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The Nasdaq's 5 Most Hated Stocks

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By Sean Williams, The Motley Fool

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Although the Nasdaq Composite is the only major U.S. index that’s nowhere near its all-time high, it still turned in an impressive gain of 8.2% for the quarter. Gains were broad-based, with everything from technology and health care to energy and financials helping the index.

However, the optimism among investors wasn’t shared by some. Weakening consumer-confidence figures in recent months would suggest that consumers are more cautious about the overall economy — a perfect scenario to persuade short-sellers to dig in their claws. Here’s a look at the five most hated stocks in the Nasdaq Composite that have drawn the ire of short-sellers:

Company

Short Interest As a % of Shares Outstanding

Coinstar

50.12%

Spectrum Pharmaceuticals

44.47%

Questcor Pharmaceuticals

43.10%

Uni-Pixel

42.73%

SodaStream International

39.96%

Source: S&P Capital IQ.

As we’ve done previously, I suggest we look at the various reasons why short-sellers may have homed in on these five companies and decide whether the pessimism is justified.

Coinstar
Why are investors shorting Coinstar?

  • The reason short-sellers have barreled into Coinstar has to do with the company’s reliance on the DVD-rental business and the expectation that its sales will shrink in a similar fashion to Netflix‘s DVD sales. Coinstar’s most recent quarterly profit blew past estimates, and it did forecast revenue growth of 12% at the midpoint for its current fiscal year, but the proliferation of streaming services is expected to take a big bite out of Coinstar’s margins.

Is this short interest deserved?

  • Having 50% of the outstanding shares being held short as a short-squeeze is a genuine concern, but I can definitely understand the pessimism surrounding Coinstar. If Coinstar’s margins are anything like Netflix’s, then its DVD business generates double the margins that the streaming business will in a like-for-like comparison. This means Coinstar probably has a few years of growing pains in its immediate future.

Spectrum Pharmaceuticals
Why are investors shorting Spectrum Pharmaceuticals?

  • Short-sellers had already been skeptical of Spectrum Pharmaceuticals‘ palliative metastatic colorectal cancer treatment, Fusilev, long before the stock nosedived in March. Generic competition for the drug was available, but shortages of those generics had encouraged Spectrum’s management to expect sales growth in 2013. That turned out to be all for naught, as Sagent Pharmaceuticals stepped up to fill the generic void and Spectrum lowered its full-year sales forecast by 40% to 47% at the top and bottom end. 

Is this short interest deserved?

  • As much as I’d like to think that traders overreacted to Spectrum’s warning, the massive reduction in Fusilev sales is going to push the company into the red in 2013 and may it keep it there for some time. Folotyn and Zevalin could help move Spectrum back to a profit as soon as next year, but the uncertainties surrounding Fusilev, by far its biggest revenue generator, are too great to suggest buying in even here.

Questcor Pharmaceuticals
Why are investors shorting …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

3 Biggest Biotech Crashes This Month

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By Keith Speights, The Motley Fool

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What a month! The Dow set all-time highs. So did the S&P 500. But March wasn’t so great for everyone. While the big indexes enjoyed the thrill of victory, these three biotechs experienced the agony of defeat. Here’s what happened.

Serious impact
Impax Laboratories  suffered from a comedy of errors. Unfortunately, the impact on its shares wasn’t so funny. Shares sank more than 22% during the month.

The culprit for the stock decline was none other than Impax itself. Back in March of last year, the Food and Drug Administration conducted an inspection of the company’s manufacturing facility in Hayward, Calif. Impax Labs had plenty of time to correct those problems. However, when the FDA completed its follow-up inspection earlier this month — one year later, three of the same problems were cited again. To make things worse, the FDA found nine new issues.

In response to the problems, CEO Larry Hsu stated that the company “committed significant resources in [its] efforts to meet FDA requirements.” Obviously, those resources and efforts weren’t enough.   

A long fuse
With a long fuse on a stick of dynamite, you know the explosion is still coming, even if it might take a little longer. The same type of situation has applied for Spectrum Pharmaceuticals . Many observers have expected for quite a while that Fusilev sales would eventually bomb. The explosion finally came in March, resulting in about a 35% drop in Spectrum’s shares.

Critics have been saying for months that sales for non-Hodgkin’s lymphoma drug Fusilev would fall as providers turned to generic alternatives. Fusilev enjoyed an extended period of high sales volumes resulting largely from shortages of generic leucovorin, driving Spectrum’s revenue up tremendously. However, that shortage ultimately ended as Teva and Sagent Pharmaceuticals cranked out more supply.

The anticipated firestorm hit in mid-March after Spectrum announced revenue guidance 40% lower than previously expected.This huge guidance cut stemmed from hospitals that switched to generics. No surprise there. Spectrum insisted that demand for Fusilev in clinics was “stable” and that “solid demand” was anticipated for 2013. Unfortunately for Spectrum, “stable” and “solid” aren’t words that can be accurately used to describe its stock these days.

The biggest crash of all
Impax and Spectrum might have had bad months, but at least they still look better than Ziopharm Oncology . Ziopharm’s stock collapsed more than 60% in March following bad news from a late-stage clinical trial this week.

