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Questcor Investors: Is a 50% Plunge Just the Beginning?

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No one had a worse day than Questcor Pharmaceuticals (Nasdaq: QCOR  ) , whose shares were eviscerated as major insurer Aetna (Nasdaq: AET  ) halted reimbursement of its lead drug Acthar from all indications except infant spasms. With the company worth barely more than half of what it was yesterday, did the market overreact?

Questcor claims that Aetna's reimbursement change affects only 5% of Achthar shipments and won't have a material impact on the business. Noted short-selling blog Citron Research says otherwise. It hypothesizes that Aetna is the first domino and that other large insurers, such as UnitedHealth Group (NYSE: UNH  ) , WellPoint (NYSE: WLP  ) , and Cigna (NYSE: CI  ) will soon follow suit. This isn't simply a renegotiation about the cost of the drug. Aetna claims Acthar is only "medically necessary" for spasms and has not proved to be as effective as, or more effective than, competing treatments in other indications.

Investors would be best served watching this one from afar. If Questcor can limit the damage to Aetna, all the better, but with all of the cost-control pressure the Affordable Care Act is putting on insurers, Citron makes a valid point. If the worst comes to pass, Questcor will be in a difficult position, as essentially all of its $218 million in 2011 sales are from Acthar.

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David Williamson holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of WellPoint. Motley Fool newsletter services have recommended buying shares of UnitedHealth Group and WellPoint and creating a diagonal call position in UnitedHealth Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (6) | Recommend This Article (9)

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  • Report this Comment On September 19, 2012, at 11:14 PM, prginww wrote:

    Today's PR from the company right after the stock was halted was horrific at best. How on earth can management say there's no material change regarding results and/or Aetna's coverage ? Good grief, there's a HUGE material change that might send the company eventually into bankruptcy if other insurers follow in Aetna's footsteps. Sure ... infantile spasms seem to not be affected, but that's such a tiny sliver of the business. If reimbursements come to a halt for M.S., it's game over for Acthar and Questcor.

  • Report this Comment On September 19, 2012, at 11:46 PM, prginww wrote:

    There is absolutely no evidence that Acthar will be deleted from insurance formularies. It will require pre-authorization and present users will continue to be covered. I am sure that the CC tomorrow AM will once again show that Citron is a company with the basest of intentions. They are short sellers of the worst kind. This is an opportunity to enter the stock or add to an existing position (I did).

  • Report this Comment On September 19, 2012, at 11:47 PM, prginww wrote:

    You say AET "halted reimbursement" .. Aetna RE-ITERATED Acthar is second line, not for "corticosteroid - responsive conditions". Well, shocker spoiler, thats the SAME thing the Co said at recent CC & presentations. Don't you do any research ? Why does MF repeat such patently flawed crap ? Is it because there is so little traffic here your articles just don't matter ?

  • Report this Comment On September 20, 2012, at 12:47 AM, prginww wrote:

    Does anyone bother to LISTEN to the presentations before buying stock ?

    ThinkEquity 9th Annual Growth , Sept 12-13 2012

    'Regarding MS flares / exacerbations'

    "The primary or first line treatment for exacerbations IS STEROIDS ... we do not compete with steroids ... we actually encourage physicians out there by all means to try steroids first"

    "we believe there is a cohort of patients for whom steroids do not provide an adequate remedy "

    "It is that subset that we view as Acthar candidates"

    and per 8K filed docs

    43% (after steroids) get much better

    27% only a little better

    30% sstay same or get worse


    "Acthar is marketed for the on-label indication of MS exacerbations in adults, though the chart includes "Related Conditions" - diagnoses that are either alternative descriptions of the condition or are closely related to the medical condition which is the focus of the chart. About 5% of the prescriptions in the chart are for related conditions."

  • Report this Comment On September 20, 2012, at 2:54 AM, prginww wrote:

    It's time someone nails Citron. And if the SEC cannot clean Wall St maybe it's up to QCOR to sue Citron for intentional mis-presentation, for the total amount of cap loss yesterday (1% of this amount would leave Citron homeless)

    Achtar was approved by the FDA...

    Of course insurance cos will try to get away with no-payment any time any way they can. With all respect it's the FDA to decide if a drug works, not the insurers'. Luckily.

    But in this case - the more I look the more I see - there are no news here. The details are in comments above

    A corrupt shortist is making a fortune on panic.

  • Report this Comment On September 21, 2012, at 10:22 PM, prginww wrote:

    Would have been nice to wait for the conference call before publishing this. The author would then have actually understood the reimbursement procedures involved.

    Anyhow, the article is watered down Citron research. Earning of the company is growing and they use the drug very successful when steroids fail or patients can not use them. In those cases - and only in those - the drug is employed in the applications under question.

    Maybe I would dig at what is wrong at AET......

    The recent string of articles coming out from MF on biopharma is characterized by the fact that they don't seem to understand that business. They got PPHM blatantly wrong, now this one.........

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