It’s amazing how people always seem to forget that the stock market is a market of individual stocks. Even though the overall market may seem rather dismal at times, there are still companies out there that have fabulous products and make more money quarter after quarter after quarter. Inevitably these spectacular earnings get recognized, and the stock prices of these amazing companies respond positively.
Back in September of 2008, I posted this tidbit in the $$$MR. MARKET$$$ is HUGE forum:
09-11-2008, 03:00 PM
Administrator Join Date: Sep 2003
QCOR - Another little gem?
I like QCOR here at a price of $6.21.....
PE of 8.8
EPS growth last 3 yrs of 157%
EPS Growth over last 5 yrs = 48%
Revenue growth Last qtr vs. prior year qtr = 501%
Revenue Growth TTM = 27.7%
Price performance last 13 weeks up 25%
Price performance last 52 wks up 44%
Seems like a good pharmaceutical story...
I am HUGE! Bring me your finest meats and cheeses.
- $$$MR. MARKET$$$
Lo and behold, this stock, QCOR, was trading at $6.21 about 4 years ago. Now it trades a lot higher. I liked the stock then. I LOVE the stock now.
Today I bought QCOR at 51.38. I will sell it in 4 to 6 weeks at 59.18. Here’s why I (still) like Questcor:
Questcor Pharmaceuticals, Inc., a biopharmaceutical company, provides prescription 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. Questcor Pharmaceuticals, Inc. was founded in 1990 and is headquartered in Anaheim, California.
Now this is not a typical $$$MR. MARKET$$$ chart with the stock price going straight up. This stock chart shows you a company that has investors scared that bad things are going to happen at any second to this company. Afterall, QCOR is a one trick pony, for all intents and purposes selling one drug - Acthar. Every time it posts another great quarter, it seems like investors head for the hills like scared rabbits, fearing the party is going to end. Ha Ha Ha - I laugh at such cowardice.
Although the multiple indications for Acthar might generate significant revenue in the future, almost all of Questcor's revenues come from just three of these indications: multiple sclerosis, infantile spasms, and proteinuria in nephrotic syndrome. More than 80% of paid prescriptions in 2011 were from multiple sclerosis, which increased 250% from 2010. Sales for nephrotic syndrome are still relatively small but increased almost nine-fold from 2010.
The stock is up 90% in the last 12 months and it has a trailing PE of 32. Sure that’s a little pricey, but not when you consider that the forward PE is less than 15! Why is the forward PE so cheap? Try these numbers on for size:
• Profit Margin (ttm): 38.55%
• Operating Margin (ttm): 55.57%
• Return on Assets (ttm): 41.52%
• Return on Equity (ttm): 59.92%
• Qtrly Revenue Growth (yoy): 160.50%
• Qtrly Earnings Growth (yoy): 243.40%
• Total Debt (mrq): 0.00
These are like Madden numbers! The consecutive earnings surprises over the last four quarters, averaging 22.6%, make this stock a solid momentum pick. In their most recent earnings report in April (there will be another one this month), Questcor came out with impressive results, including adjusted earnings of 58 cents per share that beat year-ago earnings by 222.2%. Net sales jumped approximately 161% to $96.0 million. The quarter saw Questcor Pharma ship 4,111 vials of Acthar, up 104% year-over-year.
QCOR is plowing back their cash into the company via share repurchases. It returned approximately $29 million to its stockholders during the quarter through its share buyback program. On May 15, 2012, the company expanded its repurchase program by 5 million shares. Management LOVES this company so much they are literally BUYING it back! Questcor Pharma exited the first quarter of 2012 with cash, cash equivalents and short-term investments of $223.7 million and no long-term debt.
The stock has been consistently trading above its 200-day moving average since the beginning of the year. It has also remained above the 50-day moving average since June 6, 2012. Questcor has constantly outperformed the S&P 500 since the beginning of the year. The year-to-date return for the stock is approximately 33.0%, compared with the S&P 500’s return of 3.4%. Earnings are predicted to increase annually by a rate of over 38% for at least five more years. In addition, Questcor's R&D budget is being applied to additional clinical trials for Acthar Gel. These trials could prove that this gel may also be effective in the treatment of 40 additional diseases as well.
Questcor has been a favorite among mutual funds as its stock has experienced 8 consecutive quarters of increasing mutual fund ownership and it had a 4% YOY increase in mutual fund ownership for its first quarter of 2012.
The reason why the near term future is so bright is that Acthar Gel currently has no therapeutically equivalent counterpart and it is extremely difficult to reverse engineer Achtar. So unlike the movie Ironman when the bad guys figured how to make the Ironman suit, it’s not gonna happen to Achtar. Acthar basically has a monopoly on a lot of the markets of the 19 symptoms it can be used to treat which means mo money mo money mo money. Questcor estimates that the market sizes for Nephrotic Syndrome and Multiple Sclerosis are at least $1B each. Moreover, H.P Acthar Gel's opportunity in the rheumatology market is also estimated at roughly $1B. HUGE.
