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Questcor (QSC) yesterday announced that the Company has completed the repurchase of the outstanding 2,155,715 shares of Series A Preferred Stock from Shire Pharmaceuticals, Inc. for cash of $10.3 million, or $4.80 per share which was the closing price of Questcor's common stock on February 19, 2008.

The Company has been growing cash on the balance sheet at an amazing rate since its new pricing plan was started, and we now estimate that the company had about $39 million in cash on January 31, 2008, and that it also had an accounts receivable balance of approximately $24 million. Remember, the Company provides 60 day payment terms to the distributor of the Company's products in the United States and thus we expect Cash amounts to build substantially going forward.

This amazingly strong and cash rich balance sheet affords the company many investor friendly options to enrich shareholder value. Indeed, company has taken first steps in that direction with this stock buy back. With cash growing at these fast rates, the future may see additional buy back programs and a stock dividend could also be initiated in addition to the buy backs.

Finally, as was stated in the company release, the Series A Preferred Stock had "required Questcor to obtain the holder's separate vote in the event of a merger and acquisition transaction." The buy back of the Series A Preferred Stock now opens the door to a possible takeover of QSC by a larger Biopharma rival. Considering the large positive cash flows and future earnings of QSC, such a takeover can not be ruled out at this time.

Our original research report, dated 12-11-07, can be found here.

Our current earnings and revenues estimates follow:

............................... EARNINGS PROJECTION ...........................

....................... 2006 ....... 2007 ......... 2008 ........ 2009


Q1 MAR : .... A (0.06) ..... A (0.05) ..... E 0.24 ..... E 0.38



Q2 JUN: ..... A (0.04) ..... A (0.03) ..... E 0.27 ..... E 0.49



Q3 SEP: ..... A (0.02) ...... A 0.12 ........ E 0.30 ..... E 0.58



Q4 DEC: ..... A (0.06) ...... E 0.22 ....... E 0.33 ..... E 0.66


YEAR: ....... A (0.28) ....... E 0.26 ......... E 1.14 ...... E 2.11


......................... REVENUE PROJECTION (in millions) .............

...................... 2006 ..... 2007 ....... 2008 ........ 2009


Q1 MAR: ..... A 2.01 ..... A 3.70 ..... E 26.10 ..... E 42.50


Q2 JUN: ..... A 3.33 ..... A 4.14 ..... E 29.40 ..... E 54.80


Q3 SEP: ..... A 4.05 ..... A 14.81 ..... E 32.70 ..... E 64.80


Q4 DEC: ..... A 3.40 ..... E 23.95 .... E 36.90 ..... E 73.70


YEAR: ....... A 12.79 ..... E 46.60 .... E 125.10 ..... E 235.80


Given a very favorable balance Sheet, and favorable valuation levels, based on our above analysis and earnings estimates, A BUY rating is maintained on the stock of QSC, which had a closing price of $4.80 on February 19, 2008.

Disclaimer: Author's financial firm, Independent Financial Consultants [IFC] is long QSC.

Source: Questcor Stock Buyback Opens Door to Acquisition