Zooming in on Acthar Competition: Consultant Sees
Significant Barriers to Entry
Following our conversation with a consultant, we remain optimistic about Acthar's
commercial longevity. We believe much of the recent volatility around the stock is
due to "noise" regarding if and when some form of a competitive threat to Acthar
could emerge. Our key takeaway from our consultant is that the most likely form of
competition (new biogenerics) is at least ~5yrs away. At current levels, we believe
the stock is pricing in a generic entrant in YE2017, which we think is unlikely. We
expect shares to rebound by YE12 as competitive concerns subside. We expect
Acthar monthly script updates (released by the 10th of every month) to provide upside
with share repurchases to further boost QCOR shares.
■ Consultant Believes New Biogenerics Are Most Likely Threat. Our consultant
believes new biogenerics, not older corticotropin products nor NVS's Synacthen,
represent the most probable threat, given difficulties with attaining manufacturing
approval for older/discontinued corticotropin products, and the limited period of
exclusivity for Synacthen, should NVS pursue US approval.
■ Biogenerics Face Significant Hurdles With Approval Unlikely For > ~5yrs.
The composition of Acthar (including level/consistency of impurities) hasn't
been disclosed, presenting a moving target from a manufacturing/composition
replication standpoint. QCOR may erect another barrier by proving activity of other
peptides in Acthar. Last, we believe FDA biogeneric guidance won't be finalized
■ Our Analysis Implies Shares Are Already Pricing in Generic Threat. Assuming
a generic comes by YE2017, which we view as highly unlikely and the absolute
worst-case scenario, our analysis implies ~$37 fair value. Therefore, we believe
shares are currently at a valuation floor and see a highly attractive risk/reward
■ Acthar Remains Well Protected from Generic Threat; Near-term Catalysts
to Drive Shares. Despite limited IP protection, we believe Acthar sales remain
well protected for many years. With ~30% short interest and material near-term
positive catalysts, including monthly script updates and disclosure of additional
share repurchases, we expect QCOR shares to return to the high $50's by YE12.
Honestly, thanks for posting all this free research to us. I speak for many silent thread readers I am sure. It is very usefuly especially in these very down times. Keep up your good works!
Honest, I also appreciate the post and per my last post agree with the analyst on both the barriers as well as the pps being attractive at these levels. I like your bold call on the upsdide as it goes well with my call that we have hit bottom no later then the scrip release date. I am more confident now we may have already seen the bottom and my confidence level in our future is as bright as ever.
Long and Strong QCOR !