3 Drug Stocks Getting Crushed

An unfavorable court ruling is sinking Akorn stock

by Josh Selway

Published on Oct 1, 2018 at 2:04 PM

U.S. stocks are off to a strong start to the fourth quarter, with the Dow getting a lift today thanks to the trade agreement with Canada. Meanwhile, we're monitoring big moves out of the healthcare sector from Akorn, Inc. (NASDAQ:AKRX), Nektar Therapeutics (NASDAQ:NKTR), and Avrobio Inc (NASDAQ:AVRO). We'll break down what's causing the accelerated trading in shares of AKRX, NKTR, and AVRO below.

Akorn Stock Sinks After Judge Rules For Fresenius

After earlier being halted for volatility, AKRX shares are near the bottom of the Nasdaq today after a judge ruled that Fresenius (FMS) validly terminated its takeover offer for Akorn and can walk away from the deal. Last seen down 56.3% at $5.68, the stock earlier fell to a seven-year low of $5.56. AKRX suffered a similar sell-off a few weeks back on concerns such a ruling could come through, and overall is now down more than 82% year-to-date. The analysts covering the security may need to reduce their outlooks, which could keep the pressure on. For instance, the average 12-month price target stands all the way up at $27.25.

Short Seller Says Nektar's Main Drug Doesn't Work

NKTR stock is also sinking today following a report out of Plainview LLC -- which has a short position on the stock -- saying the company's primary drug NKTR-214 has "zero value." This has Nektar Therapeutics down 7.6% at $56.32, and testing the 320-day moving average, which acted as support through June to August. While the shares have pulled back considerably since peaking near $110 back in March, they still sport a one-year lead of roughly 134%, and tend to outperform in October.

Still, continued underperformance on the charts could spark downgrades. Of the eight brokerage firms in coverage on NKTR, seven have "strong buy" ratings in place, with not a single "sell" on the books.

AVRO Nosedives on Trial Data

Rounding out this group of losers is AVRO, down 48.1% at $26.94. Causing the decline is subpar trial data on the company's gene therapy treatment for Fabry disease. The stock has given back all of its September gains, on pace for its lowest close since July. The shares are now trading right near where they opened on their first day of trading back in June. Analysts covering Avrobio are certainly bullish though, with all five sporting "buy" or "strong buy" ratings.

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