Questcor Pharmaceuticals, Inc.
) has delivered six straight quarters of positive earnings
surprises with an average beat of 17.1%. Most recently in the
second quarter of 2012, this biopharmaceutical company announced
year-over-year earnings and revenue growth of 210.0% and 145%,
With a continued increase in earnings estimates and a long-term
growth projection of about 39.5%, this Zacks #1 (Strong Buy) looks
like a solid growth pick. Increased promotional efforts and growing
acceptance of key product H.P. Acthar Gel should ensure strong top-
and bottom-line growth.
Solid Second Quarter Results
On July 24, Questcor reported second-quarter earnings per share of
65 cents, beating the Zacks Consensus Estimate by 6.6% and year-ago
earnings by 210.0%.
Net sales jumped 145% year over year to $112.5 million, surpassing
the Zacks Consensus Estimate of $109 million. This is the first
quarter in the company's history when sales crossed the $100
Sales were driven by expanded usage of Acthar, which is approved
for nineteen indications including idiopathic nephrotic syndrome
and multiple sclerosis exacerbations. Acthar vials shipped were up
94% year over year to 4,710.
Meanwhile, shares worth $156.1 million were repurchased during the
second quarter with approximately 4.7 million shares remaining
under the company's share buyback program.
Acthar Shows Promise
With Questcor expanding two sales forces and building a third in
rheumatology, Acthar sales should continue increasing. The company
estimates that the nephrotic and multiple sclerosis indications
alone represent annualized sales of $200 million each. Three
factors should work in Acthar's favor: (1) the product's clinical
profile, which provides benefit to difficult-to-treat patients who
fail to respond to other therapies; (2) modest market penetration;
and (3) the expanded sales force, which will increase physician
Acthar also has the potential to be developed for additional
indications, which bodes well for long-term growth.
Earnings Estimates on the Rise
Following the release of second quarter results, earnings estimates
have been moving up steadily. The Zacks Consensus Estimate for 2012
rose 3.8% to $2.74 per share over the last 7 days, implying
year-over-year growth of 126.6%. The Zacks Consensus Estimate for
2013 increased 3.1% to $3.70 per share over the last 7 days. This
implies year-over-year growth of 35.0%.
Valuation Looks Reasonable
Questcor looks attractive on a PEG basis. Given a long-term growth
projection of 39.5%, the PEG ratio comes in at 0.4, a 60% discount
to the benchmark of 1 for a fairly priced stock. Moreover, the
company's ROE of 71.3% is significantly higher than the peer
group's ROE of 29.6%.
Questcor is currently trading at a forward P/E of 15.5x, reflecting
a premium of 18.3% compared with the peer group average of 13.1x.
On a price-to-book basis, shares are trading at 19.8x, a 633.3%
premium to the peer group average of 2.7x. However, based on the
company's strong performance and fundamentals, the premium
valuation is justified and well supported by its long-term earnings
growth projection, which is higher than the peer group average of
Questcor is currently trading above its 200-day moving average of
Anaheim, California-based Questcor Pharmaceuticals focuses on the
development of treatments for serious and difficult-to-treat
autoimmune and inflammatory diseases. The company's main areas of
focus are neurology and nephrology. Its key product, Acthar, is
approved for nineteen indications though a major part of sales are
generated from the nephrotic syndrome, multiple sclerosis
(treatment of acute exacerbations) and infantile spasm indications.
Questcor's other marketed drug is Doral (insomnia).
Incorporated in California in September 1992 as Cypros
Pharmaceutical Corporation, the company changed its name to
Questcor Pharmaceuticals, Inc. in November 1999. Questcor, which
has a market cap of $2.60 billion, operates in the US.
QUESTCOR PHARMA (QCOR): Free Stock Analysis
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