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Questcor PDUFA



September 08, 2010 – Comments (3) | RELATED TICKERS: QCOR.DL

I'll just add a quick blurb here in advance of the Questcor Pharmaceuticals PDUFA for Acthar Gel for infantile spasms. This catalytic event isn't getting a fraction of the attention devoted to Arena and Lorqess but might end up being substantially more profitable for a savvy investor.

Based on the overwhelmingly positive Advisory Panel vote in May, it seems more than 80% likely that the company will win approval on Friday or Monday. Interestingly, the stock is off recent highs over 11 although moderately up today. The problem is that the share price has already more than doubled this year in anticipation of approval. Will the stock "sell on the news"?

I'm guessing a brief jump to at least 12 with approval. The September call premiums aren't high and the 7.5 and 9 in-the-money calls will be profitable with a rise over 11. I'd give this a close look if the stock retraces under 10 on Thursday or Friday. I wouldn't take my eye off the investment for a second after approval though - I don't expect a rapid rise to be sustained. There's no guarantee that FDA approval will have a dramatic effect on Questcor's bottom line. Acthar Gel is already used extensively for infantile spasms off label and accounts for much of the drug's revenue. Is there much room left to grow in this rare disease? Acthar sales for MS exacerbations also appear to be stagnant, despite the company's emphasis on secondary indicators of growing use rather than actual revenues.

So here's my suggestion. September in-the-money calls on a retracement before the PDUFA (maybe 2.5 for the 7.5's and 1.5 for the 9's) and January puts if they look cheap and the share price has jumped over 14 after approval.

3 Comments – Post Your Own

#1) On September 08, 2010 at 4:27 PM, zzlangerhans (99.82) wrote:

Oops! Those September options prices are going to drop tomorrow. No sooner had I finished posting than Questcor announced a PDUFA delay of unspecified duration. Could present a great buying opportunity - watch price and options action closely tomorrow.

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#2) On September 08, 2010 at 5:01 PM, HoldThatWinner (30.70) wrote:

I'm going to have to short it. Looks like it may see the 8s again.


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#3) On September 09, 2010 at 9:56 AM, bzliteyear (< 20) wrote:

"The problem is that the share price has already more than doubled this year in anticipation of approval"

 I disagree w/ your "assumption" above.  Infantile Spasm revenues from Achthar is NOT the growth driver(neither is FDA approval).  QCOR's success and revenues growth in promoting Acthar for MS and Nephrotic Syndrome and addressing these much larger and growing markets is the reason the stock has performed well this year.  Keep in mind, with or without FDA's approval for IS, QCOR is still barely a 10x PE stock on 2011 EPS(ex-cash), and those estimates have been steadily going up.  If anyone want do options, I'm selling out of the money PUTS as I think they will expire worthless going into 2011. 

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