As we head into New Year 2023, we wanted to take a look at some of the top pharmaceutical blunders of the last several months. While many pharmaceutical stocks can hold immense profit potential, others can wipe out your accounts in the blink of an eye. That’s because – far too often — investors buy these stocks, which turn out to hold weak or non-existent pipelines. Or, investors will buy on the promise of unachieved growth. In fact, here are three that fit those molds, and should be sold heading into 2023.
| NVAX | Novavax | $9.66 |
| GH | Guardant Health | $27.90 |
| DNA | Gingko Bioworks | $1.66 |
Novavax (NVAX)
Novavax (NASDAQ:NVAX) was a great coronavirus vaccine play at one point. Unfortunately, that’s not the case any longer. Novavax was working on vaccines for years before COVID-19 hit. The best known was ResVax, for Respiratory Syncytial Virus (RSV). But ResVax failed in two Phase III studies. To stay in the public market Novavax had to conduct a 1:20 reverse stock split in 2019. To small investors, this should have been a clue to stay away.
Novavax won extensive government help in developing its coronavirus vaccine, eventually called Nuvaxovid. In addition, Novaxovid did finally win emergency use authorization. It can be stored in an ordinary refrigerator. It wasn’t based on Messenger RNA, the technology used by BioNTech (NASDAQ:BNTX), Pfizer (NYSE:PFE) and by Moderna (NASDAQ:MRNA). Unfortunately, Novaxovid didn’t reach the market until the MRNA vaccines had saturated the U.S. market.
Now the company is back on square one. It did have $1.3 billion in cash at the end of Sept. It’s also trying to combine Novaxovid with a flu vaccine. It continues working on a vaccine for RSV. Unfortunately, operating cash flow is once again negative. Unless something amazing happens, I don’t see this stock coming back.
Guardant Health (GH)
Guardant Health (NASDAQ:GH) detects cancer through blood tests.
Guardant’s test, called Shield, recently completed a major study called ECLIPSE, which detected 83% of colorectal cancers and 13% of advanced adenomas. However, that fell short of Cologuard, which can identify 92% of colorectal cancers and 42% of pre-cancerous polyps, according to Reuters.
In addition, as noted by Barron’s, Dr. Mark Fendrick, a public-health researcher at the University of Michigan says, “in January 2023, federal law will require most health plans to cover the cost of Cologuard screening and follow-up colonoscopy for Americans aged 45 and older. That coverage won’t apply to Guardant’s test until it is recommended by the U.S. Preventive Services Task Force—something unlikely to happen for several years.”
Gingko Bioworks (DNA)
Gingko Bioworks’ (NYSE:DNA) business model is to produce drugs using synthetic biology, designed with genetic engineering. It offers to produce these drugs at cost, in what it calls a foundry, then take a cut of the proceeds when those drugs are sold. It’s like the Apple (NASDAQ:AAPL) app store. Gingko likes to say it’s chasing a $4 trillion opportunity.
Gingko is competing with scaled producers like Thermo Fisher (NYSE:TMO) and China’s Genscript Biotech (OTCMKTS: GNNSF), which sell their capabilities at a profit. Gingko’s innovation is the business model.
For a time, the business model seemed to work. Gingko revenue more than doubled between the third quarter of 2021 and the first quarter of 2022, peaking at $168 million. But it lost $590 million during that big quarter, and revenue has plummeted since, to $66 million in the September quarter. In a rising market, investors will buy the hope of a business model. But Gingko has lost 80% of its value in 2022 because the model doesn’t work. Gingko stays in business through secondary offerings of stock, watering down existing shareholders in the hope things will turn around. That seems unlikely.
On the date of publication, Dana Blankenhorn held long positions in AAPL and MRNA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.