Today’s Top Pick for 2014 is a specialty pharma company with significant sales and earnings growth in the forecast.
Questcor Pharmaceuticals (QCOR)
from Cabot Benjamin Graham Value Investor
Questcor Pharmaceuticals (QCOR) is a specialty pharmaceutical company providing H.P. Acthar Gel (Acthar), a prescription drug for treating autoimmune disorders and other ailments, including MS (multiple sclerosis). Questcor is in Phase II trials to gain FDA approval to sell Acthar as a treatment for ALS (Lou Gehrig’s disease).
In 2014, sales are forecast to increase 30%, and EPS (earnings per share) are estimated to jump 38%, to $6.32.
QCOR shares have dropped recently—after the report of an investigation by the states of Pennsylvania and New York—and, in addition, by the Securities and Exchange Commission. Details are few, but the investigation seems to include examining Questcor’s labeling and marketing practices.
Realistically, Questcor will lose part of its fight and will be fined and admonished. The outcome will probably have no material effect on the company’s sales and earnings.
Questcor shares are now a bargain at 11.8 times current EPS with a dividend yield of 2.2%. The balance sheet includes minimal debt, but QCOR shares are high risk because of the speculative nature of the company’s biotechnology business and the pending investigation. I expect QCOR’s shares to achieve my Minimum Sell Price of 114.85 within two years.
J. Royden Ward, Cabot Benjamin Graham Value Investor, www.cabot.net, 978-745-5532, December 24, 2013