Questcor Pharma rises following upgrade

NEW YORK -- Shares of Questcor Pharmaceuticals Inc., which had lost 60 percent of their value in the last four weeks, recovered some lost ground Tuesday after a Jefferies & Co. analyst upgraded the stock.

THE SPARK: Analyst Biren Amin said investors have become too pessimistic about insurance coverage for Questcor's only approved product, H.P. Acthar gel. He said the current price of Questcor shares assumes almost no insurers will cover Acthar as a treatment for the kidney condition nephrotic syndrome and for multiple sclerosis, and Amin said that is not realistic. While he expects sales for multiple sclerosis treatment to taper off, he said revenue from its use as treatment for nephrotic syndrome should keep growing although at a slower pace because of new hurdles from insurance companies..

Amin raised his rating to "Buy" from "Hold" and increased his price target to $28 per share from $24.

THE BIG PICTURE: Acthar is used as a treatment for a variety of conditions including multiple sclerosis, nephrotic syndrome and infantile spasms, a type of seizure disorder that affects children. In September, health insurer Aetna Inc. said it may stop reimbursing all uses of Acthar except for infantile spasms. It said there is not enough clinical evidence that Acthar is more effective than steroids in treating those conditions.

Aetna is expected to make a final decision on Acthar coverage in October. Its announcement caused Wall Street to worry that other insurers will also cut back on their coverage of Acthar.

At the same time as Aetna's announcement, Medicaid said it will reduce its reimbursement rates for Acthar, giving Questcor significantly more revenue. Questcor had been required to pay full rebates to state Medicaid programs that buy the drug.

SHARE ACTION: Questcor shares rose 98 cents, or 4.8 percent, to $21.27 in midday trading. The stock had been down 60 percent from its closing price of $50.52 on Sept. 18.