Temperatures might be dropping, but some stocks are heating up. Here are the three most sizzling health-care stocks of the past week.
The intelligent investor
Our most humongous winner this week would have looked like an unlikely candidate for most of 2013. Investors watched the stock of OncoMed Pharmaceuticals (NASDAQ: OMED ) steadily slip throughout much of the year. That changed this past week, though, with OncoMed shares skyrocketing by 97%.
What turned things around? Thank you, Celgene (NASDAQ: CELG ) . The big biotech announced a deal with OncoMed this week that changed the small company's fortunes. Celgene is paying $177.25 million upfront to OncoMed in return for option rights to up to six anti-cancer stem cell, or CSC, treatments and equity in the company.
On the heels of its third quarter results, I listed Celgene's smart investments as one of the secrets to the company's future success. This looks like it could be yet another shrewd move. Celgene gained 50% of OncoMed for less than $180 million when the small company was valued by the market at nearly $400 million. Now OncoMed is worth almost $750 million. That's what I call an intelligent investor.
This study, called I-SPY 2, focused on use of neratinib as a neoadjuvant treatment for breast cancer. Patients taking the regimen with Puma's drug plus paclitaxel followed by doxorubicin and cyclophosphamide showed a significantly higher pathological complete response, or PCR, rate than did those in the group taking standard neoadjuvant chemotherapy.
Puma plans to present the full data at a scientific meeting sometime down the road. The next big step is to move forward with a phase 3 clinical study to be named (you probably guessed it) I-SPY 3.
Power of positive thinking
It seems like only yesterday that Aerie Pharmaceutica (NASDAQ: AERI ) went public. That's perhaps because the company had its initial public offering just six weeks ago. And now Aerie's stock performance lands it among the best in the nation for this week -- with shares jumping 36%.
That nice surge stemmed from positive comments made by Needham analyst Elliot Wilbur. Needham initiated coverage on Aerie this week with a "buy" rating and price target of $18. Wilbur said that the company's glaucoma drugs could "emerge as a best-in-class treatment" with a potential market of around $2 billion annually in the United States.
Aerie investors have perhaps gotten used to such gushing comments from analysts. Stifel Nicolaus analyst Annabel Samimy stated in November that "Aerie represents the most attractive opportunity in ophthalmology today." RBC Capital Markets' Adnan Butt also thinks that Aerie's drugs could beat out competitors in the glaucoma market in terms of safety and efficacy.
Season of giving
Since we're in the season of giving, this week we'll add one more to our list of humongous health-care winners. The bonus prize honor goes to Xoma (NASDAQ: XOMA ) . Shares of Xoma zoomed nearly 26% higher this week.
Biotech-heavy hedge fund Baker Brothers has been scooping up the stock of Xoma recently. Baker Brothers owns over $100 million of the company now, representing close to one-third of Xoma's market cap. It's been a good ride for investors who bought the stock earlier this year. Xoma is up more than 130% so far in 2013.
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