What happened
Corcept Therapeutics (CORT +19.66%) didn't have a happy hump day. On Wednesday, the company's stock cratered by nearly 17% due to some disquieting legal news.
So what
In a regulatory filing, Corcept disclosed that it received a subpoena from the U.S. Attorney's Office (USAO) for the District of New Jersey on Nov. 15. That subpoena concerned the biotech company's only commercialized drug, Cushing's syndrome treatment Korlym.
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According to Corcept, the New Jersey USAO is "seeking information relating to the sale and promotion of Korlym, Corcept's relationships with and payments to healthcare professionals who can prescribe or recommend Korlym and prior authorizations and reimbursement for Korlym."
The company added that the New Jersey USAO is investigating whether it violated any criminal or civil laws when engaging in such activities. Corcept said that it is not currently considered a defendant, merely an "entity whose conduct is within the scope of the government's investigation."
Also that morning, Corcept announced that it is extending its current tender offer for shares of its common stock. That offer, which was to expire Tuesday evening at 11:59 p.m. ET, was extended to next Wednesday, Dec. 15 at the same time.
Corcept originally launched the offer on Nov. 8 for the purchase of up to 10 million shares of its common stock at a price between $20.75 and $23.75 per share. It added that these sales are contingent upon at least 3 million shares being tendered. To date, slightly over 8.28 million shares have been purchased.
The company did not provide a reason or reasons for the extension of the offer.
Now what
The words "U.S. Attorney's Office investigation" strike fear into shareholders and for good reason. Companies have been hit with stiff fines and other sanctions for breaking or bending the law. Investors are right to be hesitant about Corcept stock, and they should keep a sharp eye on how the investigation develops.
