There are some pharma stocks to sell in May this year. These companies have been grappling with various issues. These include pipeline setbacks, increasing competition, and regulatory hurdles. All of these issues have adversely affected their financial performance and stock prices.

Moreover, with the broader market presenting attractive investment options, holding on to these riskier pharma plays could result in significant opportunity cost. Many promising growth stocks and defensive value plays offer better risk-adjusted return prospects than these pharma stocks to sell.

Here are three stocks that lack the required risk to return payoff to justify investors holding. There are many opportunities in the market that don’t have these risky investment profiles. One should examine their positions carefully and understand if it meets their expectations or objectives for the future.

These names should be carefully examined, as the pharma industry in general can be considered quite risky. This is especially true if investors put their money into the wrong companies.

Eli Lilly (LLY)

Eli Lilly (NYSE:LLY) has experienced substantial growth driven by its diabetes and weight loss drugs. However, its valuation has become excessively high.

However, there has been some good news. In Q1 2024, Eli Lilly reported a 26% increase in revenue, driven by new product launches and pipeline milestones. Earnings per share (EPS) rose by 59% compared to Q1 2023. The company has raised its full-year revenue outlook to $42.4 billion – $43.6 billion and expects EPS to be between $13.05 and $14 on a non-GAAP basis.

Still, LLY trades at 118 times earnings and analysts are pricing in a 139.90% increase for its EPS this year.

LLY is then in a precarious situation. If the market makes a pullback, it will likely be excessively high P/E firms like LLY that will be the first on the chopping block. Besides this, if it misses expectations, such as its EPS growing by an extremely aggressive 50% than the 139% predicted, then it could be a case of setting it up for failure, as it may also retrace downwards.

Acadia Pharmaceuticals (ACAD)

Acadia Pharmaceuticals (NASDAQ:ACAD) faced a sharp decline this year after deciding not to proceed with further trials for pimavanserin, a drug aimed at treating schizophrenia, and now its outlook looks bleak or at least unfavorable.

The company’s portfolio includes drugs like NUPLAZID for Parkinson’s disease psychosis and DAYBUE for Rett syndrome.

In Q1 2024, Acadia reported total revenues of $205.8 million, marking a 74% year-over-year increase. This growth was primarily driven by sales of DAYBUE, which contributed $75.9 million, and a 10% increase in NUPLAZID sales, amounting to $129.9 million. The company reported a net income of $16.6 million, or $0.10 per share.

Acadia’s cash, cash equivalents, and investment securities totaled $470.5 million, up from $438.9 million at the end of 2023.

However, I think that ACAD is buoyed by the same issues as LLY is. Analysts are pricing in huge EPS increases which seem unlikely to come to fruition, namely a 96.05% jump in FY2025.

Moderna (MRNA)

Moderna (NASDAQ:MRNA) experienced a significant drop in revenue from $19.3 billion in 2022 to $6.8 billion in 2023 due to falling COVID-19 vaccine sales. Despite setting a revenue target of approximately $4 billion for its respiratory franchise in 2024, the company faces challenges with its valuation and growth prospects​.

Moderna is advancing several new products in its pipeline, including a combination vaccine for seasonal flu and COVID-19, which is currently in Phase 3 trials. The company is also working on vaccines for cytomegalovirus (CMV), Epstein-Barr virus (EBV), and varicella-zoster virus (VZV), among others. 

Moderna has been struggling with profitability. In Q1 2024, the company posted a net loss of $1.2 billion, compared to a net income of $79 million in Q1 2023. The significant net losses, coupled with lower revenues.

It may also be overvalued despite these short-term weaknesses on a price-to-sales basis since its pipeline doesn’t seem particularly compelling. Make the smart play and drop these pharma stocks to sell.

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.