3 Plunging Stocks Steal Dow's Thunder

Markets are flat as the curtain rises on the second quarter. After record gains over the past three months, investors are right in asking if the good times will keep on rolling. The just released ISM data came in stronger than expected, at 53.4, and showed a 1.0 gain over last month, confirming the manufacturing sector is gaining strength. A sustainable domestic recovery plus the Fed's carrot of additional help if that recovery falters should keep markets humming in positive territory in the coming months.

With that in mind, let's take a closer look at how the major indexes are faring so far today and then take a closer look at three stocks making news for all the wrong reasons.

Dow Jones Industrial Average (INDEX: ^DJI) 2.420.02%13,214.46
Nasdaq (INDEX: ^IXIC) 7.600.25%3,099.17
S&P 5003.250.23%1,411.72

Source: Yahoo! Finance.

Not everyone is behaving as nicely as the broader market, and our first offender is Groupon (NAS: GRPN) . If you love losses, Groupon has a deal for you! The daily deals site plunged 15% on news that it's restating fourth-quarter numbers deeper in the red, nearly doubling its loss to almost $60 million. The company claimed it had a "material weakness" when it came to financial statements and it has clashed with the SEC on its accounting before, so investors only have themselves to blame for ignoring the copious amount of smoke emanating from its Chicago headquarters.

However, no one is topping a pair of biotechs today when it comes to destroying shareholder wealth. Keryx Biopharmaceuticals (NAS: KERX) and AEterna Zentaris (NAS: AEZS) have lost two-thirds of their value after reporting colorectal cancer drug perifosine failed to meet its primary goal in a phase 3 trial named X-PECT. I guess investors didn't X-PECT failure!

Where do Keryx and AEterna go from here? They are evaluating whether to discontinue an ongoing phase 3 trial of perifosine in multiple myeloma, which casts a pall over perifosine's phase 2 trials treating several other cancers. Keryx doesn't have much of a pipeline to fall back on, with Zerenex currently its only other candidate, but it did get the FDA to sign off with a SPA for its ongoing phase 3 trial. AEterna's pipeline is more robust, with AEZS-130 in phase 3 trials as a diagnostic and AEZS-108 in phase 2 development fighting various cancers.

Both biotechs' value was largely tied to perifosine, so the sell-off isn't unwarranted. Of the two, AEterna's deeper pipeline is more intriguing, but I wouldn't recommend sifting through today's wreckage looking for value.

A better approach
Motley Fool co-founder David Gardner recently identified a small-cap health-care company that is poised for monster returns, without worrying about trial failures. To uncover this top pick today, take a look at our special free report, "Discover the Next Rule-Breaking Multibagger." Don't miss out on this limited-time offer and your opportunity to discover this game-changing company before the market does. Access your report -- it's totally free.

At the time this article was published David Williamsonholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story