My quest to build a diversified high-growth biotech portfolio has brought me to Questcor (QCOR) as a great counter-balance to my hot tamale tendency to invest in extremely volatile biotech stocks.
Two-year-plus-investors in Questcor have something to boast about. The once $3.49/share stock on 12 November 2009 close has enjoyed a near linear rise to a $32.78/share high on 27 July 2011. With all the attention Dendreon (DNDN) has garnished, I venture Questcor investors deserve equal if not more bragging rights. Despite recently dipping to a $25.80/share close on 22 August 2011, Friday's close at $27.79/share offered a sweet ~7% return on a short-term play. But what is the future direction of Questcor's share price? Up or down?
In my estimation, Questcor should eventually climb to new high of $40/share. I also wouldn't rule out $50/share depending on the new indication possibilities for Achthar sales. That offers current buyers potentially hefty returns, which is what highly-risky-biotech-investors prefer. Here's how I arrive at that conclusion:
First, the only downside I see for Questcor is the overall market, but analysts seem equally divided about how that will play out. I remember months ago, many were calling for a market correction--now we have that, but I also don't see the markets breaking down despite Washington, earthquakes, tsunamis and hurricanes. What we do see are cash-flush blue chips running lean because world governments like Europe need to clean up their banking messes while Warren Buffet puts his money behind Bank of America (BAC). In the U.S., if Washington is focused on taking control of its own debt and stopped trying to be the savior for the economy, I venture there's enough synergy in Wall Street for the bulls to chase the bears. As for Questcor, its only downside isn't Questcor, it's Washington politicians, who'd rather go on vacation after nearly bankrupting the nation.
Second, unlike Dendreon, Questcor is ringing the register. A good summary reported:
QCOR’s primary drug, H.P. Acthar, an injectable drug for inflammatory disorders, drove the strong results, with paid subscriptions for multiple sclerosis [MS] up 147% from last year.
CEO Bailey stated on the company's Q2 conference call:
The exceptional MS and NS sales growth along with the very good IS sales quarter naturally led to a record Acthar vial shipped quarter, record sale and record earnings. In addition today, we are announcing the fourth vertical market, we aim develop for Acthar, which is lupus. Now, we are adding fourth vertical market, lupus. Of course, we still have were [sic] a dozen additional on-label indications for Acthar that we have yet to analyze to determine their commercial potential" (Ibid). (Note: "MS" - multiple sclerosis; "NS" - nephrotic syndrome; "IS" - infantile spasms)
Therefore, if Questcor continues to meet with success, it has an incredibly huge upside.
Third, if you look at a long-term chart, any purchase under $28/share is an excellent buy. Remember, this is a long-term debt-free cash generating firm that is saying it has "a dozen additional on-label indications for Acthar" (Ibid). What's not to like about that? It's amazing to me that Questcor has avoided being bought out. Given the instability of the overall market, Questcor offers an excellent opportunity to presently buy shares under-valued by at least 5%--that's incredible resilience given the market's downside correction. But even if the investor prefers a short-term play, there are great opportunities here to gain multiple 5-10% returns if the investor is astute at timing market swings.
In conclusion, for non-risk adverse biotech investors who are looking for a wider biotech portfolio measuring risk-reward, I suggest Questcor would be a great addition. For example, Questcor would be a great counter-balance to my analyzed favorite Spectrum (SPPI) and for highly risky yet my creme de la creme favorites BioSante (BPAX) and Antares (AIS), and my even riskier favorite AEterna Zentares (AEZS). These five biotech stocks are stand-outs. In my estimation, all five stocks offer double to triple digits returns.
Disclosure: I am long BPAX, AIS. I may initiate a position in other stocks mentioned, and/or buy or sell my long positions in BPAX and AIS, after 72 hours of this article being published. Investors buy or sell at their own risk.