Shares of Questcor Pharmaceuticals Inc QCOR.O fell more than 15 percent on Friday on concerns that Acthar, the company's top-selling drug to treat infantile spasms, would face competition.
An update to a U.S. Food and Drug Administration website indicated that a little-known company, Cerium Pharmaceuticals, had sought orphan drug status for a synthetic version of Acthar.
Questcor shares fell to a low of $21.53 on the Nasdaq on Friday, before recovering some of their losses to trade down 6 percent at $23.80.
Both Questcor and Cerium could not be reached for comment.
David Moskowitz of PropThink, which provides investment advice on healthcare and life sciences stocks, said chances that the FDA would overrule Acthar's orphan drug exclusivity were slim, and that the drug enjoys that status till 2017.
An orphan status, granted to drugs that treat rare conditions, provides seven years of marketing exclusivity.
Citron Research, which has traditionally been critical of Questcor and Acthar, also said the stock movement was an over-reaction.
However, the research firm, led by short-seller Andrew Left, said Cerium's application proved that a generic threat to Acthar does exist.
Citron has previously raised concerns about Questcor's marketing of Acthar and said that the company's stock could "retreat to single-digits" as the market for Acthar was threatened by a low barrier to entry by generic versions of the drug.
(Reporting by Zeba Siddiqui in Bangalore; Editing by Saumyadeb Chakrabarty)