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The Worst-Performing Biotechs in 2012 and 1 to Avoid in 2013

http://www.fool.com/investing/general/2012/12/07/the-worst-performing-biotechs-in-2012-and-1-to-avo.aspx

Sean Williams
December 7, 2012

As we enter the final few weeks of 2012, I thought it would be a positive reflective activity to look at the worst biotech performers in 2012, examine why that had such a miserable year, and point out one biotech company on my avoid list for 2013.

Just as I did yesterday when I examined the top performers in the biotech sector, I've excluded some of the smallest companies so we can focus our efforts (and hopefully learn some lessons) on why these five companies had a year to forget.

Company

Year-to-Date Performance

Chelsea Therapeutics (NASDAQ: CHTP)

(79.73%)

Cell Therapeutics (NASDAQ: CTIC)

(76.55%)

Aeterna Zentaris (NASDAQ: AEZS)

(75.87%)

Progenics Pharmaceuticals (NASDAQ: PGNX)

(72.83%)

AVEO Pharmaceuticals (NASDAQ: AVEO)

(64.24%)

Source: Finviz.com. Data as of Dec. 6, 2012, close.

Chelsea Therapeutics took the dubious crown of worst-performing biotech this year thanks to a March rejection by the Food and Drug Administration of its neurogenic orthostatic hypotension drug, Northera. What's particularly interesting about Northera is that despite some safety yellow flags, it was recommended for approval by the FDA panel, but failed to gain approval by the FDA. In the complete response letter, Chelsea was told to run an additional two-to-three month trial to examine the longer-term effects of Northera on patients, but was again told in July by the FDA to run an even longer study. The results, released just days ago, were mixed at best, showing that Northera demonstrated a reduction in dizziness within the first week versus the placebo, but weren't statistically significant beyond that point.

If you're shocked to see Cell Therapeutics on this list, don't be, because over the past decade shares of Cell Therapeutics are down a split-adjusted 99.982%. Cell Therapeutics, which has an accumulated deficit in excess of $1.8 billion, finally (and I do mean finally) has a drug, Pixuvri, available for commercial sale in select Europe nations for the treatment of multiple relapsed or refractory non-Hodgkin's lymphoma. While a positive development, Cell Therapeutics continued its almost ritualistic dilution of shareholders with a $60 million preferred convertible share offering announced in October.

Aeterna Zentaris, a biotechnology company that I personally added to my own portfolio within the past two weeks, has had a rough year due to it and its partner Keryx Biopharmaceuticals' (NASDAQ: KERX), experimental advanced colorectal cancer drug, Perifosine, failing to meet its endpoint in late-stage trials. With the company having no immediate drugs lined up for market, despite having $33.2 million in net cash, investors are concerned that future dilutive offerings are in the making. As for me, the impetus for my purchase is Aeterna's seven clinical trials and four preclinical studies that offer multiple avenues for a rebound in 2013. 

Progenics Pharmaceuticals shareholders can place all their frustration this year on the FDA's decision in late July to deny it and its licensing partner, Salix Pharmaceuticals (NASDAQ: SLXP), an additional treatment indication on its opioid-induced constipation drug Relistor. Progenics had been attempting to gain FDA approval for Relistor's use in non-cancer-related chronic pain, but the FDA requested additional clinical data instead. With the need for additional trials being run, shareholders can expect costs to rise and cash t