Investors in a handful of health-care stocks are probably all smiles this week. Several stocks saw nice double-digit gains over the past five days. Here are three of the biggest winners.
Earlier this week, Questcor announced that it's buying rights to Synacthen from Novartis (NYSE:NVS) for $135 million plus potential milestone payments. Synacthen is a synthetic form of adrenocorticotropic hormone, or ACTH, and has been viewed as a potential threat to Questcor's Acthar gel. While Synacthen isn't yet available in the U.S., the drug sells elsewhere in the world for only a fraction of Acthar's cost.
Skeptics of Questcor's success have long maintained that the company would inevitably face competition from lower-cost alternative drugs. Questcor appears to have headed off one of those threats with this acquisition. The company says it plans to actively promote Synacthen for different indications than those for which Acthar is used and potentially some common indications where the synthetic product shows better clinical efficacy.
On a roll
Avanir Pharmaceuticals (UNKNOWN:AVNR.DL) is on a roll. After solid gains during the first week of June, the stock jumped another 19% this week.
The primary source of investor excitement stems from a Food and Drug Administration decision announced last week to allow a faster development path for AVP-786, which is basically a newer version of Avanir's Nuedexta. Avanir will now be able to use some data from Nuedexta studies in support of its Investigational New Drug, or IND, application process for AVP-786.
This week, Japanese investment firm Mizuho initiated coverage of Avanir with a "buy" rating. Mizuho established a price target of $10 per share, more than double the stock's current price.
Sell-off leads to buying?
Home health and hospice provider Amedisys (NASDAQ:AMED) also had a great week. Shares climbed 14%.
What precipitated these nice gains? Amedisys made no major announcements other than to report results from its annual stockholder meeting held on June 6. There wasn't anything in that announcement to fire up investors, though.
Piper Jaffray raised its price target on Amedisys. However, its new target is $12 per share -- well below where the stock already trades.
Amedisys did announce in late May that it had retained a firm to sell around 35 care centers that aren't performing as well as desired. This move could be behind some of the renewed interest in the stock.
Whatever is behind the latest demand driving up Amedisys shares, it's certainly good news for those who have owned the stock for a while. Amedisys is currently trading at the highest levels since last October, when shares were in the midst of a slide that eventually wiped away nearly 40% of the company's valuation.
Any of this week's high-flyers could experience the effects of gravity in short order. Questcor reported disappointing Acthar sales in the first quarter. If it does so again in the second quarter, the stock will take some licks. After a run of more than 50% this year, Avanir could be due for a breather. However, I suspect both of these stocks will do well over the long run.
Amedisys, though, operates in a tough industry. The company experienced declining revenue and a huge earnings drop in its most recent quarter. If Amedisys doesn't report significantly improved results next quarter, expect the current upward trajectory to reverse again.