The Market Just Crushed My Stock
CAPS Rating(out of 5)
|Exelixis (NAS: EXEL)||****||(40.2%)|
|Amedisys (NAS: AMED)||***||(23.4%)|
|Rediff.com (NAS: REDF)||*||(19.2%)|
With the markets falling 297 points yesterday, or 2.5%, stocks that went down by even larger percentages are pretty big deals.
That's going to leave a mark
Failing to reach an agreement with the FDA on how a study of its experimental prostate cancer drug cabozantinib should be conducted leaves biotech Exelixis in a precarious condition, though not in extremis even if the market's reaction makes it seem as such.
Rather than get the special rules it was looking for, Exelixis will proceed under regular guidelines. It will first study cabozantinib's ability to reduce pain with no impact on survival, then move on to survivability itself. That might not seem worthy of slicing 40% of the company's market value, but since Exelixis has no products on the market, it's going to have to do some significant fundraising in the meantime, and that pushes any possible sales much further out. Obviously the biotech's risk profile just leapt much higher.
Should it ever make it that far, Exelixis' treatment would compete against AstraZeneca's vandetanib in the thyroid cancer market, but would potentially go up against the likes of Johnson & Johnson (NYS: JNJ) , Dendreon, and Sanofi (NYS: SNY) in the more-promising prostate cancer market.
CAPS member monkey222 is willing to wager that Exelixis is successful in its efforts, even if that means it has to wait awhile to realize them: "A hiccup in phase 3 trials created a huge sell-off. Once this drug passes, this stock should double at least."
Put Exelixis on your watchlist and see whether it will be able to alleviate the pain of investors, assuming it survives that long.
An ailing industry
The drop in Amedisys should have been easy to see coming. When Gentiva Health Services (NAS: GTIV) got socked by allegations of providing medically unnecessary patient care -- as did Amedisys and LHC Group -- the outlook for continued profitability was put in doubt.
With Amedisys already under the gun from the Securities and Exchange Commission probing the home health services industry, and in the crosshairs of the Justice Department over its billing practices, investors really didn't need to know that cutbacks in Medicare reimbursements would lead to a disappointing quarter. Add in a COO who up and quit and you've got a prescription for investor pain.
With nearly 1,000 CAPS members weighing in on the home health and hospice care provider, 90% believe it will be able to convalesce and recover. You can add Amedisys to the Fool's free portfolio tracker, then head over to the Amedisys CAPS page to let us know whether you think it can still care for itself in the future.
Easy come, easy go
Another obvious turn of events was the drop in Rediff.com's stock yesterday. The Indian Internet portal went along for the ride yesterday with IT specialist Sify Technologies (NAS: SIFY) after the latter posted better-than-expected earnings, but as I noted, the reaction was out of proportion to the news. As expected, Sify tumbled too, dropping 24% as investors regained their senses.
When Rediff reported its earnings two weeks ago, it said business was rather flat, with revenues rising just 1% from the year-ago period and revenues from its India Online business also up only 1%. Hardly the stuff of major gains as we've been seeing.
Still, Rediff's shares are 30% higher than they were a week ago and are worth 60% more than they were last month. Of course, that could just mean they still have a much longer way to fall. However, CAPS member reemster thinks demographics point to greater gains: "India's fast-growing economy is poised for large gains in the Internet industry as the increasing middle-class turns toward technology."
Let us know in the comments section below if you see Rediff rising, then add the Internet portal to your watchlist to see which way it goes.
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson, Exelixis, and Dendreon.Motley Fool newsletter serviceshave recommended buying shares of Johnson & Johnson and Exelixis.Motley Fool newsletter serviceshave recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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