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  • maxdad01 maxdad01 Apr 18, 2013 11:31 AM Flag

    From LAZARD TODAY !!!


    Questcor Pharmaceuticals

    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.

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    • 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

    • so lizard analyst says wait for q2 q3
      is that upgrade or downgrade

    • Max--

      Here is the balance of Lazard note--you asked me to post since YMB was blocking your efforts.

      Investment Thesis
      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