For investors, one of the most attractive aspects of biotech stocks is their ability to increase in value in a short period of time quickly. After all, it only takes one major breakthrough in clinical trials or a Food and Drug Administration approval to rush a stock into the headlines rapidly. Yet, as quickly as these securities go up, so too can they come down, resulting in biotech stocks to sell.
In these cases, investors who act quickly or see through the hype can avoid portfolio losses while maximizing profits from a bull run. An example of this would be savvy investors who foresaw the overvaluations of Pfizer (NYSE:PFE) and Moderna (NYSE:MRNA) at the height of the COVID-19 pandemic. Getting out of these positions back then would have been incredibly lucrative, as it’s unlikely they will return to those levels any time soon. As such, here are three biotech stocks to sell before they begin to trend down as a result of slowing sales or disappointing reports.
Lyell Immunopharma (LYEL)
One of many biotech stocks in the early stages of treatment development, Lyell Immunopharma (NASDAQ:LYEL) has struggled to attract investor excitement with its proprietary immune system treatments for fighting cancer. The company’s primary focus revolves around genetically reprogramming T-cells which make up one of the body’s most important immune functions for attacking solid tumors.
While several peer-reviewed studies have corroborated the potential efficacy of this approach, all of the company’s therapies are either in the pre-clinical stage or Phase 1 testing. As a result, there’s little commercialization for investors to look to as a sign of future profits.
While a breakthrough in one of its therapies would be life-changing for patients, it’s likely still too early for investors to hold on to this stock for now. Thus, with no way to generate revenue, it’s not likely that LYEL’s next quarterly report will have much growth in store for shareholders.
Ocular Therapeutix (OCUL)
While many investors interested in biotech stocks might not think about eye diseases, one company, Ocular Therapeutix (NASDAQ:OCUL), has made them its primary focus. Mostly centering its drugs around age-related and diabetic eye conditions, OCUL’s biggest growth driver will be continuing to obtain FDA approval for its three drugs currently in the pipeline.
However, the company’s drug focus limits it to more geriatric populations, which, while growing in the U.S., may not be a broad enough category to drive the kind of sales necessary to bring the company’s stock value to the levels it saw in 2015.
Moreover, the company’s financial picture seems somewhat concerning, as its increased general expenses and research expenses in the first quarter of the year contributed to a $64.8 million loss. With more drugs in the pipeline, it’s likely its second-quarter earnings report will paint the same picture on August 7.
Marinus Pharmaceuticals (MRNS)
If you own Marinus Pharmaceuticals (NASDAQ:MRNS) stock, chances are you’ve already sold it. Considering that the company has been embroiled in claims of securities fraud and is now facing a class action lawsuit against it from its investors, getting out quickly would be wise.
The lawsuit in question alleges that Marinus Pharmaceuticals made false statements and/or concealed information regarding some of the trials one of MRNS’ drugs underwent over the last year. This led to a lack of information regarding the risk of termination of these trials, which meant investors couldn’t make a sound decision on whether or not to divest.
Ultimately, the filing of this lawsuit doesn’t prove MRNS is guilty or innocent of defrauding investors, but it might be wise to keep your money out of a stock actively facing a lawsuit from its investors.
On the date of publication, Viktor Zarev did not have (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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.