ABIOMED (NASDAQ: ABMD ) shareholders, you've just been given clearance to breathe a sigh of relief.
Following the close of the bell yesterday, ABIOMED released a statement announcing that U.S. regulators had closed a 20-month-long investigation into the company's marketing and promotion practices of the Impella Recover LP 2.5 Percutaneous Cardiac Support System.
Regulators had honed in on what it considered to be unapproved claims regarding the Impella 2.5's usage time frame, which was set at six hours or less and in only certain instances, and based on comparisons the company had made that its blood-pumping device was superior to other technology on the market. While no specifics were detailed as to how ABIOMED remedied the FDA's requests originally sent in June 2011, it nonetheless resulted in the closure of the investigation.
This might appear to be another ho-hum moment, but it actually should get investors' blood flowing again. U.S. regulatory investigations can sometimes end with incredible tough financial damages levied against the accused company, or can dramatically drag down a company's share price.
Health-care conglomerate Johnson & Johnson (NYSE: JNJ ) paid the second-highest settlement ever levied by U.S. regulators against a pharmaceutical company last June -- $2.2 billion. The scope of the case had to do with J&J's marketing of anti-psychotic drug, Risperdal, as well as two other drugs.
Similarly, Amgen (NASDAQ: AMGN ) paid a hefty $780 million settlement of its own in October 2011 stemming from the marketing, dosing, and pricing of Aranesp and Epogen, as well as clinical trial information disseminated about these drugs.
Sometimes it doesn't take a fine, but the sheer overhang of an investigation to do the damage. Questcor Pharmaceuticals (NASDAQ: QCOR.DL ) , which supplies Acthar gel for more than a dozen diseases, is currently being probed by the U.S. government for its marketing practices. Specifically, it appears questionable to regulators why the drug carries a $23,000 price per vial across all 19 of its indications despite having orphan drug status that protects it from competition. Shares of Questcor are down about 50% from their 52-week high.
For ABIOMED, this means the investigatory cloud has been lifted, and it can focus entirely on its heart device line. ABIOMED's most recent quarterly results highlighted a 19% increase in sales to $38.3 million, with Impella devices accounting for 87.5% of sales and demonstrating 21% growth. ABIOMED isn't exactly cheap at 30 times forward earnings, but with the stock plunging better than 30% at one point last year because of the investigation, it could have some moderate upside potential.
Will a U.S. probe permanently derail Questcor?
Questcor is one of the most debated names in all of biotech. Its premium priced drug, Acthar, is growing at a torrid pace -- and minting money in the process. However, recent events have created significant doubts about Questcor's future. Will insurance companies continue to cover the drug? Will a government investigation lead to huge fines? We highlight these high-profile issues inside our brand new premium research report on Questcor. In it, you'll learn about the key opportunities and threats facing the company, as well as multiple reasons to buy and sell the stock. We're providing a full year of analyst updates as key news hits, so make sure to claim a copy today by clicking here now.