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3 pharma stocks you should consider selling

David Boulder
19. 4. 2024
4 min read

Recently, it has become apparent that some pharmaceutical company stocks pose a significantly elevated risk. Increased regulatory scrutiny and growing competition from the sector is putting some firms under considerable pressure. Economic and market factors such as changes in patent protection and price wars further complicate the situation.

Read on to find out why you should consider selling shares in three specific companies that are in difficult situations and whose future prospects are not promising.

Moderna $MRNA+1.6%

Moderna, a U.S. biotechnology company that has become a major player due to its rapid development of a vaccine against COVID-19, is now facing the challenges of declining sales. In 2023, the company saw a significant drop in revenue to $6.8 billion compared to $19.3 billion in 2022. This decline was largely due to a reduction in demand for their COVID-19 vaccines, leading to major changes in the company's financial health. Profits that were positive in 2022 turned into a net loss of $4.7 billion in 2023.

MRNA

Moderna

MRNA
$166.61 $2.60 +1.59%
Fair Price: $08.04
Etfrzihq: 18.11%
Undervalued
Overvalued
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In response to this situation Moderna has set new targets for 2024, when it plans to achieve approximately $4 billion in revenue from its respiratory franchise. This target reflects the company's efforts to diversify its portfolio beyond pandemic vaccines and stabilize its financial results. Despite these plans, however, many analysts are skeptical that these goals will be achievable given the current market environment and the loss of market share to competitors that are rapidly gaining momentum.

MRNA

Moderna

MRNA
$166.61 $2.60 +1.59%

Moderna's financial metrics further deteriorates its investment profile. Leading valuations such as P/E are negative, and a forward price-to-sales (P/S) ratio of 9.47, down from 5.99 over the past 12 months, suggests overvaluation of stock. This factor, along with the lack of a dividend to support investors during uncertain periods, makes Moderna stock less attractive compared to other companies in the pharmaceutical sector that offer more stable yields and dividend growth.

Acadia Pharmaceuticals $ACAD-2.2%

Acadia Pharmaceuticals, a company focused on developing drugs for central nervous system disorders nervous system, has faced significant challenges recently. The recent news of the failure of a Phase 3 clinical trial for pimavanserin, a drug designed to treat schizophrenia, caused a significant drop in investor confidence. The company's shares responded by falling by more than 20% in the week following the announcement. This contributed to an overall share price decline of 31% over the last five years, raising questions about its future.

For 2024 Acadia has set ambitious revenue targets, expecting DAYBUE net sales to reach $370 million to $420 million and NUPLAZID sales to be between $560 million and $590 million. These targets were set despite the fact that NUPLAZID, a treatment for Parkinson's disease psychosis, has previously faced questions about its efficacy and safety. However, these optimistic estimates are in stark contrast to recent results and analysts fear they may not be realistic.

ACAD
$15.20 -$0.34 -2.19%

Another troubling aspect is the share ownership structure of Acadia Pharmaceuticals. With almost non-existent stake of shares held by insiders, specifically only 0.49%, and dominant institutional ownership holding 99.57%, concerns arise as to management's true commitment to the company's long-term success. This distribution may be an indicator of a lack of confidence in the company's own portfolio and strategy.

Royalty Pharma $RPRX-0.9%

Royalty Pharma, which specializes in investing in pharmaceutical and biotechnology royalties, is now in a financially challenging situation that is causing investors concern. The company's total debt reached $6.14 billion as of the most recent quarter, while free cash flow stands at $777 million. This imbalance between debt and available cash leads to a negative net cash position of around -4.90 billion dollars. In 2022, the company paid $187.19 million in interest, representing nearly 16% of its pre-tax income, indicating a significant financial burden.

In addition, the stock Royalty Pharma saw a 37.66% year-over-year dilution , increasing thenumber of shares outstanding from approximately 324 million to 446.69 million. This dilution may have negative implications for existing shareholders as it reduces their share of earnings. This strategy may be worrisome for investors seeking stability and certainty in their investments and may lead to a decline in confidence in the Company's investment strategy.

RPRX
$26.62 -$0.23 -0.86%

Another cause for concern is the decline in Royalty Pharma's shares by almost 40 % as a result of this dilution and other market factors. This decline has occurred despite some positive financial results and may reflect deeper problems in the company's financial and operating model. With such large debt and continued dilution, investors should carefully consider the potential risks associated with holding Royalty Pharma shares, particularly in a volatile market environment.

Disclaimer: There is a lot of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always conduct a thorough analysis of your own.

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