The last full week of 2012 brought fears of falling off the fiscal cliff, which in turn brought the overall markets down. Health-care stocks were no exception, but the worst results had nothing to do with the fiscal cliff. Here are three of the most horrendous performers for the last week of the year.
Musical chairs
What do you get when you combine widespread worries about multilevel marketing companies with the unexpected departure of the chief financial officer? The answer this week for Medifast (MED 2.87%) was a stock that plunged more than 14%.
Medifast shares fell last week after hedge fund manager Bill Ackman came out swinging against Herbalife (HLF -1.08%). Things got worse for investor skittishness earlier this week, when Medifast acting CFO Edward Powers resigned to "pursue other interests." Powers had been in the role for two months, filling in for Brendan Connors, who had resigned as CFO on Nov. 13.
The departure of key financial executives equates to a bright yellow flag for many investors. When two exits occur in a short period of time, selling off seems to be a prudent action. This kind of musical chairs could prove to be a not-so-fun game.
Shorts standing tall?
The past week saw more fuel added to the fire of controversy surrounding Questcor Pharmaceuticals (NASDAQ: QCOR). Shares were down nearly 10% for the week after stories flew around that another insurer was restricting coverage of the company's Acthar gel.
Several online publications, including The Motley Fool, reported that Blue Cross & Blue Shield of Michigan updated its policies to cover Acthar only for infantile spasms. The medical policy updated on Dec. 17 does clearly state that the gel is covered only for West Syndrome (also known as infantile spasms).
However, digging into the details of the insurer's policy update shows that authorization for Acthar can still be requested for patients who are not responsive to corticosteroids for other indications. Those are exactly the patients Questcor targets with Acthar. The company has a dedicated team set up to help those patients obtain authorizations. That's basically Questcor's standard business model.
With a short interest over 50%, any appearance of bad news helps those who have sold Questcor short. The latest news was no exception. I doubt, though, that shipments of Acthar will be materially affected by this policy update. This controversy seems likely to continue to rage on.
It could be worse
Typically, our most horrendous health-care stocks of the week experience declines in the double digits. This week, though, the third poor performer didn't do quite as badly as usual. Pluristem Therapeutics (PSTI 0.73%) shares were down around 8% this week.
The stem cell researcher's stock probably fell as a result of two factors. First, shares have been on a general downtrend over the past few weeks. Second, Pluristem announced on Dec. 26 an agreement to sell up to $95 million of its shares "from time to time." That number reflects about half of the company's market cap, so shareholders are probably bracing for upcoming dilution.
On a positive note, Pluristem also announced that it was taking final steps to move into its new "state-of-the-art" manufacturing facility in Israel. The company will use this facility for production of its PLX (PLacental eXpanded) cells pending regulatory approval.
Happy New Year!
While this week marks the last of 2012, next year will bring its own ups and downs. As always, we'll be here to keep you posted on the good, the bad and the ugly in health care. From the Fool and me to all of our readers: Happy New Year!
