Monday, March 14, 2011

Questcor Pharmaceuticals Inc (NASDAQ: QCOR) Q2 2011 Price Target

Recent price: 13.45$
P/E Ratio: 24.90
3 Months Target Price: 14.77$

Company Description
According to Reuters, Questcor Pharmaceuticals Inc is a pharmaceutical company focused on diseases and disorders. Questcor’s primary drug is H.P. Acthar Gel (repository corticotropin injection), an injectable drug that is approved by the United States Food and Drug Administration (FDA) for the treatment of a variety of diseases and disorders. Acthar is also used in treating patients with infantile spasms (IS), a rare form of refractory childhood epilepsy, and opsoclonus myoclonus syndrome, a rare autoimmune-related childhood neurological disorder, but is not approved for the treatment of either disorder. Acthar is approved to induce a diuresis or a remission of proteinuria in the nephrotic syndrome (NS) without uremia of the idiopathic type or that due to lupus erythamatosus. The Company also markets Doral (quazepam), which is indicated for the treatment of insomnia. As of December 31, 2009, Acthar is approved in the United States for the treatment of multiple sclerosis (MS) exacerbations, nephrotic syndrome and many other conditions.

Confidence Margins
Strong resistance $16.67 (+24%)
Light resistance $14.77 (+10%)
Light support $12.16 (-10%)
Strong support $9.33 (-31%)

Shares of Questcor Pharmaceuticals fell during the month of February after an article published in the Barron's over the weekend, raised concerns about sales of the company's main drug Acthar. Even if this information proves to have grounds in the long term, shares of the company are currently trading at interesting multiples and offer a good entry point in the stock.

Entry strategy
For the cautious investor:
Buy the stock for 14$ or less.

For the risk-taking trader:
The July 2011 14$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 190$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 14.75$, or keep it until 16$ if you are more bullish in your own analysis. It is highly recommended to keep the position on check if it goes sour.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 14.75$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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