3 Horrendous Health-Care Stocks This Week

The markets had a short week with the Martin Luther King holiday on Monday, but we had no shortage of horrendous stocks in the health-care sector. Here are three of the worst performers.

Yo-yo effect
Pacific Biosciences of California  (NASDAQ: PACB  )  shares fell 12%. Last week, the stock gained in the double digits. Shareholders might be feeling as if they bought a yo-yo.

There really hasn't been any major news to hit the wires about Pacific Biosciences that would move the stock dramatically. It could be that this week's drop merely reflects some profit taking. Even with the decline, shares have more than doubled since October.

The company benefited earlier this month from a decision by the FDA to use its DNA sequencing technology in a major study. That study involves genetic sequencing of 100,000 foodborne pathogens to determine how bacterial infections evolve.  

Weighty matters
Arena Pharmaceuticals (NASDAQ: ARNA  ) dropped 11% over the last week. Shares fell after the company announced questions for its obesity drug Belviq were raised by the European Medicines Agency's Committee for Medicinal Products for Human Use, or CHMP.

CHMP's Day 180 List of Outstanding Issues referenced several concerns arising from clinical studies of Belviq, including the occurrence of tumors on rats as well as heart valve problems and adverse psychiatric effects in humans. These issues weren't viewed as serious enough to derail Belviq's U.S. approval by the FDA, but European approval is a different matter.

Proponents of Arena would argue that the concerns raised by CHMP are overblown and that Belviq should still be approved for Europe. Detractors would maintain that Arena is likely to follow the same path of rival VIVUS  (NASDAQ: VVUS  ) . European authorities rejected approval of VIVUS' Qsymia over concerns about potential cardiovascular and central nervous system effects of the drug. The next few months will reveal which side is right. For this week, at least, the naysayers's opinions carried more weight.

No energy for Synergy
Shares for Synergy Pharmaceuticals (NASDAQ: SGYP  ) were down over 8% this week on the heels of a 9% fall last week. What's going on? 

Synergy started the year off on a good note with positive results from its phase 2b/3 trial of plecanatide. The experimental drug for chronic idiopathic constipation met its primary and key secondary endpoints in the study. That news helped drive shares higher by 25%. But the stock has gone steadily downward since Jan. 17.

It's probably merely a coincidence that Synergy announced the closing of its merger with Callisto Pharmaceuticals on that date, especially since the deal has been in the works for months. The decline might be related to worries that Synergy won't be able to find a partner to bring plecanatide to market. Whatever the reason, shares have certainly lost the energy from earlier in January.

Temporary pain?
I think that it's quite possible that this horrendous week of losses could be temporary for all three of these companies. Pacific Bioscience's drop could just be a minor pullback in an overall uptrend. Better news from Europe would lift Arena's shares. Announcement of a partner should reenergize Synergy's stock.  If so, temporary pain could lead to the opportunity for down-the-road gain. 

Is there pain or gain ahead for Arena Pharmaceuticals? The company has been largely successful after obtaining FDA approval for its innovative obesity drug. There are still plenty of obstacles ahead, though. In The Motley Fool's brand-new premium research report on Arena Pharmaceuticals, we walk investors through the must-know opportunities and threats facing the company. Since key news can develop quickly, we're also including a full year of updates for those who sign up. Click here now to learn more.

 


Read/Post Comments (9) | Recommend This Article (3)

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  • Report this Comment On January 25, 2013, at 8:25 PM, don509 wrote:

    Titles such as this pantload are why this year's subscription to Motley Fool will be my last.

    How irresponsible can you folks possibly get with your unchained bloggers given credentials from your name, but you take no responsibility for their "work".

    It's a strange and not very believable defense to say that they are not run thru your editorial dept.

    What a foolish few paragraphs on Arena. The sole connection between Arena and VVUS are that they are both companies that produce weight loss products. The differences are vast but the bottom line is that unlike VVUS, Arena provides a safe and effective product.

  • Report this Comment On January 25, 2013, at 9:00 PM, jmazeppa wrote:

    Where have you been synergy has been on a run since November trading at around 3.00. Most stocks don't go straight up and some profit taking is often the order after such gains.

  • Report this Comment On January 26, 2013, at 6:50 PM, RSRdriver wrote:

    5 SOLID REASONS WHY ARNA WILL BE BANKRUPT WITHIN 1 YEAR

    1, BELVIQ!

    It barely works, period! While certain "writers" have pushed inconsequential numbers as important and convinced some that they are relevant, all the number spinning in the world will not convince the medical communities both here and abroad. The REAL WORLD efficacy speaks for itself.

    2,FORWARD PROFIT PROJECTIONS

    To even think that a company that has no viable product, a domineering partner (with already questionable sales practices Eisai/Legard!) who takes about 40%. Some here will say that the forward numbers will be more than adequate but, they project those numbers using data that is based on off label use of Belviq. Another pie in the sky dream.

