Questcor Pharmaceuticals, Inc.
) hit its 52-week high of $54.31 on June 26 due, in part, to its
efforts to launch H.P. Acthar Gel in the lucrative rheumatology
This biopharmaceutical company achieved a Zacks #1 Rank (Strong
Buy) based on strong positive estimate revisions. In addition ,
consecutive earnings surprises over the last four quarters,
averaging 22.6%, make this stock a solid momentum pick.
Solid First Quarter Results
On April 24, Questcor Pharma came out with impressive first quarter
2012 results, including adjusted earnings of 58 cents per share
that beat the Zacks Consensus Estimate by 16% and year-ago earnings
Net sales jumped approximately 161% to $96.0 million, surpassing
the Zacks Consensus Estimate of $90 million. Strong sales of H.P.
Acthar Gel, its primary growth engine, contributed to the huge jump
in revenues. The quarter saw Questcor Pharma ship 4,111 vials of
the drug, up 104% year-over-year. The company is expected to
deliver strong results going forward thanks to by H.P. Acthar Gel.
The company's strategy of rewarding stockholders through share
repurchases is also impressive. 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.
In its first quarter conference call, management stated that 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.
Estimates on the Upswing
Following the release of first quarter results, earnings estimates
moved up steadily over the last 30 days. The Zacks Consensus
Estimate for 2012 rose 3.8% to $2.43 per share, driven by 3 upward
revisions out of 6 estimates. For 2013, the Zacks Consensus
Estimate is pegged at $3.45 per share, up 4.9% over the last 30
Premium Valuation Justified
Questcor currently trades at a forward P/E of 21.7x, reflecting a
huge premium of 92.0% compared with the peer group average of
11.3x. Also, on a price-to-book basis, shares are trading at 14.3x,
a 429.6% premium to the peer group average of 2.7x. Given the
company's strong fundamentals, the premium valuation is justified
and well supported by its long-term estimated earnings growth rate
of 38.7%, compared to the peer group average of 22.3%.
However, with respect to return on equity (ROE), the stock looks
attractive. It has a trailing 12-month ROE of 55.6%, which is
substantially above its peer group average of 23.5%. This implies
that the company reinvests its earnings more efficiently than its
Shares of Questcor traded in the range of $38.51 to $43.39 between
late December 2011 and late May 2012. It broke that range on June
6, 2012 driven by its strong fundamentals.
In fact, 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.
Volume is fairly strong, averaging roughly 1,813K daily. 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%.
Headquartered in Anaheim, California, Questcor is a
biopharmaceutical company with a market cap of $3.35 billion. The
company, which operates solely in the US, was formed in 1999
following the merger of RiboGene Inc. and Cypros Pharmaceutical
Corporation. Questcor Pharma primarily focuses on the areas of
multiple sclerosis (MS), nephrotic syndrome (NS) and infantile
spasms (IS). The marketed drugs of Questcor Pharma are H.P. Acthar
Gel and Doral (insomnia). Even though H.P. Acthar Gel is approved
in the US for nineteen indications, most of the revenues from the
drug come from the MS, NS and IS indications.
QUESTCOR PHARMA (QCOR): Free Stock Analysis
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