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Today, Questcor announced that it will be acquiring BioVectra Inc. for $50 million.

QCOR is down 2.73% on a big market up day.

I know very little about BioVectra, but since, according to Questcor management, the purchase secures the trade secrets surrounding Acthar, it appears that management is looking out for its company's best interests by doing what they can to protect their sole drug. I always wondered what would happen if there is a leak at Questcor and the secrets of manufacturing Acthar gets out. That would be the end. Even with this purchase, it can still happen, but there is less risk.

Also, this purchase just makes a lot of sense. Avenues that were not possible prior to Acthar becoming a blockbuster are opening up now with the influx of revenue for Questcor. Vertical integration should allow more upside as Acthar sales take off.

It is also evidence that Questcor's real assets are growing. It is one thing to generate revenue and distribute it to shareholders or do share buybacks. It is another to plow it back into the business for the chance to grow the company in a multi-billion dollar business. Exactly how Questcor will do this is speculation by outsiders, but there's no reason at this time to doubt management's ability or drive.

Given what I know, I like this purchase, and I hope there are more benefits to the purchase besides protecting the trade secrets of Acthar. We'll see.


Located in Prince Edward Island, Canada, BioVectra is a trusted, long-time partner to many of the industry's leading pharmaceutical companies. It has been Questcor's manufacturing partner for the API in Questcor's H.P. Acthar® Gel (repository corticotropin injection) for nearly a decade. The acquisition will enable Questcor to further secure the manufacturing process trade secrets surrounding Acthar. BioVectra will continue to operate independently in Prince Edward Island, under its existing management team and Questcor intends to support the continued growth of BioVectra's business.

"We are excited to join efforts with BioVectra as we look to diversify our revenue," said Don M. Bailey, President and CEO of Questcor. "This action puts us in a better position to meet the continuing growth in demand for Acthar, brings to our company a broader depth of technical and scientific expertise, and provides us with a platform for potential international expansion."

"We pride ourselves on being a strategic partner, forging long-term relationships with our clients and utilizing our proven technical skills to serve our clients' business needs," said Ron Keefe, CEO of BioVectra. "Questcor has been an important long term partner and we look forward to further building our relationship."

BioVectra's capabilities include synthetic organic chemistry, natural extraction of bioactive compounds from plant and animal-based biomass sources, PEGylation and conjugation chemistry, and fermentation of a variety of molecule types. BioVectra's facilities have been approved by United States and Canadian regulatory authorities to produce and supply intermediates, API's and drug substances.

BioVectra's facilities are staffed by approximately 180 employees including chemists, engineers and technicians. BioVectra had sales of approximately $28 million in its last fiscal year ended August 31, 2012, a 15% increase over its prior fiscal year.

Transaction Details

Questcor will purchase all issued and outstanding shares of BioVectra for an upfront payment of C$50 million, utilizing cash on hand. BioVectra stakeholders could also receive additional cash consideration, based on BioVectra's financial results over the next three years. The contingent payments could result in the payment of up to an additional C$50 million. The transaction is expected to be immediately accretive to non-GAAP earnings. Subject to customary conditions, Questcor anticipates closing the transaction in January 2013.

About BioVectra

BioVectra Inc. is a supplier to the global pharmaceutical industry, operating from three, FDA inspected facilities in Prince Edward Island, Canada. The company is proficient in synthetic organic chemistry, natural extraction of bioactive compounds, PEGylation and conjugation chemistry, and fermentation of chemical and biologic molecules. BioVectra has submitted 10 product filings, including ANDA, DMF, VMF, and CMC section preparations for both the FDA and Health Canada. These filings have been made for both synthetic and biologic molecules, and include a human injectable API, as well as a final drug product.
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