Why DreamWorks Animation, Vertex Pharmaceuticals, and Karyopharm Therapeutics Tumbled Today

On Monday, stocks were generally little changed, as investors waited for greater clarity on the situation in Iraq and on the state of the global economy. Merger and acquisition activity continued to play an important role in the market, with high-profile combinations again revealing the incentives in international mergers designed to escape U.S. corporate taxation. Yet even though most major market benchmarks didn't make any big moves today, the news was much different at the individual-stock level. Among the worst performers today were DreamWorks Animation (NASDAQ: DWA  ) , Vertex Pharmaceuticals (NASDAQ: VRTX  ) , and Karyopharm Therapeutics (NASDAQ: KPTI  ) , each of which made substantial drops Monday.


Source: DreamWorks Animation.

DreamWorks Animation dropped 11% after its How to Train Your Dragon 2 sequel failed to make the splash that investors had hoped to see. With $50 million in weekend box-office revenue, the movie wasn't a complete disaster for DreamWorks. But as the stakes for high-profile successes increase, DreamWorks will have less margin for error. Moreover, the disappointment reveals the risks involved in assuming that sequels will be able to match or even approach the success of their original installments, especially as the need for long-lived franchises to justify initial expenditures seems to increase.

Vertex Pharmaceuticals declined almost 9% after a stock analyst discussed concerns about the company's VX-809 cystic fibrosis treatment and its combination with Vertex's Kalydeco drug. Early indications from the company's phase 3 trial of the drug combination appear to be less than promising, with minimal efficacy and certain complications making some question the long-term viability of the drug as a recommended treatment. With much of the upward momentum in its stock price now gone, Vertex really needs a success on the trial front in order to dispel these long-term concerns about its viability in the future.

Karyopharm Therapeutics fell 12.5% Monday, but it's important to put the day's drop into context after the stock nearly doubled on Friday. Last week's positive news came after the biotech company announced positive results from its phase-1 trial of multiple-myeloma treatment selinexor. Today, Karyopharm came out with good news on the veterinary front, with its verdinexor drug approved by the FDA's veterinary wing for use in a relatively small population of dogs suffering from canine lymphoma. Even with the good news, it'll be years before Karyopharm's full potential can be realized -- absent a buyout in what has become an increasingly popular arena for merger and acquisition activity.

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