QCOR: New Sales Force Hires Start Making an Impact Closing Price: $13.88 Target Price: $23.00
Opinion We had the opportunity to host several investor meetings late last week with Don Bailey, CEO of Questcor. Also in attendance were a regional sales manager and a local salesperson responsible for that territory. We received details on some of the new sales force hires that took place in November 2010. The local rep who accompanied us to the meeting was a new hire and is already one of the top five sales reps in terms of sales. This factoid underscores that some of the new hires have hit the ground running, and we could see a meaningful impact from these hires in 2011.
· Sales Incentives Geared to Drive Sales Growth: We received details on the sales incentives established for the sales force. The company resets its sales quotas every quarter based on the preceding quarter, and the plan is for quotas to increase over time with increased sales. The range of script quotas is between four and 11 scripts per quarter, and the company believes that about 60% of all reps have exceed their quotas in the past. An average MS rep needs about ten scripts per year to cover their costs. Some of the recent hires have started making an impact, and, of the 39 new reps hired in late 2010, half have sold other MS products in the past.
· Nephrotic Syndrome Trial Could Be Initiated Soon: A 100-patient trial to evaluate Acthar's efficacy in treating nephrotic syndrome in patients with membranous nephropathy could begin in the near term. QCOR is currently in the discussion phase with clinical research organizations. The company believes the trials could take three to four months to enroll and would require six months of treatment and six months of follow-up. While data would not be available until possibly late 2012, the company expects the 25 clinical sites participating in the trial to start to develop experience with Acthar for this approved indication and could prescribe to patients ineligible to participate in the trial.
· Management Reiterates Sales Trends: Management reiterated that Q1 should be slightly ahead of Q4. The company would not comment on March script trends but reiterated that February was a record month and that January was slightly lower than December. The company also believes it is adequately reserved for Medicaid rebates.
· Valuation: We reiterate our Buy rating and 12-month price target of $23, which is predicated on our DCF valuation, which is derived from our sales projection for Acthar sales.
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