If Santa can make his list and check it twice to find out who's naughty and nice, so can we. Here are the naughtiest health-care stocks over the last week.
Good news, bad news
One biotech's good news meant another biotech's bad news this week. Shares of Enanta Pharmaceuticals (NASDAQ: ENTA) plunged more than 25% for the week after Gilead Sciences (NASDAQ: GILD) announced positive clinical results for hepatitis-C drug Sovaldi.
Enanta's ABT-450 is a key component in the antiviral drug combo from AbbVie (NYSE: ABBV). AbbVie has been in a race with Gilead to be the first to market with an all-oral treatment for hepatitis-C genotype 1, the most common form of the disease. Gilead's great late-stage study results will allow the company to now submit for regulatory approval earlier than originally expected, giving the biotech a leg up in the hep-C race.
While AbbVie took a minor hit to its stock from Gilead's news, Enanta took the brunt from the tremendous results for Sovaldi. That's to be expected, since Enanta's fortunes ride solely on ABT-450 -- at least in the near term.
Raised doubts, falling stock
Few stocks have sizzled like Rockwell Medical (NASDAQ: RMTI) in the second half of 2013. Shares more than tripled between July and late November, before a gradual decline began. That decline kicked into high gear this week, with Rockwell Medical falling 14%.
A negative opinion from investment firm Brean Capital took its toll. Brean analyst Jonathan Aschoff said that the FDA could be poised to reject approval for Rockwell's anemia drug Triferic. Aschoff raised doubts about the effectiveness of Triferic and the design of the clinical studies for the drug.
Summer Street Research Partner's Carol Werther, however, disagrees totally. Werther points to outstanding phase 3 results for Triferic. She also noted that the study was designed with input from the FDA. Depending on which analyst you believe, Rockwell Medical could be a great buying opportunity -- or a great shorting opportunity.
What goes up must come down
Aratana Therapeutics (NASDAQ: PETX) also enjoyed an incredible run during the latter half of the year. Shares of the maker of prescription pet medications soared over 240% between the company's IPO in late June and the middle of October. Gravity has appeared to take effect since October, though. Aratana is down 40% from its highs -- and down almost 9% in the last week.
Unlike Rockwell Medical, though, Aratana didn't have any negative comments from the analyst community over the past few days. Actually, there wasn't any major news related to the company at all this week. Instead, the post-IPO euphoria seems to be continuing its steady fade.
There does appear to be solid opportunity for Aratana over the longer term, though. Factors such as a growing market for pet medications and an advantageous financial model for drug development when compared with human medications could work in the company's favor. Aratana has three drugs currently in development and looks to 2016 as a potential breakout year if it gains FDA approval for the products.
Best of the worst
Picking the best investment idea from this week's horrendous health-care stocks isn't easy. Enanta could come back should AbbVie gain regulatory approval for its hep-C combo. Aratana is in a great market and could rebound to levels from a few months ago.
However, of the three stocks on our list, I suspect Rockwell Medical could see the biggest gains. Granted, there's considerable risk with a stock like Rockwell. If Brean Capital is right about the faulty design of the Triferic studies, all bets are off. On the other hand, a positive recommendation by an FDA advisory panel -- and especially ultimate approval by the FDA itself -- would send shares into orbit. The risk is large, but so are the possible gains.
One great pick for 2014
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.