There are some pharma stocks to sell in April. Holding these companies is too risky, especially as the industry faces increasing regulatory scrutiny and pricing pressures. Several major pharmaceutical firms are grappling with patent cliffs, where key drug exclusivities are expiring. This opens the door for generic competition.
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.
ACADIA Pharmaceuticals (ACAD)
As Investorplace reported previously, ACADIA Pharmaceuticals (NASDAQ:ACAD) is focused on the development of medications for central nervous system disorders. Recently, ACADIA’s decision not to proceed with further trials for pimavanserin in schizophrenia after failing to meet its primary goal in a Phase 3 study caused the stock to drop significantly.
This contrasts sharply with its guidance. For 2024, ACADIA has made ambitious targets, projecting DAYBUE net product sales to be in the range of $370 to $420 million and NUPLAZID net product sales between $560 to $590 million.
However, despite being down 30.96% over the past five years, the worst has yet to come for ACAD, making it one of the top pharma stocks to sell.
The almost non-existent shares insiders hold is a troubling sign, with only 0.49% held and 99.57% owned by institutions. Furthermore, the market has taken a bearish position on ACAD, with around 10% of its total float being sold short.
I don’t think the price in ACAD’s share fully reflects how badly it missed its revenue target, which makes it risky.
Moderna (MRNA)
Moderna’s (NASDAQ:MRNA) revenue decreased to $6.8 billion in 2023 from $19.3 billion in 2022, primarily due to a decline in COVID-19 vaccine sales. This decline was also reflected in the company’s net income. It turned from a profit in 2022 to a net loss of $4.7 billion in the same year.
For 2024, MRNA has set a revenue target of approximately $4 billion from its respiratory franchise. However, I don’t believe that MRNA is a great long-term play for investors. The company’s valuation crated 30.99% over the past year alone. Even still it’s not a bargain when compared to its peers such as Pfizer (NYSE:PFE).
The company’s P/E ratio is negative. Its forward P/S ratio of 9.47 compared with its trailing 12-month measure of 5.99. It’s expected to become even more expensive as time goes on. MRNA also doesn’t pay a dividend, compared with PFE’s yield of 6.38% with a 2.48% dividend growth rate, and PFE’s long-term forecasts are also stronger.
MRNA then presents a significant opportunity cost for investors, and that’s why it’s one of those pharma stocks to sell.
Royalty Pharma (RPRX)
Royalty Pharma (NASDAQ:RPRX) invests in biopharmaceutical royalties. While it has shown some positive financial metrics,there are concerns about its debt levels and other problems relating to its competitive moat.
The company has a concerning financial profile, with $1.23 billion in cash but a much larger $6.14 billion in debt. This results in a net cash position of -$4.90 billion, or -$10.97 per share. To put that number into perspective, it paid 187.19 million in interest expenses last year, which detracted around 16% of its pre-tax income.
Another concern is that its outstanding shares have ballooned 37.66% year-over-year to 446.69 million, with only around 3.8% of those being held by insiders and the rest by institutions.
It seems that RPRX is content to continue diluting shareholders, effectively offloading company risk as opposed to taking on more debt.
RPRX is a solid company, but consider shares have diminished almost 40% through dilution alone makes it particularly risky. This doesn’t take into account its share has dropped 19.38% over the same period.
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.