Why You Should Be Watching Sarepta, Hologic, and Achillion Today
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Good morning, fellow Foolish investors! Let's take a look at the top health care headlines that could be moving stocks across the sector today.
Sarepta suffers a serious setback
The top story today is Sarepta Therapeutics , which just suffered a serious setback after the Food and Drug Administration told the company that it should not seek accelerated approval of eteplirsen, its treatment for Duchenne muscular dystrophy, or DMD.
DMD is a muscle-wasting disease that affects one in every 2,400 male births. The disease is always fatal, usually confining patients to a wheelchair by the age of 12 and resulting in a maximum lifespan of approximately 25 years. To date, no effective treatment has been developed for the disease.
Over the past year, three major companies have been locked in a contest to bring a DMD treatment to the market first -- Sarepta, Prosensa Holding , and its partner GlaxoSmithKline . Sarepta's drug, eteplirsen, was tested on a small group of 12 boys during phase 2 trials. Prosensa and Glaxo's competing treatment, drisapersen, was tested on a group of 53.
Prosensa and Glaxo started to lose ground against Sarepta in August, after the two companies released disappointing phase 2 trial results that didn't measure up to Sarepta's. One particular damaging comparison was in the production of dystrophin, a protein required for muscle growth that DMD patients lack. Prosensa's drug showed dystrophin production in 72% of patients receiving a continuous dose of the drug, whereas Sarepta's drug resulted in a 100% success rate.
Subsequent reports suggested the same -- that Sarepta was destined to produce a blockbuster treatment while Prosensa, which has lost nearly 90% of its market value over the past three months, was doomed. Shares of Sarepta soared more than 60% during the same period.
However, the FDA has now completely dashed Sarepta's hope that its drug could gain accelerated approval based on its phase 2 results alone. The main point of contention was the size of Sarepta's study -- positive results from 12 boys just weren't enough. This means that Sarepta how has to conduct phase 3 studies with a larger group of boys before its drug can even be considered for approval.
At the time of this writing, shares of Sarepta have sunk more than 54% in pre-market trading.
Hologic slides on bleak fourth-quarter and full-year guidance
Medical equipment maker Hologic could also open sharply lower this morning after reporting mixed fourth-quarter earnings and disappointing guidance.
Hologic reported non-GAAP fourth quarter earnings of $0.39 per share, topping the Bloomberg consensus estimate by $0.02. Revenue rose 5.7% year-over-year to $622.1 million, but fell short of the $624.4 million that analysts had expected.
Hologic reports revenue in four segments -- diagnostics, breast health, GYN (gynecological) surgical, and skeletal health products.
Revenue at Hologic's diagnostics and breast health segments -- which together account for 84% of the its top line -- rose from the prior-year quarter. Diagnostics was the standout performer, with its revenue rising 14.4% year-over-year to $290 million. The company attributed most of this growth to the inclusion of revenues from Gen-Probe, a maker of blood screening products, which it acquired last year for $3.7 billion.
Meanwhile, sales at its GYN surgical and skeletal health segments respectively slid 3.8% and 15.3% from the prior year quarter. Hologic blamed the losses in these two segments on lower demand for three product lines -- its NovaSure system for heavy periods, its mini C-arm, and bone densitometry systems. Those losses were slightly offset by stronger demand for its MyoSure system, which is used for the removal of fibroids and polyps in the uterus.
However, what sank Hologic's shares was its bleak guidance for the first quarter of fiscal 2014 and the year ahead, as seen below.
Consensus Estimate (Bloomberg)
1Q 2014 EPS
1Q 2014 Revenue
$600 million-$610 million
FY 2014 EPS
FY 2014 Revenue
As a result, shares are down more than 10% in pre-market trading at the time of this writing.
Achillion reports third-quarter earnings and outlines plans
One last stock to keep an eye on is Achillion Pharmaceuticals , which just reported its third quarter earnings. Shares of Achillion have plunged more than 60% since the end of September, when the FDA retained its hold over the company's lead drug candidate for hepatitis C, sovaprevir.
The FDA originally placed the hold on the drug in June due to abnormal liver results in patients, and investors had hoped the hold would be lifted in September. It wasn't, and Achillion was forced to fall back on its three other hepatitis C treatments, which are currently in pre-clinical, phase 1, and phase 2 trials.
For the third quarter, Achillion reported a net loss of $0.14 per share, an improvement over the net loss of $0.20 it reported in the prior year quarter. The company did not report any revenue during the quarter.
Achillion CEO Milind S. Deshpande outlined three main goals for the company going forward -- to initiate human trials of its hepatitis C treatment ACH-3422, initiate a drug interaction study combining its two other hepatitis C drugs -- ACH-3102 with ACH-2684, and engage in regulatory discussions about the future of sovaprevir.
Therefore, there's not much immediate upside for Achillion, but on the bright side, there's not much downside for the stock, either.
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The article Why You Should Be Watching Sarepta, Hologic, and Achillion Today originally appeared on Fool.com.Fool contributor Leo Sun has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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