Surviving Wednesday's Wild Ride in Healthcare and Biotech

by: M. E. Garza

As Americans' worries about job security flared again, the markets went on a wild ride on Wednesday. Overall, experts think that economic data has started to show some encouraging signs in a number of sectors. On Thursday, there will be another round of economic data released.

"While it was always unrealistic to expect continued uninterrupted improvement in economic indicators, in particular as the recovery in some series had broken previous records, the confluence of these negative releases comes at a sensitive time when markets have begun to question underpinnings of the six-month long equity rally and when the sustainability of the broader recovery remains in question," said Michael Hart, a currency strategist for Citigroup.

In healthcare, shares of Caraco Pharmaceutical Laboratories Ltd. (AMEX:CPD) shot up 20% to $5.09 +0.88, to lead healthcare stocks on Wednesday. The company agreed to a consent decree that allows them to resume operations at its Detroit plant if it receives a written notice from the FDA and independent experts monitoring its compliance with manufacturing regulations.

Senomyx Inc. (NASDAQ:SNMX) shares rose to $4.03+0.28 (7.47%) thanks after analyst Andrew Vaino with Roth Capital Partners initiated coverage with a "buy" rating and a 12-month price target of $5. Most biomedical investors had never really heard about the company, because while they are focused on using taste receptor-based assays, they spend most of their time on screening technologies to discover and develop flavors, flavor enhancers and bitter blockers for the packaged food, beverage and ingredient supply industries.

Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP), a bio-pharmaceutical company focused on the discovery, development and commercialization of its own drugs based on prostones, a class of compounds derived from functional fatty acids that occur naturally in the human body saw its shares rise modestly to $5.83 +0.31, but on a day when most stocks closed in the red it was good enough to get them into the top 5 gainers list. Two weeks ago they started an internal shuffling of the staff. Shares of the company had traded as high as $7.71 as recently as early August, right before the company posted a quarterly loss and sent shares down a slanting slope to a low of $4.58 a month later when the company withdrew its application to market in Europe its drug for chronic constipation. Shares have been rising unsteadily since then.

Shares of Orexigen Therapeutics, Inc. (NASDAQ:OREX) gained ground Wednesday on positive midstage study data for its obesity drug candidate Empatic. The company said the obesity drug candidate met treatment goals in a midstage study. Empatic reduced the weight of study subjects by 9.9 percent, according to Orexigen. The company filed an SEC form 8-K which you can find here. Shares of VIVUS, Inc. (NASDAQ:VVUS) rose, too, as investors appeared to discount Empatic as a threat to the company's own obesity drug candidate, Qnexa.

Shares of BioCryst Pharmaceuticals, Inc. (Nasdaq: BCRX) managed to climb out of a hole early in the day to $8.24+0.06 (0.73%) after the company released news that was met with a bit of skepticism by some experts in the biotech community. According to some on the street, BioCryst had been searching for a deal to raise capital when their stock was trading between the $12 and $13 level, but share prices started to work against them when word of possible dilution leaked and mild fear hit the stock - which has been on a downward slope since. Even a September 21st press release announcing that the company had been awarded an additional $77.2 million modification to its BARDA (Biomedical Advanced Research and Development Authority) contract failed to stop the slow downward slide. Those BARDA funds were originally given to the company by the U.S. Department of Health & Human Services in 2007 as part of an effort to complete development of Peramivir, an anti-viral agent for the treatment of complicated influenza.

While today's news included some quoted references to H1N1, some industry insiders were confused since the studies had been previously described as focusing on patients hospitalized due to "serious influenza" and not just H1N1 (Swine Flu). Dr. Frederick G. Hayden, a virologist at the University of Virginia, said recently that intravenous administration "gives a high concentration in the plasma rapidly and makes a lot of sense." But he added that Peramivir did not appear to work that well against infections resistant to Tamiflu. It will be interesting to see if this news finally breaks the shares out of their descending trend. The company said it will start two trials by the end of this year and they are expected to be complete in mid-2011.

Shares of Sequenom, Inc. (NASDAQ:SQNM) may have finally hit bottom at $3.23 -0.23 (-6.65%) since shares started to show some very modest signs of life after hours. After the market closed on Monday, the diagnostics firm fired a slew of key execs after an investigation revealed mishandled test data.

Here are the rest of Wednesday's Top Gainers and Losers:

Gainers (% price change) Last Trade Change Mkt Cap
Caraco Pharmaceutical CPD 5.09 +0.88 (20.90%) 198.97M
Senomyx Inc. SNMX 4.03 +0.28 (7.47%) 124.60M
The Aristotle Corporation ARTL 5.73 +0.35 (6.51%) 102.93M
Sucampo Pharmaceuticals SCMP 5.83 +0.31 (5.62%) 243.95M
3SBio Inc. (ADR) SSRX 11.00 +0.51 (4.86%) 236.64M

Losers (% price change)

Rockwell Medical Tech RMTI 7.78 -1.22 (-13.56%) 110.54M
Dyax Corp. DYAX 3.59 -0.48 (-11.79%) 260.17M
Lannett Company, Inc. LCI 7.48 -0.76 (-9.22%) 183.39M
Jazz Pharmaceuticals, Inc JAZZ 8.02 -0.69 (-7.92%) 248.39M
Sequenom, Inc. SQNM 3.23 -0.23 (-6.65%) 197.54M

Most Actives (dollar volume)

Pfizer Inc. PFE 16.52 -0.25 (-1.49%) 111.50B
Wyeth WYE 48.58 -0.07 (-0.14%) 64.86B
Johnson & Johnson JNJ 60.89 -0.04 (-0.07%) 167.80B
Merck & Co., Inc. MRK 31.63 -0.22 (-0.69%) 66.70B
Schering-Plough Corp. SGP 28.25 +0.12 (0.43%) 46.16B

Disclosure: No Positions