4 Big Biotech Companies to Sell Now

NEW YORK (TheStreet) -- Biotech stocks are one of the hottest investment areas.

Health care in general is transforming due to an aging population, the Affordable Care Act and new technology. The demand for blockbuster drugs among investors and cures for diseases among patients and doctors has never been higher. The iShares Nasdaq Biotechnology ETF (IBB) is up roughly 20% for the year. But not all biotech stocks are smart buys.

The companies listed are all large-cap biotech companies rated "Sell" by TheStreet Ratings. When you're done be sure to check out which big pharmaceutical companies to buy in the wake of Johnson & Johnson's (JNJ) announcement it will start developing 10 new drugs by 2019.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on May 22, 2015 closing prices.

ALNY Chart ALNY data by YCharts

1. Alnylam Pharmaceuticals (ALNY)
Market Cap: $10.5 billion
Year-to-date return: 28.7%
Rating: Sell, D

Alnylam Pharmaceuticals, Inc., a biopharmaceutical company, discovers, develops, and commercializes novel therapeutics based on RNA interference.

TheStreet said: "We rate ALNYLAM PHARMACEUTICALS INC (ALNY) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Biotechnology industry and the overall market, ALNYLAM PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ALNYLAM PHARMACEUTICALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALNYLAM PHARMACEUTICALS INC reported poor results of -$5.14 versus -$1.43 in the prior year. This year, the market expects an improvement in earnings (-$2.99 versus -$5.14).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Biotechnology industry average. The net income increased by 79.8% when compared to the same quarter one year prior, rising from -$250.94 million to -$50.78 million.
  • This stock has increased by 104.35% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in ALNY do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • ALNY's very impressive revenue growth greatly exceeded the industry average of 19.9%. Since the same quarter one year prior, revenues leaped by 124.0%. Growth in the company's revenue appears to have helped boost the earnings per share.

 

 

 

GEVA Chart GEVA data by YCharts

2. Synageva BioPharma Corp. (GEVA)
Market Cap: $8.1 billion
Year-to-date return: 135%
Rating: Sell, D

Synageva BioPharma Corp. operates as a biopharmaceutical company in the United States. It focuses on the discovery, development, and commercialization of therapeutic products for patients with rare diseases.

TheStreet said: "We rate SYNAGEVA BIOPHARMA CORP (GEVA) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SYNAGEVA BIOPHARMA CORP's earnings per share declined by 40.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SYNAGEVA BIOPHARMA CORP reported poor results of -$5.87 versus -$3.37 in the prior year. For the next year, the market is expecting a contraction of 25.7% in earnings (-$7.38 versus -$5.87).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 63.6% when compared to the same quarter one year ago, falling from -$36.42 million to -$59.60 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Biotechnology industry and the overall market, SYNAGEVA BIOPHARMA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 19.9%. Since the same quarter one year prior, revenues fell by 41.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Compared to its closing price of one year ago, GEVA's share price has jumped by 146.80%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in GEVA do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

 

 

 

ICPT Chart ICPT data by YCharts

3. Intercept Pharma Inc. (ICPT)
Market Cap: $6.3 billion
Year-to-date return: 67.6%
Rating: Sell, D

Intercept Pharmaceuticals, Inc., a development stage biopharmaceutical company, focuses on the discovery, development, and commercialization of novel therapeutics to treat chronic liver and intestinal diseases utilizing its proprietary bile acid chemistry.

TheStreet said: "We rate INTERCEPT PHARMA INC (ICPT) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • INTERCEPT PHARMA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, INTERCEPT PHARMA INC reported poor results of -$14.42 versus -$3.70 in the prior year. This year, the market expects an improvement in earnings (-$8.50 versus -$14.42).
  • Compared to other companies in the Biotechnology industry and the overall market, INTERCEPT PHARMA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Biotechnology industry average. The net income increased by 84.0% when compared to the same quarter one year prior, rising from -$246.03 million to -$39.39 million.
  • ICPT's very impressive revenue growth greatly exceeded the industry average of 19.9%. Since the same quarter one year prior, revenues leaped by 256.8%. Growth in the company's revenue appears to have helped boost the earnings per share.

 

 

SGEN Chart SGEN data by YCharts

4. Seattle Genetics (SGEN)
Market Cap: $5.4 billion
Year-to-date return: 34.5%
Rating: Sell, D

Seattle Genetics, Inc., a biotechnology company, develops and commercializes antibody-based therapies for the treatment of cancer.

TheStreet said: "We rate SEATTLE GENETICS INC (SGEN) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SEATTLE GENETICS INC's earnings per share declined by 30.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SEATTLE GENETICS INC reported poor results of -$0.62 versus -$0.52 in the prior year. For the next year, the market is expecting a contraction of 22.6% in earnings (-$0.76 versus -$0.62).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Biotechnology industry average. The net income has significantly decreased by 33.0% when compared to the same quarter one year ago, falling from -$16.30 million to -$21.69 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Biotechnology industry and the overall market, SEATTLE GENETICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SEATTLE GENETICS INC is currently very high, coming in at 89.80%. Regardless of SGEN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SGEN's net profit margin of -26.40% significantly underperformed when compared to the industry average.
  • Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

 

 

 

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