3 Humongous Health-Care Stocks This Week

Why Ariad, Prana, and Geron enjoyed humongous gains this week.

Jan 25, 2014 at 10:00AM

This week ended as one of the worst for the broader indices in quite a while. However, a handful of health-care stocks flourished in the midst of the surrounding negativity. Here are three of the most humongous winners of the week.

Rumor has it
Rumors of a potential buyout landed Ariad Pharmaceuticals (NASDAQ:ARIA) our top spot this week. Shares of the biotech surged 30%.

The buzz stemmed from a report by London's Daily Mail speculating that several bigger companies could be putting a deal together to acquire Ariad. Eli Lilly (NYSE:LLY) reportedly stands at the head of the pack. According to the Daily Mail, Lilly has approached Ariad's board of directors about a buyout for $20 per share -- more than twice the company's current valuation. Lilly is reported to be interested in adding chronic myeloid leukemia Iclusig to its product lineup.

Ariad's shareholders have experienced a roller-coaster ride over the past four months. The Food and Drug Administration first placed a clinical hold on studies of Iclusig after some patients developed blood clots. Then the agency made Ariad suspend sales of the drug for a while before allowing resumption of marketing with more stringent warnings related to safety concerns. Now, the rumor mill is helping shares regain at least a little ground from the huge drop in October.  

On the road again
Prana Biotechnology
(NASDAQ:PRAN) hasn't made news nearly as much as Ariad. Lack of news didn't stop shares of Prana from jumping almost 27% this week, though.

The most likely catalyst for Prana's big move stems from anticipation of the announcement of results from two mid-stage clinical studies. Both studies focus on the company's lead drug, PBT2, with one targeting treatment of Alzheimer's disease and the other targeting Huntington's disease. 

It probably hasn't hurt that Prana's executives have been on the road talking up the company's prospects to investors. This road show, sponsored by Credit Suisse, has focused on the upcoming clinical results for PBT2. Prana's CEO, Geoffrey Kempler, and Chief Scientific Advisor Rudy Tanzi, who is also a professor of neurology at Harvard Medical School, have been out and about singing PBT2's praises.

Snapping back
Our third big mover didn't have big news, either. Shares of Geron (NASDAQ:GERN) climbed nearly 25% this week on no significant developments. 

Like many biotechs, Geron presented at the J.P. Morgan Healthcare Conference last week. The market initially didn't care too much for what it heard. Geron CEO John Scarlett talked a lot about the company's cancer drug, imetelstat, but didn't have anything to say about potential partnerships or updates from the FDA. 

After a little more reflection, though, investors snapped back -- and so did Geron's stock. Imetelstat shows significant promise for patients with myelofibrosis. Incyte's (NASDAQ:INCY) Jakafi is currently the only drug approved to treat the disease, although several companies have potential competitors in development. 

Geron, though, hopes that its approach of inhibiting telomerase, an enzyme that allows cancer to spread, will prove to be more effective than any of the others. The company thinks that imetelstat has the potential for disease modification. If that proves to be the case, it could jump past Incyte and all other competitors to become the dominant player in the myelofibrosis market -- and perhaps other forms of cancer.

Most likely to succeed
Which of this week's humongous health-care stocks should be the most likely to see continued success? I'll go with Geron.

If the rumors about a potential acquisition of Ariad pan out, the stock will skyrocket. However, at this point, these are only rumors. If Prana announces positive results for PBT2 in the next couple of months, the stock could also soar. 

I like Geron's prospects the best, though. Imetelstat looks to have the potential to be a true game-changer. More positive clinical results could solidify that potential. Keep in mind, however, that plenty of risk remains -- for all three of these stocks. Just because one week is humongous doesn't guarantee that history will repeat itself.

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Fool contributor Keith Speights and The Motley Fool have no position in any of the stocks mentioned. 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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