Monday Losers: Delcath, CVS Caremark and Coldwater Creek

Among the biggest losers in Monday’s early trading are Delcath (NYSE: DCTH), CVS Caremark (NYSE: CVS) and Coldwater Creek (Nasdaq: CWTR).

Top Percentage Losers — Monday, June 7, 2010
Company Name (Ticker) Intra-Day Price Intra-Day
% Loss
52-Week High 52-Week Low
Delcath (Nasdaq: DCTH) $12.80 -12.6% $16.45 $2.71
CVS Caremark (NYSE: CVS) $31.53 -6.7% $38.27 $27.38
Coldwater Creek (Nasdaq: CWTR) $4.51 -5.9% $9.20 $4.14

*Table includes companies with minimum market capitalizations of $200 million and three month trading volumes of at least 100,000 shares. All percentage returns are listed as of 10:45AM Eastern Standard Time. Click on ticker symbols for up-to-the-minute price quotes and percentage gain data.

Biotech Investors are Dubious of Delcath

Although many biotech firms are seeing nice gains on Monday after this weekend’s annual ASCO cancer conference, shares of Delcath (Nasdaq: DCTH) are plunging more than -12% after the company conceded its promising drug delivery system can also prove very toxic and perhaps lethal if it is not administered correctly. That raises concerns that approval by the U.S. Food and Drug Administration (FDA) would prove very challenging, and even if approved, might come with heavy restrictions that limit the potential market size for its product.

Delcath has competed key clinical trials and now awaits word from the FDA. Investors could eventually reverse their negative reaction, as the drug delivery system did yield pretty impressive efficacy data.

Action to Take –> Keep an eye on this story as it develops. If it increasingly looks like the FDA will overlook the toxicity issues, then shares could be in for a sharp upward spike. But don’t look to bottom-fish these shares just yet, as an FDA rejection would send shares even lower. As with many biotechs, this is a high risk/high reward situation.

Other biotech stocks that are off this morning due to poorly-received date at the ASCO conference include Celldex Therapeutics (Nasdaq: CLDX) and Arqule (Nasdaq: ARQL).


CVS down on Walgreen Move

#-ad_banner-#Shares of CVS Caremark (NYSE: CVS) are down nearly -7% after drugstore rival Walgreen (NYSE: WAG) announced plans to stop using CVS’ pharmacy benefit manager (PBM) arm, Caremark, for any new customers. CVS merged with Caremark three years ago, and many questioned whether the deal might lead to lost business for CVS, as rivals would essentially be ceding some profits to the merged entity. It may have taken longer than expected, but that finally happened. Walgreen cited other reasons for ending the relationship for any new clients, but no amount of spin could obscure the real reason. Some speculate that MedcoHealth Solutions (NYSE: MHS) might win the contract from Walgreen. Shares of Medco are up nearly +4% today.

CVS took a risk by merging with a PBM. The deal brought in clear potential synergies, but those synergies would be lost if more clients grow uncomfortable doing business with an ostensible rival.

Action to Take –> At this point, the nearly $4 billion drop in CVS’ value appears well larger than the impact of the lost Walgreen business. Investors are likely anticipating further pressures on the PBM business. But the core drugstore business looks poised for improvement as management is focusing on improving working capital and boosting free cash flow at the chain. Wait for the dust to settle, but shares are likely to climb higher in coming months if no other PBM clients defect.


Coldwater Creek moves Deeper into Value Territory

When we looked at Coldwater Creek (Nasdaq: CWTR), on Thursday we suggested that shares were cheap but lacked any near-term catalysts. Well, shares fell further on Friday and are shedding another -6% this morning.

Action to Take –> As mutual funds and other holders continue to steadily exit the stock, it is pushing deeper into value territory. Further weakness would have been justified if the retailer were faced with open-ended losses or carried a lot of debt. That’s not the case here, and if you have a long-term view, shares should now hold greater appeal as the price/sales ratio is by far the lowest of its peer group, and improved merchandising or an improving employment picture will eventually help to boost the sales and profit picture.