3 Horrendous Health-Care Stocks This Week

It was a great week overall for health-care investors. Lots of stocks in the sector jumped more than 10%. Unfortunately, the good times didn't roll for everyone. Here are three of the worst-performing health-care stocks of the last week.

Revision collision
Our biggest stock crash over the past few days came from Merge Healthcare (NASDAQ: MRGE  ) . Shares of the health-care software firm dropped almost 14% this week on news that the company had to revise previously announced subscription backlog totals.

Merge reported on Wednesday that a former employee falsified customer contract information. While the issue didn't affect any GAAP financial reporting, the company had to backtrack on subscription backlog numbers provided earlier. More than $15 million in subscriptions backlog announced by the company last quarter was phony -- a drop of 27%.

Things just haven't looked too hot for Merge since August, when the company's earnings came in well below what analysts expected. This latest issue doesn't help matters at all. What Merge really needs is a strong quarter showing solid earnings growth. Few are expecting that kind of improvement anytime soon, though.  

Fears of Feraheme failure
Shares of AMAG Pharmaceuticals (NASDAQ: AMAG  ) fell 13% this week. The sell-off came on the heels of AMAG's announcement about a meeting with the U.S. Food and Drug Administration about the supplemental New Drug Application, or SNDA, for anemia drug Feraheme.

AMAG already markets Feraheme for treatment of iron deficiency anemia, or IDA, in adult patients with chronic kidney disease. The company hopes to gain FDA approval to expand the indication to include all adults with IDA who have failed or cannot tolerate oral iron treatment.

Unfortunately, in the latest round of discussions, the FDA didn't bring up proposed labeling or post-marketing requirements for the expanded indication. That led some investors to worry about the likelihood of failure in winning approval for the broader indication.

Subpoena subtraction
Aegerion Pharmaceuticals
' (NASDAQ: AEGR  ) stock closed at $73.56 on Jan. 3. This week, though, Aegerion closed at $65.77 -- nearly 11% lower. What caused the subtraction in shareholder value? A subpoena.

On Thursday, the company announced that the U.S. Department of Justice has launched an investigation related to Aegerion's marketing and sales of Juxtapid, which treats rare genetic disease homozygous familial hypercholesterolemia, or HoFH. Aegerion said that it intends to fully cooperate with the investigation.

A warning shot was fired over Aegerion's bow back in November, when the FDA sent a letter to the company about alleged misleading marketing of Juxtapid. The FDA expressed concern about potential improper positioning of the drug as a stand-alone therapy that was safe and effective for reducing cardiovascular events. 

Outlook not so good
Remember the old Magic 8-Balls that had an answer for pretty much any question? If we asked the 8-Ball about any of the stocks on this week's list, my hunch is the answer might be "outlook not so good."

Merge Healthcare has solid technology, but the company just isn't firing on all cylinders right now when it comes to financial performance. AMAG had a nice run in 2013. However, a thumbs-down on Feraheme's broader indication would probably nix the chances of a repeat performance this year.

Aegerion could get past the DOJ investigation and still have a big fight on its hands to succeed. Another drug, Kynamro from Sanofi's (NYSE: SNY  ) Genzyme unit and Isis Pharmaceuticals (NASDAQ: ISIS  ) , also competes in the HoFH market. Kynamro is still quite expensive at around $176,000 per year, but that's a lot less than the price tag for Juxtapid. 

For now, investors might want to hold off on jumping too heavily into any of these stocks. The situation can change, though. That's why the Magic 8-Ball often gave the sage advice: "Ask again later."

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 11, 2014, at 8:22 AM, Ostrowsr wrote:

    Note the 4 star rating on ISIS and the fact that Kynamro is the very beginning of it's suite of drugs coming to market in the next few years. Combine this with the patented processes and agreements with large pharma. and guess who will have a very large mote around the business. Listen to the presentation they make on Monday night and decide for yourself about this company as a long term investment.

  • Report this Comment On January 11, 2014, at 7:11 PM, TheStockDoctor wrote:

    MRGE's subscription numbers may be down only temporarily, so chance for a bounceback fairly quickly. If management thought they had better numbers they wouldn't push as hard. Now that those numbers were false, expect management to push much harder.

    AMAG is unfounded fear about the FDA. While it is a total crapshoot with the FDA and intelligent thought is rare, the drop in AMAG is totally based on fear and presents a speculative opportunity.

    AEGR has some work to do with the DOJ to clean its record. Kynamro doesn't work, so there is no threat there. Yes, only the biggest Fool would pretend that ISIS could build a suite of drugs based on a failed platform. It is a nice wish, just not rooted in reality.

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