The company, Questcor Pharmaceuticals, has acquired the rights to Synacthen, a drug from Novartis, that is sold in Europe but not in the United States. Synacthen is similar to Questcor’s drug, which is called H.P. Acthar Gel and used to treat various immune-related ailments.
Questcor’s agreement to pay Novartis at least $135 million trumped a bid from a start-up company called Retrophin that had hoped to sell Synacthen in the United States for a few hundred dollars a vial, sharply undercutting Acthar’s price, according to people briefed on Retrophin’s negotiations.
Questcor’s stock shot up 15 percent on Tuesday, the day its deal to acquire Synacthen was announced. “We believe the acquisition removes a key overhang as a potential competitor to Acthar is removed,” Biren Amin, an analyst at Jefferies Company, wrote in a note.
One antitrust lawyer, not involved in the negotiations, predicted the deal would receive “intense scrutiny” by federal antitrust regulators.
“The type of acquisition that raises the most concern under the antitrust law is when a dominant firm acquires a potential rival,” said the lawyer, David A. Balto, a former policy director of the Federal Trade Commission who now calls himself a public interest antitrust lawyer.
But Steve Cartt, the chief operating officer of Questcor, disagreed. He said Questcor did not have to report the transaction to antitrust regulators because Novartis, the licenser, would retain some manufacturing rights to Synacthen.
The Federal Trade Commission is now proposing new rules to end such exemptions from notification.
A spokesman said the trade commission did not comment on whether it was reviewing particular transactions but said it could even when that was not required.
Questcor, based in Anaheim, Calif., has achieved huge success with Acthar, a hormone purified from pig pituitary glands that was selling for only about $40 a vial when the company acquired the drug in 2001.
Questcor began increasing the price. In 2007, it was raised to about $23,000 a vial from $1,650, provoking howls from some doctors and patients, and has continued to raise the price since then.
The company initially said the high price was necessary because the main use of the drug was to treat a very rare condition that causes spasms in babies. But the company has aggressively marketed the drug for more common immune-related disorders like multiple sclerosis and nephrotic syndrome. Sales reached $509 million in 2012, and the price of the company’s stock has soared since 2007.
But insurers are now making sure that Acthar is used only when far cheaper steroids cannot be. The federal government is investigating Questcor’s marketing practices. And many short-sellers have been betting Questcor’s stock will fall.
The most obvious threat to Questcor’s business was the possibility of someone bringing Synacthen to the United States. Synacthen is a synthetic fragment of the hormone in Acthar.
Questcor eliminated that competitor by licensing the exclusive rights to the drug in the United States and various other countries, excluding 13 in Europe, according to a company regulatory filing.
Its initial payment of $60 million to Novartis greatly exceeded the $16 million Retrophin was offering, according to a summary of the tentative deal terms that Retrophin was circulating to investors in an effort to raise money to buy Synacthen. Retrophin, however, was offering Novartis a 20 percent royalty on sales, which is likely to be far higher than what Questcor agreed to pay.
Retrophin, which went public through a reverse merger with a shell company, is based in New York and is run by Martin Shkreli, a former biotechnology hedge fund manager. He declined to comment for this article.
It is not clear if there were other bidders. Novartis declined to comment.
Novartis can revoke the rights if Questcor does not meet deadlines in terms of testing Synacthen in clinical trials and seeking approval to market it in the United States, according to a regulatory filing by Questcor. The deadlines are not being made public.
Mr. Cartt of Questcor said the company would spend millions of dollars testing Synacthen to see if it could help American patients. “That is the essence of discovery and competition, not their elimination,” he said in an e-mail.
In the past Questcor executives have disparaged Synacthen.
“We believe it is unlikely to be a competitor to Acthar,” David Young, Questcor’s chief scientific officer, said in a call with analysts last July. He said it was not a protein produced by the body like Acthar was and added, “Synacthen contains benzyl alcohol, which is toxic to children and can potentially cause gasping syndrome, which can be fatal.”
But in a news release this week, Dr. Young said that Questcor intended to test the drug “not only in conditions different than Acthar but also in conditions where Synacthen would potentially provide a clinical benefit over Acthar.”
Article source: http://www.nytimes.com/2013/06/15/business/questcor-pays-135-million-for-rights-to-competitors-drug.html?partner=rss&emc=rss