3 Horrendous Health-Care Stocks This Week

While many investors worried about the Nasdaq's three-hour shutdown this week, shareholders of a few stocks probably wished it wouldn't have come back up. Here are three horrendous health-care stocks this week.

Groans from Crohn's study
gets the dubious honor of being the most horrendous health-care stock of the week. Shares of the biotech plummeted 31% this week on disappointing late-stage results for its Crohn's disease drug vercirnon.

On Friday, GlaxoSmithKline , which licensed vercirnon in 2010, announced that the drug failed to meet primary or secondary endpoints in a phase 3 study for treating Crohn's disease. The big drugmaker has three other studies in process with vercirnon for the same indication, but it suspended enrollment and dosing while the latest results can be analyzed further.

While ChemoCentryx took a big hit with the disappointing news, the biotech isn't entirely dependent on vercirirnon. It has a diabetic nephropathy drug in phase 2 development and a couple of drugs in phase 1 studies. Glaxo also licensed a rheumatoid arthritis drug from ChemoCentryx and has an option to license another drug.

New wearing off?
It's been less than a month since Agios Pharmaceuticals closed its initial public offering.Agios shares fell nearly 19% this week. Is the newness wearing off already?

There really wasn't any bad news for Agios this week. Several analysts initiated coverage, but none were overtly negative. J.P. Morgan was perhaps the least optimistic, starting coverage with a "neutral" recommendation. However, the firm set a $35 price target -- well above where Agios currently trades.

What we're probably seeing with Agios' drop is simply profit-taking. The IPO price was $18 per share. Anyone who was in on the IPO and sold at the lowest level this week still made a nice 36% gain in just a few weeks.

DMD wars
Another relative newbie, Prosensa Holdings , also experienced a rough few days. Shares dropped 16% this week following the announcement last Friday of phase 2 clinical results for Duchenne muscular dystrophy, or DMD, drug drisapersen.

Prosensa's partner, GlaxoSmithKline, said that 72% of boys taking drisapersen experienced increased dystrophin levels after 25 weeks of treatment. That's not bad -- except rival Sarepta Therapeutics reported that 100% of patients in its phase 2 study of DMD drug eteplirsen showed increased dystrophin levels. Observers clearly saw Sarepta as the winner in the latest round of the DMD wars.

The end of the story still hasn't been reached yet, though. Glaxo and Prosensa have a larger phase 3 study under way for eteplirsen. Sarepta is hoping to gain approval based on its small phase study. There's still a possibility that drisapersen makes it to market earlier than its rival.

Staying horrendous
I suspect that Agios will make a nice rebound from this week's decline. Prosensa also has at least a decent shot at making a comeback. Any good news from the phase 3 study of drisapersen or any bad news for Sarepta will help the stock.

Recovery for ChemoCentryx could be much more difficult, though. It wouldn't be the end of the road for the biotech if Glaxo's review of the vercirirnon data leads to a cancellation of development of the drug. However, it would be a huge and damaging detour. That worst-case scenario might not happen, but I think ChemoCentryx is the most likely of this week's horrendous health-care stocks to stay on the "horrendous" list.

Health-care stocks, particularly smaller biotechs, crash and burn practically all of the time. That's why you don't want too much of your portfolio allocated to these high-risk, high-reward investments. It's smart to put some of your money into dividend stocks. Over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

The article 3 Horrendous Health-Care Stocks This Week originally appeared on Fool.com.

Fool contributor Keith Speights and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story