Questcor Pharmaceuticals' (NASDAQ:QCOR) shares tumbled more than 32% on Monday after the drug company revealed that its promotional practices are being probed by the U.S. government.
The latest headache for the Anaheim Hill, Calif.-based drug company comes on top of ongoing criticism from Citron Research, which is led by short-seller Andrew Left.
The long-time critic claimed in July that Questcor used questionable tactics to market Acthar and forecast that its shares would fall to single digits.
“Questcor seems to have no hesitation when it spins its multi-billion dollar 'snake oil sales' story – on Wall Street,” Citron said in a statement in July.
The U.S. investigation also comes just days after health insurer Aetna (NYSE:AET), the third largest in the U.S., said it would limit coverage of Questcor’s blockbuster multiple sclerosis and infant seizure drug H.P. Acthar, which makes up nearly all of the biopharmaceutical company’s revenue.
Aetna had argued that the Acthar gel proved only effective at treating infant spasms and was no better than existing therapies in the other 18 diseases it has approval for. It dropped coverage last week for all uses of the drug except for infant seizures.
On Wednesday, following the Aetna statement, Questcor’s shares dropped 48%, touching their lowest price since June 2011. They fell as much as 33% to a 52-week low of $20 on Monday.
In a terse securities filing, Questcor said on Monday that it “intends to cooperate with the government in its investigation.”
The company said last week that it did not expect the move by Aetna to have a material impact on its results, as the insurer accounted for just 5% of Acthar prescriptions.
However, Questcor continues to come under fire by short sellers. Some 21.2 million of its shares had been shorted as of the end of August, representing roughly 35% of its outstanding shares, according to Nasdaq data.