Once again, biotech investors are reminded that a slow day on the markets doesn't guarantee we'll be drama free in the health-care sector. We had several big moves and a few notable headlines grabbing investor attention. Let's dive into two of those stories and highlight key investor takeaways.
Targacept (Nasdaq: TRGT) managed to completely roll back yesterday's 11% decline, which happened when its ADHD drug candidate TC-5619 didn't pass its phase 2 trial. Adam Feuerstein of The Street noted that the support came from institutional buyer and major shareholder Fidelity. TC-5619 might not work for ADHD, but it may for schizophrenia and Alzheimer's, two massive markets.
This morning, shares traded for under cash on hand, although for an unprofitable biotech, cash is certainly a moving target. Before investors jump in with real money, though, remember that just because Targacept has institutional support, that doesn't mean its drug will be successful; Alzheimer's is a particularly tough disease to crack. Just ask Elan (NYSE: ELN) investors, who lost 15% when bapineuzumab was shelved, or the fact that Eli Lilly (NYSE: LLY) climbed 3% even as its drug, solanezumab, failed both phase 3 trials simply because it had a hint of efficacy.
Arena Pharmaceuticals (Nasdaq: ARNA) added another 7% to yesterday's 3% gain, despite the news that rival obesity drug Qsymia by Vivus (Nasdaq: VVUS) was commercially available. Having a competitor beat you to market is generally a bad thing, but this was widely expected, since Arena's Belviq is tied up in the DEA classification process. Besides, Belviq will be on the market soon enough, and the winner won't be decided in the first few months. Arena's rise this week is probably just momentum behind both obesity-drug makers, but at these lofty levels, a stumble by either one on launch could dampen enthusiasm for the space.
For an in-depth look at the hottest stock in biotech, try The Motley Fool's new premium report on Arena Pharmaceuticals. This report outlines key opportunities and risks facing the company plus the must-watch areas for investors. Click here to receive your copy now!
David Williamson holds no position in any company mentioned. Check out his holdings and a short bio. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
