3 Horrendous Health-Care Stocks This Week

Why wait until the end of October for a few Halloween scares? Some health-care stocks managed to frighten investors in the first few days of the month. Here are the three most horrendous performers for the week.

Hold horrors
Achillion Pharmaceuticals (NASDAQ: ACHN  ) takes the worst spot this week. Shares plunged 62% on bad news from the U.S. Food and Drug Administration.

In June, the FDA placed Achillion's hepatitis C drug sovaprevir on clinical hold because some patients experienced elevated liver enzyme levels in a phase 1 study. The company moved quickly to respond to the FDA's concerns, but that response wasn't enough. The FDA decided to keep the clinical hold in place.

While Achillion has a few other drugs in its pipeline, this amounted to a huge setback for the company. Management stated that it will work with the FDA to try to resolve the agency's concerns, but that could prove to be an uphill battle.

Slashers
Credit Suisse slashed its price target for Arena Pharmaceuticals (NASDAQ: ARNA  ) . Shares dropped 16% in response. 

After reviewing prescription data from the past three months, Credit Suisse analyst Lee Kalowski said that sales of Arena's obesity drug Belviq are likely to fall well short of previous projections. Kalowski downgraded the stock to underperform and cut the price target for Arena from $5 to $4.

That wasn't the only analyst action in the obesity drug market. Cowen initiated coverage on Arena and one rival -- Orexigen Therapeutics (NASDAQ: OREX  ) . The investment firm also upgraded Vivus (NASDAQ: VVUS  ) . 

Unfortunately for Arena, Cowen was much more bullish about Orexigen and Vivus. Analyst Simon Simeonidis said that Vivus appears poised to become the market leader and that Orexigen has a shot at emerging as a significant threat.

Burnt offering
Generic drugmaker Lannett  (NYSE: LCI  ) also fell almost 16% this week. There weren't any outside forces impacting the company's shares, though. Lannett's woes were self-inflicted.

On Friday, Lannett announced the pricing of a secondary share offering. When a company offers shares for 14% below where the stock was trading, it tends to drag shares down. That's what Lannett did, with its stock suffering the consequences.

In the big picture, though, this week's drop is just a blip for Lannett. The stock has more than quadrupled so far this year. Record-high sales and earnings in 2013 have powered its shares steadily.

Best of the worst
Picking the best of our three horrendous health-care performers is an easy task this week. Arena certainly faces difficult challenges from rivals. Achillion's road to recovery must go through the FDA. Lannett's decline, though, should prove temporary.

That doesn't mean that the generic pharmaceutical company will continue to enjoy the kinds of gains that it's had over recent months. It won't. Even with moderating growth, though, Lannett could be one to keep on your watchlist.

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  • Report this Comment On October 05, 2013, at 12:21 PM, RSRdriver wrote:

    Horrendous? That depends on which side of the trade you have been on.

    Personally I have grown very fond of Arena stock and continue to look forward to even better times.

  • Report this Comment On October 05, 2013, at 2:31 PM, meldog6 wrote:

    Cowen gives Vivus a $17 price target on good sales?

    That's about the funniest thing I have ever heard!

    Sales, after a year on the market is 10,000 scripts a week and has been flat for weeks. They are actually down from the previous week.

    Vivus is $350 million in the whole and losing $40-$50 million a quarter. In 2014 loans start to be repaid, they have 10 post studies to pay for. They are playing musical CEO's, can't even afford to advertise and have an erectile dysfunction drug collecting dust on a shelf.

    Where do these analyst come from?

  • Report this Comment On October 05, 2013, at 2:37 PM, bmc007 wrote:

    A little bit over-dramatic today, aren't we?

    "Credit Suisse slashed its price target for Arena Pharmaceuticals"

    So, cutting the price target from $5 to $4 is called slashing now, is it? Hmm.

    "Unfortunately for Arena, Cowen was much more bullish about Orexigen and Vivus. Analyst Simon Simeonidis said that Vivus appears poised to become the market leader..."

    Sure, as their script numbers dropped for the week while ARNA's continue to rise! Hmm.

    "...and that Orexigen has a shot at emerging as a significant threat."

    Well, of course he can say anything he wants because there's absolutely no way anyone can refute it because they are still miles away from getting anything to market! Hmm.

    It seems to me the only slashing going on around here is the (poorly disguised) hatchet job you just tried to carry out on ARNA.

    Nice try, McFly! :-)

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