What do Valeant Pharmaceuticals and Theranos have in common? While the two represent different segments of the healthcare sector, the buzz surrounding both entities and their enormous valuations helped boost the buzz behind stock numbers in both industries, according to Panos Mourdoukoutas, Forbes contributor and chair of the economics department at Long Island University in New York.
"Now, the two companies have another thing in common: negative publicity," Mr. Mourdoukoutas wrote in a column for Forbes. "Theranos has had questions raised about the efficacy claims of its blood tests. Valeant has had questions raised about its business practices, such as its relations with specialty pharmacy Philidor — which have drawn the attention of U.S. Congress."
Although the efficacy of the allegations against the respective companies remains in question, the negative publicity is certainly tapering the interest of investors, and that downturn in investor excitement is impacting the healthcare sector overall.
For the time being, the negative information surrounding Valeant is having a more noticeable impact, partially because Theranos is a privately held company, but Mr. Mourdoukoutas wrote its troubles have still stolen some thunder from the biotech and healthcare sectors.
"Investors who have been around Wall Street long enough know very well what happens when hot industry icons are trashed," he wrote. "The hot air comes out and bullish markets turn into bear markets. History doesn't just repeat itself. It rhymes."