Questcor to receive an orphan drug status and market and promote the drug specifically for the indication of infantile spasm, a serious form of epilepsy, or seizure disorder, occurring during infancy and childhood (~0.03 to 0.05% of live births).

Delay in June
Originally, the FDA was expected to announce the final call on H.P Acthar Gel's approval on June 11, causing the stock to rally at the time.  However, an unforeseen notification was issued to Questcor to postpone the key date to Sept 11, 2010.  News like this typically would drag the stock price down as investors retreat in panic.  Surprisingly, instead of a large scale sell off, the stock soared and gained 14% in 4 days after FDA's delay ($10.01 --> $11.44).

Cheerful note
The surge in stock price, while peculiar, may have resulted directly from the FDA's positive tone in its communication with QCOR:

The FDA extended the PDUFA date in order to review information regarding labeling and potential post-approval commitments that they solicited from Questcor.

"Labeling" and "post-approval commitments" sound to me like an 80% tilt in the direction of approval.  Furthermore, the advisory panel, which met on May 6, 2010, expressed willingness to support the passing of Questcor's drug.  The members voted 22 yes to 1 no when asked, "did Questcor provide substantial evidence of effectiveness of Acthar as a treatment for the patients with infantile spasms?" and 20 yes, 1 no, and 2 abstentions when asked, "did Questcor submit sufficient evidence of safety of Acthar at an effective dosing regimen?"

Stock trend
QCOR has seen its ups and downs in the past 3 month.  With the key PDUFA date ahead (Sept 11, 2010), the stock is poised for a run.  However, with the recent dismal outcome of drug reviews (e.g. Jazz Pharmacuticals, Vivus Inc.) and FDA's notorious unpredictable nature, nothing can be said for sure.  Nevertheless, in a recent note provided to his clients, John Newman, an Oppenheimer analyst, maintains a buy rating on QCOR with a $14 price target, expecting FDA's complete approval of Acthar Gel for the treatment of infantile spasm.  Upon approval, the drug could add $10 - 15 million to Questcor's already-impressive earnings and raise EPS by 4 to 9 cents.

Disclaimer:  Long QCOR     

Remember Questcor Pharmaceuticals (QCOR)? - PDUFA Sept 11, 2010

Read about Questcor Pharmaceuticals (QCOR) here.  The upcoming PDUFA for the company's infantile spasm drug, H.P Acthar Gel, is scheduled for Sept 11, 2010.  The FDA requested an extension for reviewing this drug back in June which brought the shares down.  However, Questcor expressed confidence in gaining FDA nod for the drug in their press release despite the delay.  The positive sentiment will likely attract investors back ahead of the key decision date - Sept 11, 2010.

Shares plunged 8.24% in after-hour trading following QCOR drug approval delay BUT... things may not be all negative

Investors pulled out of Questcor Pharmaceuticals (QCOR) as news around FDA's delay on QCOR's Acthar Gel approval surfaced 5 minutes after regular trading hours ended.



While this may seem like a blow to the chest for those still holding positions (which was strongly recommended against in my earlier post), it may be an opportunity to ride the waves again before the new September PDUFA. Why is this? Well, reading QCOR's press release closely, one is able to discern positive sentiment behind the approval delay, which, according to the agency, was to allow more time for them "to review information regarding labeling and potential post-approval commitments that they solicited from Questcor". Judging from this, it seems like a matter of time before Acthar Gel gets cleared by the FDA, an ultimate hope for young patients, doctors, and stakeholders.

My prediction is that the price will come down from its peak, as already happening after the news on Friday, to around $7-8, at which point it would be a great point of entry for another climb before the September 11 PDUFA. Again, like I suggested before, upon approval, the shares will likely be pushed up to $12-14. Nevertheless, since QCOR only published the FDA's response late Friday afternoon, we will have to gauge the direction as well as the magnitude of QCOR's stock movement and the state of the market as whole in order to make further decisions on the next steps. Hang on tight! We may be in for another fun ride with Questcor!

Questcor Pharma's (QCOR) shares likely to drop on after-market announcement of FDA's extension

Questcor Receives Notification of PDUFA Date Extension to September 11, 2010

UNION CITY, Calif., June 11, 2010 /PRNewswire via COMTEX News Network/ -- Questcor Pharmaceuticals, Inc. (Nasdaq: QCOR) today announced that it has received notification from the U.S. Food & Drug Administration (FDA) that the PDUFA date for Questcor's supplemental new drug application (sNDA) to approve Acthar for the treatment of infantile spasms (IS) has been extended to September 11, 2010. The FDA extended the PDUFA date in order to review information regarding labeling and potential post-approval commitments that they solicited from Questcor. This follows the May 6, 2010 votes by the Advisory Committee to the Division of Peripheral and Central Nervous System Drugs of the FDA which indicated support for approval of this new Acthar indication.

"We look forward to working with the FDA over the next few months in order to finalize these critical elements," said Don M. Bailey, President and CEO of Questcor.

Investors should note that there can be no assurance that the FDA will approve this sNDA by September 11, 2010, or thereafter.

