Pharma stocks and the biotech sector can offer explosive gains. It also offers incredibly crushing defeats in which share prices decline precipitously. It is and will remain a very hit-or-miss sector for investors.
That said, it’s important to recognize when business models, future promises of growth and chance of FDA approval are unfavorable. Additionally, the market is showing signs of increased volatility at the moment. That fact is introducing an extra element of risk into these already riskier shares. Some of these firms are truly very close to collapse. Others offer long-term upside that will take a while to materialize — if ever. That said, here are some pharma stocks to sell now.
Axcella Health (AXLA)
I continue to believe that Axcella Health (NASDAQ:AXLA) is a stock to avoid. In fact, I think it’s one of the more dangerous shares an investor can play with at the moment. I think investors expect the company to produce results in relation to its pursuit of Long Covid treatment commercialization. It exploded recently because fears of a Covid reemergence are high.
It also had a patent granted in relation to its business pursuits. However, it isn’t commercialized, and it can’t simply push its pipeline forward any faster than any other pharma firm.
What it did was enact a 1-for-25 reverse stock split that investors have simply ignored. It’s a dangerous stock, to say the least, and I can’t see why investors should expect it to garner sales anytime soon. However, they are treating it as if that is what will happen.
Never mind that Axcella Health continues to lose money, has suspended research and development and is exactly the kind of biotech that rises and becomes attractive before dramatically declining again.
Novavax (NVAX)
Novavax (NASDAQ:NVAX) will always remain the 1st runner-up in the race to develop a Covid-19 vaccine. That fact has set the stock’s price on a downward trajectory that hasn’t relented. At the height of the vaccine race, its price was close to $300. It now trades for around $7.
While investors may believe in Novavax in relation to Covid boosters, I believe it’s wiser to consider the long-term trajectory of the firm. Novavax is contracting and is expected to continue to do so. Last year’s revenues reached $1.9 billion. However, they’re expected to fall to $1.35 billion this year and $1.28 billion in 2024.
My guess is that if demand for boosters gets very high, the established names will fare better than Novavax. In other words, Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA) and Johnson & Johnson (NYSE:JNJ). There’s tons of upside in NVAX shares, and I could certainly be proven wrong here. It could rise and provide quick gains, but I’d rather be safe than sorry in this instance.
Mind Medicine (MNMD)
Mind Medicine (NASDAQ:MNMD) isn’t a ticking time bomb in the sense that its stock has legitimate prospects for growth long term. It is developing psychedelics for the treatment of brain disorders. I can’t deny that the growth potential of the sector is real.
I’ve written about the stock positively in relation to its development of serotonergic psychedelics, including DMT, psilocybin and LSD. Mind Medicine is leveraging the science of neuroplasticity and neuron growth in relation to those compounds. That remains exciting for the long term, and I can’t argue that MNMD has any less potential currently than it did months earlier over the long term. It has a cash runway that is expected to bring it through 2025.
However, I expect trepidation and bearishness from the markets through 2024. Investors are nervous about interest rates and the effects of another rate hike in November. That implies we will see a pivot into safer equities and a more defensive stance overall. That doesn’t favor MNMD. I see investors heading for defensive stocks at the moment. They offer growth, and those wary of conservative plays are probably headed into bonds with their high yields and zero risk.
On the date of publication, Alex Sirois 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.
