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Avoid These 7 Big-Name Biotechs and Pharmaceuticals

Warning signs start to flash for these giant sectors

On Tuesday morning a few biotech and pharmaceutical companies were trending lower—and it’s not because of the election.

Weaker-than-expected profits, faltering sales and full-year guidance cuts are weighing on several companies shares, including Valeant Pharmaceuticals Intl Inc (VRX) and Depomed Inc (DEPO).

Valeant Pharmaceuticals reported that sales of its dermatology products and irritable bowel syndrome treatment slipped during the most-recent quarter. As a result, total revenue dropped 11% year-over-year to $2.48 billion. Adjusted earnings per share were 15.5 cents per share, well below the consensus estimate for $1.73.

In light of the weaker-than-expected quarter, Valeant Pharmaceuticals also cut its full-year 2016 guidance. Revenue is now expected to be between $9.55 billion and $9.65 billion, down from $9.9 billion to $10.1 billion. Adjusted earnings were revised to a range of $5.30 to $5.50 per share, which was down from $6.60 to $7.

As a result, VRX shares plunged more than 25% at the open on Tuesday.

Depomed actually reported a 5% increase in revenues during the third quarter, but sales growth did not meet expectations. Total revenue was $110.5 million, falling short of estimates for $127.22 million. Adjusted earnings came in at $20.9 million, or 28 cents per share, which missed the consensus estimate for 35 cents per share. So Depomed posted a 13% sales miss and a 20% earnings miss.

Again, the weak quarter led Depomed to slash its 2016 revenue and earnings guidance. The company now expects total revenue between $455 million and $465 million, which is down from previous guidance for $480 million to $505 million. Adjusted earnings are forecast to be between $79 million and $85 million, down from the previous forecast of $95 million to $105 million. DEPO shares opened more than 10% lower this morning.

In light of these recent results, I thought biotech and pharmaceutical stocks were worth a closer look.

According to Portfolio Grader, many of the big-name biotech and pharmaceutical companies are strong sells right now. Below are seven healthcare-related companies you should avoid at all costs.

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