QCOR

Call Spread on QCOR on 7/8/2013

Questcor Pharmaceuticals (QCOR) is a biopharmaceutical company.

It provides drugs for the treatment of multiple sclerosis, nephrotic syndrome, and infantile spasms indications. It primarily offers H.P. Acthar Gel, an injectable drug for the treatment of acute exacerbations of multiple sclerosis in adults; to induce a diuresis or a remission of proteinuria in the nephrotic syndrome without uremia of the idiopathic type or that due to lupus erythematosus; and as monotherapy for the treatment of infantile spasms in infants and children under two years of age. The company’s H.P. Acthar Gel also focuses on rheumatology-related conditions, including collagen diseases and rheumatic disorders.

In addition, it offers Doral for the treatment of insomnia. The company sells its Acthar primarily to specialty pharmacies; and Doral to pharmaceutical wholesalers. Shares have formed a bullish "pennant" after Questcor announed that it struck a deal to acquire Novartis drug Synacthen. The drug is approved outside the U.S. for certain autoimmune and inflammatory conditions, but have never been developed or approved for patients in the U.S. Under the terms of the transaction agreements, Questcor has paid Novartis an upfront consideration of $60.0 million. Questcor will make additional payments of at least $75.0 million in the aggregate over the next several years, as well as potential milestone payments prior to FDA approval.

The stock goes ex-dividend on July 18th (25 cents) and earnings are reported on July 23 after the close.

52-Week Trading Range: $17.25 - $58.91

Entry Point: $46.53

Here is the trade:

Buy One QCOR August $45 Call option for less than $3.90

Sell One QCOR August $50 Call option for less than $2.00

The payoff is shown in the chart below.