Questcor rises after hedge fund discloses stake

NEW YORK -- Share of Questcor Pharmaceuticals Inc. climbed Tuesday after the hedge fund Deerfield Management Co. disclosed a stake in the beleaguered company.

THE SPARK: Deerfield President James Flynn disclosed ownership of 3.5 million Questcor shares, or a 5.8 percent stake in the Anaheim, Calif., drugmaker. Deerfield Management, which specializes in health care-related deals, is now one of Questcor's largest shareholders.

THE BIG PICTURE: Questcor sells H.P. Acthar gel, a drug that is used to treat illnesses including the kidney condition nephrotic syndrome, multiple sclerosis, and infantile spasms, a type of seizure disorder that affects children. Shares of Questcor plunged in September after health insurer Aetna Inc. said it may stop covering 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 other conditions.

Aetna's announcement caused Wall Street to worry that other insurers will also reduce their coverage of Acthar, hurting Questcor's revenue. Aetna is reviewing its policy on Acthar and is expected to make a final decision in October.

Later in September, Questcor said the U.S. government is investigating its promotional practices. The company is scheduled to report quarterly results in a week.

SHARE ACTION: Questcor stock rose $1.64, or 7.1 percent, to $24.86 in afternoon trading. The shares are down 54 percent since Aetna's review became public, including a 48 percent drop on Sept.19.