Why Did My Stock Just Die?

Your stock just took a nosedive -- but don't panic. First, let's see whether it had good reason to fall. Sometimes, panic-fueled drops can make excellent buying opportunities. Here's the latest crop of cratered stocks that could provide a possibility for profit:

Stock

CAPS Rating
(out of 5)

Yesterday's Change

Uranium Resources (Nasdaq: URRE  )

***

(24.89%)

Denison Mines (NYSE: DNN  )

****

(22.49%)

KV Pharmaceutical (NYSE: KV-A  )

**

(13.93%)

The U.S. markets looked fairly resilient in the face of the collapse of the Nikkei bourse. After being down 170 points at one point, the market rallied to end down just 51 points. It's a big turnaround, for sure, but the Nikkei has collapsed again, dropping 11% (after being down 14% at one point). The question is, can U.S. markets withstand the aftershocks, thus making stocks that went down by even larger percentages bigger deals still.

The devil's in the details
For any name in the nuclear energy space, there's only one word needed to understand what's happening: Japan. The disaster unfolding at the Fukushima power plant is likely to dramatically set back the nuclear power industry for years.

While Uranium Resources and Denison Mines were two of the biggest decliners in the space and on the market, the entire sector has been damaged. The CAPS Uranium sector was down 17% as a whole and companies like UR-Energy (NYSE: URG  ) , which had already been struggling after reporting its uranium deposits were overstated, plummeted 27%. But even the much more muscular Cameco (NYSE: CCJ  ) , which is the country's leading uranium miner, was unable to hold up against the assault, and it dropped almost 13% on the day.

The crisis in Japan is far from over, and could very well get much, much worse. Europe is already reacting, with Germany saying it will hold to its pledge to go nuclear-free by 2021. I indicated yesterday my belief that, whether rightly or wrongly accused, industry players like USEC (NYSE: USU  ) and Cameco were going to be lumped together and be damaged goods for some time. Previous bullish positions now need to be reexamined.

For example, CAPS member shanelofgren had expected Cameco to excel because of plans to double uranium production by 2018. If the Obama administration does react by clamping down on expansion, however, such corporate forecasts would likely be revised downward.

But there is an investing opportunity here. It seems to me the fact that the Tepco nuclear facility has not gone into meltdown yet despite the incredible devastation to it, speaks volumes about the overall safety of the design and by extension the industry. And the Fukushimi plant was of an older design, newer ones are said to be even better.

Before the disaster struck there were 441 nuclear reactors in operation, 63 new reactors being built, and an additional 156 ordered or planned. China and India have said they have no intention of swearing off nuclear power anytime soon. The new, lower prices of uranium miners could give investors an opportunity to buy quality companies at depressed levels. I'd just wait for the toxic cloud of doubt to blow out to sea first before looking at which might still be viable.

Cameco certainly seems like one. Let us know on the Cameco CAPS page how soon or whether it will recover from the Japanese debacle.

Truly unconscionable?
It has nothing to do with Japan, but KV Pharmaceutical is still feeling the aftershocks of its decision to hike prices of its drug Makena to $1,500 a dose. The FDA recently approved the treatment it's developing with Hologic (Nasdaq: HOLX  )  for reducing the risk for women with a history of singleton spontaneous preterm birth.

While it didn't hurt that it's the only such treatment on the market, what did cause the backlash was KV's decision to jack up the cost of a drug that doctor's previously were able to prescribe for just $10. So far Hologic has managed to escape any taint from being associated with KV.

Of course, those complaining loudest are doctors and insurance companies who are routinely subject to criticism for their own high fees and policies.

Despite announcing a "patient assistance" program to help pay for the drug, it seems KV has thoroughly soiled an already tarnished reputation. While each investor has his own threshold he will not cross, CAPS member ImpetuousFool says he's allowing emotions to rule his investment decisions this one time.

As the outrage to KV's actions mount you can see the fallout from the sidelines by putting the stock on your watchlist. Let us know if you think it's an evil company in the comments section below or on the KV Pharmaceutical CAPS page.

Ready for a resurrection
Just because your stock has taken a beating doesn't mean it's going to roll over and die. Markets are known for overreacting. A closer look at what's happened to your stock can give you an edge over other investors who just react to the market's lead.

That's why it pays to start your own research on these stocks on Motley Fool CAPS where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether it's ready to come back from the dead.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in the article. You can see his holdings here. The Motley Fool has a disclosure policy.


Read/Post Comments (11) | 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 15, 2011, at 12:01 PM, TMFKris wrote:

    It always depends what side you're on. Isn't KV Pharmaceutical smart to charge as much as it can for this drug? It's approved to prevent preterm birth in women who have previously experienced preterm birth, women who know they are at risk if they become pregnant again. And paying for the drug will be a super-high priority for women because it protects their baby.

    One of the reasons health-care costs and insurance are so out of control is because the debate is so emotional. We are reluctant to say no when a treatment exists or might exist. Especially if we value the patient group.

    Kris - TMF copyeditor

  • Report this Comment On March 15, 2011, at 12:59 PM, manycents wrote:

    Comment on KVA (disclosure: I work for AT&T)

    Someone once asked an AT&T saleswoman if she would triple the price on an item customers were desperate to have and had no other source.

    She said, "No, of course not. If I did that, the customer would hate me for taking cheap advantage of them. They would never want to do business with me again." Re KVA, enough said.

  • Report this Comment On March 15, 2011, at 1:36 PM, TMFCop wrote:

    Kris and manycents,

    I guess my question is, is there still an alternative to Makena now that it has FDA approval? From what I could find out, it seems now that KV has approval, the workaround doctors used to use -- the drugs they could have made up for $10 or $20 -- are no longer allowed to be used.

