Citron publishes "Questcor (NASDAQ:QCOR): A Single Digit Stock in 18 Months and Here's Why"
Everyone knows the old cliché "snake oil salesmen" – hawkers of mysterious preparations promising miracle cures with secret formulations that can't be made by anyone else. Such tactics have been outlawed since the Food and Drug Act was signed into law over a century ago. For very obvious reasons, unsubstantiated claims cannot be made when marketing drugs in the U.S. to doctors or their patients. Yet Questcor(NASDAQ:QCOR) seems to have no hesitation when it spins its multi-billion dollar "snake oil sales" story – on Wall Street. Can a company tell one story to doctors and a completely different one to Wall Street? Apparently, in 2012, the answer is yes.
Let's be clear: Citron is not claiming Questcor's sole drug HP Acthar Gel is "snake oil". It is a real drug with a bona fide FDA approval. The truth is right there in black and white in Questcor's approval letter from the FDA. HP Acthar Gel is injectable corticotropin. It has one active ingredient: a well known, naturally occurring substance in humans called adrenocorticotropic hormone, or corticotropin, or ACTH for short.
The problem with Questcor as an investment thesis is that this same hormone ACTH has also been approved by the FDA as a generic drug numerous times in the last 60 years – by numerous manufacturers – with essentially the same label for the same conditions. Through the Freedom of Information Act, Citron has obtained the FDA's approval history on ACTH. If you are a Questcor investor, Citron recommends you read these file, which completely negate the "barrier to entry" claims of Questcor's CEO. Certainly the numerous analysts "covering" the company's stock with generous buy recommendations and lofty price targets have not done so – their projections wouldn't be so optimistic if they did their homework. On the other hand, it's nice to be ahead of the Street when you have the chance.
Then there's the biotech advisory newsletter BioPharmInsight, far from the company-laced propaganda on Wall Street, full of the most eye-popping quotes revealing the realities behind Questcor's claims about its sole drug Acthar … Citron guarantees Questcor Don Bailey does not want you to read this article — including his own quotes.
So why is Questcor's CEO saying these crazy things about Acthar? Because he needs to create the illusion of a barrier-to-entry to justify a purported "multi-billion dollar market opportunity" — when it simply doesn't exist.
If you are a Questcor investor, "Dr. Citron" prescribes a dose of truth about Questcor, easily digested from the attached .PDF file. Warning label: It's strong medicine. It includes:
- a complete workup on the competitive threats that can cause heart seizure for Questcor's earnings at any time
- a diagnosis of the insurance industry's tightening policies on the all-important reimbursement of Acthar Gel, without which Questcor gets no revenue.
- an "X-ray" of Questcor management's indisputable history of printing out and exercising options while the company buys back stock — which might make you want to yell "Clear!"
This presents Citron's most comprehensive coverage of a US healthcare company since Amedisys (NASDAQ:AMED) and Arthrocare (NASDAQ:ARTC), both of which lost over 80% of their market value when Citron's stories were borne out by subsequent company admissions.
Citron's work doesn't get caught up in the "moral outrage" angle, which is all about history:
- how a company takes control of a legacy drug with no market
- hangs an astronomical price on it
- launches a high-priced salesforce to sell it
- and with no new science, no new drug pipeline, and no intellectual property protection …
- gets its stock caught up with Wall Street's mo-mo crowd and winds up with a 3.5-billion-dollar valuation.
For Citron, it's all about the business, which is about the present and the future…and the truth. Comprehensive, insightful and detailed — 22 pages in all. Truth you won't read anywhere else.
Make no mistake, Questcor's business is facing severe headwinds. As usual, don't count on the company or the analysts to tell you about them… for that you'll have to read for yourself….
Cautious Investing to All