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Is Questcor Pharmaceuticals a Bargain or Bust?

Sean Williams
September 27, 2012

Shares of Questcor Pharmaceuticals (Nasdaq: QCOR  ) hit a 52-week low on Wednesday. Let's take a look at how it got there and see if clear skies are still in the forecast.

How it got here
Disneyland has Mr. Toad’s Wild Ride, and Questcor shareholders now have their own version, although it's not nearly as fun.

Questcor has gone from being within a few dollars of a new 52-week high to a brand new 52-week low -- all in a matter of days. Questcor lost nearly half of its value last Tuesday following an announcement from Aetna (NYSE: AET  ) that it would no longer cover the multiple indications for Questcor's Acthar gel, save for one. At $23,000 per treatment, Acthar gel is extremely costly for health insurers like Aetna to cover, and fear spread quickly that other insurers may eventually follow suit. Questcor denied it would be a major problem, as Aetna's coverage accounted for just 5% of total sales.

However, that was just the beginning of Questcor's issues. Later that week, Questcor announced a probe by the U.S. government into the company's marketing practices -- specifically, the company's use of a $23,000 price tag on Acthar gel across all indications because of its status as an orphan drug that's without competition. As my Foolish colleague Keith Speights points out, probes into marketing practices wound up costing Johnson & Johnson (NYSE: JNJ  ) $2.2 billion and Amgen (Nasdaq: AMGN  ) $780 million for their deceptive practices. Questcor shareholders have every reason to be concerned.

How it stacks up
Let's see how Questcor stacks up next to one of its closer competitors, Pfizer (NYSE: PFE  ) .

QCOR Chart

QCOR data by YCharts.

As you can see, even with the drop Questcor is vastly outperforming Pfizer.


Price/ Book

Price/ Cash Flow

Forward P/E