3 Horrendous Health-Care Stocks This Week

Why Intercept Pharmaceuticals, USANA Health Sciences, and Corcept Therapeutics were stinkers and sinkers this week.

Jan 18, 2014 at 8:45AM

Have a less-than-stellar week at work? It could be worse. You could have owned shares in one of these three horrendous health-care stocks for the week. (My condolences to those with a bad week at work and in the market.)

Gnashing of teeth
Shareholders of Intercept Pharmaceuticals (NASDAQ:ICPT) were exuberant a couple of weeks ago for good reason -- the stock skyrocketed a whopping 545%. This week was a different story, with Intercept's shares dropping 34%.

What happened? Mark Pruzanski, Intercept's CEO, simply spoke the truth at the J.P. Morgan Healthcare Conference. Pruzanski told investors that his company would likely need help from a bigger player to bring its nonalcoholic steathohepatitis, or NASH, drug obeticholic acid, or OCA, to market.

Intercept seems to be in great position to eventually reach the market with OCA even if a partner is needed. The company's mid-stage study was halted early because results were so positive. Assuming OCA ultimately gains approval, experts think it will be a big winner with over 6 million Americans suffering from NASH and no current treatments for the disease.

Chinese checkers and dominoes
Shares of USANA Health Sciences (NYSE:USNA) fell 17% this week. For USANA, the plunge stemmed from a game of dominoes -- and Chinese checkers.

The first domino to fall was Nu Skin (NYSE:NUS). Shares of the skin-care and nutritional products company dropped 42%. Why? That's where the Chinese checkers come into play.

State-run Chinese newspaper People's Daily accused Nu Skin of being a pyramid scheme and marketing its products illegally. While the company denied the allegations, it announced that revenue will probably be negatively affected by a subsequent investigation by China's State Administration for Industry and Commerce.

Other multilevel marketers with direct-selling operations in China saw their stocks knocked down like dominoes in the wake of the Nu Skin scandal. Shares of Herbalife (NYSE:HLF), which battled similar allegations in 2013, fell 14%. Likewise, USANA's stock sank along with its peers. USANA receives around 40% of its total revenue from China.

Corcept Therapeutics
(NASDAQ:CORT) didn't have to deal with an investigation, but the company's market cap lost 15% of its value this week. The culprit: a downgrade from Stifel.

Annabel Samimy, an analyst with Stifel, lowered the investment firm's rating for Corcept from "buy" to "hold." Samimy stated that Corcept's shares are now fairly valued after a nice run-up in the stock. Stifel's report issued on Monday also noted the slow launch of Cushing's syndrome drug Korlym.

Corcept received regulatory approval for Korlym in February 2012. The company brought the drug to market two months later. During the first nine months of last year, Korlym generated only $6.2 million in sales.

Best comeback candidate?
We can't rule out any of these three horrendous stocks of the week from making a comeback. Corcept could resume its upward march that started last November with strong fourth-quarter sales results for Korlym. USANA should be able to move past the fallout from the Chinese investigation of Nu Skin -- assuming there aren't more far-reaching investigations of multi-level marketers.

Intercept, though, appears to have the best shot at bouncing back, in my view. While there's no guarantee that OCA will win FDA approval, the prospects appear to be promising right now. Intercept could easily have a blockbuster drug on its hands. Bank of America Merrill Lynch thinks OCA could hit peak annual sales of $4 billion. With Intercept's market value currently at $5.6 billion, the stock could still have plenty of room to run.

One stock that could make you rich
Despite having a bad week, all three of these horrendous health-care performers could be viewed as pretty good stocks overall by some investors. But 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.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool has options on Herbalife. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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