Questcor rebounds following steep drop Wednesday

Questcor rebounds after falling 48 percent Wednesday as Aetna tightens drug coverage

Associated Press

NEW YORK (AP) -- Shares of Questcor Pharmaceuticals Inc. bounced back Thursday, a day after one of the largest health insurers in the U.S. said it was cutting back on coverage for Questcor's H.P. Acthar gel, which makes up nearly all of its revenue.

The stock dropped 48 percent Wednesday, touching their lowest price since June 2011. Even with Thursday's rebound, shares have still lost about a quarter of their value in 2012.

THE SPARK: Health insurer Aetna said it had decided not to cover Acthar in conditions other than infantile spasms. Aetna said that for other conditions, Acthar either doesn't work better than other treatments, or it hasn't been proved to be effective.

THE BIG PICTURE: Questcor markets Acthar gel as a treatment for conditions including infantile spasms, multiple sclerosis, nephrotic syndrome, and other illnesses. Aetna said the main ingredient in Acthar gel — corticotropin — is approved for more than a dozen other conditions for patients who are not being helped by corticosteroid therapy. However it said Acthar "is rarely necessary" for those patients and it can cause significant side effects.

Aetna accounted for about 5 percent of Acthar prescriptions this year. Questcor said Wednesday that it doesn't think Aetna's move will have a significant effect on its financial results.

Questcor CEO Don Bailey also said Thursday that the company is not aware that Aetna has stopped covering Acthar for use in other conditions. Bailey said Questcor has had "ongoing dialogue with Aetna" and will continue discussing Aetna's policy. He said the policy appears to be an interim decision that will be updated in October.

Aetna's opinion was posted to its website Friday and the company said it expects to further review its policy on Acthar on Oct. 13. The short seller's firm Citron Research reported on the development Wednesday.

THE ANALYSIS: Oppenheimer & Co. analyst Christopher Holterhoff said that Aetna's decision will hurt Questcor's revenue, but other large insurers still cover Acthar gel as a treatment for other conditions. He cut his price target to $65 from $69. He had raised that target from $59 on Tuesday, before Aetna's move was widely reported.

Other analysts were more pessimistic. Jefferies & Co. analyst Biren Amin said that other insurers may also drop coverage for Acthar. Aetna, meanwhile, is not likely to change its opinion without more clinical evidence that Acthar is more effective than other, cheaper options for illnesses other than infantile spasms, he said. While patients can appeal the company's decision, most of those appeals won't likely succeed, he added.

Amin lowered his rating on Questcor shares to "Hold" from "Buy" and cut his price target to $30 per share from $35.

SHARE ACTION: Shares of the Anaheim, Calif., company rose $5.05, or 19 percent, to $31.40 in late afternoon trading. On Wednesday the stock sank to $22.26, its lowest price since June 2011.

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