Sequenom's 30% Nosedive Leads an Up-and-Down Week in Biotech

Sequenom's 30% Nosedive Leads an Up-and-Down Week in Biotech

Biotech's the biggest boom-or-bust business on the market, with regulatory approvals and clinical trial results routinely sending stocks hurtling up or down by significant amounts. The industry had a comparatively slow week as a whole, with the Nasdaq Biotechnology Index gaining less than 0.4% over the past five days. But in an industry like this, there are always big gainers and big losers every week -- and this was no exception.

From one firm's FDA roadblock to a big win in a phase 2 study, let's check out the stories biotech investors need to know from the week.

Array's phase 2 study pays off big
It's tough to find a stock anywhere on the market that had as good a week as Array BioPharma . Shares of the biotech picked up nearly 17.8% on the week, part of a 63.5% gain year-to-date. The company's developmental drug to treat persistent allergic asthma, ARRY-502, hit the right marks in improving patient lung function in phase 2 trial results. Even better for investors, Array CEO said several other health companies have shown interest to help the company in development of ARRY-502.

Array's partnered with some of Big Pharma's best in the past. ARRY-502 will still need to deliver in later-stage trials to become a success, but the drug could have uses in treating other indications, such as atopic dermatitis, according to the firm. The asthma market's a competitive one, so finding other uses for the drug will be a big win for Array if the company can come through. For now however, the company's drug looks good after succeeding in the phase 2 trial. Keep an eye on what develops for the future -- particularly if Array can lock in a development partner.

Good was the opposite of Vertex Pharmaceuticals' week, as shares of the firm fell 8.8% over the past five days. Vertex scored big back in 2011 with the approval of its hepatitis-C drug Incivek, but that therapy's reliance on an injectable combination therapy has set back the drug's progress as all-oral hep-C medications have become all the rage. Vertex is working on its own all-oral therapy, VX-135.

The FDA stiff-armed the company and VX-135 this week, when U.S. regulators halted certain doses of the drug in Vertex's clinical trials after liver toxicity emerged in some European patients. The FDA's still allowing lower doses of the drug to continue in the tests, but it's a blow to Vertex as competitors advance in the all-oral hep-C race.

Gilead Sciences has taken an early lead in the race to market an all-oral compound. The company's developmental drug sofosbuvir won a priority review status from the FDA last month, and the FDA's partial hold on VX-135 will only expand the company's lead as it tries to carve out a niche in an all-oral hep-C market that could reach $20 billion. That momentum has propelled Gilead's stock into the stratosphere, and Vertex will struggle to catch up as other companies such as AbbVie also surge ahead with all-oral drugs.

Vertex couldn't stack up with biotech's big loser this week, Sequenom , whose shares lost a painful 29.8% this week after the company reported an intensifying second-quarter loss in its earnings report. Earnings aren't always a big deal for smaller biotechs, but a reimbursement delay caused by billing code changes from the Centers for Medicare and Medicaid Services around Sequenom's MaterniT21 chromosomal diagnostic test sparked a rash of downgrades from across Wall Street.

For its part, Sequenom announced that it would cut back services to payers that couldn't properly reimburse the company, but several analysts warned that the company would lose market share as a result. It's a no-win scenario for Sequenom, and the stock reacted like it.

Sequenom's terrible week is a critical example of the boom-or-bust potential of biotech. To weather the storm of down weeks, you need to diversify your portfolio -- and to capitalize on that diversification, long-term investing is the best plan to maximize your chances at financial freedom. The best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" shares stocks that could help you build not only long-term wealth but also winning strategies that every investor should know. Click here to grab your free copy today.

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