On Friday Money McBags promised he would get to QCOR’s spankrific Q today and with the market quieter than dark matter or Tim Tebow’s bedroom (wink wink) due to QE2, he finally found the time to do so.

For those of you new to the award winning When Genius Prevailed, first of all, where the fuck have you been?  Secondly, Money McBags has written about this company extensively as it is more under the radar (or was) than the lovely Hayley Atwell, has two potential growth markets (one is currently growing faster than Christine O’Donnell’s bush, and yes that is the third Christine O’Donnell bush joke in three days but it is the gift that keeps on giving, like comedy herpes, and the other is still in its early stages but could double the company’s revenue), has an unbelievably clean balance sheet, generates more cash than an Aimee Teegarden kissing and blumpkin stand, is well run, treats a bunch of diseases that aren’t going away, and is made from a pig pituitary so won’t have any generic competition unless someone figures out how to clone Rosie O’Donnell.

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For the full story, throw it in to the search engine above and you will see the voluminous work Money McBags has put up about this company ever since it was trading at less than half of its current price (so if you’re keeping score at home, Money McBags gives you unfiltered macro analysis, original dick jokes, real fundamental research, and well performing stock picks, all in one place.  So speak kindly of him when you get fired for using your work computer to guess the NSFW muffs about which he told you).

As for this Q from QCOR, here are some highlights:

1.  Net revenue was up to $31.3MM driven by a 123% increase in MS sales.  MS sales are now ~55% of revenue up from <20% just a short time ago.  That said, sequentially MS sales were only up 6% so that is a tad bit worrisome, though not as worrisome as the fact that we may one day have to drink recycled pee.

2.  EPS of $.18 which beat Money McBags estimates of $.15 due to lower operating costs driven by ~$800k lower R&D expense and ~$1.5MM lower SG&A expense.  The SG&A is a bit puzzling to Money McBags, like the concept of underwear (or tone) to Brittney Spears.  They doubled their sales force to 77 from 38 (well doubled it plus 1) so Money McBags juiced up their SG&A by $2MM which apparently was a bit fucking high.  On the call they said they expect expenses in Q4 to be higher and if Money McBags understood them correctly, they expect the sales force to add ~$12MM of incremental costs so ~$3MM per Q which should start to hit more in Q4.  It was a bit confusing, like pension accounting or the success of that show The View, but that is Money McBags’ best interpretation of what management said (his second best interpretation is simply “costs are going up materially before revenues hit, dingbat,” but whatever).

3.  They only have penetrated ~9% of the 4,500 MS doctors (which is fewer penetrations than Nick Manning did all of last month, and just slightly less invasive), so there is more room to grow than in a pair of Hammer pants.  Doubling the sales force will certainly help.

4.  They hired their first full time NS salesperson with 3 to 4 more on the way.  This is the next huge area of growth for QCOR and they will be presenting NS data on 11/20 at the American Society of Nephrology’s annual meeting in between topics such as “There is nothing cute about Acute Renal Failure,” “The kidney, neither kid nor knee.  Discuss,” and “At least we’re not urologists.”  The point is, in time this could double QCOR’s revenue if they are able to grow this business and Money McBags has it as ~$0 in his model right now.

5.  They have a shitload of cash (~$114MM) and their second priority for it after investing in the business is returning it to shareholders.  Now it doesn’t take $114MM to grow an MS and NS platform, especially when they are generating ~$10MM of cash per Q.  In fact, it doesn’t even take half of that to grow their business so the company can institute a sizeable buyback or eventually a special dividend.  This is what they said on their call about buybacks:

So our second priority has been the shareholder buyback program – share buyback program….And we’ve done what we could there. We’ve been locked out for a year now, so it’s a been a little frustrating. We did explore the possibility of a special dividend, but we put that aside for now, it’s just too complicated to try to do before the end of the year. So that’s about the range of things that have been discussed.”

So they could easily drop $20MM to $30MM on a buyback (which is way more than what Lawrence Fishburne spent on buybacks this year) and reduce the share count by ~3% and still have plenty of money left over to invest in the business and make sure they are supporting their local Rick’s Cabaret.  Or they could drop shareholders ~$.50 to even $1.00 in a special divvy if they wanted to and be no worse off.  Money McBags has no idea how much cash they intend to give back, but cut their cash in half to $57MM and it will have no effect on their day to day business.  Given that, there is room for a big return to shareholders here (but to be clear, Money McBags is 100% pulling those numbers around size of cash buybacks or dividends completely out of his finely quaffed ass, so keep that in mind).  They have cash and management has a track record of giving it back to shareholders, so this is something of which to be very aware (though this is something of which to be even more aware).

6.  IS remains within historical levels but as we all know, they can now put IS on label and market to IS doctors and they estimate only ~50% of IS doctors have prescribed Acthar.  On the call they said the new label is fully updated and modernized (like Demi Moore’s face) as they not only added new indications (such as rheumatoid arthritis, lupus, optic neuritis, and the heebie-jeebies) but switched fonts from Anglican Text to Digital Whimsy.  The point is, this should provide them some nice growth in their core business.

So what the fuck do we do with all of this?  Well, next Q Money McBags has them with ~$34.7MM in revenues and ~$.20 in EPS because he expects their costs to jump as noted.  Next year, he now has them ~$.91 in EPS but that includes almost nothing from NS and 30% MS growth which is aggressive, but not unreasonable (though the 6% sequential growth does give him a bit of pause, while the 100% sales force growth gives him whatever the opposite of pause is, perhaps a cocaine high).

They are currently trading at 13.5x that but again, they are growing revenue well over 20%, have a potential huge new market, are generating a shitload of cash, and will likely either be reducing shares (potentially adding another $.05+ to eps) or paying out a special dividend.  If they keep executing and can get some momentum in the NS market, in the next two years this company could be on a $1.25+ EPS run rate which you could have now for just 10x.  This continues to be a nice core holding and if they can get some size, it could be an acquisition candidate as well.  Just be very careful with medicare reimbursements and headline risk as this is one of the 5 most expensive drugs on the market so there is always a chance for some bureaucrat to get their panties in a bunch about the pricing (though if it is republican congresswoman Mary Bono Black whose panties get bunched, that will certainly dull the pain).

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