Questcor comes clean on adverse effects of beleaguered drug Acthar

Sales of Questcor's ($QCOR) drug Acthar, which is approved to treat 19 inflammatory and autoimmune disorders, rose 50% last year to $761 million--an impressive turnaround for a product that has been under fire from everyone from Wall Street short sellers to drug-marketing legislators. Now Questcor is disclosing that Acthar may pose more risks than it had let on. An SEC filing from Thursday reported that 14% of prescriptions written for the drug in 2013 resulted in adverse side effects, up from 9.1% in 2011.

It was the first time the California company publicly acknowledged potential problems with Acthar. The disclosure came just weeks after a New York Times investigation of FDA data that revealed 20 deaths and 6 disabilities associated with Acthar have occurred since 2012. The Times discovered that while Questcor had reported some of those adverse events to the FDA, it hadn't disclosed them to investors, even though they might be material to any decision to buy or sell the stock.

Acthar, which accounts for 95% of Questcor's revenues, was certainly material to the $5.6 billion acquisition offer that came from Ireland-based Mallinckrodt ($MNK) in April. At the time, Mallinckrodt CEO Mark Trudeau predicted that the deal would be immediately accretive to earnings, largely because of Acthar's growing popularity among physicians. And Questcor seems to have enjoyed unlimited pricing power. Questcor has pushed up the price of a vial of Acthar, a hormone derived from pigs, from $40 when it bought the drug in 2001 to $28,000 today. 

According to Questcor's new disclosure, 1,022 patients reported 3,100 adverse events between January 2011 and December 2013. The company did not respond to the Times' request for comment but stated in the SEC filing that the "types of adverse events that have occurred are consistent with the current safety profile of Acthar as presented in its prescribing information, no new safety signals have occurred, and we continue to comply with all appropriate safety, surveillance and reporting required by the FDA."

It's just the latest shock for Questcor shareholders, who have been on quite a roller coaster over the past couple of years. The company's shares fell below $20 in 2012 after U.S. investigators launched a probe into the marketing of Acthar. The stock eventually recovered, but earlier this year, Questcor short seller Citron claimed Acthar doesn't include all the active ingredients it claims to, causing shares to drop nearly 8% in a day. Questcor has disclosed that it's under investigation by the SEC and by U.S. attorneys in New York and Pennsylvania. Questcor's stock fell from a high of $93.73 yesterday to $90 before bouncing back to $93.49.

- access Questcor's SEC filing here
- here's the Times story (sub. req.)
- read the earlier Times story about Achtar's adverse events