The past week has seen various conflicting reports for QuestCor Pharmaceuticals (QCOR) One article reports that Questcor stock could dive due to its weak pipeline. The company has no new drugs in development, and is focusing on therapeutic areas alone. Even with this in mind, another article from Seeking Alpha contributor Ry Frank cites the company's weak pipeline as a potential for gain, should the drugs break into new markets. These conflicting viewpoints offer a point of contention to investors: What is really going on?
To be sure, QuestCor is taking a unique approach with its pipeline. The pipeline on the website is empty, and as stated before, the only R&D is in the therapeutic areas of multiple sclerosis, Nephrotic syndrome, infantile spasms, and Opsoclonus Myclonus Syndrome (OMS). A line from the web page says:
Our current research and development efforts focus primarily on serious, difficult to treat medical conditions that have received little funding and support.
Does this mean that QuestCor has decided to stray from medication development and instead focus on therapeutic and rehabilitative treatments? In one respect, yes. However, QuestCor still has both Doral, a sleep aid and insomnia treatment, and the H.P. Acthar Gel to rely on. The Acthar Gel alone holds a large part of QuestCor stock power, and is used to treat various diseases, including infantile spasms in young children, multiple sclerosis attacks in adults, remission of both lupus and nephrotic syndrome, and a laundry list of other ailments. Because of this, QuestCor seems to be focused on using its existing treatments on a wider basis of disease, as opposed to investing the time and money into new developments, and this is a double-edged sword for investors.
There is a possibility of two outcomes: One, the strategy works, and both Doral and the H.P. Acthar Gel are effectively used to treat multiple diseases each. This would cause the stock price to skyrocket, as there would be no overhead for new medication - the drug already exists. On the other hand, should the strategy fail, the stock price would plummet as no back-up medications are in development, and there would be nothing to buffer the fall. Should the latter happen, QuestCor investors would be in serious trouble. There are evident risks to both sides of the equation, for the company and for the investor.
Keeping those risks in mind, there are additional biotechnology companies that compete with QuestCor that offer investors a safer alternative investment. One of these companies is Jazz Pharmaceuticals plc (JAZZ). This company is the producer of many commonly used drugs, including Xyrem, a narcolepsy treatment, and Prialt, an alternative painkiller for patients who react poorly to morphine. Jazz Pharmaceuticals also has in development additional forms of a medicine to add to its FazaClo drug to give patients an option in how they are dosed. The market size is around $2.46 billion, offering a sturdy investment base to fall back on. Jazz Pharmaceuticals was ranked number six in Yahoo Finance's 10 Best Performing Stock of the Three-Year Bull Market. It is a good investment which has grown greatly in the past three years, and looks set to rise even further.
Another competitor is Spectrum Pharmaceuticals (SPPI). Smaller than the other companies mentioned in this article, Spectrum has a market size of around $609 million. However, it makes up for this in its marketability and pipeline. Spectrum has two drugs, Zevalin and Fusilev, already on the market, and 12 drugs in the pipeline. Of these, three are in Phase III trails, with one awaiting NDA approval. The two commercial drugs already available from Spectrum are cancer treatments, Zevalin target towards lymphoma and Fusilev aimed at colorectal cancer. According to reports, the demand for Fusilev is high, leading to an increase in stock price and an decrease in availabity. Because of this, Spectrum is allegedly expanding its manufacturing capacity. With this development, it has risen to a level that investors should keep an eye on the company. With its wide product base and ambitious pipeline, Spectrum is set to become a potential gold mine.
On the opposite end of the size spectrum, Alexion (ALXN) surpasses QuestCor and Jazz Pharmaceuticals by a huge margin. Alexion has a market size of around $17 billion, and is increasing. According to reports, the stock, currently trading at around $92 per share, will continue to rise. For the producer of Soliris, a treatment for atypical hemolytic uremic syndrome, this can only be a good thing. The same applies to investors. As one of the larger biotechnology companies, Alexion has to fall a long way before it loses potential, and is therefore a safe investment. Investors should take hold of this opportunity while they still can; the pay off potential is extraordinary.
The last competitor I will recommend looking at is Vivus (VVUS). This biotechnology company has a market size of around $2 billion, and is the producer of Qnexa, a revolutionary obesity drug. A Seeking Alpha contributor recommends Vivus as one biotech company to keep an eye on because of this drug. With the growing obesity epidemic, the stock price is sure to rise as the demand for treatment increases. Not only that, but with the approach of summer, the need for a beach body will send buyers looking for a way to lose weight, and fast. It's likely that Qnexa will be considered for that. Therefore, investors should buy in now, while the stock price is relatively low.
QuestCor approaches the market with a unique strategy not commonly seen due to the risks involved. However, it has been around long enough to know how to handle various situations, and will likely benefit from this. So even though the new strategy divides analysts into two different camps, I feel as if Questcor is a smart investment despite the risk. I advise investors to make their own decisions, but take what I have said into account. It is risky, but leaves the potential for great dividends.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.