Healthcare stocks, especially biotech companies, are very risky for investors. Their share price can be highly volatile and surge higher or plummet lower based on news regarding a clinical trial, treatment authorization, or any number of events that could be or break a company. In other industries, this massive shift in price action isn’t nearly as prevalent.
Some biotech companies are failing and won’t offer investors much in the way of returns. And they should be ditched from any watchlist because the future doesn’t look exceptionally bright. That doesn’t necessarily apply to the three biotechs to sell below but investor should be wary anyway.
Novavax (NVAX)
Novavax (NASDAQ:NVAX) focuses on developing and commercializing vaccines for infectious diseases. It offers an authorized vaccine to treat Covid-19 and a treatment for malaria.
Novavax saw its share price surge in early 2021 following approval of its vaccine. Shares traded at around $300 per share have since dramatically diminished. In the last year, its share price has fallen by 25% and now hovers around $5 per share.
On Feb. 28, NVAX reported earnings for the fourth quarter and full year 2023, in which it stated total revenue fell by 19% and its net loss shrank by 2% to $178 million compared to the previous year. Following the report, the stock fell by 27% due to missing analysts’ expectations though the share price has since recovered.
Novavax reached new heights in 2021 during the pandemic when vaccines were in high demand. Since then, it has not been able to adapt to the changing environment. It only has a Covid vaccine on the market, making it a failing biotech stock that’s a strong sell.
Moderna (MRNA)
Moderna (NADSAQ:MRNA) specializes in the development and commercialization of messenger RNA vaccines. Its COVID-19 vaccine is authorized for commercial use, and it has various other vaccines and therapeutics in different stages of clinical trials.
Similar to Novavax, Moderna experienced a surge in its share price in 2021 during the height of the pandemic, following the rollout of its vaccine to treat Covid-19. Within the past year, though, its share price has fallen by approximately 33%, following financial instability and slowing demand for its messenger RNA products.
On Feb. 22, Moderna released its financial report for the fourth quarter of the full year 2023, stating that total revenue dropped by 45% and net income fell by 85% year-over-year. Moderna reported a decline in revenue, which still beat estimates, resulting in its share price growing by 14% following this report.
Even with Moderna reporting a recent earnings beat, the company is still on the decline. It is experiecing significant drops in COVID-19 sales, which are the backbone of its business model, and has no other product on the market. It hopes to get approval for a respiratory syncytial virus (RSV) vaccine this year but there is no guarantee it will receive it. Moreover, there are bigger, better-financed companies with an existing RSV vaccine suggesting sales might not be meaningful. It all combined to make Moderna a biotech to sell.
Ironwood Pharmaceuticals (IRWD)
Ironwood Pharmaceuticals (NASDAQ:IRWD) develops and markets therapeutics to treat gastrointestinal diseases. Its authorized medication is Linzess, which is a treatment for irritable bowel syndrome.
Ironwood’s share price dramatically fell by 38% following a phase 3 trial for its drug candidate to treat short bowel syndrome. Top-line results were positive, but the company reported multiple unmet secondary endpoints, which caused investors to sell off shares.
Before this report, Ironwood saw fairly dramatic and consistent growth in its share price. But, as I mentioned previously, the biotech industry is very volatile, and IRWD lost a majority of its gains over the last year in just one day following a clinical trial report.
On Feb. 15, Ironwood reported earnings for the fourth quarter of the full year 2023, stating that total revenue increased by 10% compared to the year before. It reported a net income of $49 million for Q4 2022 and a net loss of $2 million in Q4 2023.
It will be interesting to see how IRWD stock performs in the future following this massive blow to the company and whether it can recover.
As of this writing, Noah Bolton 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.
