IPOs, Lawsuits, and Cancer Treatments: Healthcare Recap

Healthcare stocks ended the generally positive week on an upswing, with shares of Threshold Pharmaceuticals starting the day up more than 9 percent. But shares of LipoScience, which began their first day of trading on the Nasdaq Friday morning, took a hit as the company was forced lower its initial offering price to $9 per share, and shares of the hospital operator HCA were trading flat after a state judge fined the company for neglecting facility upkeep.

Threshold Pharmaceuticals (NASDAQ:THLD): Current Price $5.04

The biotechnology company only has a market capitalization of $240 million and its stock price has been rather volatile for the past month, but its pancreatic cancer drug TH-302 portends a promising future.

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Shares were on the rise on Friday after Threshold reported it had earned a $30 million milestone payment for its partner Merck (NYSE:MRK), which has paid for approximately 70 percent of the drug’s development costs. The Merck-led study is being conducted under a Special Protocol Assessment with the U.S. Food and Drug Administration that will provide basis of an efficacy claim for the drug’s marketing application.

The market for pancreatic cancer drugs is not huge, but it has room for more effective treatments. According to a statement issued by Threshold, pancreatic cancer is the eighth most common cancer in Europe and the eleventh most common in the United States. Furthermore, those with the disease have a low survival rate regardless of the disease’s stage, with almost 95 percent of patients dying within 5 years. The company’s treatment is designed to be activated under a specific condition, known as tumor hypoxia, that typically indicates a cancerous growth.
LipoScience (NASDAQ:LPDX): Current Price $9.75

LipoScience is the first healthcare company to go public this year. The company saw a strong market for its diagnostic cholesterol test, which has been cleared by the FDA, and plans to use the majority of the proceeds from its initial offering to fund marketing for its product. Already, LipoScience has said that it has eight million orders for the test.

But the company started its public career with a disappointment: LipoScience was forced to cut its IPO price on Thursday. Initially the company had decided to offer 5 million shares at the $13 to $15 price range. However, that price was lowered by 32 percent, and the stock began trading at $9 a share. Despite debuting at a price well below expectations, shares were trading up 8 percent just after 12 p.m. Eastern Standard Time.
HCA (NYSE:HCA): Current Price $37.89

A judge in Missouri ruled that the nation’s largest profit-making hospital chain failed to make the required improvements to run-down hospitals it bought in the Kansas City area. The $162 million fine may be incidental for a company that reported $360 million in net income for the third quarter of last year, but the judgement could be important for the industry as a whole. As The New York Times reported, many for-profit buyers have been purchasing struggling non-profit community hospitals after agreeing to maintain certain levels of charitable care. But this case has sparked concerns that such an arrangement is not viable.

After acquiring a dozen hospitals from Health Midwest in 2003 for $1.125 billion, HCA consented to making $300 million in capital improvements in the first two years and $150 million in the next three years. However, the Health Care Foundation of Greater Kansas City, a non-profit foundation, found that HCA was already behind schedule by 2004 and sued in 2009.

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