Questcor Pharmaceuticals (NASDAQ:QCOR) is scheduled to report third quarter earnings Tuesday after the market closes, and the Wall Street Consensus expects revenues (mostly Acthar Gel) of $129M, and EPS of $0.77. This compares with last quarter’s (2Q 2012) revenues and EPS of $112.5M and $0.69, respectively. It is interesting that EPS estimates for QCOR have been trending higher in the last month, despite all the controversy over health insurance companies tightening their policies for Acthar reimbursement. In addition, the earnings estimates for Tuesday represent strong sequential growth. We continue to believe that if QCOR at least holds revenues and earnings constant with 2Q 2012, the stock is undervalued, and if the company delivers quarterly results in line with 3Q 2012 expectations – growth – the stock will move higher.
Traditionally, the company has been able to deliver upside to estimates, as reported Acthar prescriptions may be conservative. In fact, QCOR stated in its 2Q 2012 earnings release:
“Because Acthar prescriptions are filled at specialty pharmacies, the company does not receive complete information regarding either the number of prescriptions or the number of vials by therapeutic area for all of the patients being treated with Acthar. However, Questcor monitors trends in payer mix and areas of therapeutic use for new Acthar prescriptions based on data from its reimbursement support center. Questcor estimates that over 90% of new Acthar prescriptions are processed by this support center, but believes that very few refill prescriptions are processed there.”
If results equal to 2Q12 earnings are good; and in-line with 3Q12 expectations are better; then improvement over 3Q12 will likely be a major positive for the stock. The good news for QCOR investors is that the bar is low for Tuesday night’s earnings release, with skew towards results that will provide further confidence that Acthar Gel sales are more stable than the stock is implying.
In addition to the numbers, commentary by the company over the processing of new Acthar prescriptions and discussions with other health plans such as Oxford Health (a part of UnitedHealthcare) will be key to how the stock trades. We continue to believe that the Aetna policy change is not an indicator of how other health plans will reimburse Acthar, and even the Aetna plan changes may not be as bad as some have indicated.
Aetna’s Preferred Drug, Precertification, Quantity Limit, Step-Therapy and Specialty Care Rx Lists are available here and here, for both 2012 and 2013 respectively. Note that Acthar’s status remains the same on both lists with regard to precertification, and there appear to be no changes to Acthar’s reimbursement according to the 2013 list. This apparent lack of change is comforting and indicates that patients could have more access to Acthar under an Aetna plan than was originally thought. Precertification is common for plans covering Acthar Gel, and physicians are continually willing to go through the hurdles to get their patients on the drug given the lack of alternative treatments for patients after corticosteroids have been tried.