Questcor Pharmaceuticals Inc., under attack from a short seller, said it was being investigated by a U.S. government agency over its promotional practices, driving its shares down 37 percent Monday.
The drugmaker has been under pressure since Citron Research, run by California-based investor and short-seller Andrew Left, raised concerns in July about Questcor's marketing strategy and a possible generic threat to Acthar, the company's main drug.
Questcor's shares have halved since Citron said the company had used Acthar's orphan drug status for treating infantile spasms to aggressively expand usage for other medical conditions.
Orphan status, which is granted in the United States to drugs that treat diseases affecting fewer than 200,000 people, can provide seven years of marketing exclusivity.
Citron said the company used questionable tactics to market Acthar and said that the stock could ultimately retreat to single digits.
Questcor's shares plunged $11.05 to close at $19.08 Monday.
The company, which had a market value of $1.8 billion as of Friday, said it would not be available for further comment on the investigation. It did not say which agency was undertaking the probe.
Aetna Inc said last week it would no longer reimburse patients for the use of Acthar for a number of diseases, wiping out more than $1 billion from Questcor's market value.
The third-largest U.S. health insurer said the gel was medically necessary only to treat infantile spasms and that it was not better than existing therapies in the 18 other diseases that it was approved for.
Questcor said last week it did not expect Aetna's move to have a material impact on its results as the insurer accounted for only about 5 percent of prescriptions for the gel.
The number of Questcor shares shorted were 21.2 million shares as of the end of August, according to Nasdaq. That would represent roughly 35 percent of the company's outstanding shares. Short interest on the stock has steadily climbed from the 7 million shares in mid-January, according to Nasdaq.
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