$3.94 -0.17 (-4.14%)
11/6/2009 4:00 PM

Questcor Pharmaceuticals (QCOR)

CAPS Rating: 3 out of 5

A pharmaceutical company that focuses on novel therapeutics for the treatment of diseases and disorders of the central nervous system.

Current Price $3.94 Mkt Cap $252.54M
Open $0.00 P/E Ratio 7.90
Prev. Close $4.11 Div. (Yield) N/A (N/A)
Daily Range $3.91 - $4.14 Volume 776,525
52-Wk Range $3.10 - $9.81 Avg. Daily Vol. 554,000

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All Members

272 Outperform
18 Underperform
 

All-Star Members

89 Outperform
11 Underperform
 

Wall Street

4 Outperform
0 Underperform
 

Top QCOR Bull/Bear Pitches

The best Bull and Bear pitches based on recency and number of recommendations.

MagicDiligence (92.05)
Submitted September 25, 2009

Questcor Pharmaceuticals (QCOR) produces and markets for all practical purposes a single product: H.P. Acthar Gel. Acthar is an injectable treatment for inflammatory disorders, particularly multiple sclerosis (MS) and infantile spasms (IS) in… More

tenmiles (99.99)
Submitted November 13, 2007

technical short after pop on MS drug sales growth - current price unsustainable

QCOR VS S&P 500 (SPY)

Recent Community Commentary

Read the most recent pitches from members about QCOR.

Recs

0
Member Avatar Prodigy16 (84.42) Submitted: 10/27/2009 4:53:18 PM : Outperform Start Price: $4.72 QCOR Score: -17.45

Joel Greenblatt Pick

Recs

0
Member Avatar ZiggyLuckyShadow (71.86) Submitted: 10/26/2009 3:50:08 PM : Outperform Start Price: $4.74 QCOR Score: -17.03

There were 30 items in your list. Here they are in random order:

-AMED (already selected)
-USMO (already selected)
*VM CAPS=3 star
-SOLR (already selected)
*AGX CAPS=3 star
*DLX CAPS=2 star
*QCOR CAPS=4 star
*FIX CAPS=4 star
KHD
JTX
EME
ITWO
UNTD
FLR
CBI
RTN
GHM
PRGX
ELNK
ENDP
PTIE
DIVX
PPD
CYTK
PRIM
GTLS
GIGM
EXBD
MIPS
JCOM
Timestamp: 2009-10-26 19:43:49 UTC

Recs

3
Member Avatar MagicDiligence (92.05) Submitted: 9/25/2009 6:54:42 AM : Outperform Start Price: $5.20 QCOR Score: -26.47

Questcor Pharmaceuticals (QCOR) produces and markets for all practical purposes a single product: H.P. Acthar Gel. Acthar is an injectable treatment for inflammatory disorders, particularly multiple sclerosis (MS) and infantile spasms (IS) in children. The company also markets Doral for insomnia, but Acthar contributes about 99% of all revenues, making an analysis of Questcor equivalent to an analysis of the outlook for sales of Acthar.

The drug, and its relationship with this company, have an interesting history. Acthar is not a new drug - it was first synthesized way back in the 1940's from pig pituitary glands. Eventually the drug was owned by Aventis, which nearly discontinued production in the mid-1990's due to poor sales. However, pediatricians objected, as there were few choices for treating IS, and Acthar was (and still is) the first option for treatment. Questcor acquired the rights to Acthar in 2001. With such low volumes and a low price, Acthar did not provide many benefits to Questcor. The company continued to be unprofitable.

In 2007, new management decided to change the direction of the company and focus solely on Acthar. Other pharmaceutical interests were divested. Management implemented a massive 14x increase in the price of Acthar, from $1,650 a vial to over $23,000 a vial in mid-2007. Immediately, Questcor's fortunes did a 180 degree turn. Revenues are up 900% since then. Operating margins today are a nearly unheard-of 60%. Free cash flow margins are right around the same levels. The balance sheet is squeaky clean, with $70 million in cash and no debt. Management is aggressively buying back shares. Simply put, right now Questcor is one of the most profitable companies MagicDiligence has ever analyzed... and results show no immediate signs of weakening.

