Questcor (QCOR) is leveraging a broad label to enter new markets, boosting sales and profit growth and fueling an aggressive share buyback program.
The company's one drug is Acthar, a high price, complex drug used to treat a growing list of diseases, including Multiple Sclerosis ("MS"), Nephritic Syndrome ("NS") and Infantile Spasms ("IS").
Vials shipped are accelerating.
In Q1, 105% more vials were shipped than last year. And the strength has continued into Q2, with May shipments reaching 1,560 vials, nicely above the 1,350 shipped in April and 21% more than were shipped in December.
Pricing power is holding steady too. In Q1, revenue per vial shipped rose to $23.5k from $18k a year ago. For comparison, the measure clocked in at $20.5k last fall.
As a result, revenue has accelerated in each of the past four quarters, growing 62%, 91%, 158% and 161% year-over-year, respectively.
It's newest market has already become its biggest.
A significant amount of this success is tied to the company's recent focus on selling Acthar as a treatment for Nephritic Syndrome ("NS"). The market is ripe for treatment options, given NS affects only 2 in 10,000 people and causes irreversible kidney damage within 2 to 20 years.
To drive NS growth, the company took its sales team from 5 to 28 last year. As a result, the company shipped 72% more NS vials in May than in December. In Q1, NS paid prescriptions were 238, up from 146 in Q4.
That's good for a $175 million annualized run rate, making the new market the company's largest. The recent addition of 30 more sales people means strength is likely to continue through year end.
New hires offer upside to Multiple Sclerosis sales too.
In 2010, Questcor ramped its MS sales team to 77. This effort drove paid scripts to 1000 in Q1 '12, up from just 231 in Q1 '10.
In May, MS vials shipped were 13% above December and MS paid prescriptions have increased in each of the past 8 quarters, good for a $170 million revenue run rate.
Yet, Questcor thinks there's still plenty of room to grow in MS, where it holds only a single digit market share. This year, it plans to bring its sales team to 109 people to better reach the 200,000 patients who suffer relapses annually.
Future growth from rheumatology.
Even with the rapid growth in NS and MS, the real reason to own shares may be in Acthar's potential in rheumatology.
The company believes Acthar has a billion dollar opportunity treating diseases such as lupus. So, they're launching a small sales team later this year to see if they're correct.
If they are right, the company will leverage its MS and NS experiences to build out a larger sales team, which could drive sales growth through mid decade.
Beyond rheumatology, the company is also looking at other on-label indications, such as dermatology and ophthalmology.
Growth is fueling an aggressive buy back program.
The debt free company is returning a lot of its new cash to shareholders through buybacks. Last quarter, they repurchased 800k shares. And, so far in Q2 the company has bought back an additional 3.7 million shares.
This means Questcor has bought back 19.9 million shares over the past four years, or roughly 27% of its shares outstanding.
And, even with all the buybacks, the company is still holding $119 million in cash. With 4.7 million shares remaining on the buyback program, you can bet they'll continue to support prices.
Despite analysts bumping up 2013 earnings estimates to $3.34 from $3.29 30 days ago, short sellers remain pessimistic. Currently, some 15.88 million shares are short, triple last fall and equal to nearly 9 days of average daily trading volume. If the company continues to grow, shareholders should benefit as sellers cover, making the stock increasingly attractive.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in QCOR over the next 72 hours.