Navigate the volatile pharma market by spotlighting the strategic stock sells essential for your portfolio’s health
Recent trends in the stock market have seen a shift in investor interest from tech giants, known as the Magnificent 7, towards pharmaceutical companies, particularly those involved in weight-loss drugs. But, it’s important to identify which pharma stocks to sell before they plummet, as not all will benefit equally from the hype.
As a result, pharmaceutical companies like Eli Lilly (NYSE:LLY), Pfizer (NYSE:PFE) and Novo Nordisk (NYSE:NVO) are attracting retail investors’ attention given their portfolio exposure to the weight-loss trend. This shift became pronounced when Novo Nordisk’s shares hit a record high after announcing updates on a new obesity drug, surpassing Tesla (NASDAQ:TSLA) in market cap ranking.
Similarly, Eli Lilly has also been in the spotlight, with Bank of America (NYSE:BAC) setting a $1,000 price target based on the sales potential of its weight-loss drug, sparking speculation about it becoming the first trillion-dollar drug company.
While these mega-cap companies are seeing their shares soar, others have found 2024 a difficult year.
Which pharma stocks to sell during this market boom cycle?
ACADIA Pharmaceuticals (ACAD)
ACADIA Pharmaceuticals (NASDAQ:ACAD) is a biopharmaceutical company focused on discovering, developing and commercializing small molecule drugs designed to address unmet medical needs in central nervous system (CNS) disorders.
The company’s flagship product, Nuplazid (pimavanserin), is the first and only medication approved by the FDA for the treatment of hallucinations and delusions associated with Parkinson’s disease psychosis.
Headquartered in San Diego, California, ACADIA is dedicated to advancing its pipeline of innovative therapies targeting conditions such as schizophrenia, dementia-related psychosis and major depressive disorder.
This week, Acadia stock fell more than 17% in a single day following the announcement that the company has decided against conducting further trials for pimavanserin. This decision came after the drug, aimed at treating schizophrenia, did not achieve the primary goal set for its Phase 3 study.
Mizuho analysts downgraded their rating on ACAD, citing trial results.
“Given the failed ADVANCE-2 trial, we remove our sales forecast for Nuplazid in negative symptoms of schizophrenia (NSS),” said analysts at the firm. “Our new $25 PT incorporates value for Nuplazid in Parkinson’s disease psychosis (PDP), Daybue with ~$1B peak sales, and potential Nuplazid IP extension into 2038 for PDP.”
Amylyx Pharmaceuticals (AMLX)
Amylyx Pharmaceuticals (NASDAQ:AMLX) is a biopharmaceutical company developing new treatments for neurodegenerative diseases. The company is known for its work in creating innovative therapies aimed at slowing the progression of debilitating conditions like Amyotrophic Lateral Sclerosis (ALS) and other motor neuron diseases.
One of their notable products, AMX0035, has garnered attention for its potential in treating ALS, showing promising results in clinical trials. However, the company’s stock fell more than 80% last week to an all-time low following disappointing results from a trial of its ALS drug, which failed to show patient benefits.
This outcome raises concerns that U.S. regulators might have endorsed an ineffective treatment, casting doubt on the drug’s future prospects and the company’s valuation. As a result, investors are likely to avoid Amylyx Pharmaceuticals, given the high uncertainty.
The company disclosed that there was no notable difference in the primary endpoint results between patients treated with the drug and those given a placebo in the trial. This outcome aligns with the worst-case scenario previously outlined by Amylyx, making Amylyx Pharmaceuticals one of the top pharma stocks to sell.
West Pharmaceutical Services (WST)
West Pharmaceutical Services (NYSE:WST), one of the three pharma stocks to sell, is a major global manufacturer specializing in the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable medicines.
The company’s products include stoppers and seals for vials, as well as syringe and cartridge components, serving the pharmaceutical, biotech, and generic drug industries. The company’s stock faced a sharp decline recently after it offered a bleak forecast for 2024.
Despite previous expectations for a 7% to 9% increase in sales this year, the company anticipates only a 2% to 3% growth next year, citing a reduction in client purchases. The anticipated adjusted diluted earnings for 2024 range from $7.50 to $7.75 per share, significantly lower than the expected $8.77.
Furthermore, projected net sales are between $3 billion and $3.1 billion, falling short of the anticipated $3.2 billion. The company reported $732 million in revenue for the last quarter, missing the $739 million forecast, although adjusted earnings per share exceeded expectations at $1.83.
The pharma company attributes the slowdown to inventory management changes among its major customers but anticipates an improvement in business after the first quarter. However, the sudden shift in management’s outlook has left investors wary.
“It appears that destocking has worsened, or broadened, or both,” William Blair analyst Matt Larew wrote in a Thursday morning note. “West will have to work hard and fast to put some guard rails around the timeline and magnitude here and effectively communicate that there are no further cuts coming.”
On the date of publication, Shane Neagle 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.