The key question on Questcor is simple: how long can the company ride Acthar at current price levels? Surprisingly, the chances are pretty good. For one, the addressable market for conditions treated by Acthar is very small - only a few thousand prescriptions per year. Insurance companies have reimbursed the drug at nearly 90%, even with the massive price increase, although some have required stronger evidence of need. One reason for this is the low volume - most insurance companies may have to cover one or two cases a year, making the higher price statistically insignificant. A second is that it is one of the only treatments for IS, which can irreversibly affect a child's development if left untreated, making the drug virtually non-discretionary for these cases. The low volumes also make it less likely that a large competitor will target the market. Lastly, Questcor has filed to make Acthar an approved treatment for IS with the FDA (currently it is prescribed off-label). If approved, the company would be granted a 7-year exclusivity period and could also actively market the product as an IS treatment, which it cannot do today.

However, this is a very "high-risk" stock. High healthcare costs are squarely in the government's cross-hairs, and a firm pulling 60% operating margins puts a big target reading "price gouger" on its back. There are alternatives for IS, the most obvious being Vigabatrin, which is the treatment of choice in most other countries and now under review by the FDA for approval in the United States. There are no typical pharmaceutical moat factors around Acthar, either. The drug is old, has no patent protections, and can easily be produced by generics makers and sold at lower prices. Ganaxolone is another potential competitor aimed specifically at IS, in Phase IIb studes by Marinus Pharmaceuticals. Seeing as 60% of Acthar's sales come from IS indications, any of these competitive factors could very well damage Questcor's golden goose.

Questcor also has no backup plan if Acthar fails. The pipeline has but one single candidate, and the company has all but abandoned development of it. The growth strategy is to get Acthar approval for IS and to expand the salesforce for MS.

Questcor is unbelievably profitable and stands a decent chance of maintaining that profitability at least for a few years. The earnings yield is nearly 20%, significantly discounting the potential effects of margin erosion due to competition, specifically Vigabatrin. But all the eggs are in one basket here. If Questcor cannot maintain high pricing for Acthar, the entire business strategy is moot. There are so many things that can go wrong here. While MagicDiligence believes the odds are with the company over the short term, and is putting a tentatively positive outlook on the stock, it is much too risky for most investors and the Top Buys portfolio.

Leaderboard

Find the members with the highest scoring picks in QCOR.

Score Leader

Jonock

Jonock (< 20) Score: +160.02

The Score Leader is the member with the highest score across all their picks in QCOR.

Top
Pick
Member Name Member
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
S&P
Gain
Score Commentary
This player feels very strongly about this pick and has marked it a Top Pick. Top Picks do not affect a player’s score. cewncew < 20 11/13/2007 Outperform NS $1.86 +111.55% -22.91% +134.46
AW2580 < 20 11/13/2007 Outperform 3M $2.76 +42.76% -23.12% +65.88
CrazyTrout < 20 11/14/2007 Outperform NS $3.25 +21.23% -24.78% +46.01
patron4 < 20 11/14/2007 Outperform 5Y $3.25 +21.23% -24.78% +46.01
brendan310 22.21 8/11/2009 Underperform 5Y $6.28 -37.26% +7.71% +44.97
sheppajc 32.91 5/22/2009 Underperform NS $4.08 -3.43% +20.60% +24.03
shephunts 98.08 5/22/2009 Underperform NS $4.07 -3.19% +20.67% +23.86
embodiedheart 97.11 11/14/2007 Outperform NS $4.00 -1.50% -24.51% +23.01
KeepYourCoolFool 99.60 6/1/2009 Underperform 5Y $4.22 -6.64% +14.15% +20.79
marvljohn 49.63 11/15/2007 Outperform 3M $4.15 -5.06% -23.42% +18.36

Wall Street

See what the Wall Street professionals think, according to their public statements and filings.

Member Name Member
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
S&P
Gain
Score End Date Commentary
TrackMaximGroup < 20 2/19/2009 Outperform NS $7.35 -46.39% +36.68% -83.07
TrackOppenheimer 26.63 12/18/2008 Outperform NS $7.12 -44.66% +20.25% -64.92
TrackSoleil 83.54 9/11/2008 Outperform NS $5.78 -31.83% -9.90% -21.94
TrackStanfordRes 80.42 9/11/2008 Outperform NS $5.53 -28.75% -9.48% -19.28
TrackJGreenblatt 48.54 8/18/2008 Outperform 1Y $5.06 +13.64% -22.58% +36.21 8/17/2009 @ $5.75 2 Comments

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