Questcor Pharmaceuticals, Inc. (QCOR)

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QCOR

Questcor Pharmaceuticals, Inc. QCOR: $34.60
Buy Price Target: $57.00
QCOR: Comments from Meetings with Management

THINK ACTION:
We recently spent some time with the CEO of Questcor, Don Bailey, meeting with clients and we come away from our meetings incrementally more positive on the prospects for Acthar specifically, and for QCOR overall. We believe that concerns around the marketing of Acthar are largely unfounded based on our meeting with some regional sales representatives from both the Nephrotic Syndrome (NS) group and the Multiple Sclerosis (MS) group and that the sales reps are marketing Acthar within the label and industry norms. We are reiterating our Buy rating on shares of QCOR and our $57 PT.

KEY POINTS:
Acthar reps are experienced, and well aware of how to appropriately market Acthar, in our view. We had the opportunity to meet with both an NS rep and an MS rep to discuss their thoughts on the marketing & compliance at QCOR and we come away impressed with the experience and maturity level of the reps we met and their understanding of how to appropriately and best market Acthar to their detail doctors. The average rep at QCOR has approximately 10 years experience in the industry, has worked at some of the top names in the biotech space prior to joining QCOR, and each appeared to us to employ a “low key” approach to presenting the available data to their detail docs. The reps employed the (admittedly limited) Acthar data and case studies to help doctors to be able to identify appropriate patient candidates among their patient population, and then suggested trying Acthar for these candidates. This appeared to us to be a far cry from an “aggressive” strategy of “ambushing” doctors with Acthar.

Selling the product and the data that they have. In the words of the inimitable Donald Rumsfeld “you go to war with the army you have, not the army you might want or wish to have” and we believe that this applies to Acthar as well. While it remains true that the supporting data around Acthar is not as strong as the data supporting some other drugs, that does not take away the fact that Acthar is FDA approved for ~19 separate indications (down from 50+ prior to 2010). QCOR is allowed to market for those 19 indications and CEO Bailey re-affirmed that all reps are fully compliant with marketing regulations and that all Acthar promotional materials are submitted to the FDA’s Office of Prescription Drug Promotion (OPDP), formerly the Division of Drug Marketing and Communication (DDMAC).

We expect the web blog has run its course. While it’s not for us to speculate on the motivations of a web blog, we found little in either article to dissuade us from our conviction that QCOR continues to represent one of the more interesting opportunities in our specialty pharma coverage group. We continue to see significant growth prospects in both NS and MS and note that the early 2012 NS sales force expansion could lead to meaningful upside to our $106M 2012E NS sales projections and $2.20 EPS projections.

Reiterate Buy rating and $57 price target. We continue to see QCOR as a top pick in our specialty pharma group with an estimated 40% EPS CAGR over 2011E-2014E based on what we believe are modest penetration assumptions into the MS and NS markets.