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Questcor Acquires BioVectra

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Questcor Pharmaceuticals Inc. recently announced that it has completed the  acquisition of BioVectera Inc. for an immediate cash payment of CAD 50 million ($50.40 million approximately). 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.

Questcor and BioVectra have had a long association with the latter 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 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 as many as 19 indications. The company’s other product is Doral (insomnia). 5,590 vials of Acthar were shipped during the third quarter of 2012, up 92% year over year.

We currently have a Neutral recommendation on Questcor, which carries a Zacks Rank #3 (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. (VRX - Free Report) , which carries a Zacks Rank #1 (Strong Buy).  Other companies performing well are BioCryst Pharmaceuticals, Inc. (BCRX - Free Report) and Anacor Pharmaceuticals, Inc. , which carry a Zacks Rank #2 (Buy).

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