Cadence shares fell 9% to $8.20 in early Wednesday trading despite what looks like good news -- The U.S. Food and Drug Administration approved Ofirmev, an intravenous formulation of the pain reliever acetaminophen that Cadence plans to sell to U.S. hospitals. The stock traded as low as $7.51 earlier in the day.
When is a drug approval reason to sell a stock? Answer: When the drug's approval was widely expected and when the company planning to market the approved drug faces significant challenges convincing doctors or hospitals to buy it.
Cadence and Ofirmev fit both scenarios, hence the stock's significant weakness. Cadence is being penalized further because the company needs money to fund the Ofirmev commercial launch."For now, the stock faces investor skepticism about the launch – most recent drug launches have been disappointing – and a financing overhang. These issues may mute the usual post-approval stock rise and provide an inexpensive entry point, in our view," said Canaccord Genuity analyst Adam Cutler. Cadence closed the second quarter with $68 million in cash but now needs to pay $15 million to Bristol-Myers Squibb (BMY) as part of the licensing deal for Ofirmev.
>To contact the writer of this article, click here: Adam Feuerstein. >To follow the writer on Twitter, go to http://twitter.com/adamfeuerstein. >To submit a news tip, send an email to: email@example.com.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV