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Top Health-Care Stocks for 2014

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Picking the top health-care stocks for 2014 isn't easy. In addition to the normal valuation issues that every sector has, health-care stocks are at the whim of the Food and Drug Administration and predicting the binary outcomes of clinical trials isn't easy.

Of course if you can pick correctly, the top health-care stock in 2014 will far outpace other sectors. Those winners helped the Nasdaq Biotechnology index produce a 65% return this year, outperforming the broader Nasdaq index by more than 25 percentage points this year.

Here are three health-care stocks that could top the charts in 2014.

2014 Top health-care stock No. 1: Joining the pack
It's a heck of a lot easier to determine the potential value a biotech when there's a company further ahead with nearly identical assets. Orexigen (NASDAQ: OREX  ) has two.

The biotech is developing an obesity drug Contrave, which will be reviewed by the FDA in 2014. Further ahead, Arena Pharmaceuticals (NASDAQ: ARNA  ) developed obesity drug Belviq that launched this year. VIVUS (NASDAQ: VVUS  ) sells Qsymia, which has been on the market for a little over a year.

OREX Market Cap Chart

Market Cap data by YCharts

Without an approval in hand, investors are rightfully discounting Orexigen. Or put another way, Orexigen should have a similar value to Arena Pharmaceuticals and VIVUS once investors are convinced that it has the same potential as the other two.

An approval of Contrave looks highly likely after Orexigen successfully completed all the FDA's requests from an earlier rejection. Orexigen has the potential to double in value next year, which could make it one of 2014's top health-care stocks.

2014 Top health-care stock No. 2: Swinging for the fences
(NASDAQ: GERN  ) has a potential blockbuster on its hands; in a small clinical trial, some myelofibrosis patients taking its imetelstat went into complete remission.

Geron needs to run a larger clinical trial to confirm the results. Assuming imetelstat works as well in the larger trial and doesn't show any unmanageable side effects, imetelstat will be a blockbuster for sure.

Of course, that's easier said than done, but the potential reward looks like it's worth the risk. Geron has a market cap around $650 million while Incyte, which sells Jakafi -- the only approved drug to treat myelofibrosis -- is an $8 billing company. Based on the data so far, imetelstat appears to be a better drug than Jakafi, which treats the symptoms of myelofibrosis, but is far from a cure.

2014 Top health-care stock #3: The pharma stalwart
It's going to be hard for Johnson & Johnson (NYSE: JNJ  ) to match its amazing 2013 -- up over 30% this year -- but there's rarely a bad time to buy. If you're going to own a large cap health-care stock for the long-term, you can't go wrong with Johnson & Johnson.

If the first two health-care stocks perform to their highest potential, Johnson & Johnson won't be the top stock in 2014. But the conservative nature of the pick means you're not likely to get hurt as bad if a drug or two fails to perform up to expectations.

And the dividend, producing a yield a little under 3%, will deaden any blow. With 51 consecutive years of dividend increases, it seems safe to assume Johnson & Johnson will increase the dividend in 2014 as well.

Our top pick for 2014 across all sectors
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.

Read/Post Comments (12) | Recommend This Article (9)

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  • Report this Comment On December 29, 2013, at 8:31 AM, marp11 wrote:

    sweet try osmelli...contrave 2 generics already out and no wors from mangement for the 40% dropout rate in trials and no word on those heart issues,,,,

    arna belviq eisai eom

  • Report this Comment On December 29, 2013, at 8:32 AM, marp11 wrote:

    Bupropion (CONTRAVE] Linked With Delayed-Onset Urticaria?

    Bupropion (contrave) Linked With Delayed-Onset Urticaria

    NEW YORK (Reuters Health) Dec 25 - Bupropion may put patients at risk for delayed-onset urticaria, a nationwide study from Taiwan has shown.

    Doctors should consider this possibility in patients on bupropion -- especially patients under 40 and those with a history of urticaria.

    Dr. Wright, who edited the journal article manuscript but was not otherwise involved in the study, said, "Doctors should be more cautious about prescribing bupropion."

    Bupropion-induced urticaria seldom develops alone and sometimes appears with other more serious allergic reactions, including arthralgia, angioedema, serum sickness-like reaction, and anaphylactic symptoms, the authors warn.

    "This was a good large study that established a firm connection between bupropion and urticaria. It is likely that bupropion causes urticaria," said Dr. Anton Alexandroff, a consultant dermatologist at the University Hospitals of Leicester in Leicestershire, United Kingdom, by email to Reuters Health.

    "Now physicians should advise their patients that bupropion can cause urticaria, and that, if this happens, they should consider changing to another medication," he said. Dr. Alexandroff was not involved in the study.

  • Report this Comment On December 29, 2013, at 8:54 AM, marp11 wrote:

    Contrave may have a new name

    but its ingredients and side effects are well known.

    It is a combination of two older drugs, Wellbutrin and Naltrexone.

    Wellbutrin is an antidepressant and Naltrexone is used for addictions.

    Both drugs, as a side effect, cause weight loss in patients. The drug is then recalled for deadly heart problems only after thousands suffered needlessly.

    Side Effects Associated With Wellbutin and Naltrexone: High blood pressure is one of the major side effects which give you a higher risk for heart attacks and stroke. This means your risk of death is increased dramatically. A stroke or heart attack if it does not kill you right off, often leaves you with permanent impaired compromised health or bed ridden.

    This is a life threatening side effect. Increased seizures in patients with no problems before were also experienced by patients in these clinical trials. Nausea, headaches, constipation, and increased pulse were more side effects commonly experienced by the patients.

    Is Contrave Worth The Side Effects? In the Contrave clinical trial, 40 percent of the patients dropped out because of the nasty side effects.

    According to clinical trial standards, the new drug is supposed to give greater than 5 percent success over the placebo group to be considered effective. The percentage was only 4.2 percent over the placebo group. It did pass the second criteria which was that patients should lose over 5 percent of their body weight, but at what cost to their heart?

    Weight loss with Contrave Is Not Long Term: The researchers also stated that they felt unless the patient stayed on the drug, the weight lost would be regained.

    So to keep the weight off, you must stay on Contrave, which is not proven to be safe but is proven to cause greater risk for heart problems and seizures.

    Somehow that does not seem like much progress toward a healthier life and increased longevity. You may lose weight, but only 4 to 9 percent, but increase your risk dramatically to die from heart related side effects. You may really want to rethink that decision...

    good call osmelli,,,TRYING TO KILL FATTYS?


  • Report this Comment On December 29, 2013, at 10:32 AM, TheGazoo wrote:

    Well Brian......................

    First off OREX's Contrave has no shoe in to be approved by the FDA!!!!!

    They are presently reviewing some very nasty side effects from this drug...........

    AS IS EUROPE......... So I wouldn't get all warm and fuzzy over this just yet!

    They LOOSE the APPROVAL...... in the USA & or EUROPE...... Takta will drop them like a hot potato! Not that they've put any money up front to help have they???? Now there's confidence in a drug you want to distribute huh?????

    This could also..... & ..... most likely be the beginning of the end for OREX's Contrave!!!!

    Chances for approval....... less than 10%

    Financial ruin....... 90% VERY RISKY INVESTMENT.

  • Report this Comment On December 29, 2013, at 10:44 AM, TheGazoo wrote:

    Oh.... Brian..... one more thing.......

    You sais, & I'll quote:

    ""nearly identical assets""


    Your chart alone shows a market cap difference of 1/2 a BILLOIN dollars..... That's with a "B"....

    Orex just closed "pipe" financing of a 100 mil to continue operations.... NOT CASH FLUSH!!!!!!

    ARNA......250 mil in the bank, milestone payments coming, sales increasing, world wide markets about to open up with approvals, etc.....on & on......

    Can you no/t see a difference between these two companies?

    Obviously not according to this article!!!!

  • Report this Comment On December 29, 2013, at 10:52 AM, marp11 wrote:

    brians masters insist that he keep spoutung this nonsense

  • Report this Comment On December 29, 2013, at 7:47 PM, TheGazoo wrote:

    Happy New Year To All

  • Report this Comment On December 29, 2013, at 9:26 PM, rufustherat1 wrote:

    Great article Brian,

    I agree Orex is a double from here. It is almost guaranteed FDA approval, it meets all the FDA goal posts for approval, not to mention it has the best safety data of all the obesity drugs. A European approval in 2014 is very likely too. This is really a gift to accumulate at this price.

  • Report this Comment On December 30, 2013, at 3:47 AM, biogemfinder wrote:

    Your advice to buy OREX because VVUS and ARNA have approved drugs in obesity and their market cap is bigger than OREX is misguided and a fallacy. Its a bad and dangerous advice. The key difference being, Belviq has been FDA approved and with sales going up and will likely pick up really well in 2014 with the start of TV commercials featuring Belviq. ARNA has no debt and unquestionably has the safest weight-loss drug ever marketed which also happens to be very novel drug approved in the last 13 years! I grant you that there is some similarity between Qsymia (VVUS) and Contrave (OREX) because both are combination drugs (sold as new) of existing and generic drugs with known and nasty side effects. Whatever perceived "greater weight loss" with Qsymia and Contrave compared to Belviq will be long gone once the results of Bel+Phen are in and the trials have already begun.

    Much simpler proposition is to invest in ARNA (Belviq) as it alrady has an approved drug with very little downside. With OREX you are playing russian roulette fr sure! First there is no guarantee that FDA will be happy to see "less than 2x incidence of heart attack in Contrave arm" compared to placebo. Second, even if Contrave were to be approved, it is likely to get the same REMS that qsymia got which will not only restrict the sales of the drug, but also will forbid it from advertizing it on TV. And finally, just like Qsymia (after being in the market for more than 1 year has very little to show for), patients will want to be out of this drug due to the side effects. Belviq does enjoy the better reviews compared to Qsymia primarily due to the side effects. The only low reviews for belviq are those from non-responders, which is well known from the trials. And oh yes, the responder rate turns out to be lot better than initially thought (could be easily as high as 75%), and so was the overall efficacy (a lot higher than 5% in 3months).

    But keep trying to sell OREX now that your efforts to sell and pump VVUS have failed under its own weight. No matter how much you hate and downplay arena's Belviq, it is the ultimate winner you like it or not. But I do sincerely hope you are here in 2014 to eat the humble pie offered by Belviq!!

  • Report this Comment On December 30, 2013, at 3:13 PM, marp11 wrote:

    arna 2014 $25-$40


  • Report this Comment On December 30, 2013, at 5:35 PM, xetn wrote:

    I just have to ask: what about any of these stocks is "health care"?

  • Report this Comment On December 31, 2013, at 10:37 AM, biogemfinder wrote:

    exactly. His title suggest he is talking about health-care stocks and not drug companies! And orex is not even a company with approved drug! Shows you OSmelli spend all his money from hedgefund masters surfing all day at the beach and doing very little if any research on companies he covers fort hem!

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