    3, EMA REJECTION

    The EMA's recent requests to Arena for further answers on the safety and efficacy of Belviq will produce answers no different than the ones they already gave them. They released the drug from development to early in an attempt to beat Vivus. As a result, they have to live with the numbers and safety guidelines they already have. There is no way the European non profit healthcare systems will or can accept a drug or service that is not cost effective and has lingering safety issues.

    4, AMA REJECTION

    With a viable drug (Vivus Qysimia) already on the market and proven to be effective, the chances of a doctor prescribing Belviq are slight. Yes, again, there are those that will say that safety and availability will trump efficacy, this is ridiculous. There are several male enhancement aids selling by mail order that are doing very well. If you think that minimal safety issues with Qysimia are a detriment then perhaps you should look at any drug ad copy or listen to the legalese following ANY drug ad here in the U.S.!

    5, LAWSUITS

    It is highly likely that Eisai will sue Arena for not living up to contractual obligations IE; not providing a viable drug!

    Iam sure that the extremely vocal so called ARNA retail longs will not only be suing but also blaming everyone from TV analysts to Santa Claus!

    There are quite a few who have enjoyed the rise of ARNA's PPS in the last year. How that happened is IMO highly questionable. However, anyone holding this stock now either has their head in the sand or is purposely ignoring the facts.

  • Report this Comment On January 27, 2013, at 11:22 AM, feelinIrie wrote:

    Last I understood it IS VVUS that was rejected in the EU. Belviq WAS DELAYED. Please post link showing rejection, not delay, otherwise that is a lialeous statement.

    Anyway, VVUS rejected....

    BLACK BOX LABELED!!!!!

    STAY AWAY!!!!!!!!!

    VVUS Can't even be sold in brick and mortar stores,it is to risky of a product for that!!!!

    Those are the facts!!!!

    ARNA shorts are toast!!!

  • Report this Comment On January 27, 2013, at 12:13 PM, SamFreedom wrote:

    Keith,

    Are you dating Adam Feuerstein? When I see high school level, hack jobs like this, it's very, very difficult to not sense there's something personal clouding the author's view. Not only is the article horrendous, but the use of the word "horrendous" in the title makes it exponentially more so.

    You should be ashamed of such horrible journalism.

    REGARDING RSRDRIVER'S ILL-INFORMED COMMENTARY:

    Here's my rebuttal to each of his points:

    5 SOLID REASONS WHY RSRDRIVER'S ANALYSIS SUCKS:

    1. BELVIQ

    Not only is Belviq reported as safe and effective, it's expected that it can be combined with other cheap, already approved, generics (like phenteramine) for an even greater effect. Those who stayed on the program lost far more weight than the average which included people who dropped out.

    2. FORWARD PROFIT PROJECTIONS

    ARENA's CEO, Jack Lief, has been voted BEST CEO by the very particular Motley Fool community. That's no accident. Amongst other reasons too numerous to list here, ARENA has had the vision to cut costs dramatically by partnering with entities who are proven sales forces. ARENA has engineered brilliant agreements that have paid for future testing and eliminated their need to train and pay a sales force.

    When it comes to the launch of a blockbuster anti-obesity, one of the first in 13yrs, do you really want to take risks on the sales and marketing end of things or do you want to come out of the gate with the strongest push possible? Essai can deliver on that.

    ARENA is also working on other similar agreements around the world. It's creative, its brilliant.

    3. EMA REJECTION?

    If RSRDRIVER doesn't even know the difference between a rejection and a simple delay to request more info, then what else does he IMAGINE he understands, but doesn't? You can't trust that shoddy kind of thinking. And not only is it shoddy but he uses it to criticize the EMA for doing its DUE DILIGENCE.

    Imagine that? He characterizes the EMAs due diligence as a rejection! Talk about personal prejudice blinding a person...

    4, AMA REJECTION

    Given the choice between something so risky it has REMs and is rejected by the EMA... and something that both the FDA and DEA consider safe, low risk for addiction and effective, doctors are going to always choose the safer alternative:

    SEE: HIPPOCRATIC OATH - DO NO HARM

    VVUS' Qysmia, in my opinion, would be selected only if the obesity and co-morbidities were more of a risk than the Qysmia itself. But with BELVIQ being safe and effective and approved, doctors have a much safer alternative.

    5, LAWSUITS

    ARENA and ESSAI have set up "milestone payments" which are performance-based bonuses. It is ridiculous, again, for RSRDRIVER to suggest ESSAI would sue ARENA in the event of poor performance. ARENA performs and gets the milestone payments or they don't perform and dont get the milestone payments.

    The only reason I could ever see for ESSAI to sue ARENA would be for outright fraud or negligence which would be true for ANY company. Is RSRDRIVER openly accusing ARENA as being disingenuous, negligent and fraudulent? If not, then let him clarify his claim and explain how the milestone payments agreement doesn't address performance.

    IT IS LEGALLY QUESTIONABLE THAT RSRDRIVER WOULD say it is highly unlikely that ARENA will provide a viable drug when the FDA has already approved BELVIQ. Is RSRDRIVER saying that the FDA approves sugar pills?

    RSRDRIVER SAYS:

    "Iam sure that the extremely vocal so called ARNA retail longs will not only be suing but also blaming everyone from TV analysts to Santa Claus!"

