Health Stocks in Motion

Shares of Staar Surgical(STAA Quote) were among the worst-performing health-related stocks Monday, falling 34% after the company warned that the Food and Drug Administration is prepared to take action against the company for failing to correct numerous violations.

In a letter to the company, the FDA said that Staar has "failed to adequately correct numerous violations" that were identified in September 2004. As a result, the "FDA is gravely concerned about Staar's serious, continuing violations and is prepared to seek the appropriate remedies, the letter continued. The letter, which was received by Staar on July 5, 2005, represents the FDA's final attempt to notify Staar of its noncompliance, Staar said. The company now has 10 calendar days following the receipt of the letter to provide responses and supporting documentation to the FDA.

Staar plans to respond to the letter by July 15, "but believes that the FDA will pursue enforcement action against the company if it finds the response inadequate," it said. If the FDA does take action, Staar believes it would likely have a material and adverse impact on the company and its prospects.

Finally, Staar said it continues to believe that its Visian ICL contact lens will not receive marketing approval in the U.S. until all compliance matters have been resolved. Shares were trading down $1.72 to $3.35.

D&K Healthcare Resources(DKHR Quote) vaulted 68% after the company agreed to be acquired by McKesson(MCK Quote) for about $207 million in cash. The deal values D&K at $14.50 a share, representing a premium of 71% over Friday's closing price of $8.50. McKesson will also assume D&K's outstanding debt. The acquisition, which is expected to close in the third quarter of 2005, is not expected to have an impact on fiscal 2006 earnings, but is expected to be mostly accretive to McKesson's fiscal 2007 earnings. D&K, a drug distributor that serves independent and regional pharmacies primarily in the Midwest, Upper Midwest and the South, posted fiscal 2004 sales of $2.5 billion. Shares were trading up $5.81 to $14.31; McKesson was recently trading up 60 cents to $45.15.