Questcor Has the Potential for Double Digit Growth this Year
Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Investors who seek shares in mid-sized health care companies could be rewarded with a nice amount of growth based on the good news and the forward progress of certain drugs that are on their way to market.
Although the company struggled to breach 2011 levels, popular drug products such as Doral for the treatment of insomnia and Acthar Gel for multiple sclerosis in adults that have been developed by Questcor (NASDAQ: QCOR) have had a great deal of positive news, moving the company's shares up exponentially in some cases.
Over the past month, Questcor seems to have broken out to a recent new 52-week high. Analysts have recently projected that Questcor could see an earnings increase of over 93% in 2012 and an additional 37% for 2013. In addition, earnings are predicted to increase annually by a rate of over 38% for at least five more years.
In this article, I will discuss why I like Questcor and the earning potential of its up and coming treatments for numerous health conditions, as well as some of the recent positive developments at other biotech companies.
Questcor's Fundamentals
Questcor's offering of drugs related to the treatment of multiple sclerosis, infantile spasms, and nephritic syndrome are followed with the firm's primary product, Acthar Gel. This particular drug - currently approved for use with 19 different health conditions - including particular ophthalmic diseases and rheumatoid arthritis - helped the company's drug sales to nearly double between 2010 and 2011. This has also pushed income up by 100% during that same time period.
In addition, Questcor's R&D budget is being applied to additional clinical trials for Acthar Gel. These trials could prove that this gel may also be effective in the treatment of 40 additional diseases as well.
The future outlook for Questcor is positive. The company's per share estimate for the second quarter of 2012 is $0.57, which is up quite a bit from the EPS for the same period last year of $0.22.
Shares of Questcor also recently rose over 3% based on positive comments from company officials in regards to the commercialization of its rheumatology drug Acthar. Analysts are highly encouraged by both the prospect for the drug itself, as well as by the ability of Questcor to execute its strategy.
Although the drug is still in an exploratory stage, past expansion efforts in the areas of nephrology and neurology by Questcor have been well executed - and should Acthar be approved, it would represent a multi-billion dollar opportunity for the company.
Based on this, the fiscal year earnings per share estimates for Questcor have been raised to $2.26 from $2.25, and the fiscal year 2013 estimates have also been raised from $3.18 to $3.39.
I feel that this company's strong past performance, coupled with the positive forward movement of its drugs that are presently moving through the development stage, could lead Questcor's shares even further past its earlier 52-week high.
Other Mid-Sized Pharmaceuticals Working to Treat Worsening Health Issues
Disorders of the central nervous system such as depression, schizophrenia, and even addiction have come into the health care spotlight with one company in particular, Alkermes (ALKS), having approximately 20 drug products in the development stage. These include medications such as Vivitrol - and the recent approval by the FDA for the firm's diabetes drug Bydureon has helped in moving the company's shares up by roughly 5%.
Over the past several years, obesity also seems to be worsening in the U.S. Most people would rather turn to a quick fix through a pill, however, instead of exercising and following a more healthy diet - and this is good news for the pharmaceutical companies that are developing and offering obesity related drugs.
Based on BMI estimates, approximately 36% of United States residents are obese, and by the year 2050, this number is predicted to rise to over 40%. Estimates for other countries are following in a similar upward trend - showing a real need for a "cure." In fact, it is estimated that the market for obesity treatment will reach in excess of $3 billion per year by 2016.
One company that is moving obesity related products through the testing stages is Vivus (NASDAQ: VVUS). With its Qnexa drug - a medication that addresses obesity, as well as sleep apnea, male sexual health, and diabetes - the company states that Qnexa's controlled-release formulation of low-dose phentermine and topriamate will help to reduce the user's appetite with the feeling of being full.
Qnexa has already completed Phase 3 trials for its obesity treatment and is currently in Phase 2 for the clinical development for type 2 diabetes as well as its treatment for obstructive sleep apnea. A February 2012 vote of 20-2 by the FDA Advisory Panel for Qnexa helped in moving the company's shares up 100% in the short term, and up by 9% on the day of the announcement.
Another diet drug developer, Orexigen (OREX), is the maker of Contrave, also a diet related medication. The company is also the maker of the diet drug Lorcaserin - a medication that is actually licensed by Arena (NASDAQ: ARNA).
Lorcaserin's approval was originally slowed down due to the need for additional safety information as cited by the United States Senate Committee on Appropriations. And, although official FDA approval has not yet been formally granted for Locaserin, the share price of Arena has doubled based in large part by the advisory committee's 18-4 recommendation for the drug.
The Bottom Line
Questcor could prove to be a great asset for a growth related portfolio. With its projections for increases in revenue, earnings, and total return, the firm also possesses a positive balance sheet and recent appreciation in price.
Given Questcor's strong past performance, coupled with its positive future outlook and upwardly adjusted earnings per share estimates through 2013, I believe that the company could be a real winner for investors who are seeking both short and long-term portfolio growth.
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