October 28, 2016
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – It’s no secret that biotech stocks have been somewhat volatile over the past year, with the Nasdaq Biotechnology Index down more than 20 percent for the year. And, investors know there is always an element of risk when it comes to investing.
Some stocks might seem as a safe bet due to their long-term growth and history of delivering a positive return on investment. However, there are also some stocks that investors might want to avoid—like the plague. Writing in the Motley Fool this morning, analyst Corey Renauer tracks three biotech stocks his colleagues believe investors should be very wary of and avoid altogether.
It’s been a bad few years for Valencia, Calif.-based MannKind . The company has consistently struggled, gone through multiple rounds of layoffs and has seen dismal sales of Afrezza, a rapid-acting inhaled form of insulin to treat diabetes. Earlier this year, Paris-based Sanofi terminated its license and collaboration deal for Afrezza with MannKind because the drug had not met sales expectations. The company may has to consider a potential sale of Afrezza just to stop the hemorrhaging of cash. All of that bad news has resulted in shares of MannKind dropping about 65 percent this year—on top of a 75 percent drop in stock price in 2015. Those poor stats are enough for some analysts to believe the company is headed to declare bankruptcy within the next year. Shares of MannKind are trading at 46 cents this morning, down from its opening price of 48 cents.
Sarepta Therapeutics got a shot in the arm in September after it became the first to win U.S. Food and Drug Administration approval of its DMD drug eteplirsen (Exondys 51). Still, the news wasn’t all grand. When the drug was approved, BioSpace reported as part of the approval, Sarepta will need to conduct a two-year, randomized controlled trial to verify the drug’s benefits. At its core, more data is needed to prove that the drug actually improves motor functions. If that trial fails, FDA approval could be withdrawn. Shares of Sarepta spiked following approval of the DMD drug, but since then, has slid throughout October from $62.35 to this morning’s price of $42.24. Since its approval, there have been questions about the efficacy of Exondys 51. Earlier this month health insurer Anthem said it would not cover the $300,000 per-year DMD drug due to efficacy questions. In its notice about the drug, Anthem said “uncertainty exists regarding whether the small observed increase in dystrophin will confer a clinically meaningful benefit.” However, on Oct. 27 Humana stepped in to say it would cover the drug—but with strings attached. The insurance company said it will cover six months of the medication if it’s covered by initial approval. If the patient remains ambulatory after that period, Humana will cover the next six months.
3. Novavax Inc.
Shares of Novavax have continued to struggle since it fell 82 percent in September after the company released data that its Phase III trial for its RSV F Vaccine for older adults did not meet its goals, failing to demonstrate “vaccine efficacy.” The trial results are a major blow to the company that was hoping to develop the first RSV vaccine. Following the announcement, shares of Novavax fell from $8.32 to $1.18 per share. The stock has slightly recovered and is trading at $1.45 per share this morning. While Novavax believes there still remains a path forward for the RSV vaccine, Renauer said it was doubtful given the expense of conducting the investigations compared to the actual available amount of money the company has. “With its stock price depressed, raising equity to develop some early-stage vaccines in its pipeline would lead to huge dilutions, and I doubt potential lenders will be eager to answer the company’s calls going forward,” Renauer said.
