Questcor Pharmaceuticals Plunges on U.S. Government Investigation

Last week, Questcor Pharmaceuticals (NASDAQ: QCOR) was among the most volatile stocks on the Nasdaq exchange after insurer Aetna (NYSE: AET) said that it was limiting coverage of the company's Athcar Gel drug used for the treatment of multiple sclerosis. The news sent QCOR plunging last Wednesday, with the stock falling 56 percent at its worst levels before closing the day down more than 30 percent. In subsequent days, QCOR retraced some of its losses, but remained down sharply for the week.

On Monday, more bad news for the company has sent the stock skidding once again. During afternoon trading shares were sitting near new 52-week lows. In the last hour of trading, Questcor shares were down around 35 percent to $19.64 after the company revealed that the U.S. government is investigating its marketing practices. The investigation is clearly another major concern for investors, who were already worried about the potential for more Athcar Gel coverage reviews at insurance companies.

Marko Kozul, an analyst at Leerink Swann, downgraded the stock on Monday from Outperform to Market Perform and wrote in a note that, “Due to a multitude of factors, we believe Acthar may increasingly show up on insurers' radars and undergo reimbursement reviews."

Few details were released regarding the government investigation, but it is clearly another cause for concern. Analysts who cover the stock said that the investigation could deal another blow to Athcar Gel sales, which are the company's primary source of revenue. Athcar Gel is used in the treatment of multiple sclerosis and infant spasms, among other indications.

Oppenheimer analyst Christopher Holterhoff wrote in a note that “We believe investors may be hesitant to put new money to work on (Questcor) given the increased risks/uncertainties associated with the government investigation." He also lowered his rating on the stock from "outperform" to "perform." Year-to-date, QCOR has now shed more than 50 percent.

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