Lackluster trading was being blamed for the Dow Jones Industrial Average ticking down 21 points yesterday, gripped by ennui over both domestic and international financial woes. Will Europe implode? Will Congress actually perform its duties and come to grips with a budget plan that prevents across-the-board budget cuts?
Weighty questions indeed, but the three companies below had more to worry about than macroeconomic concerns as they confronted defining moments that caused them to lead the way lower. With more than half of all stocks listed on major U.S. exchanges falling yesterday, these three were among the more notable ones leading the charge down.
The Active Networks
Now don't go running over the cliff with them like a bunch of lemmings: It could just be a temporary situation. Let's first see whether they had good reason to fall as panic-fueled routs can sometimes lead to excellent buying opportunities.
That saying "don't count your chickens before they're hatched" applied in spades to Danish drug giant Novo Nordisk yesterday, which was smacked down by the Food and Drug Administration rejecting its new diabetes therapy despite it having gained European approval for the drug and the regulatory agency's own advisory panel recommending it be given the green light.
Particularly since the Fool's Keith Speights warned last year that just such an outcome was possible, investors should have been aware rejection was a distinct possibility. But considering Wall Street analysts were anticipating Tresiba and its related Ryzodeg would bloom into multibillion blockbusters challenging Sanofi's Lantus -- still the top-selling long-lasting insulin -- they could be forgiven for thinking the risk was remote.
Yet the FDA concern regarded potential heart risks associated with taking the drugs as a fatal flaw, though most watchers assumed the agency would approve the treatment but order that concurrent new trials be conducted. The harshness of the FDA's decision, though, is reflected in its unwillingness to even consider Tresiba or Ryzodeg until the drug maker completes those tests, which Novo Nordisk admits will take several years.
That's big news for Sanofi since Lantus sales continue to grow, hitting $6.8 billion in sales in 2012 and jumping 7.8% in the fourth quarter. Sanofi sold almost 6.4 million units, and it owns about 80% of the insulin market, so it's unsurprising that its own shares jumped 3% yesterday. Tresiba was the biggest threat to its dominance because Eli Lilly's new long-acting insulin LY2605541 is still years away from market, but with the huge hurdle the FDA just threw in front of its rival, Sanofi will be able to widen the gap further.
What the heck?!
Wastewater management specialist Heckmann tumbled after getting downgraded by an analyst at Wedbush who believes it won't be able to meet Wall Street's profit projections. The secular decline in natural gas prices has drillers cutting back production, and since Heckmann provides them with water to conduct hydraulic fracturing (as well as treats the wastewater the process produces), the analyst sees its upcoming performance as weak.
While low prices have been the bane of the gas industry for sometime, it has spurred a lot more industries such as utilities to switch over to gas from coal. Last year Heckmann doubled down on the industry's drilling prospects by acquiring Power Fuels, a fluid services specialist focused solely on the Bakken shale, which broadens its presence in the fracking field.
Undoubtedly the pricing situation has an impact on results today, but the long-term outlook for gas remains as robust as ever, and that's the bet Heckmann is making. Downgrades like those yesterday can hurt, but investors may want to thank the analyst later on for giving them a better entry point in what I'm betting will be a big winner down the road.
Declined due to inactivity
There was no company-specific news to account for The Active Network's drop yesterday, but it will be reporting earnings this week -- Valentine's Day, as a matter of fact -- and so far it's not showing investors any love. The stock has lost almost two-thirds of its value over the past year and is down more than 70% from its highs.
Following yesterday's freefall, The Active Network resumed its decline today, down another 3%, perhaps due in part to a Seeking Alpha article that excoriates the business as one facing "structural insolvency" and not worth more than $2 a share. If the analysis is correct, investors may soon find The Active Network to be an inactive stock, but let me know in the comments section below whether you agree with that analysis or why you think it can restore its growth prospects.
Ready for a resurrection?
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The article Can These 3 Stocks Be Resurrected? originally appeared on Fool.com.
Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends The Active Network. The Motley Fool owns shares of Heckmann and has the following options: Long Jan 2014 $4 Calls on Heckmann and Short Jan 2014 $3 Puts on Heckmann. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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