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Strategies & Market Trends : Calls and Puts for Income

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From: CommanderCricket	10/7/2012 11:10:38 AM
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Quite an aggressive price target with the shares trading at $19.45. IV popped higher Friday afternoon and provided a chance to sell premium, so I sold a few more Jan 13 - 15 puts. If IV drops back to where it was earlier in the week, these should be worth a 30% gain on an IV fade alone over the next few days. We shall see. Be very careful with these and don't get greedy as gamma can pop significantly higher quickly (within minutes) on the fast sell offs. Oxford Health update seems markedly positive to us; BUY (QCOR, BUY, $19.36, PT: $74.00) QCOR is trading down on Oxford Health reimbursement update for Acthar which we view as a positive. • New Acthar reimbursement policy for Oxford: The policy indicates the review period for use of Acthar Gel in multiple sclerosis and infantile spasm has shortened, but the drug continues to be reimbursed for steroid refractory and intolerant patients because it is on-label use of the drug. We see this as a marked positive for QCOR given investors' fears that the reimbursement dominoes are starting to tip onto Acthar after Aetna's coverage determination. We believe QCOR still has an opportunity to execute through challenges ahead and reiterate our BUY rating. We appreciate this is a contentious stock with extremely passionate views in either direction, but we still don't have reason to waiver in our perspective. Our PT remains $74. • • Questcor still has some options: While we are still weaving our way through the reimbursement process for Acthar, there are a few ways for QCOR to still come out ahead. These include: 1) convince Aetna to add a 5th bullet on its policy for which use of Acthar in steroid resistant/refractory settings is considered medically necessary; 2) gain access to Acthar for "off-formulary" (note – NOT off-label) use of the drug through the appeals process with medical directors; 3) contain Aetna's new reimbursement policy to Aetna. • • Maybe it's a matter of philosophy: We believe the split in the investment community and perhaps even in the medical community is based on philosophy. Specifically, should one take a dogmatic "evidence-only" approach to reimbursement for drugs, or does one believe that an individualized care approach that may deviate from clear data is appropriate. Based on our experience in rheumatology prior to joining the Street, we're used to having to operate in a data vacuum and believe that "the absence of evidence is not the evidence of absence" in patient care.

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