Why Did My Stock Just Die?

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CAPS Rating (out of 5)

Friday's Change

Mannkind (NAS: MNKD) **(12.2%)
Idenix Pharmaceuticals (NAS: IDIX) *(11.5%)

The markets jumped 158 points on Friday, or 1.2%, so stocks that went down by even larger percentages are pretty big deals.

That's gonna leave a mark
The drop in share value of biopharmaceutical drug developer Mannkind was the continued fallout over its decision to massively dilute shareholders. The stock lost a third of its value last week after the company announced plans to offer $50 million in stock and up to $161 million in debt with the stock portion of the deal, including a warrant to purchase part of a second share.

Mannkind is hoping to bring its inhaled insulin therapy Afrezza to market, but has run into resistance from the FDA, which has concerns over the company's switch to the Dreamboat inhaler. However, even if Afrezza makes it to market, there are still questions over its potential. Pfizer's Exubera was a commercial flop and ended development of the drug. Both Novo Nordisk (NYS: NVO) and Eli Lilly (NYS: LLY) subsequently abandoned plans for their own inhaled insulin treatments as a result, sticking with their tried-and-true insulin offerings.

Mannkind proposed a $370 million debt offering last September and surprised everyone with the latest offering, which suggests the company is having difficulties and is quickly running out of cash. Despite the FDA giving the biopharma the go-ahead for two clinical studies, unless it quickly partners with someone, a development most people seem not to expect, then the company is likely to continue spiraling down.

Although 82% of the CAPS members rating the biopharma believe it can still beat the market averages going forward, the low, two-star rating they've assigned it suggests they also think there are better places for your money. Add Mannkind to your Watchlist to see if it can rebound from management's dilutive ways.

Up in smoke
It wasn't financing that doomed Idenix Pharmaceuticals' stock on Friday, but rather the expectation that its treatment for hepatitis C was about to become superfluous.

The FDA actually gave the small biotech good news by lifting the clinical hold it had placed on its hep-C candidate IDX184 after it raised safety concerns about the drug. That means it will be able to move forward with clinical trials. Problem is, Gilead Sciences (NAS: GILD) announced even better news, mainly that its hepatitis therapy GS-7977 -- when combined with ribavirin -- completely eliminated the hep-C virus in genotype 1 patients after four weeks.

While that's bad news for Idenix Pharmaceutical, Bristol-Myers Squibb can't be too happy either, having recently paid $2.5 billion to Inhibitex for its hep-C drug candidate.

This has been the hottest area of biotechnology of late, spurring some huge deals (Gilead paid $11 billion for Pharmasset and GS-7977) and some Idenix investors were of the mind that it, too, would be next in line to be acquired. But this latest development could mean they'll be left standing at the altar.

Just 78% of CAPS All-Stars thought it would beat the Street, but its one-star rating showed they were infused with even less confidence than those rating Mannkind. Add the biotech to the Fool's free portfolio tracker and let us know on the Idenix Pharmaceuticals CAPS page if you think there's still reason to hope a white knight will ride to the rescue.

Ready for a resurrection
Your stock taking a beating doesn't mean it's going to roll over and die. Markets are known for overreacting. Balance out the extremes by having a mix of stocks, funds, and ETFs that will help you maximize your retirement savings. You can find them in The Motley Fool's brand new report, "The Shocking Can't-Miss Truth About Your Retirement." This is a special free report that you can access right now simply by clicking here -- it's free.

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.Motley Fool newsletter serviceshave recommended buying shares of Gilead Sciences and Pfizer. 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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