Things You Need to Know From Questcor Pharmaceuticals Inc (QCOR)’s Killer Q2 Earnings

3. Watch out for even more expansion.
Tremendous results from the first full quarter marketing Acthar for rheumatology prompted Questcor to set its sights on another indication — pulmonology. The company intends to use the same strategy used for other indications to target treatment of symptomatic sarcoidosis.

Acthar claims 19 on-label indications, several of which could be pursued more aggressively. The company is sponsoring a clinical study for Acthar in treating one of these other indications — lupus. Enrollment is under way for this study. Questcor is also sponsoring an independent study evaluating use of Acthar in treating lupus exacerbations.

Questcor isn’t stopping there, though. It also has begun screening patients for a mid-stage trial of Acthar in treating patients with Amyotrophic Lateral Sclerosis, or ALS, commonly known as Lou Gehrig’s disease. Currently, Sanofi SA (ADR) (NYSE:SNY)‘s Rilutek is the only drug approved to treat ALS. However, the drug helps only moderately in slowing progression of the disease. Rilutek generates sales of around $50 million in the U.S.

There’s no guarantee that Questcor will see success with Acthar in treating ALS, of course. Its phase 2 study targeting diabetic nephropathy could also flop. However, the company’s drive to expand use of Acthar (and Synacthen now that Questcor owns the rights to its second drug) is good for shareholders.

Buy, sell, or hold?
One number stands out to me in consideration about what to do with Questcor’s stock — the price/earnings-to-growth, or PEG, ratio. The PEG ratio is a good metric to use with growth stocks. Stocks with a PEG ratio well below 1.00 tend to be valued attractively with growth prospects factored in.

Questcor’s PEG stood at 0.47 as of the end of the day on Tuesday. With shares surging in the double-digit percentages in after-hours trading, that ratio won’t be quite as low, but it will still be attractive. You’re not going to find too many solid, growing companies with a PEG in that ballpark that also happen to sport a 2% dividend yield.

My view three months ago was that the second quarter would show whether Questcor was cheap for a reason or only cheap for a season. I think the company has now answered that question resoundingly. Questcor looks to be a buy.

The article 3 Things You Need to Know From Questcor’s Killer Q2 Earnings originally appeared on Fool.com is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned, and neither does The Motley Fool.

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