The bulls may have gotten the day started in decided fashion, but they sure didn’t end the day that way. By the time the closing bell rang, an intraday gain of 0.4% for the S&P 500 had been pared back to only a 0.13% gain.
Here’s what went wrong for each.
Biogen Inc (BIIB)
Hopes were high for Biogen MS drug opicinumab, but the company dashed those hopes today by reporting sub-par trial results, sending BIIB down a hefty 12.7% in the process.
The company as well as most BIIB investors knew it was a risky bet, but one with a reward to match it. Opicinumab had the potential to be an effective therapy for patients with relapsing sclerosis, repairing the damage caused by the disease rather than taking aim at the cause of the disease itself. Some drugmakers address the disease, but there’s yet to be a true game-changing therapy for MS.
Opicinumab still isn’t it. In its phase 2 trial, the drug failed to improve physical or cognitive functioning.
It matters, as some analysts felt the drug could drive as much as $10 billion or more worth of revenue per year within the underserved MS treatment market.
LendingClub Corp (LC)
Online lender LendingClub also threw up a red flag by postponing its annual meeting on the same day a major shareholder announced that stake had been cut.
The shareholder in question is U.K.-based investment management company Baillie Gifford & Co. As of the end of the first quarter, it owned 34.6 million shares of LC. But now, it has sold them all, suggesting that the so-called smart money sees trouble ahead.
Fanning the bearish flames that sent LC shares more than 7% lower today was news that the company’s shareholder meeting — which actually got started on Tuesday — was quickly dismissed before any meaningful business was conducted, and rescheduled for June 28. The reason? The company wasn’t ready.
Valeant Pharmaceuticals Intl Inc (VRX)
Finally, Lending Club wasn’t the only name to get rocked by a new perception of potential trouble on Tuesday.
Not that the hedge fund manager didn’t already have a decided amount of control over Valeant Pharmaceuticals anyway, but as of today — for better or worse — he is the single-biggest VRX shareholder, and he didn’t have to buy one more share to earn the title.
In a disclosure document filed on Tuesday, investment advisor Ruane, Cunniff & Goldfarb reported it had pared back its stake in Valeant Pharmaceuticals from 8.9% of VRX shares to only 4.7% of the company’s stock. Ackman still owns his 6.3% stake, which has given him an often-irritating level of control. Now he has more than anyone.
Fanning the bearish flames behind the 14% plunge VRX made today were lackluster Q1 results and a disappointing 2016 outlook. Profits of $1.27 per share missed estimates of $1.36, and the company now expects a bottom line of between $6.60 and $7.00 per share this year, versus prior guidance of between $8.50 and $9.50.
Between the two, VRX never had a chance.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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