It is not a fun day to be a shareholder of Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR). The stock is currently down 38%. The stock was earlier down as much as 60%!

Questcor Logo

Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR) shares plunged after insurer Aetna Inc(NYSE:AET) limited the reimbursement for drugs made by Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR)’s. The noted short seller Citron Research, was the first to point this out. Citron notes that for 19 indications which the FDA has approved Acthar, Aetna decided that the clinical research only supports one.

Citron notes on their website in bright bold:

Aetna Inc. (NYSE:AET) drops coverage for Questcor’s only drug, for indications now generating 95% of Questcor (NASDAQ:QCOR) revenues. 

HP Acthar Gel for multiple sclerosis and nephrotic symdrome will not be reimbursed. 

Investors still have something to laugh at. As far as we can tell the plunge happened this morning, not yesterday, after hours. Oppenheimer just yesterday put out a bullish piece on Questcor, with a price target of $60. Shares are currently trading at $31.11, after dropping as low as $22 a share.

Yesterday, Oppenheimer noted the following in their research report:

Acthar Reimbursement Remains Very Strong; Unlikely To Change. Despite recent market speculation about payers looking at Acthar reimbursement with increasing scrutiny, based on comments from management, we believe reimbursement rates remain extremely strong (85-90%), and we expect this high rate to continue.
? Are The Shorts Out Of Ammo? While investor blogs and the dissemination of short theses have resulted in volatility in QCOR shares, we believe investors are now becoming more comfortable with the true risks associated with the stock. In our view, reduced volatility should attract additional long-only funds to the name.
? Raising PT to $69 On High Probability Of Medicaid Rebate Improvements ~Early 2013. Following further discussions with management, we believe Medicaid reimbursement changes are a near-certainty, likely to be finalized by early 2013. Assuming rebates move from 100% to 25%, our 2013 revenue estimate moves to ~$687M from ~$590M and our PT moves to $69 (from $59 prior).
? See Potential For Longer Term Upside To New PT. While our $69 PT fully values market opportunities that QCOR is currently focused on, we see potential for upside to our estimates and PT on better than expected uptake in other on label
indications that QCOR’s reps are not currently addressing (mainly lupus and rheumatoid arthritis).

(Disclosure: No position in any securities mentioned in this article)