One dose of H.P Acthar Gel now costs more than $25,000. They are now actively ramping up their sales force to spread the word. Do you know what happens to your company’s bottom line if you sell a lot more things at a price of $25,000 per whack? The company recently disclosed its plans to market its drug Acthar as a treatment for rheumatology conditions. Questcor said it will start a pilot sales program by mid-July. It will start by hiring 12 sales representatives and will focus on rare neuromuscular conditions. By late in the year it intends to market the drug to as many as 1,000 neurologists specializing in neuromuscular disease. The gel is approved to treat several other conditions including rheumatoid arthritis and other types of arthritis, although Questcor is not yet marketing it in this capacity. Can you say, “untapped potential”? Hmmmmmm??
Here’s what the CEO Don Bailey had to say about the success of increasing their sales force:
“So we started back about a year ago with hiring of five reps, so with this whole five and yellow areas is on the chart. And that -- those five reps generated 45 scripts and they were then able to grow that number in the subsequent quarter.vvWe then started an activity to expand that sales force to 28 reps and you can see sales jumped up, script count jumped, and jumped up again in most recent quarter, and we are now in the middle of another expansion, which I’ll talk about little later expanding the 28 sales reps up to 58. So sales have been going rather nicely there… Again there is a high unmet need. It is difficult to treat conditions. There is serious health issues involved and significant patient population and we believe there are multi-billion dollar opportunity. We have very little sales in that rheumatology, just a handful of scripts but we will be entering this market later this year.”
During the last year Amgen (AMGN) was up 17%, Vertex Pharmaceutical (VRTX) was up 19% and Repligen Pharmaceutical (RGEN) was up 7% while Questcor soared up 90%. That’s like the Harlem Globetrotters beating up on the Washington Generals. That’s like Pedro Morales against Johnny Rodz. During the first quarter of 2012, Questcor shipped 4,111 vials of Acthar, compared to 2,010 vials in the year ago quarter. Now they have more people selling it….!! HELLO!
The share repurchase program is like taking your earnings and putting them on steroids. “So in the last four years, we have repurchased 19 million shares. We now have 60 million outstanding. So this is a 26%, is that right Mike, about 26% of our shares, 27% of our shares were repurchased. We have 5.4 million shares remaining. We just extended or just added another incremental buyback program. We have returned $236 million worth of our free cash flow to shareholders. So the repurchase activity this year is 3.8 million shares, 800,000 in Q1, 3 million in Q2. And we had the more aggressive buyback now because in the last six months, our sales and earning have been increasing rapidly. So, I think, as you all would know, repurchased shares are accretive, highly accretive since interest we can earn on that cash is basically near zero. The Q1 -- just in Q1 alone, based on the repurchase activity up through Q1, so that doesn’t include what happened in Q2. We estimate it has increased EPS by 24%. So, if we had not done any of this activity, EPS would have been impacted by 24% in Q1.”
How can this company possibly be this successful?:
“Acthar is a very interesting drug. It’s an old drug. It’s not well understood how this drug works. It appears to moderate the autoimmune system. It works very nicely in a number of different of these autoimmune conditions. As you can just see from what we’ve talked about so far, rheumatology, kidneys and central nervous systems, it’s quite a wide variety. Acthar works -- technically we believe it works through the melanocortin peptide system. There are a number of receptors located throughout organs in the body. Acthar seems to activate those receptors, which then modulate the immune system.”
Here’s the real fun:
“All the contents of Acthar and its effective ingredients have yet to be totally characterized. We are in the process of doing that. The PK profile is not in the public domain and that is not well known. So none of this will ever been made public. So basically these are all trade secrets that provide some pretty significant hurdles to a competitor to ever duplicate this drug….But we also have started a number of efforts looking at other possible future indications for Acthar, the biggest one being diabetic nephropathy, the autism, traumatic brain injury, ALS and migraine. Amongst others are also areas that we have some research going on. So in summary, Acthar has, we believe sustainable competitive advantages and we’re past the point of having really any FDA risk, certainly FDA approval risk. Acthar has a very strong label with quite a few viable, commercially viable indications. Sales in both nephrotic syndrome and MS have shown some very nice growth characteristics over the last 24 months, and yet it looks like there is plenty of room to grow there in the future.”
There’s not much more earnings analysis or chart reading you have to do to decide whether or not to invest in this stock here. If you believe that Questcor will continue to sell Acthar at this ridiculous pace of growth, the stock is a no brainer. If you’re afraid that something bad might happen, then for Pete’s sake, do not buy this stock.
Here’s what the boss has to say about what he thinks we should do:
“We believe our sales will continue to grow due to three key factors. First, Acthar provides benefits to many difficult to treat patients not responding to other treatments. Second, our market penetration in terms of the total number of nephrologists and neurologist prescribing Acthar while growing remains relatively small. Third, we have assembled in our expanding an excellent experience commercial team that successfully executing our straight forward growth plans. We are expanding the organization and associated infrastructure to address the significant growth opportunities in front of us. We are continuing to focus on nephrotic syndromes and MS sales. And at the same time, we are investing in research and development to learn about the possible therapeutic applications of Acthar to treat other inflammatory and autoimmune diseases. Questcor’s future looks bright.”
I’m sold and I really hope I’m right, because not only will I make a lot of money, but a lot of people will be feeling better because Acthar was able to help them.
If everything works out on this pick, and you end up benefiting from this write up. Please think about sharing just a little bit of your profit and helping out someone who needs it. Please visit www.dereksdreams.com
I am HUGE!!