The Worst-Performing Biotechs in 2012 and 1 to Avoid in 2013

As we enter the final few weeks of 2012, I thought it would be a positive reflective activity to look at the worst biotech performers in 2012, examine why that had such a miserable year, and point out one biotech company on my avoid list for 2013.

Just as I did yesterday when I examined the top performers in the biotech sector, I've excluded some of the smallest companies so we can focus our efforts (and hopefully learn some lessons) on why these five companies had a year to forget.

Company

Year-to-Date Performance

Chelsea Therapeutics (NASDAQ: CHTP  )

(79.73%)

Cell Therapeutics (NASDAQ: CTIC  )

(76.55%)

Aeterna Zentaris (NASDAQ: AEZS  )

(75.87%)

Progenics Pharmaceuticals (NASDAQ: PGNX  )

(72.83%)

AVEO Pharmaceuticals (NASDAQ: AVEO  )

(64.24%)

Source: Finviz.com. Data as of Dec. 6, 2012, close.

Chelsea Therapeutics took the dubious crown of worst-performing biotech this year thanks to a March rejection by the Food and Drug Administration of its neurogenic orthostatic hypotension drug, Northera. What's particularly interesting about Northera is that despite some safety yellow flags, it was recommended for approval by the FDA panel, but failed to gain approval by the FDA. In the complete response letter, Chelsea was told to run an additional two-to-three month trial to examine the longer-term effects of Northera on patients, but was again told in July by the FDA to run an even longer study. The results, released just days ago, were mixed at best, showing that Northera demonstrated a reduction in dizziness within the first week versus the placebo, but weren't statistically significant beyond that point.

If you're shocked to see Cell Therapeutics on this list, don't be, because over the past decade shares of Cell Therapeutics are down a split-adjusted 99.982%. Cell Therapeutics, which has an accumulated deficit in excess of $1.8 billion, finally (and I do mean finally) has a drug, Pixuvri, available for commercial sale in select Europe nations for the treatment of multiple relapsed or refractory non-Hodgkin's lymphoma. While a positive development, Cell Therapeutics continued its almost ritualistic dilution of shareholders with a $60 million preferred convertible share offering announced in October.

Aeterna Zentaris, a biotechnology company that I personally added to my own portfolio within the past two weeks, has had a rough year due to it and its partner Keryx Biopharmaceuticals' (NASDAQ: KERX  ) , experimental advanced colorectal cancer drug, Perifosine, failing to meet its endpoint in late-stage trials. With the company having no immediate drugs lined up for market, despite having $33.2 million in net cash, investors are concerned that future dilutive offerings are in the making. As for me, the impetus for my purchase is Aeterna's seven clinical trials and four preclinical studies that offer multiple avenues for a rebound in 2013. 

Progenics Pharmaceuticals shareholders can place all their frustration this year on the FDA's decision in late July to deny it and its licensing partner, Salix Pharmaceuticals (NASDAQ: SLXP  ) , an additional treatment indication on its opioid-induced constipation drug Relistor. Progenics had been attempting to gain FDA approval for Relistor's use in non-cancer-related chronic pain, but the FDA requested additional clinical data instead. With the need for additional trials being run, shareholders can expect costs to rise and cash to burn in the meantime. 

Finally, AVEO Pharmaceuticals was the company that couldn't win this year for trying. Within the past two weeks, it and its partner Astellas Pharma have submitted a new drug application for Tivozanib, their experimental renal cell carcinoma treatment. The initial data on the drug looked promising -- comparing it not against a placebo, but Onyx Pharmaceuticals' (UNKNOWN: ONXX.DL  ) Nexavar, and showing a modest progression-free survival benefit. Unfortunately, between a skeptic FDA that expressed concerns about long-term survival trends , and expectations that PFS would be considerably higher from an investors' perspective, expectations on Tivozanib have dropped dramatically.

One biotech to avoid in 2013
Yesterday, I declared Exelixis (NASDAQ: EXEL  ) as my No. 1 biotech company to watch in 2013 because of the recent approval and overwhelming clinical success of Cometriq, its metastatic medullary thyroid cancer treatment. Today, I'm going to highlight one biotech company that I feel will have a miserable 2013: Synageva BioPharma (NASDAQ: GEVA  ) .

Synageva's most advanced drug, SBC-102, is focused on treating lysosomal acid lipase deficiency and is currently in phase 1/2 of the clinical trial process despite receiving fast-track status. Synageva is purposefully targeting unmet medical needs in order to remove competitors from the picture, but with the company sporting a valuation of $1.15 billion, and just one drug in early clinical trials, I'd hardly say that success is a given! We'll be lucky if we hear from Synageva more than once in 2013 regarding its SBC-102 data, and I highly doubt any of its four preclinical trials move into the clinical stage next year.

Still three years away from having its first drug on the market, at best, Synageva is primed to return to Earth after an incredibly strong campaign in 2012. It's a name I'd avoid like the plague next year.

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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 December 07, 2012, at 12:26 PM, insidetrack22 wrote:

    I think now is a buying opportunity for AVEO pharmaceuticals. Aveo pharmaceuticals has successfully proven that Tivozanib is just as good if not better than Nexavar in terms of a statistically significant Progression Free Survival. What wall street was expecting is absolute superiority to Nexavar in terms of overall survival. This will result in an accelerated approval process. What investors have done with AVEO is throwing the baby out with the bath water. Although the chemo field is crowded, price for chemo is still high and any competition that can potentially drive down price and give patients/physician more options to improve the patient quality of life (even if you do not extend the life), is a welcome addition. I personally do believe that AVEO pharmaceuticals at the current price of $6's is a steal

  • Report this Comment On December 10, 2012, at 12:34 PM, kthor wrote:

    AVEO might test the $5 range

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