Things could always be worse. Unfortunately, that's the good news for a few health-care stocks this week. Here are three of worst performers.
At first glance, those results don't sound bad. Nektar reported that 213 out of 295 patients with osteoarthritis of the knee participating in the phase 2 study experienced an average 40% reduction in pain. The problem, though, was that enough patients taking placebo also had reduced pain so that the NKTR-181 results didn't show a statistically significant improvement.
This probably won't be the end of the line for the pain drug, though. It isn't the end for Nektar, either. The company claims a solid pipeline with several other drugs across multiple therapeutic categories.
Just a couple of months ago, things were really looking up for Minnesota-based BioScrip (NASDAQ: BIOS). The company's stock hit a rough patch after its earnings release in August, though. The decline continued this week, with BioScrip shares falling another 20%.
The negative catalyst this time around stems from a subpoena from the New York State Attorney General's Medicaid Fraud Control Unit and a civil investigative demand from the U.S. Attorney's Office for the Southern District of New York. An investigation is under way regarding BioScrip's distribution of Novartis' iron chelation drug Exjade.
This investigation is related to issues that potentially occurred in the past. BioScrip sold its mail-order and retail pharmacy business in May 2012 to giant pharmacy chain Walgreen (NYSE: WAG). There has been no hint of any investigation relating to Walgreen's operations of the divested business. BioScrip now focuses on its infusion services, home health care, hospice, pharmacy benefits management, and durable medical equipment businesses.
Bloomberg reported on Tuesday that Clovis had been working with Credit Suisse Group and JPMorgan Chase to find potential buyers. No buyers were interested, though. According to Bloomberg's source, Clovis has now decided to take down the "for sale" sign.
Even after this week's drop, Clovis sports a market cap of $1.8 billion. That's with no products on the market, no revenue, and no drug past phase 1 development. Share prices falling in the double digits isn't good, but the market still has priced in an optimistic outlook for the company.
I wouldn't be surprised if all three of this week's horrendous stocks bounce back over time. Nektar still has plenty of pipeline potential. The sell-off over the investigation of BioScrip could be overdone. And assuming Clovis advances either of its cancer drugs currently in early stage studies, there just might be some interested buyers down the road.
Those are all admittedly "ifs and maybes," though. It makes sense to be cautious. There's no guarantee -- for any stock -- that a horrendous week can't turn into a longer-term horrendous period.
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