Why Did My Stock Just Die?
CAPS Rating (out of 5)
|Oncothyreon (NAS: ONTY)|
|AEterna Zentaris (NAS: AEZS)|
The markets fell 203 points yesterday, or 1.6%, so stocks that went down by large percentages are pretty big deals.
That's going to leave a mark
If you're going to build up expectations, then you'd better not deliver any news that does not meet or exceed them. Oncothyreon found this out after increasing the anticipation that its lung cancer therapy Stimuvax might be able to stop its clinical trials early since it was so effective at extending the lives of patients. So when Merck Serono announced that the study is ongoing with results due next year, it was all too apparent there would be no early stoppage. Worse was the belief it may indicate that trials aren't going as well as planned.
Highly rated CAPS All-Star member quinpeung admonishes those who bought into the "enrollment theory hype," and while the hopes were likely as exaggerated as the fears currently are, it provides an example of what happens when the market essentially goes all-in on a single outcome.
Yet this also represents a big buying opportunity because the plunging stock price is clearly an overreaction to something that wasn't really negative. It might not have been the overwhelmingly positive outcome hoped for, but a good result is still possible, and as it gets closer to those trial results dates, you'll likely see Oncothyreon making up a lot of lost ground.
Many people who talk about Oncothyreon also mention Dendreon (NAS: DNDN) in the same breath, likening its travails with cancer therapy Provenge to those experienced by the lung cancer drug developer. Both have given investors a roller-coaster ride, and those with bets on Oncothyreon are hoping the outcomes will be similar, though without the added drama of the problem-plagued launch that's since resulted in diminished sales expectations.
Regardless, I've marked the biotech to outperform the market on CAPS, believing yesterday's reaction was an overreaction. I might not stay in through the trial results, but I believe it will make up much of its lost ground. Add Oncothyreon to your watchlist to be notified of the latest developments as they occur.
The family tree is wilting
Another cancer drug developer that's moved sharply on heightened expectations is AEterna Zentaris, which is joined at the hip with Keryx Pharmaceuticals (NAS: KERX) as it tries to shepherd perifosine through the FDA's clinical trial maze. A day after their shares soared 23% and 33%, respectively, on hopes of a positive outcome, both have come crashing back to earth. Keryx was down 12% yesterday as well.
The whipsaw action was started when an article appeared on investing website Seeking Alpha saying FDA approval was "practically a done deal." That gave investors hope we'd soon seen action and they piled into the stock, only to have the veracity of those claims called into question.
One reason is Keryx and AEterna are awaiting the 360 event mark, the time when 360 deaths have occurred in the trial after which they can view the data and compile the results. While March is the expected reference point for that to happen, there can be no assurances and it still takes time to analyze what occurred. Exelixis (NAS: EXEL) saw an extended time frame beyond what was expected when it was testing cabozantinib. "Imminence," therefore, is a highly subjective word.
Although a lot hinges on perifosine getting approved, CAPS member mitch2538 says AEterna has a number of irons in the fire: "A lot of drugs in the pipeline, but it all comes down to the FDA approval of 'PERIFOSINE'....stay tuned!"
Add the biotech to the Fool's free portfolio tracker to see if it comes through as expected, and weigh in on the AEterna Zentaris CAPS page on its chances for success.
Ready for a resurrection
Just because your stock has taken a beating, that doesn't mean it's going to roll over and die. Markets are known for overreacting. Balance out the extremes by finding companies the will help you build a solid retirement portfolio. You can find them in The Motley Fool's brand new report, "3 Stocks That Will Help You Retire Rich" 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. The Motley Fool owns shares of Exelixis and Dendreon.Motley Fool newsletter serviceshave recommended buying shares of Exelixis. 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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