KV Pharmaceutical Shares Plunged Temporarily: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of drugmaker KV Pharmaceutical (NYSE: KV-A  ) fell as much as 14% in a wild ride that currently has the stock trading flat from yesterday's close.

So what: If you could have timed this move just right, there was a lot of money to be made in just a few hours as KV took a nosedive and then recovered all of those losses. Volume is nearly double normal with more than two hours left in the trading day, but there wasn't a big sale or purchase that prompted today's move.

Now what: Investors are likely trying to decipher what to do with this stock after it popped earlier this week on revenue projections for Makena. Since then, doctors have been outraged by the plan to charge $1,500 for the drug, so there could be pressure to reduce prices along with subsidizing low-income customers. After the meteoric rise KV has been on since Makena was approved, I am going to give it a little time to breathe before jumping in. I don't want to be on the wrong side of a correction if the company falls short of increasing expectations.

Interested in more info on KV Pharmaceutical? Add it to your watchlist.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 11, 2011, at 2:15 PM, perfectstorm19 wrote:

    Travis,

    I think we all know that Motley Fool has a short position in KV, evidenced by the negative bias of its articles. You have basis of proof in your articles. If you can show me an orphan drug that isn't expensive , I will think differently about your article. Show me how insurance companies will not prosper from preventing premature births and I will think along your lines. and other Motley Fools articles. Do some research and tell me how much it will cost the health care system when preemies are born. The billions will outweigh the 7-800 million KV will be selling in two years. Ask the March of Dimes how they feel about this drug. Travis Is it a good thing to prevent compounding Pharmacies from making an unsterile product with inconsisent bioavailabilties? I think we all know that answer. Please Travis don't be a fool!!

  • Report this Comment On March 11, 2011, at 2:22 PM, perfectstorm19 wrote:

    I meant no basis of proff in your articles.

  • Report this Comment On March 12, 2011, at 5:59 PM, hmjbros wrote:

    I can’t believe the bashers on this drug. Explain this, how can hospitals charge $15.00 for an aspirin that only costs 10 cents to purchase? If you ask the doctors or hospitals they’ll say, “They do that do offset the uninsured patients costs” and that's how they justify the enormous price hike. Clearly, KV is using this same philosophy in their cost structure by this statement off their website:

    • Insured patients with annual household incomes of up to $100,000 who apply for and are eligible for copay assistance will have a copay of $20 or less per injection for Makena.

    • Uninsured patients with annual household incomes of up to $60,000 who apply for and are eligible for patient assistance will receive Makena at no cost. Uninsured patients with annual household incomes between $60,000 and $100,000 will be able to acquire Makena at a cost that is comparable to the average copay assigned by commercial insurance plans.

    If we bash KV, bash the system that allows this to go on everywhere. From Hospitals to Pfizer that can charge $100 dollars per pill on some of their drugs, that clearly doesn’t cost that much to create. I’m not long or short on this stock, I just find it funny that people want to bash a company that is just following thousands of others that have profited from this loop hole of pricing for profit..

  • Report this Comment On March 13, 2011, at 5:50 PM, Troy2008 wrote:

    You fail to see that it's not how much it costs to make a pill, it's the R&D that cost millions. Ten years to get through the conception to FDA approval.

  • Report this Comment On March 17, 2011, at 9:58 PM, fogelsonmd2 wrote:

    This month KV Pharmaceuticals gained FDA approval for their drug Makena, or 17 Hydroxyprogesterone Caproate, for use in prevention of preterm birth. This drug has been shown in randomized studies to moderately decrease the rate of preterm birth in women with previous preterm deliveries.

    While this is the first FDA approved product for this indication, this very compound has been available on the market for many years, generated by compounding pharmacies nationwide for as little as $9 a dose. One major supplier, Wedgewood Pharmaceuticals, provides the product in vials every bit as professional looking as anything you would get from a major Pharma manufacturer.

    The big problem, as most already know, is that KV Pharmaceuticals has decided to price their drug at approximately $1500 a week. Furthermore, they are extending legal power to prevent compounding pharmacies from creating any more of the drug.

    This is outrageous. This is a well studied drug, already having gained acceptance in the community based on the landmark 17-OHP trial published in 2003. Millions of doses have been given nationwide without adverse effect. The fact that it has become FDA approved has done nothing for women or infants. The only effect has been that KV now has legal protection to price the drug at 200 times the previous price and block out competitors who previously had been providing the same drug at a tiny fraction of the cost.

    An article was recently written in the New England Journal decrying this usurious pricing scheme. In their analysis, they write “For every dollar spent for compounded 17OHP, $8 to $12 in health care costs related to pematurity are saved.. by contrast, Makena will require $8 to $12 in drug spending for every dollar in such prematurity costs avoided.” Further editorials have been published in both print and digital media, such as this, this, and this. My friend @drjengunter weighs in here

    KV has responded to the criticism, pointing out that they have a patient assistance program. To be fair, they are willing to give the drug for free to uninsured women making less than 60,000 a year, and at a small copay for women making less than 100,000. But to be fair to women and the world, this isn’t nearly enough. No matter what individuals are paying for the drug, the medical system will be paying billions of dollars for something that used to cost a few million a year.

    Positive spin on Makena has promoted it as the first drug to decrease the rate of preterm delivery. This is an agregious mistruth. The drug has been on the market for over 50 years, and has been used for the indication for almost a decade in the United States.

    At the core, KV Pharmacueticals is a leech on the blood of our society. They are providing nothing of value, but through our bureacratic process have been guaranteed that they can extract billions of dollars a year from our healthcare system – all to get a benefit we already had. They didn’t even have to do the research; it was done for them and published in 2003 (with compounded drug.) The idea that their particular FDA approved product is somehow better or safer than the compounded product is completely theoretical, cannot be justified by any data. Furthermore, the underlying efficacy of the drug KV claims has immeasurable benefit is worthy of some skepticim despite the 2003 trial, as since it went into widespread use the preterm birth rate has risen from 12.3% to 12.7%.

    So what are we to do about this. I am doing this.

    I will not write a single dose of Makena, and I call for you to do the same.

    If I can, I will continue to use compounded 17-OHP. If I can’t, I will recommend daily vaginal prometrium, which very likely will have the same effect as 17-OHP. Its off label, but so was 17-OHP before KV got ahold of it. If a patient asks, I will politely explain that I refuse to give in to KV Pharmaceuticals and their piracy. The cost of healthcare is destroying this country, and this is an area in which we cannot afford to give in. Patients need to understand that these are the kinds of decisions that drive the cost of healthcare, and that we are all responsible for protecting our country’s healthcare future.

    I encourage everyone over which I have any influence to refuse to write Makena for any reason, and to pass this message on to anyone who will listen.

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