Questcor: A Case Mistaken Identity?

One mistaken headline, an error of less than five words, was enough to send shares of Questcor Pharmaceuticals (NASDAQ:QCOR) hurtling down by 7.3 percent Friday morning. Shares fell as low as $21.53 before recovering slightly, closing at $23.80

Benzinga incorrectly reported that Cerium Pharmaceuticals’ synthetic version of Acthar had been approved by the Food and Drug Administration when in fact the drug had received an Orphan Drug Designation. The online publication has since rectified its mistake, but change did not put all analysts concerns to rest.

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The difference may seem slight, but the Orphan Drug Designation simply means that the drug met the FDA’s standard definition, granted to drugs that treat rare conditions. Had the drug received approval by the regulator, Questcor’s Acthar would have to prepare for increased competition.

According to the FDA’s website, the Orphan Drug Designation is meant to advance the development of treatments for rare diseases or conditions that affect fewer than 200,000 people in the United States; without the designation many drug companies would not find it profitable to pursue treatments for diseases with such small potential markets. However the designation is not the same as approval. Cerium will first need to complete clinical trials in order to demonstrate the efficacy of its drug, Synacthen.

Furthermore, Questcor’s Acthar, which treats infantile spasms, multiple sclerosis, and several rheumatic disorders, has already received the orphan designation, which entitles the drug to seven years of marketing exclusivity. David Moskowitz of PropThink told Reuters that there was little chance that the FDA would overrule Acthar’s exclusivity before the period comes to an end in 2017.

Benzinga’s headline was not the first indication that Acthar could be susceptible to generic competition; worries have plagued the company since a Citron Research report dated October 19 cautioned that Questcor’s marketing of Acthar could cause the company’s stock to “retreat to single-digits” when generics were introduced.

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