1. What is the name of the company? What is the industry sector?
Questcor Pharmaceutical is biopharmaceutical company focused on the treatment of patients with serious, difficult-to-treat autoimmune and inflammatory disorders. 2. What are the operating risks of the company? * The complex nature of our manufacturing process and the potential for supply disruptions or other business disruptions * The lack of patent protection for Acthar; and the possible FDA approval and market introduction of competitive products; * The ability to generate revenue from sales of Acthar to treat on-label indications associated with NS, and our ability to develop other therapeutic uses for Acthar; * Research and development risks, including risks associated with Questcor's preliminary work in the area of nephrotic syndrome and our reliance on third-parties to conduct research and development and the ability of research and development to generate successful results; * Regulatory changes or other policy actions by governmental authorities and other third parties as recently adopted U.S. healthcare reform legislation is implemented; * The ability to receive high reimbursement levels from third party payers; * An increase in the proportion of our Acthar unit sales comprised of Medicaid-eligible patients and government entities; * The ability to estimate reserves required for Acthar used by government entities and Medicaid-eligible patients and the impact that unforeseen invoicing of historical Medicaid sales may have upon our results; * The ability to operate within an industry that is highly regulated at both the Federal and state level; * The ability to effectively manage our growth and our reliance on key personnel; * The impact to our business caused by economic conditions * The ability to protect our proprietary rights; * The ability to maintain effective controls over financial reporting; * The risk of product liability lawsuits; * Unforeseen business interruptions; * Volatility in Questcor's monthly and quarterly Acthar shipments and end-user demand, as well as volatility in our stock price; and
3. What is the financial risk of the company (the debt to total capitalization ratio)?
The financial risk is considered moderate. Total debt is 90.60M & total debt + shareholders equity is 161.83M. The debt to total capital ratio = 56%. 4. Does the company have any preferred stock?
No, the company currently does not have any preferred stock. 5. What is the capital structure of the company?: Short term portion of Long Term Debt, Long Term Debt, Preferred Stock (if any), and market value of Common Stock issued and outstanding?
The capital structure of the company is 36% debt and 64% equity. Total Liabilities/Total assets=35.98%, there is no preferred stock and outstanding market value on Common stock is 58.54M. 6. What is the company’s current actual Beta?
The company’s current actual Beta is 1.37 7. What would the Beta of this company be if it had no Long Term Debt in its capital structure? (Apply the Hamada Formula.)
Questcor has not Long term debt in its capital structure. Its long term debt accounts for only 0.00% of total capital. 8. What is the company’s current Marginal Tax Rate?
Marginal tax rate is 35% 9. What is the Cost of Debt, before and after taxes?
Since it has no debt this simply includes all forms of equity. Its after tax cost of equity during the last year was 6.56%. The company clearly has very strong liquidity having no debt to finance, $155.31 million in cash on hand as of last quarter and a business that generated $210.15 million in earnings before interest, taxes, depreciation and amortization in the same period 10. What is the Cost of Preferred Stock (if any)?
No preferred stock 11. What is the Cost of Equity?
In Questcor Pharmaceutical,'s case, since the