3 Horrendous Health-Care Stocks This Week

With the major indexes hitting new highs, most health-care stocks enjoyed nice gains. Not all of them, though. A select few brought nothing but misery to shareholders. Here are the three most horrendous health-care stocks over the past week.

Devastating disappointment
By far the biggest loser on this week's list is Prosensa (NASDAQ: RNA  ) . Shares plunged 70% for the week on surprisingly poor results from a late-stage study of Duchenne muscular dystrophy, or DMD, drug drisapersen.

Prosensa and partner GlaxoSmithKline (NYSE: GSK  ) announced on Friday that drisapersen failed to meet its primary endpoint of improving performance on the six-minute walk test used to assess DMD patients. While the two companies still plan to review the results more fully, the situation looks bleak for Prosensa right now. 

The biotech's bad news ended up being good news for chief rival Sarepta Therapeutics (NASDAQ: SRPT  ) , which is seeking approval for its DMD drug eteplirsen. Shares of Sarepta see-sawed early in the day following the drisapersen announcement. That changed big-time by late morning. Sarepta finished up around 16% as investors saw Prosensa's stumble as a significant opportunity for eteplirsen.

Inside scoop
There was no late-stage clinical failure for Questcor Pharmaceuticals (NASDAQ: QCOR  ) . Actually, there wasn't any significant news whatsoever. The stock still dropped by 12%, though.

The most probable impetus behind the decline could be some insider selling that began in late August and continued into this week. Dave Medeiros, Questcor's chief technical officer, sold more than $4 million worth of shares on Aug. 26 as he exercised some stock options. Last Friday, CEO Don Bailey took the same path in a transaction of nearly $2.6 million. Virgil Thompson, a member of Questcor's board of directors, sold more than $318,000 in a stock option exercise earlier this week.

Insider sell-offs can sometimes spook investors. Of course, it's hard to blame anyone from selling somewhat with a stock that has more than doubled so far this year.  

Secondary slippage
It isn't often that a stock falling by less than double digits makes the "horrendous" list, but Sangamo BioSciences (NASDAQ: SGMO  ) managed to do so this week. Shares fell 9% on Sangamo's announcement of a secondary stock offering.

The biotech is selling 6.1 million shares at a price of $10.58. That level is 6% below where Sangamo traded at the end of last week.

Sangamo's lead drug candidate is SB-728, which is in a mid-stage study as a potential treatment for HIV/AIDS. The company also has partnered with Shire on hemophilia and Huntington's disease drugs that are in the pre-clinical stage.

Most likely to succeed
Of this week's group of horrendous health-care stocks, I pick Questcor as the most likely to do well in the days ahead. The company continues to execute well on its strategy of expanding indications for Acthar. Rumors that major insurers would severely limit reimbursement for the drug have been overblown so far.

Even with a triple-digit jump in the company's stock in 2013, Questcor doesn't appear to be unreasonably valued. Its trailing price-to-earnings multiple is below 15. If Acthar's sales grow as expected, the stock should see brighter days ahead.

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Read/Post Comments (5) | Recommend This Article (3)

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 September 21, 2013, at 2:38 PM, awallejr wrote:

    I doubt past insider sales had anything to do with Qcor's price movement. There can be many reasons for a sale. Now purchases on the other hand usually only have one reason.

    And it isn't a matter of just sales for profit taking but of traders shorting it to almost 20% of float. I don't understand the shorts' thesis here. In fact I am considering taking a position in the company as per here:

    http://caps.fool.com/Blogs/questcor-advice/870365

  • Report this Comment On September 21, 2013, at 10:24 PM, drdonrs wrote:

    Yes indeed, it was obviously shorts manipulating the stock with impunity. Position taking is no doubt occurring because in a short few weeks the quarterly report will be forthcoming and it promises to be a winner. The sell-off certainly had nothing to do with the planned insider selling.

  • Report this Comment On September 22, 2013, at 1:37 PM, uyutnaya wrote:

    The QCOR's product profile screams BUY!

  • Report this Comment On September 23, 2013, at 3:56 AM, npnb wrote:

    Excuse the harsh word, but the part about SGMO is pure nonsense.

    The drop last Friday has nothing to do with the offering which had been published and thus been well known to everybody since Wednesday Sep.18 before market opening.

    If this should have been the reason for the drop, why didn't it happen on Wednesday or Thursday already? The reason is very simple, there was a short sellers hatchet piece the Streetsweeper on Seekingalpha exactly on Friday well before market opening. Has the quality of the Fool.com's articles dropped so much, does nobody revise them anymore? Don't you have more knowledgeable authors?

    There would be a lot to say about the Streetsweeper's dumb and very obvious attempt to make some short term money shorting SGMO. These guys either have already covered at the end of the day or will have to do so very soon. Only people who don't know the entire story of SGMO have fallen for it.

    Their shorting story is about the development of a functional cure for AIDS, which indeed is very promising although still needing a lot of work. Who know Biotech, knows that drug development takes many years and a long breath. This is well known to investors, maybe not to traders. The shorters quote one dubious "expert" to "prove" their point, but they forget that only recently a significant pharma firm (Shire) with certainly a lot more expertise has invested millions into SGMO's research on several other, similar fields which guarantee SGMO a continuous stream of income and funding. SGMO is not a single pony show and the HIV project, although perhaps causing most of the public interest, is by far not the only one and not even the most important one.

    I am very disappointed, not by SGMO, but by the quality of the Fool.com article.

  • Report this Comment On September 24, 2013, at 11:30 AM, npnb wrote:

    Shorters are covering. No doubt, recklessly and falsely putting SGMO in the context of "Horrendous Health-Care Stocks" exactly in this moment (wrongly claiming that the secondary offering made it slip while indeed it was caused by a hit piece written by known professional short sellers) Mr. Speights objectively worked in their interest.

    Just wondering if he really had "no position" in this stock. Do short positions count, too? And how does he prove the claim?

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