While the major indexes pulled back this week, their declines paled in comparison to the huge drops experienced by a handful of health-care stocks. Here are three of the most horrendous performers this week.
Sometime, the momentum from bad news is too much to overcome. That's the case for Merrimack Pharmaceuticals Inc (NASDAQ:MACK) these days. Shares fell over 23% for the week, continuing a 9% slide from last week.
The culprit for Merrimack Pharmaceuticals Inc (NASDAQ:MACK)'s shares falling still seems to be disappointment from its interim review of clinical studies for experimental drug MM-121, which is in development with Sanofi. Merrimack Pharmaceuticals Inc (NASDAQ:MACK) announced last week that primary endpoints probably would not be met for a study of MM-121 in treating ovarian cancer, and another study in treating wild type non-small-cell lung cancer. The company also reported a worse-than-expected net loss in its second-quarter financial update last week.
Merrimack Pharmaceuticals Inc (NASDAQ:MACK) actually had some good news this week, but it wasn't enough to offset the other disappointments. The company reported that it received two separate orphan drug designations from the U.S. Food and Drug Administration for MM-111. The FDA granted orphan drug status to MM-111 for the treatment of esophageal cancer, and for the treatment of gastric and gastroesophageal junction cancers.
Good news, bad week
MannKind Corporation (NASDAQ:MNKD) reported positive results from its long-awaited clinical studies of inhaled insulin Afrezza on Wednesday. Shares jumped to highs 26% above the Tuesday closing price. Great week for MannKind Corporation (NASDAQ:MNKD) investors, right? Nope. The stock actually fell almost 23% for the week.
Afrezza met primary endpoints in two clinical studies -- one for type 1 diabetes, and the other for type 2 diabetes. However, the stock still fell for the week, as a whole. Part of the problem stemmed from shares dropping by 8% prior to the clinical study results announcement. Another factor was that, although MannKind Corporation (NASDAQ:MNKD) did jump 26%, investors sold off immediately afterwards.
This sell-off could have simply been due to profit taking. It's also possible that some investors might have focused on one of the few negatives with the type 1 diabetes study results -- fewer patients taking Afrezza achieved target A1C levels of 7% and 6.5% at the end of 24 weeks than did patients taking Novo Nordisk's NovoLog. This won't be an issue with Afrezza gaining FDA approval, but it could potentially be a factor in doctors deciding whether to prescribe the inhaled insulin over Novo's insulin product.
Reverting to the mean
Synta Pharmaceuticals Corp. (NASDAQ:SNTA) enjoyed a nice 27% pop a few weeks ago with good news from a phase 2 study of its cancer drug ganetespib. The stock now appears to be reverting to its mean for the last couple of months. Shares fell 13% over the past week.
I suspect the primary cause behind Synta Pharmaceuticals Corp. (NASDAQ:SNTA)'s stock heading back down is directly related to that phase 2 study announcement. First, it's only phase 2. There's danger in becoming overly exuberant over a mid-stage study.
Second, these good mid-stage results for ganetespib came from a grand total of five patients with HER2 positive breast cancer, and 10 patients with triple-negative breast cancer. It's great that several of these patients have had positive results already, but small sample sizes don't help much in proving statistical significance. Synta Pharmaceuticals Corp. (NASDAQ:SNTA) still has a long way to go (and could very well get there) -- but the market decided it's too early to throw the big party for ganetespib.