QCOR - last minute tactics

The panic and turbulence reigning the market at the moment has capped the run-up normally preceding a PDUFA action date. In Questcor Pharmaceuticals' case, you can the many spikes from the $10 mark that are rapidly being pulled back. This signifies the uneasiness of investors even with the positive outcome from the FDA's advisory meeting in early May. While the stagnate price lures many buyers to enter at the last minute, hesitant early birds, many of whom already sitting on ~50% gain (those entered ~3 mo. in advance) are reluctant to see their profit deteriorate due to the current market turmoil, and therefore attempt to unload their cargo a little sooner. As a result of the strong opposing forces, QCOR's shares have been seesawing in the week leading up to the June 11 PDUFA.


As we're merely 2 days away from hearing FDA's decision on QCOR's drug, it's going to be fascinating to see how the story unfolds in this unique market environment. I would not hold any position past tomorrow's closing bell, anticipating a robust and rapid sell-off post Friday's announcement regardless of whether or not QCOR sees an approval or a complete response letter.

Questcor Pharmaceuticals (QCOR) - calming the jitters of the wild market

Company
Questcor (QCOR), a California-based biopharmaceutical company, is the manufacturer and provider of prescription drugs for the treatment of rare central nervous system and inflammatory disorders. The firm's lead product, H.P. Acthar Gel, is a natural form of adrenocorticotropic hormone (ACTH) approved for the treatment of acute exacerbation of multiple sclerosis and for diagnostic testing of adrenocortical function, among other indications. Interestingly, the drug has also been commonly prescribed off-label for use in infantile spasms treatment, for which the company is requesting official marketing consent from the FDA which will make the final announcement on June 11, 2010.


P/E ratio: 24.2x
EPS: 0.42
Price to Book ratio: 7.1
Return on Equity: 34.1 (one of the highest in the industry; industry avg: -3.9)
Net Profit Margin: 29.4% (industry avg: -82.5%)
Shares outstanding: 62M
Floating shares: 55M

Infantile Spasms
Infantile Spasms (IS) is a serious form of epilepsy, or seizure disorder, occurring during infancy and childhood. IS is life threatening and is seen in ~0.03 to 0.05% of live births. Physicians consider IS to be one of the most difficult types of seizures to treat. Due to its efficacy, Acthar Gel is used by many child neurologists for IS treatment based on the guidelines published by the American Academy of Neurology and the Child Neurology Society.

H.P. Acthar Gel
H.P. Acthar gel a natural form of ACTH, a 39-amino-acid peptide hormone that has been considered as the first-line treatment option for IS. It works by reducing the deregulated firing of neurons in IS through a direct and/or an indirect mechanism.

ACTH is supported in practice guidelines coauthored by the American Academy of Neurology and the Child Neurology Society, and it is regarded as “probably effective” for the short-term treatment of infantile spasms, which is the most strongly stated recommendation in the guidelines. As a result, even without formal clearance by the regulatory agency, Acthar is already broadly used by physicians to treat IS. However, for years, QCOR has been seeking the FDA's approval, which will help standardize care and offer specific dose guidelines.

FDA's Stance So Far
In the meeting with the FDA's advisory panel on May 6, 2010, it was agreed upon among a group of medical experts that Acthar was safe and effective as a treatment for infant spasms. The vote for supporting Acthar's efficacy in treating spasms in infants was 22 against only 1 objection. However, they did not reach consensus regarding the management and reversibility of the drug's complications. Side effects may be serious and may include infection, convulsions and hypertension, but many parents present at the gathering said that it was worth the risk against possible brain damage and developmental delays from the seizures themselves.

Acthar was originally acquired from then-Aventis Pharmaceuticals in 2001 and the first round of QCOR's request for marketing approval in 2006 was unsuccessful. The company insists that earning FDA's support is crucial in making dosing information as well as other information on side effects accurate and consistent for doctors and parents. In addition, FDA's clearance will allow the company to legally market the new use of the drug.

At the meeting, FDA's panel of outside advisors, many of whom already use Acthar for their infant patients, said that the data was compelling but more follow-up safety information was needed.

QCOR executives reiterated decades of successful Acthar use in infants with such seizures. Furthermore, > 30,000 babies have received the drug for spasms since the drug's approval and about 40% of all infants with such epilepsy were treated with Acthar in the last two years.

The only other FDA-approved treatment for infantile spasms is vigabatrin, sold under the brand name Sabril by Danish drugmaker H Lundbeck A/S (LUN.CO). However, according to QCOR, the rival product has a low success rate and that patients need other options. Another drug also prescribed off-label for IS treatment is prednisone.

"Even though the data isn't perfect, there was nothing that was unexpected in terms of of the side effects," said panelist Samuel Frank, a neurology professor at Boston University and the panel's acting consumer representative.

QCOR's IS drug candidate is priced at $23,269/vial and an average total treatment cost is ~$100,000/patient (~4 vials). When asked about the high price of the drug, the company's Chief Science Officer David Young said that it is necessary to maintain the complicated manufacturing process, but that the company works with various groups to ensure patients can obtain the drug, many at no or low cost.

The FDA is expected to hand out the final decision by June 11. The opinion usually, but not always, follows its panel's advice.

Trading Strategy
Despite the close proximity to the decision date and the previous hike in stock price, I believe there is still room for a final phase run-up, which should carry the price even higher to $12, even $14. Would recommend buying at around $9 to $9.50 and heading for a quick exit.


Disclosure: Long QCOR