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Ahead of the Bell: Questcor Pharma shares tumble

The Associated Press

Shares of Questcor dropped 5 percent Wednesday morning after the drugmaker revealed that federal regulators have joined in an ongoing investigation of the company.

While declining to discuss the focus of federal regulators, the company said in September that the U.S. Attorney's Office in Philadelphia was looking into its promotional practices.

Late Tuesday, the Anaheim, Calif., company told analysts that the U.S. Securities and Exchange Commission and the U.S. Attorney's Office for the Southern District of New York are now participating in an ongoing investigation by the U.S. Attorney's Office in Philadelphia.

Company officials said Questcor was cooperating and that "this type of development is not uncommon in investigations like these."

However, the announcement overshadowed what had been a very strong third quarter.

Questcor's net income increased nearly 40 percent to $94.4 million, or $1.52 per share, and revenue spiked 68 percent to $236.3 million.

Both easily topped Wall Street expectations.

Analysts that follow the company remained focused on those numbers, not the investigation.

"We continue to view the ongoing subpoena as part of the cost of doing business in (the pharmaceutical industry), given the substantial number of companies who have received them, and continue to suggest that a manageable settlement/fine at some point is the most likely outcome," Janney Capital Markets analyst Jim Molloy wrote in a research report released Wednesday.

Questcor Pharmaceuticals Inc. makes H.P. Acthar Gel, which is approved by the Food and Drug Administration for use in 19 different conditions.

Shares fell $3.53 to $66.20 before the opening bell.