The past couple of weeks in college football have demonstrated how quickly big mistakes can turn around a game. While the college football season is winding down, we can see the same principle practically every week in the world of health-care investing. Here are three of the biggest fumblers over the past week.
Irritable results
It's been all downhill for Lexicon Pharmaceuticals (LXRX 1.23%) since the beginning of October. But the slope just became much steeper. Shares dropped nearly 17% for the week as a result of disappointing clinical results.
Lexicon announced on Tuesday top-line results from a phase 2 study of LX1033 in treating diarrhea-predominant irritable bowel syndrome, or IBS-d. The good news was that the drug showed improvement in changing stool consistency. The bad news was that the improvement wasn't statistically better than the improvement found in patients taking placebo.
All's not lost with LX1033, though. Lexicon's chief medical officer, Pablo Lapuerta, stated that some positive effects on abdominal pain were noted in the patients taking its drug. Lapuerta said that these results "warrant further study".
Raining on the convertible?
On the other hand, Orexigen Therapeutics (NASDAQ: OREX) has been riding a nice wave upward since early November. Unfortunately, the market rained on Orexigen's parade this week, with shares falling 16%.
Much of the sell-off came after Orexigen's announcement on Tuesday that it had priced a $100 million offering of convertible senior notes. That amount was bumped upward to $115 million later in the week. The notes, due in 2020, were included in a private offering to qualified institutional investors.
What we're perhaps seeing with Orexigen, though, is some profit-taking after shares soared following the company's announcement on Nov. 25 about positive results from a safety study for Contrave. Orexigen hopes to join Arena (ARNA) and VIVUS (VVUS) in the obesity-drug wars by the middle of next year.
Contrave would be the last on the scene in the U.S. if it's approved. However, the drug could prove to be successful in the American market as well as win big in Europe. Arena and VIVUS both ran into problems in gaining European approval. Orexigen's safety results should help its chances across the Atlantic.
No news is bad news
Few health-care stocks have been beaten down over the past three months as much as Ariad Pharmaceuticals (NASDAQ: ARIA). Unfortunately, the past week didn't help. Shares sank almost 16%.
Ariad lost nearly 90% of its market cap since early October because of serious safety issues surrounding leukemia drug Iclusig, The company seemed to be mounting a small comeback recently after European authorities decided Iclusig could continue to be sold. That comeback appeared to fizzle out, though, over the past few days.
What big development took the wind out of Ariad's sails? There really wasn't one. No further setbacks from regulatory agencies. No new safety concerns. For Ariad, it seems that no news is bad news.
Most likely to rebound
Which of this week's horrendous stocks is most likely to see merrier days ahead? I'll go with Orexigen. Contrave should stand a reasonable chance of winning both U.S. and European regulatory approval next year.
There's no guarantee that Orexigen will find the path to commercial success any easier than its rivals. And there's another possible competitor, Zafgen's beloranib, that could jump into the fray. Still, I think Orexigen's shares could pick up steam into 2014.
