Impressive Revenue Growth
Few companies can match Questcor Pharmaceuticals Inc (NASDAQ:QCOR)’s revenue growth. The company reported 133.3% year-over-year rise in its revenue. Net income also increased by a tremendous 148% year over year.
An increase in prescriptions for H.P. Acthar gel helped boost sales volume, as the FDA approved Acthar to treat a more diverse range of illnesses. Acthar can be prescribed for a number of conditions, including kidney ailments; a rare seizure disorder that affects infants; and multiple sclerosis, which attacks the brain and spinal cord. Together, these ailments help provide nearly three-fourths of Questcor Pharmaceuticals Inc (NASDAQ:QCOR)’s business.
Furthermore, the company is trying to get Acthar approved for three more conditions, which would expand the drug’s horizon. Acthar’s incredibly strong label should allow the company to keep growing revenue at a healthy clip for years to come.
Dividends and Growth Prospects
Questcor Pharmaceuticals Inc (NASDAQ:QCOR) distributed dividends of $0.25 per share, yielding 3.15% and repurchased shares of $18.6 million. The company has been returning capital to its shareholders, and it looks like Questcor Pharmaceuticals Inc (NASDAQ:QCOR) is now becoming a dividend stock. Declaration of dividend also indicates that the company is confident about the future cash flows and revenue, which should allay the fears about the future of the company.
The management has doubled the expenditure on research and development since innovation is the key to excel given the nature of the industry. The company is currently running clinical trials on three conditions to expand usage of its core drug, H.P. Acthar. Questcor has also planned to increase the size of its sales force to create awareness about the usage of the drug.
Acthar’s status as an “orphan drug” — a treatment for rare but serious medical conditions — allows the company to charge heavy prices. If Questcor Pharmaceuticals Inc (NASDAQ:QCOR) can keep expanding the drug’s label at regular intervals, its current sales growth could continue well into the future.
Other BioPharma Players
Sarepta Therapeutics Inc (NASDAQ:SRPT) is working on its own orphan drug for Duchenne Muscular Dystrophy, a rare disease in young boys. If the company is able to get approval from FDA, then Sarepta Therapeutics Inc (NASDAQ:SRPT) will have an extremely attractive drug, which it intends to sell for $150,000-$200,000 per course of treatment. As a result, revenues of Sarepta Therapeutics Inc (NASDAQ:SRPT) will go through the roof, and so will its stock price. I would strongly recommend buying Sarepta; there is need for the treatment, and the drug is likely to be approved.
Dendreon Corporation (NASDAQ:DNDN) has faced almost the same fate as Questcor – the stock is down about 60% over the past year. Dendreon Corporation (NASDAQ:DNDN), however, is a completely different story when it comes to the business. Questcor Pharmaceuticals Inc (NASDAQ:QCOR) has a product that has been bringing in massive revenues and cash flows for the company; Dendreon Corporation (NASDAQ:DNDN), whose cancer treatment drug Provenge has struggled since its approval three years ago, does not. For the future, Analysts are pessimistic about the company and believe the revenue will remain under pressure for some time.
Conclusion
Questcor is undervalued, in my opinion. All the fundamentals are solid for the company – the product is very strong and is used for some critical conditions. The business model is strong and the insurance coverage is present, which provides certainty to revenues. I expect the stock to reach $40 during the current year, which translates into over 16% return from the current levels.
The article Why Questcor Is Undervalued originally appeared on Fool.com and is written by Ishtiaq Ahmed.
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