The company had high hopes that palifosfamide would prove to be a potent treatment for metastatic soft tissue sarcoma. However, the drug failed to significantly improve progression-free survival, the primary endpoint of the phase 3 clinical study. Despite the study’s independent data monitoring committee’s recommendation for continued analysis to follow up on overall survival rates, Ziopharm decided to pull the plug on the program entirely.

What’s next for Ziopharm? The company says it will now regroup and focus on its synthetic biology programs.  

Rising from the ashes<br …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Down 35%! This Is a Biotech Trainwreck

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By Brian Orelli, The Motley Fool

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Spectrum Pharmaceuticals is hurting today after dialing back guidance for the year. Apparently the increased production by Sagent Pharmaceuticals of generic leucovorin, a less purified version of Spectrum’s Fusilev, is cutting into Fusilev sales .

Don’t say I didn’t warn you.

October 2011: “How do you guess when Teva Pharmaceuticals and others will get their act together? And then when — dare I say, if — they do, how do you estimate how many doctors will head back to the generic?” 

July 2012: “If you can confidently say that Fusilev sales are here to stay for the long term, Spectrum is probably a good buy at this point. I don’t have that confidence.”

Spectrum claims that doctors actually want to buy the product, but that hospitals that stock the drug are cutting back on Fusilev now that the generic is more readily available.

The biotech is guiding for Fusilev sales of $10 to $15 million for the first quarter of the year, and approximately $80 to $90 million for the full year 2013. Spectrum claims sales will stabilize in the second half as inventory is drawn down and sales match demand.

That could be wishful thinking. Even if it hits that goal, assuming $30 million in the first half and $50 million in the second half, we’re still a run rate of just half the over $200 million worth of Fusilev sold last year.

Fusilev is Spectrum’s top-selling drug by far, so the drop in sales hurts overall sales. Last month, Spectrum guided for 2013 revenue above the $268 million it brought in last year. Now it’s looking for revenue in the $160 million to $180 million range.

If Spectrum can stabilize sales and get things moving back in the right direction, it might be worth picking through this train wreck looking for some value. But that’s a pretty monumentous task. Risk-adverse investors would be best off watching from the sidelines for a few quarters until things stabilize.

We know what’s eating at Spectrum’s sales, but do you know “What’s Really Eating at America’s Competitiveness“? In this brand new special free report by The Motley Fool you’ll find out what has Warren Buffett concerned for the future of the U.S. and discover a little-known stock poised to profit from a major government initiative to combat this looming crisis. Grab your free copy today by clicking here.

The article Down 35%! This Is a Biotech Trainwreck originally appeared on Fool.com.

Fool contributor Brian Orelli 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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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Bears Are Devouring Spectrum

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By David Williamson, The Motley Fool

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Just 10 days ago, I examined the bear thesis on Spectrum Pharmaceuticals  as, amazingly, over half of its float was sold short. It looks like those short sellers were on to something after all. 

Spectrum tonight announced a crushing 40% guidance reduction for 2013, setting a revenue target between $160 million to $180 million, compared to Wall Street‘s roughly $300 million estimate. The stock is currently down nearly 40% in after-hours trading. The culprit is steeply lower Fusilev sales, a branded drug that took full advantage of generic leucovorin’s unavailability to rack up $204 million in 2012 sales. Short sellers saw this as just a temporary bonanza while bullish investors believed that Spectrum could hold on to those market share gains.

The announcement is a dramatic change of tune from Feb. 21, when during Spectrum’s fourth-quarter conference call CEO Rajesh Shrotriya confidently declared, “We expect 2013 revenues to grow” on the back of strong January trends. I’m guessing February and March were trending worse than Seth MacFarlane’s Oscar performance. 

Perhaps putting too much faith in management’s comments from the conference call, I concluded my video from earlier this month that while the growth days of Fusilev were over, generics weren’t poised to immediately decimate its market share. Oops. However, I did at least argue that, over the longer haul, short sellers would be vindicated, potentially sooner if insurance reimbursement pressure hastened the switch to lower-cost generics from companies such as Sagent Pharmaceuticals . 

Spectrum’s valuation may be shattered, but it doesn’t mean the stock is finished. Fusilev is still expected to bring in $85 million in 2013. Spectrum also has two other drugs on the market, albeit neither are great sellers, a handful of phase 2 and phase 3 cancer assets, and about $60 million in net cash to help develop them. 

Even for investors who believe in those late-stage assets, the valuation of this company is still murky given that Fusilev sales could decline worse than estimated. I recommend staying away from falling knife stocks, unless you like getting cut.

 

Before investing in a stock like Spectrum, I urge you to read this brand-new Motley Fool special free report, “What’s Really Eating at America’s Competitiveness.” Find out what has Warren Buffett concerned for the future of the U.S. and discover a little-known stock poised to profit from a major government initiative to combat this looming crisis. Grab your free copy today by clicking here.

The article Why Bears Are Devouring Spectrum originally appeared on Fool.com.


David Williamson has no position in any stocks mentioned, and neither does The Motley Fool. Follow David on Twitter @MotleyDavid. 
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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Source: FULL ARTICLE at DailyFinance