Biotech may be a great sector for risk-seeking investors to find opportunity. That said, for every biotech stock worth buying, there are plenty that fit into the “biotech stocks to sell” category.
For one, while biotechs are some of the riskier stocks out there, that doesn’t mean all of them offer the possibility of outsized rewards. Plenty of names in this category have massive downside risk, while at the same time offering questionable upside potential.
Other biotechs may have tremendous upside potential, yet given the difficulty for most investors to properly handicap the odds of success for a clinical-stage biotech firm (given the complexities of the drug approval process), they are stocks best left to specialists in this market niche to sort out.
One of the best ways to avoiding biotech losses is to cash out/steer clear of these seven biotech stocks to sell. Ranging from large to small, and from profitable to unprofitable, each one is at risk of massive price declines.
Amyris (AMRS)
Back in April, InvestorPlace’s John Blankenhorn, in an article about biotech stocks to avoid, named Amyris (NASDAQ:AMRS) as a particular biotech worth staying away from. The company uses synthetic biology to produce compounds for use in pharmaceuticals and other products.
Shares have moved higher since Blakenhorn made his bear case. However, don’t assume that means it has been disproven, given the recent performance of AMRS stock. There’s plenty of reason to believe that this company remains one of the unstable biotech stocks, at risk of giving back its recent gains, and then some.
Between a dwindling cash position (just $11.2 million as of March 31, 2023), and the recent exit of the company’s CEO, it is difficult to have confidence in Amyris’ ambitious turnaround plan. Aggressively cutting costs could prove to be easier said than done. Not only that, a capital raise in conjunction with this turnaround points to a high likelihood of continued shareholder dilution ahead.
MannKind (MNKD)
Back in May, I called MannKind (NASDAQ:MNKD) one of the top overvalued penny stocks to sell before June. So far, my bearishness has proven correct. Shares in this producer of inhaled therapeutics have experienced a double-digit price decline since then.
Admittedly, a deeper look into MNKD stock suggests that the company may be in a much stronger place compared to most of the biotech stocks to sell mentioned above and below. For instance, the company reported strong figures for Q1 2023, including high revenue growth and narrowing losses.
As also seen in the latest earnings press release, CEO Michael Castagna provided upbeat statements about future results. Still, despite these possible positives, keep in mind that MannKind has disappointed more often than it has positively surprised investors in the past. The impact of further revenue growth and a swing to profitability also appears priced-in, as MNKD trades for 37.3-times next year’s forecasted earnings.
Moderna (MRNA)
After declining sharply from 2021 (the height of the Covid-19 vaccination wave) through late-2022, Moderna (NASDAQ:MRNA) shares have zig-zagged since late last year. This volatility comes as the market assesses the potential for this biotech to have a successful “second act.”
That is, investors expect the company to come out with other mRNA-based vaccines that can generate billions in sales, and bring the company back to profitability. Some sell-side analysts, like those at UBS (NYSE:UBS), are bullish on this happening. However, as I have pointed out previously, management doesn’t seem to agree.
At least, based upon the continued insider selling of MRNA stock by CEO Stephane Bancel, those closest to the business don’t seem to have much faith. Add in the fact that it’s unclear to what extent Moderna’s operating results could improve if it brings a non-Covid vaccine to market, and it’s clear you’re better off not speculating on a rebound with MRNA. If you’re selling biotech stocks, be sure to include this one on your list.
Novavax (NVAX)
Given that I’m bearish on Moderna, it should come to no surprise that I’m bearish on Novavax (NASDAQ:NVAX) as well. Perhaps the most high-profile busted vaccine play, Novavax didn’t receive a pandemic windfall.
While the company did generate billions of sales from Nuvaxovid, its vaccine candidate, this revenue failed to cover its expenses, resulting in big operating losses during 2021 and 2022. Based on Novavax’s most recently-released quarterly results, the situation doesn’t seem to be improving.
That said, down by nearly 98% from its all-time closing high, you may think NVAX stock can only go up from here, especially as the company has recently received a $350 million settlement from the Canadian government for unused Nuvaxovid shots. Nevertheless, considering all factors (including continued high operating losses), I wouldn’t buy it on the assumption that this is a possible “cigar butt” situation, with one puff left.
Ocugen (OCGN)
When it comes to the pandemic-era vaccine horse race, Moderna is the former champion, and Novavax was the “also ran,” but Ocugen (NASDAQ:OCGN) didn’t even make it to the starting gate.
In 2021, OCGN stock experienced a wave of “meme stock mania,” when this biotech firm attempted to bring an Indian Covid-19 vaccine candidate (Covaxin) to the U.S. market. At one point trading for prices north of $15 per share, the company’s ultimate failure with Covaxin, plus heavy losses resulting from its efforts to bring it to market, has slammed OCGN stock down to just 56 cents per share today.
Ocugen has given up on Covaxin, but some speculators remain interested in the stock. This is mainly due to the potential with one of its vision disorder gene therapy candidates. Yet, while success could emerge out of left field for Ocugen, keep in mind that factors like shareholder dilution stand to limit this stock’s potential upside.
Cassava Sciences (SAVA)
Contrarian investors may be thinking there’s major mispricing with Cassava Sciences (NASDAQ:SAVA) stock right now. This clinical-stage biotech, whose main candidate is Alzheimer’s treatment Simulfilam, sold off rather than rallying, following the release of trial data for this drug.
However, investors may not have reacted incorrectly, when pricing this news into SAVA stock. When reporting on the trial news, InvestorPlace’s Shrey Dua pointed out that the degree to which Simulfilam slowed cognitive decline of patients in the trial fell short of expectations. Furthermore, rival treatments appear to be more effective, based on these findings.
With this, it not only makes sense that SAVA sold off on the trial news. It makes sense as well that short-interest in this stock remains high (roughly 23.8% of float). Given the chances of continued disappointment from here, it’s best to consider Cassava one of the top biotech stocks to sell.
VBI Vaccines (VBIV)
Like Ocugen, VBI Vaccines (NASDAQ:VBIV) is another of the “never was” Covid-19 vaccine contenders. Over the past two years, VBIV stock has experienced a price decline befitting a busted vaccine play.
However, while the stock has cratered in terms of price, the days of big declines with VBIV stock have not ended. In fact, VBIV stock recently experienced one of the sharpest sell-offs. On July 6, shares fell by more than 50%, upon news of a highly-dilutive stock and warrants offering.
VBI may be confident that it can use this cash to commercialize PreHevbrio, its Hepatitis B vaccine, but keep in mind the company’s poor execution track record. VBI Vaccines is likely to burn through the proceeds of the aforementioned offering quickly, considering its quarterly operating losses of around $20 million. This points to more disappointment (and more dilution) ahead, making VBIV a biotech stock to avoid.
On the date of publication, Thomas Niel did not hold (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.