Questcor Plunging During Investor Conference; Bank of America Says Buy
Shares of Questcor Pharmaceuticals (NASDAQ: QCOR) have been plunging throughout Friday's trading session and were recently sitting near session lows, down around 7%. The company is presenting at JMP Securities Healthcare conference today. Questcor discussed the mechanism of action and unique biological and clinical properties of the company's primary product, Acthar Gel. Questcor also gave updates on its research and development plans.
The stock may be falling because QCOR did not address a report from short-seller Citron Research from July 10. That report can be found here. Citron has correctly made short calls on a number of high-flying stocks, and its latest report on QCOR has rightly made some investors nervous. When the Citron report first was released, it caused a massive intra-day plunge in QCOR on July 10, from which the stock has yet to recover.
While there is clearly some fear in the stock, analysts at Bank of America Merrill Lynch actually initiated coverage on Questcor on Friday morning with a Buy rating. The noted that Questcor is a high risk/reward name, but said that valuation was attractive at current levels. The firm's DCF-derived price target is $60, implying plenty of upside from current levels.
They wrote, "We believe that QCOR has uniquely favorable fundamentals, due to 19 legacy indications for Acthar, orphan drug pricing, rapid revenue growth, low operating expenses and high margins driven by share repurchases." The key risk that the analysts cited was generic competition for Acthar.
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