    So it seems to me that by getting Makena approved, KV used the regulatory process to eliminate competition, hardly a free market solution. Now if those alternatives still exist for $10 or $20, and KV wants to try and charge $1500 for the same thing, by all means they should go forward with their plan.

    But I'm guessing there's some sort of malpractice liability here if the doctors went with the alternatives when there was an approved drug on the market, they would face all kinds of lawsuits.

    So yes, a company should be allowed to charge what the market will bear, so long as there is a market and government regulation hasn't tilted the field of play in one direction or the other.

    Rich

  • Report this Comment On March 15, 2011, at 4:31 PM, manycents wrote:

    TMPCop,

    I disaggree. There's more to life, and more to business, than doing what you can get away with.

    Regards,

    manycents

  • Report this Comment On March 15, 2011, at 4:51 PM, ArizonaGeo wrote:

    I for one would never invest in KV Parmaceuticals even if it was a 10 bagger. Why?

    Their hard core enforcement patent enforcement and pricing of the drug WILL lead to at risk babies dying despite the silver tongued promises of a bogus patient assistance program.

    How about if you don't have health insurance and you need it right now because you're in pre term labor? Fill out a form and wait for a few days? No, you find the money or else...

    I want my conscience to be clear. I'll take no part in actions that lead to the death of babies. How many will die until this gets through the courts?

  • Report this Comment On March 16, 2011, at 12:12 AM, Trip9s wrote:

    Outrageous!

    There was a lot of angry discussion when it was learned that Dendreon would charge $93,000 for a course of Provenge treatment. However, Dendreon spent many millions and many years in the development of the treatment. In addition, there are a lot of ancillary expenses involved.

    KV has spent little time and money bringing Madena to market. So they are attempting to reap exorbitant benefits from the work of others, most recently Wake Forest University.

    Their former CEO went to jail for mislabeling some of the generics they produce. Obviously he could not have done this alone. This should tell you what kind of people run this company so there should be little surprise in their attempt to gouge the American public.

  • Report this Comment On March 16, 2011, at 1:26 AM, dwitiya wrote:

    manycents, your statement praising AT&T is amusing, to say the least. You say you work for them! 10 years ago, AT&T promised me $100 worth of Calls, if I got their credit card. Afterwards, I would be charged the "standard rate" for further calls. They charged me $1.80 per minute. I not only depleted $100, with 60 minutes of calls, I was not notified when the bonus got exhausted. So, I got a huge bill with their exorbitant "Standard Rate", which I ended up paying, before closing their account.

    So, don't try to give us your spiel, about how great AT &T is.

  • Report this Comment On March 16, 2011, at 1:36 AM, dwitiya wrote:

    The 10 dollar drug is not FDA approved, because there is no proof that it works. However, if the doctor believes in it, and the patient does no want to use Makena, there is nothing to stop the doctor from prescribing the $10 Drug, after he documents that he has discussed the pros and cons of both drugs with the patient.

    So, there is no need for anyone to get angry with KV pharma.

    They are entitled to charge whatever they think is appropriate, for something they hold a patent. I thought that there offer of free or significantly discounted treatment for women who earn upto $100,000 per year was overly generous. I cannot understand why ArizonaGeo calls it bogus, without any proof. Looks like he, and a fw other commentors here, may really have shorted the stock.

  • Report this Comment On March 16, 2011, at 7:06 AM, TMFCop wrote:

    manycents,

    I agree that just because you can do something doesn't mean you should. Yet I also wouldn't countenance the government telling KV what price it could charge for its drugs.

    As I asked, will the cheaper alternatives remain available? While diwitiya has answered in the affirmative, it seems an operationally suicidal decision to price its drugs so high. Why prescribe something for $1,500 when doctors can easily bypass it for $10. And why their outrage then? I would have liked to have seen a few state they'll continue to do the end-run prescription plan then.

    Because we're talking about pre-term babies here, emotions can run high, but it's the potential profits a company can make that encourages them to continue finding treatments that can help rare or difficult cases. Without the incentive, companies wouldn't pursue the space and patients would ultimately be worse off.

    Yet I think KV misjudged the PR backlash it would receive. Just because you can charge so much doesn't mean you should, particularly if there are (much) cheaper alternatives elsewhere and it will tar your corporate reputation as a rapacious exploiter of pre-term babies.

    Rich

  • Report this Comment On March 16, 2011, at 7:39 AM, littletuna wrote:

    yeah $1500 per dose is a lot...say you need up to 20 doses through the term ($30,000). The average cost for medical care for a premature baby is about $49,000 (http://articles.cnn.com/2009-03-17/health/premature.babies_1....

    I would much rather pay $30k (on the high end, most women won't need nearly that many doses) and have a healthy baby then $49k and have serious health risks.

    Could they lower the price...sure but I don't think that they have to. They have spent a ton of money to make it and overall they are saving people that are at risk money overall. How can people complain about this considering that now instead of getting a drug that "might" work (progesterone, which is used for lots of things), they are getting a drug that is regulated and backed by research. Plus the insurance companies will be eating the cost anyways. "What about the ones that don't have insurance" you say, well they would be paying for the bills of the premature baby anyways...So I guess they just saved money by using Makena.

  • Report this Comment On March 17, 2011, at 9:57 PM, fogelsonmd2 wrote:

    Here's a detailed impression I wrote for my blog.

    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.

    Bottom Line - KV is going to go down hard

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