Why Questcor Pharmaceuticals Inc. Soared Today

Why Questcor pharmaceuticals soared today.

Jan 16, 2014 at 4:37PM

Questcor Pharmaceuticals (NASDAQ:QCOR) is up over 10% today on unusually high volume following CEO Don Bailey's presentation at the 32nd annual J.P. Morgan Healthcare Conference. What started out as a fairly routine tour of the company's financials and lead commercial candidate, Acthar Gel, quickly turned into statements that suggest radical changes may be coming to Questcor.

From an investor's viewpoint, the most interesting part is that these statements came completely out of left field, leaving short sellers little room to find cover. In case you are new to this story, Questcor is quite a unique stock in the biotech sector. Despite growing revenues by double-digits over the last few quarters, short sellers have piled into the stock based upon ongoing investigations into the company's marketing practices for Acthar. As a result, Questcor shares have been trading for as little as three times annual sales lately. In the frothy biotech sector, that's basically unheard of.

Questcor's management, however, has actively fought back against short sellers by increasing dividends, instituting a hefty share buyback program, among other measures. Nonetheless, shorts have continued to attack the stock without mercy over the past year.

CEO mildly announces radical changes on the horizon
Mr. Bailey caught many investors off guard today by casually announcing during the company's presentation that Questcor is exploring the possibility of going private. If that wasn't enough, he later suggests that moving the company abroad might be a good idea to lessen the company's tax burden under U.S. Law. While these two bombshells started the rally, I believe what is most profound is Mr. Bailey's acknowledgement that it's time that Questcor moves beyond Acthar. 

What to do with all this cash?
There is no doubt that Questcor has been generating significant revenue from its highly successful orphan drug Acthar. Sales should top $1 billion year over year, once the company announces fourth quarter earnings next month. And so far, Questcor has primarily used this mountain of cash to buyback stock and reward shareholders by increasing dividends. In my view, however, the best way to quiet the critics about investigations into Acthar is to acquire or license another blockbuster drug. That appears to be an avenue Questcor is actively exploring this year.

Foolish final thoughts
With all of the licensing, partnering, and straight-up buyouts going on in the sector right now, Mr. Bailey's statements don't exactly surprise me. And with the company facing mounting criticism over Acthar's marketing, something big was bound to happen this year. Looking ahead, I personally think a merger with a company like Jazz Pharmaceuticals or Shire makes a lot of sense in terms of the synergies such a move would create. Regardless, Questcor definitely woke up the market today and looks ready to generate more debate among investors in 2014.

Two biotech stock picks to watch
The best way to play the biotech space is to find companies that shun the status quo and instead discover revolutionary, groundbreaking technologies. In the Motley Fool's brand-new FREE report "2 Game-Changing Biotechs Revolutionizing the Way We Treat Cancer," find out about a new technology that big pharma is endorsing through partnerships, and the two companies that are set to profit from this emerging drug class. Click here to get your copy today.

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information