Please ensure Javascript is enabled for purposes of website accessibility

3 Biotech Flops of 2013

By Seth Robey - Dec 5, 2013 at 1:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

2013 was a great year for the biotech industry as a whole, but Achillion, Prosensa, and Amarin didn't share the joy.

2013 has been a remarkable year for health care, with the iShares NASDAQ Biotechnology Index up more than 50%. Not everyone was invited to the party though, and there are always lessons to be learned from companies that missed the boat. There are lots of examples, but some of my favorite stories of 2013 come from Achillion (ACHN), Prosensa (NASDAQ: RNA), and Amarin (AMRN -3.36%).

IBB Chart

IBB data by YCharts.

Aching Achillion
Gilead, Johnson & Johnson, and AbbVie are some of the biggest names in health care. They're also the biggest players in a battle for control of a massive hepatitis C market. Achillion would have had a mountain to climb in competing for market share, but it never even made it to base camp after its experimental drug sovaprevir was put on clinical hold by the Food and Drug Administration. Achillion's lead drug candidate showed adverse drug-drug interactions and elevated liver enzymes in a phase 1 trial, though a phase 2 trial was allowed to continue. The news sent the stock down 25% on July 1, and then 58% on Sept. 30 after the FDA upheld the restriction. With $173 in cash Achillion isn't down and out yet, and is continuing to push other hepatitis C candidates through the pipeline.

Prosensa pains
Prosensa didn't wait long after its June IPO to stir up news, as its lead drug candidate for Duchenne muscular distrophy failed to meet its primary endpoint in a phase 3 clinical trial. Drisapersen, developed with partner GlaxoSmithKline, is a novel exon-skipping oligonucleotide that aims to correct the disorder at the genetic level. Unfortunately, it didn't produce a statistically significant improvement in walking distance over six minutes. Now shares are trading down 30% from the IPO price, and Prosensa is mining its data for some glimmer of hope.

The result wasn't only a blow to patients and shareholders, but also to Sarepta (SRPT 1.00%) and its shareholders. Sarepta is developing a similar drug that appears more potent, but with doubts raised by drisapersen the FDA suggested that Sarepta's eteplirsen will not gain accelerated approval. That announcement sent Sarepta shares down 70%, and now investors are asking if its time to pick up more shares at value prices.

Amarin woes
I've written before that Amarin's Vascepa is the gift that keeps on giving as far as news is concerned; in terms of returns, not so much. Amarin has plunged 75% year to date on one of the most discussed stories in the sector. Vascepa, a high-dose fish oil pill, is approved to treat patients with severely high triglycerides, but Amarin was seeking to enter the massive market for drugs that treat moderately high triglycerides. Clinical trials were promising, but then an FDA panel voted not to recommend label expansion, citing concerns that triglyceride reduction doesn't translate into a clinically meaningful benefit. Now Amarin is left to prove that a benefit does exist in the long-term REDUCE-IT trial, if its $225 million in cash and equivalents and cost-cutting initiatives can carry it long enough.

The bottom line
There are certainly gains to be made in speculative biotech investing. But these three cases serve as warnings against investing in development stage companies with limited prospects, no matter how low the risks might seem. As you move forward into 2014, make it your New Year's resolution to invest more Foolishly in biotech by choosing established companies with diverse revenue streams.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amarin Corporation plc Stock Quote
Amarin Corporation plc
$1.44 (-3.36%) $0.05
Achillion Pharmaceuticals, Inc. Stock Quote
Achillion Pharmaceuticals, Inc.
Sarepta Therapeutics, Inc. Stock Quote
Sarepta Therapeutics, Inc.
$75.71 (1.00%) $0.75
iShares Trust - iShares Nasdaq Biotechnology ETF Stock Quote
iShares Trust - iShares Nasdaq Biotechnology ETF
$120.17 (2.16%) $2.54

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.