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Analyst Blog

Questcor Pharmaceuticals Inc. recently announced that it has entered into an agreement to acquire all the shares of BioVectera Inc., for an immediate cash payment of CAD 50 million ($50.72 million). Stakeholders of BioVectra could also receive up to an additional CAD $50 million, on the basis of its financial results in the next three years. The acquisition is expected to be completed during this month.

Questcor and BioVectra have had a long association with BioVectra manufacturing the active product ingredient (API) for Questcor's H.P. Acthar Gel. With this acquisition, Questcor will gain access to Acthar’s manufacturing trade secrets for Acthar. The acquisition would enable the company to meet the continuing demand for Acthar, strengthen its technical and scientific expertise, and allow international expansion.

Our Take

We are positive on the upcoming acquisition of BioVectra, which is expected to be immediately accretive to earnings. The deal provides vertical integration and will help strengthen the Acthar manufacturing process. BioVectra’s sales in the fiscal year ended Aug 31, 2012, were $28 million, up 15%.

Acthar, an injectable drug, is the lead product at Questcor. It is approved by the FDA for nineteen indications. The company’s other product is Doral (insomnia).

We currently have a Neutral recommendation on Questcor, which carries a Zacks #3 Rank (Hold). We expect investor focus to remain on reimbursement issues related to Acthar as well as the investigation being conducted by the United States Attorney's Office for the Eastern District of Pennsylvania (USAO) regarding the company’s promotional practices.

Pharma companies that currently seem to be in a better position include Valeant Pharmaceuticals International Inc. ), which carries a Zacks #1 Rank (Strong Buy).

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