A U.S. government shutdown was avoided. The Senate appears to be on track to pass its first budget after nearly four years of failing to meet its duty. March Madness has begun with the start of the NCAA men's basketball tournament. All these developments are good news. But do you want some humongous news? Just take a look at what happened this week with these three health-care stocks.
No fly in the ointment here
Shares of Anacor Pharmaceuticals (UNKNOWN:ANAC.DL) soared 55% this week. The stock took off after the company announced positive results from a phase 2 trial of its AN2728 ointment in treating atopic dermatitis.
Anacor's mid-stage clinical study found a 71% improvement in Atopic Dermatitis Severity Index, or ADSI, scores for adolescents taking AN2728. Much of this improvement occurred in the first week -- potentially good news for patients if the drug ultimately hits the market. Atopic dermatitis, a chronic rash with symptoms of itching and inflammation, affects children most frequently. The disease impacts up to 20% of U.S. children and around 40 million people in major markets worldwide.
The impressive efficacy results weren't Anacor's only good news. The company also reported that most adverse events were mild and appeared to be largely unrelated to the drug. A solid safety profile will be important as Anacor moves ahead, since current treatments can have bad side effects.
It's nice being wanted
Obagi Medical Products (UNKNOWN:OMPI.DL) now knows how nice it is to be wanted. Shares jumped 33% this week after Valeant Pharmaceuticals (NYSE:BHC) announced an acquisition of the skin care products company.
Valeant plans to pick up Obagi for $344 million. Obagi made $120 million in revenue last year. Valeant expects the acquisition to bring annual cost-saving synergies of around $40 million. Both companies anticipate that the deal will be finalized in the second quarter.
This looks like excellent news for Obagi shareholders. The stock hadn't really done much so far in 2013 after falling almost 30% since last July. Valeant's offer catapulted shares to the highest levels in five years. Being wanted must feel pretty good.
Acadia Pharmaceuticals (NASDAQ:ACAD) was yet another on the receiving end of good news this week. Shares bounced 21% after the company announced positive phase 3 results for pimavanserin, a drug targeting treatment of Parkinson's disease psychosis.
An estimated 1 million people in the U.S. suffer from Parkinson's disease. That count jumps to as many as 6 million worldwide. Up to 60% of these patients experience psychosis resulting from the disease, which can cause hallucinations and delusions. No treatment has yet been approved in the U.S. for Parkinson's disease psychosis.
Acadia's results were undoubtedly encouraging to these patients and their loved ones. Pimavanserin showed significant antipsychotic improvement and was found to be well tolerated. The company noted that even caregivers of patients involved in the study saw clear benefits of the drug.
Obagi shareholders have received their reward already, but investors in Acadia and Anacor could continue to see bright weeks ahead. Anacor particularly looks promising. Investors need to exercise caution in depending too much on mid-stage results. However, my view is that continued good news from phase 3 testing of AN2728 could easily double or even triple the price of this stock.