The unpredictability of the biotech sector, highlights the inherent risks involved in certain biotech stocks to sell.
2023 was a rough year for the market, marked by a 10% plunge in the SPDR S&P Biotech ETF (XBI), alongside widespread layoffs and fundraising challenges. Moreover, despite forecasts pointing to a potential rebound in 2024, the biotech industry is struggling to adapt post-pandemic. For many biotech firms, securing private funding and launching successful IPOs remains a daunting task.
Furthermore, the Federal Reserve’s cautious approach toward interest rate cuts this year casts a long shadow of economic uncertainty, further intensifying the biotech sector’s inherent volatility and risk. Hence, it is best to me cautious and steer clear of these three biotech stocks.
Novavax (NVAX)
Novavax (NASDAQ:NVAX), a biotech firm dedicated to developing vaccines for severe infectious diseases, is currently navigating through testing times. Moreover, NVAX stock plummeting by over 58% in the past year, the company’s future appears uncertain.
Furthermore, the company has been caught in a dispute with GAVI, a vaccine alliance, over a hefty refund of roughly $700 million. GAVI is looking for a refund for the amount it spent on advance payments for Covid shots. Additionally, Novavax’s global credibility is under further scrutiny after a $47 million settlement in a lawsuit accusing it of overstating its vaccine production.
Financially, NVAX has witnessed its revenues drop by a 43.2% plunge in annual revenue, starkly underperforming the sector’s median growth of 6.4%. The picture darkens with a hefty $655 million operational deficit over the last year and a recent quarter showing a 74.5% drop in revenue year-over-year (YOY) to roughly $187 million.
Cassava Sciences (SAVA)
Cassava Sciences (NASDAQ:SAVA) has been a popular biotech firm due to its much-talked about Alzheimer’s treatment called Simufilam. Over the past year, its stock has dipped by 10.5%, with concerns that its future depends on Simufilam’s success.
Adding to challenges in drug development, SAVA faces scrutiny over data integrity issues. Accusations have targeted its co-founder for skewing test results to favor Simufilam. This controversy has struck a blow to SAVA, hurting its credibility and amplifying concerns over its long-term positioning.
Furthermore, Cassava’s financial health raises alarms, as a net loss of $25.7 million marks a worrying increase from last year’s $20.3 million. This financial strain is further highlighted by a negative 53.94% return on common equity, contrasting with the sector’s median of negative 42.41%.
Incyte Corporation (INCY)
Incyte Corporation (NASDAQ:INCY) is popular for its groundbreaking work in immune pathways to fight multiple diseases. It actively develops and manufactures prescription biopharmaceutical medications across various therapeutic areas. Despite its significant contributions, INCY faces challenges this year, with its stock price dropping by 25.18% over the past year.
Moreover, INCY’s fourth-quarter profit missed Wall Street predictions, pressured by rising costs for products like the skin disorder drug Opzelura and a dim sales outlook for its flagship product, Jakafi. The company’s earnings-per-share (EPS) missed estimates by 9 cents, and operating cash flow growth plummeted by 48.8% YOY, indicating significant financial headwinds.
In a competitive twist, Novartis (NYSE:NVS) is apparently in the lead in acquiring cancer drug developer MorphoSys (NASDAQ:MOR), intensifying INCY’s challenges. Additionally, JMP Securities downgraded Incyte to market perform, highlighting concerns over lost strategic opportunities and the lack of immediate growth drivers.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