    Does this not demonstrate the RSRDRIVER'S personal emotions have gotten in the way and handicapped his ability to be rational and objective? So now he has lowered himself to attacking those who disagree with him.

    "However, anyone holding this stock now either has their head in the sand or is purposely ignoring the facts."

    LIBELOUS claims. While all sorts of things can go wrong even for the best of investments, many of us feel we have made complete and noble efforts to sincerely find out as much as information and analysis as we can digest. Yet RSRDRIVER accuses us of doing what he is doing.... purposely ignoring the facts.

  • Report this Comment On January 27, 2013, at 1:32 PM, RSRdriver wrote:

    Sam Freedom,

    Even though your first question states clearly your thought process in these matters, I will address most of your concerns and leave the reader to judge for themselves what is factual and what is not.

    Belviq,

    Saying that Belviq is "reported" to be safe and is "expected" to be combined with generics ridiculous!

    "Reported" by who? Are you changing the FDA's laws against off label use?

    Forward profit projections,

    As anyone who follows this sector knows, there are numerous analysts a lot more qualified than you or I who have come out and practically laughed at the forward projections for Arena.

    To add to this comedy by stating that the 6 obese people in Korea or the partnership with a suspect marketing partner- Eisai (see Eisai/Legard) is a plus is hilarious!

    Also, "working on agreements" and actual agreements are two different things. The potential profit in this sector, coupled with your statement of "blockbuster" potential should have delivered an "agreement" by now, it has not and likely will not.

    EMA Rejection,

    Whether it is a "delay" or an outcome, IT DOES NOT MATTER! Arena can only reintroduce the same answers that the EMA finds are not acceptable! Maybe you can help Arena by sending your points to the EMA.

    I will stand by my reasons for Arena's upcoming EMA rejection.

    AMA Rejection,

    Belviq was likely passed by the FDA for political reasons. It certainly had little to do with the drugs effectiveness or safety. I suggest you read the minutes of that session. It is clear that quite a few panelists had serious questions concerning Belviq's effectiveness and safety. It is a fact that it passed using the FDA's minimum standard guidelines.

    Add to this the Obama administration's known obesity campaign and THEIR appointments on the FDA panel and it should be plain even to you, the level of influence politics likely played in this outcome.

    Doctors here in the U.S. do not prescribe drugs based on safety. If they did almost all of the big pharma companies here would not exist!

    I'm sure though that if Arena's marketing dept. throws in the usual drug sales incentives presented to U.S. doctors (golf trips etc/ obviously something likely not below their marketing dept.!) they may be able to scrape by.

    Lawsuits,

    I will stand pat on these points. Nothing is beyond a lawsuit.

    I should also point out that your observation on Arena's CEO is laughable. Anyone who has followed this company knows that at the first ADCOM he conveniently forgot to mention the cancer in rats issue. A bunch of Areniacs posting votes for CEO of the year a few times a day means nothing!

  • Report this Comment On January 29, 2013, at 6:30 PM, SamFreedom wrote:

    Wow, RSRDRIVER, your reply is truly sad. It honestly seems to me like a madman grasping at straws. Here, let us take a look:

    EMA rejection?

    Uhm, why play games? Are you really saying that you are smart enough to know Arena's answers Erroll definitely be the same yet the EMA is not smart enough to know that? If, as you say, Arena's answers can only be the same, then why didn't EMA just reject it?

    The REAL answer? EMA is smarter than you and is just doing their due diligence... unlike you, it seems, who is inventing all kinds of strange, unproven theories.

    AMA rejection?

    There you go again with those conspiracy theories. Somehow, you, alone, are privy to the secret knowledge that the FDA approved Belviq for political reasons. Really? Someone inside told you that?

    How about... the FDA approved Belviq because it was safe, effective AND THERE'S AN OBESITY EPIDEMIC!

    You're going off the deep end, buddy. Just keep it simple... no need to invent theory after theory to calm your fears as a short.

    CEO of the YEAR

    Isn't it just sad that you can't even keep your grubby little conspiracy addicted mind from meddling with something as nice as Arena's CEO winning the Motley Fool community's CEO of the Year award.

    That's how far you've sunk. Your reply is even more ridiculous than the Warren commission's "single bullet theory" re JFK.

    Lets recap....

    In order for you to be right:

    1. Essai has to be a bunch of crooks;

    2. The EMA has to be stupid and/or playing games;

    3. The AMA has to have fraudulently approved Belviq w the secret approval of Obama; and,

    4. The Motley Fool community haws to have been infiltrated by enough Arena longs to tilt the CEO of the Year vote in favor of Jack Lief.

    Ok, so my question to you is, are you $&#®ing nuts?

    So, who is behind it all... Bigfoot?

  • Report this Comment On January 29, 2013, at 7:48 PM, RSRdriver wrote:

    Once again, thanks for your help!

  • Report this Comment On January 30, 2013, at 11:41 AM, Themattyicee wrote:

    Got into ARNA at 2.98 and had a sell order executed at 13.50. Couldn't be happier!

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