Questcor: A Mid Cap Bio-Pharma With Bullish Indicators

Jan.17.12 | About: Mallinckrodt PLC (MNK)

Questcor Pharmaceuticals (QCOR) provides prescription drugs for the treatment of auto-immune diseases. The company's primary product is H.P. Acthar Gel (repository corticotropin injection), an injectable drug for the treatment of acute exacerbations of multiple sclerosis; infantile spasms in infants and children under two years of age; nephrotic syndrome; and Lupus. Questcor Pharmaceuticals was founded in 1990 and is headquartered in Anaheim, California.

Price per share on Questcor as of 1/13/11 was $36.48.

Technical Bullish signals:

The Chart shows resumption of trend line on increasing volume, possible cup and handle forming.

Fundamentals:

Market Cap (intraday) : 2.28B

Shares Outstanding: 62.49M
Float: 55.74M
% Held by Insiders: 6.82%
% Held by Institutions: 93.60%
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Very high institutional ownership for Questcor. The Market Cap should be a bit higher, as I believe the pps should be higher.

Financial Highlights
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Fiscal Year
Fiscal Year Ends: Dec 31
Most Recent Quarter (mrq): Sep 30, 2011
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Profitability
Profit Margin : 31.62%
Operating Margin : 47.39%
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Management Effectiveness
Return on Assets : 27.79%
Return on Equity : 38.35%
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Income Statement
Revenue : 171.93M
Revenue Per Share : 2.76
Qtrly Revenue Growth (yoy): 91.30%
Gross Profit : 107.12M
EBITDA 6: 82.38M
Net Income Avl to Common : 54.37M
Diluted EPS : 0.82
Qtrly Earnings Growth (yoy): 98.40%
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Balance Sheet
Total Cash (mrq): 165.71M
Total Cash Per Share (mrq): 2.65
Total Debt (mrq): 0.00
Total Debt/Equity (mrq): N/A
Current Ratio (mrq): 4.51
Book Value Per Share (mrq): 2.76
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Cash Flow Statement
Operating Cash Flow : 56.08M
Levered Free Cash Flow : 50.12M
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Excellent ROE and ROA.

Questcor has no debt and decent profit margins.

The numbers above really speak for themselves. Questcor has solid fundamentals, but the company can do a better job on EPS.

Questcor's products:

H.P. Acthar Gel (repository corticotropin injection);

Currently approved in the U.S. for the treatment of acute exacerbations of multiple sclerosis in adults, and as monotherapy for the treatment of infantile spasms in infants and children under 2 years of age. It is also indicated 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, as well as indicated for the treatment of several other diseases and disorders.

Doral (quazepam tablets, USP);

Indicated for the treatment of insomnia characterized by difficulty in falling asleep, frequent nocturnal awakenings, and/or early morning awakenings.

Business growth strategy:

  • Increasing revenues through sales and marketing activities targeted to physicians who treat patients with serious, difficult-to-treat medical conditions.
  • Leverage of its primary product, Acthar, through investing in clinical research in patient populations where there is high unmet medical need and potential benefits from Acthar therapy.
  • Actively gives back to patients and physician communities by providing state-of-the-art patient assistance programs, as well as financial support for innovative medical research at major academic institutions.

Conclusion:

The Health care bio-pharma sector will perhaps be the best performing sector in 2012, and Questcor is well positioned to take full advantage of this. The chart looks to be setting up as very bullish, although a very short term move down to $33 is possible before pushing upwards over $40.

My 2012 target for Questcor is $45.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.