3 Horrendous Health-Care Stocks This Week

The past week held plenty of fireworks, food -- and its fair share of flops. Here are three health-care stocks that didn't exactly light up the skies over the past few days.

Liver quivers
Achillion Pharmaceuticals (NASDAQ: ACHN  ) ranks as the top drop of the week. Shares plunged 24% on news that the Food and Drug Administration placed a clinical hold on experimental hepatitis C drug sovaprevir.

The FDA's concerns stem from elevated liver enzyme levels found in patients participating in a phase 1 drug-drug interaction study with sovaprevir with ritonavir-boosted atazanavir. Clinical holds for hep-C drugs have become something of a pattern for the FDA. Last August, the agency halted trials for two drugs developed by Idenix Pharmaceuticals (NASDAQ: IDIX  ) . Idenix ultimately dropped both clinical programs earlier this year.

Despite the huge fall with its stock, Achillion didn't receive totally bad news from the FDA. The company can continue to enroll patients in its phase 2 study for sovaprevir plus ACH-3102 and ribavirin. The elevated liver enzyme levels haven't been seen with any other trials involving sovaprevir. Achillion plans to respond to the FDA's request for reports from two drug-drug interaction studies and a safety analysis of ongoing sovaprevir studies within the next six weeks.

Medicare mayhem
Unwelcome news from Medicare last week sent home health provider stocks reeling at the end of last week. The aftermath continued into the first week of July, particularly for Gentiva Health Services (NASDAQ: GTIV  ) . Gentiva's shares dropped almost 11% this week after falling by roughly the same amount last Friday.

All of the tumult stems from a proposal by the Centers for Medicare and Medicaid Services, or CMS, to cut reimbursements for in-home care by 1.5% in fiscal 2014. CMS proposed rebasing the home health prospective payment system to incorporate 3.5% annual cuts from 2014 to 2017, the maximum reduction allowed under the Affordable Care Act.

While the cuts aren't set in stone yet, there's no reason to think that the situation will improve for any of the home health providers. Gentiva will be hit particularly hard, since the company receives more than 90% of its revenue from Medicare.

Good news or bad news?
Arena Pharmaceuticals (NASDAQ: ARNA  ) shares fell 9% this week as investors processed early sales results for obesity drug Belviq. The problem is that whether those sales results are good or bad depends on whom you ask.

Belviq only launched in the U.S. on June 11, so there isn't a lot of sales data available yet. IMS Health reported that 1,087 prescriptions for Belviq were written the week ended June 14. That number jumped 68% to 1,829 the next week. These initial results look good when compared to the first couple of weeks for rival drug Qsymia, made by VIVUS (NASDAQ: VVUS  ) . However, such high expectations have been raised for Belviq that many investors don't think the results are good enough.

Actually, the launches of the two drugs don't make for a good apples-to-apples comparison. Qsymia only recently hit pharmacy shelves, while Belviq was available in pharmacies from the get-go. Whether Belviq truly fares better than Qsymia, which got off to a sluggish start, remains yet to be seen.

Best pick
My hunch is that the best pick of this week's horrendous health-care stocks could be Achillion. The FDA's clinical hold certainly is bad news. However, a distinct possibility remains that the roadblock will be a temporary one. As always in the world of biotech, there is plenty of risk. Should Achillion get past the current FDA concerns, though, shares could mount a strong comeback. We'll have to wait to see if Achillion produces fireworks or just fizzles in the days ahead.

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  • Report this Comment On July 06, 2013, at 5:38 AM, mrmarkaallen wrote:

    Sales of ARNA's Belviq are ramoing up. The shares are down due to the hedge funds manipulating the price. Last reported they still have 57 million shares short and they are running out of time to cover.

    Eisai is marketing the drug for ARNA and is absorbing 90% of the post marketing trials. The deal they struck is the best I have seen in any biotech. In a month or two the sales trent will reveal itsself and a run into the teens will happen.

  • Report this Comment On July 06, 2013, at 2:05 PM, jsIRA wrote:

    ARNA - the 9% drop is not because investors were not satisfied with IMS second week data. it is because of AF bearish article and corresponding short attack.

    I don't think many LONGs sold their holdings.

    I also think that if there was no AF article, stock will not drop so much. or no drop at all.

    Stock market is always subject to cordinated manipulation with media.

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