Why Dermira, Community Health Systems, and BRF Slumped Today

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Monday was generally a strong day for the stock market, as the Dow climbed almost 340 points and other major benchmarks finished with percentage gains of a similar size. Hope rose among investors that the U.S. can avoid a devastating trade war, allowing them to focus on generally positive economic conditions in the U.S. and across the globe. Yet some individual companies didn't fare as well. Dermira (NASDAQ: DERM), Community Health Systems (NYSE: CYH), and BRF (NYSE: BRFS) were among the worst performers on the day. Below, we'll look more closely at these stocks to tell you why they did so poorly.

Dermira deals with disappointment

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Dermira stock crashed 66% after the small biotech company said that a pair of phase 3 clinical trials looking at its investigation treatment olumacostat glasaretil failed to meet primary endpoints in patients with moderate to severe acne. CEO Tom Wiggans said, "We are surprised and extremely disappointed by the results of the Phase 3 program," and other executives stated that Dermira is likely to discontinue the development program for the treatment. Without adequate improvement in numbers of lesions and the proportion of patients seeing sufficient improvement on a specific assessment scale, Dermira hopes to turn its attention to other treatments in its pipeline.

Community keeps sinking

Share of Community Health Systems fell another 4%, adding to much larger losses last week. The company's latest earnings report included a drop in revenue of nearly a third, along with adjusted losses even after accounting for one-time figures. Declining admissions contributed to the poor results as well. With the healthcare system currently in flux as the White House and lawmakers in Congress assess potential next steps after the repeal of the individual mandate as part of tax reform, risk levels for the for-profit hospital industry in general are greater than normal. That makes the potential for further declines for Community Health's business worth noting.

BRF deals with allegations

Finally, BRF stock plunged more than 19%. The Brazilian food processor faces new allegations of fraud from Brazil's federal police, with reports that a former CEO of the company has been arrested for allegedly seeking to get around food safety inspections. Major institutional shareholders had already called for new candidates to sit on BRF's board of directors amid poor results, but the extent of the Brazilian federal investigation that covers potential incidents dating back to 2012 brings new urgency to the move. Until BRF can start to unravel what happened, investors will be loath to put their capital at further risk.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool is short shares of BRF. The Motley Fool has a disclosure policy.