Thinking about the evolution of our company and the rapidly expanding use of Acthar by patients with serious, difficult-to-treat autoimmune and inflammatory disorders, I thought it might be helpful to put our current efforts into the context of the longer-term history of Acthar, the science surrounding the drug, and its ability to help patients. The reason I want to spend some time on this subject is that it explains the real long term value equation for Acthar to physicians, their patients and the healthcare system in general.
When Questcor purchased Acthar in 2001 we were rescuing an old drug that was being abandoned by “Big Pharma.” The manufacture of Acthar was quite literally in the process of being discontinued. Its prior manufacturer was experiencing significant problems making Acthar and was losing money trying to make and distribute the drug. The situation resulted in shortages that had severely affected the availability of Acthar for infants with infantile spasms and other patients. This was a serious public health concern to the FDA.
When we acquired Acthar, we knew that we would have to spend millions of dollars transferring the manufacturing of the drug to contract manufacturers, and that we might fail in doing so due to the tremendous complexities of the process. We also knew that if we were to make Acthar financially viable so that it would remain available for the long term, we would have to invest in commercial activities to grow the drug, go through a learning curve to make sure that those efforts worked, build safety net programs for patients in need, and invest in a more modern scientific understanding of the drug. That scientific investment would of course include working with the FDA to modernize the drug's label and, hopefully, add infantile spasms as an approved indication.
Today, I am happy to say that these efforts succeeded. Not to say that they all succeeded quickly, or without serious setbacks along the way – financial and otherwise. In mid-2007 Questcor was rapidly running out of cash and heading toward bankruptcy. Even before that, the upgrading and transfer of the manufacturing process took years of work and significant financial investment to be successful and be approved by the FDA. Also, the effort to work with the FDA to modernize the label and achieve approval of the infantile spasms indication failed twice before it was finally successful in late 2010. Our commercial efforts also encountered multiple setbacks as we learned about the unique and important role for Acthar in helping physicians manage patients with such diverse conditions as multiple sclerosis and nephrotic syndrome.
Over the last ten years we have overcome all of these challenges, so that Acthar is available to treat more and more patients with serious, difficult-to-treat autoimmune and inflammatory disorders, and as a result Questcor is now a successful, growing company. Importantly, our safety net programs are working very well for many patients in need, and we can also now invest back into the medical community to support important research and educational programs.
But we are not done, because we believe Acthar has the potential to play a larger role in addressing the autoimmune and inflammatory processes in many serious diseases, and in so doing help many more patients than is currently the case. A better understanding of these processes and the potential role of Acthar in addressing them could lead to additional breakthroughs in treatment over time.
In order to better understand this potential, it is worth taking a minute to discuss the emerging science behind Acthar. Acthar was approved in 1952, during one of the most exciting periods of scientific advancement in biomedical research. From the 1940s to the 1960s the developing understanding of hormones led to many important new pharmaceutical products, including hormone replacement therapies such as Premarin, reproductive hormone products such as birth control pills, and synthetic steroids like prednisone. Acthar was also initially regarded as an important product, but after synthetic steroids were introduced, scientific and medical interest in Acthar waned. Much of the medical community mistakenly regarded Acthar as merely a different way of giving steroids. Since synthetic steroids appeared at that time to be an inexpensive direct substitute for Acthar, R&D spending on Acthar essentially came to a halt.
But the focus of our story is that Acthar is not a steroid. Instead, it is a complex formulation which includes adrenocorticotropic hormone (ACTH) and potentially other active peptides reported to bind to a variety of important receptors in the human body. These receptors appear to be found, for example, in the central nervous system, the kidney, and on certain immune cells. They are also found in the adrenal gland, where their binding by ACTH stimulates the production of the natural steroid cortisol. Thus, there appear to be multiple Acthar mechanisms of action, of which only one element is steroid-related. For this reason, Acthar seems to be effective in some patients who do not adequately respond to steroid treatment. Acthar has been misunderstood and underestimated, and what many physicians think they know about the drug is not up-to-date. We are working hard to change this. As such, Acthar is now undergoing a renaissance in multiple fields of medicine. This represents our opportunity and our challenge in rescuing and reviving this old drug.
We have been addressing the opportunity and the challenge in two ways. First, we have invested heavily in developing an experienced and well-trained commercial team to educate physicians about our growing understanding of Acthar and its ability to help their patients. Our average representative has ten years of pharma or biotech commercial experience. Physicians are also supported by a growing team of Medical Science Liaisons, many of whom have PhDs and PharmDs, who answer questions and provide information regarding the emerging science behind Acthar.
Second, we have been rapidly increasing our research and development spending, focused on the science of Acthar, rather than on building a pipeline of unrelated products. In 2007 we spent less than $5 million on research and development. By 2011 we tripled that spending on research and development. And we expect that spending to continue to grow in the future. This represents very rapid growth in our R&D spending on Acthar.
So what is the potential for Acthar? Well, it is a bit different from the situation at most biopharmaceutical companies. We have an approved product that has been on the market for sixty years, so its safety is very well known and is supported by decades of clinical use. However, we need more modern data on efficacy and greater clarity regarding how Acthar works. So we have increased our R&D spending in these areas.
Unlike most biopharmaceutical companies, Questcor is not conducting clinical trials of novel compounds whose safety and efficacy in the human body are unknown. Rather, we are working to better understand a very complex biologic drug that has multiple active ingredients and multiple mechanisms of action, and through that understanding we expect to gain a better understanding of the potential for Acthar to treat certain diseases in which those mechanisms of action may be particularly important. Recent scientific work by prominent research institutions have shown some important results in these areas. For example, one study found that the efficacy of Acthar in reducing proteinuria in nephrotic syndrome appears related to its ability to suppress production of antibodies to the PLA2 receptor found in the kidney. The existence of this Acthar mechanism was a brand new finding that was previously unknown and represents only one of a series of likely mechanisms by which this drug works.
This is the frontier of science. When Acthar was originally developed, only the most basic understanding of biochemistry had yet been achieved. The developers of Acthar thought that they had merely come up with a way of obtaining the ACTH hormone, which could then be used to make the steroid cortisol in the body. But it turns out that what they created was actually far more important, more complex, and more promising. With the tools of science today, we are in the process of unlocking the true nature of Acthar. One of our primary objectives at Questcor is to use these tools to develop a better understanding of how Acthar can help far more patients by addressing a far broader set of serious autoimmune and inflammatory diseases than what we see today. This work has the potential to also one day lead to the development of entirely new, related products that could bring further hope in the treatment of these diseases.
Working with researchers, physicians, patients and families, we look forward to continuing to identify new patient populations who may benefit from Acthar, as well expand access for the patients who may benefit from this important and unique drug.
President and CEO