LAZARD CAPITAL MARKETS April 18, 2013
Extreme focus on 1Q misses the point that QCOR trades at just 5x 2014E FCF; BUY
(QCOR, BUY, $28.42, PT: $74.00)
Joshua Schimmer, 212-632-8278,
Highlights: Investors have become increasingly concerned over the constellation of effects that could negatively impact QCOR's 1Q13 performance. In our opinion, many of these are transient and could even rebound in 2Q. What's far more important in our view is the longer-term trajectory of Acthar revenue and the fairly mind-boggling fact that shares trade at only 5x our 2014E FCF - suggesting shares reflect not just reimbursement headwinds, but a full-blown hurricane which does not appear to be occurring. We reiterate our BUY rating and $74 PT.
1Q "noise" could be greater than we first estimated: A number of moving parts in 1Q may obscure end-user Acthar demand, including YE12 inventory stocking and added 1Q inventory draw-down from a changing SKU (these should even out over time). The delay in prescription processing times due to the transition to a new reimbursement center may have a meaningful (but transient) impact. Weakness in the MS franchise may reflect increasing reimbursement pressures for this specific indication, but one which we factor into our estimates and which should be offset by growth in other indications.
Anticipation of a weak quarter fueling bearish perceptions, but it all gets sorted out: Those anticipating a catastrophic collapse in reimbursement is creating uncertainty in the shares heading into Q1, but management could provide metrics to address concerns. QCOR shares are likely to be a "tightly wound spring" heading into 2Q and 3Q earnings, by which time we think the Street should gain better visibility regarding underlying trends.
Here is the balance of Lazard note--you asked me to post since YMB was blocking your efforts.
We rate QCOR shares BUY. Acthar was approved 60 years ago with an extremely broad label that has allowed the company to identify a continuous stream of indications to drive growth. Recent revenue and earnings strength has come from promotion in infantile spasm, multiple sclerosis flares, and nephrotic syndrome (each still appears poised to deliver additional growth). The company is now launching a new commercial effort in dermatomyositis/polymositis, which should be a modest commercial opportunity. More impactful will be an eventual launch in lupus, where there remains an important unmet medical need for young patients facing potentially devastating consequences from their illness. Recent Medicaid reimbursement improvement should further drive EPS growth.
We value QCOR using a DCF analysis based on our projected free cash flow through 2020 with TV calculated using a terminal multiple of 8x. Our price target is $74.
· Investors fear approval of an AB substitutable biogeneric. However, any generic compound will likely have to be tested in clinical trials, faces development and regulatory risks, and will likely not be substitutable.
· Investors fear reimbursement pressures from private insurers. We believe Acthar's use in high unmet need settings where steroids failed or are not tolerated will push through reimbursement headwinds.
· Investors fear consequences of an investigation into marketing practices. Because QCOR is not marketing off-label, we believe any penalty/settlement will be for a minimal/modest sum.
Sentiment: Strong Buy
Maybe you are on to something. Surely he must be saying everyone should wait until Q2 or Q3, buy the stock at $70 and ride it all the way up to his price target of $74. Either that or he is suggesting that the stock is a BUY right now at $28 and then ride it up to $74.
No they said "the street" will recognize that this puppy is a cash cow! and by that time you will want to be in, which means buy now. Buy your winter coat in summer, go to where the puck is going to be!
Sentiment: Strong Buy
that is very negative downgrade from lizard analcyst
read what he says
quote heading into 2Q and 3Q earnings, by which time we think the Street should gain better visibility regarding underlying trends unquote
so let us wait until clouds get cleared and no need to rush into buying
thanks fraudstreet, seems like many here mock at others saying english as second language , apparently they lack comprehension skills
READ WHAT LAZARD SAID: " the Street should gain better visibility "
which clearly means the visibility is blurred just like the vision of longs is blurred
Other insurance companies to follow AETNA as they are doing their research and studies, keep in mind AETNA announced this 8 months ago, so it will take time for others to follow FDA opens up investigation into 18 indications like someone posted below As Bloomberg reports, Aetna decided that Acthar was medically necessary for only one of its several indications: West syndrome, which causes infantile spasms. For other uses--including indications in multiple sclerosis and nephrotic syndrome--the gel hasn't been proven to work better than existing treatments, or hasn't proven effective at all .. Aetna considers repository corticotropin experimental and investigational for all other indications because its effectiveness for these indications has not been established