The biotech industry witnessed a solid uptrend amid the pandemic and continues to do well due to the inelastic demand for biotech products. However, many companies in this space are looking to reduce operational expenses and announced layoffs amid expanding macro headwinds. For example, Biotech giant Novartis AG (NVS) plans to cut 25% of its total workforce in Ireland.
Moreover, according to Fitch Ratings, consecutive Fed rate hikes are expected to drive the American economy into a 1990-style mild recession. Amid such widespread uncertainties, investor sentiment is degrading. Investor pessimism toward biotech stocks is evident from the SPDR S&P Biotech ETF's (XBI) 27.6% year-to-date decline.
Given this backdrop, we think investors should drop fundamentally weak biotech stocks Ginkgo Bioworks Holdings, Inc. (DNA) and Immunic, Inc. (IMUX) from their watchlist.
Ginkgo Bioworks Holdings, Inc. (DNA)
DNA and its subsidiaries develop a platform for cell programming. Its medium is used to program cells to enable the biological production of products, such as novel therapeutics, food ingredients, and chemicals derived from petroleum.
DNA's loss from operation came in at $646.91 million for the second quarter that ended June 30, 2022, up 979.2% year-over-year. Its net loss came in at $668.83 million, up 1140% year-over-year, while its loss per share came in at $0.41, up 925% year-over-year.
DNA's forward EV/Sales of 7.49x is 466.9% higher than the industry average of 1.32x, while its forward Price/Sales of 10.58x is 874.7% higher than the industry average of 1.09x.
DNA’s trailing-12-month ROCE and ROTC of negative 314.41% and 190.40% are lower than the industry averages of 13.91% and 7.62%, respectively.
Analysts expect DNA's revenue to decrease 10.5% year-over-year to $389.81 million in 2023. It missed EPS estimates in all four trailing quarters. Over the past year, the stock has lost 78.4% to close the last trading session at $2.66.
DNA has an overall rating of F, which equates to a Strong Sell in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DNA has an F grade for Stability and Sentiment and a D for Growth, Value, and Quality. It is ranked last among 386 stocks in the F-rated Biotech industry. Click here to see the additional POWR Ratings for DNA (Momentum).
Immunic, Inc. (IMUX)
IMUX, a clinical-stage biopharmaceutical company, develops a pipeline of selective oral immunology therapies for treating chronic inflammatory and autoimmune diseases.
IMUX's loss from operation came in at $20.61 million for the second quarter that ended June 30, 2022, up 7.5% year-over-year. Its net loss came in at $21.90 million, up 22.1% year-over-year.
IMUX's trailing-12-month Price/Book of 2.31x is 21.2% higher than the industry average of 1.91x.
IMUX’s trailing-12-month ROCE and ROTC of negative 66.93% and 41.01% are lower than the negative industrial averages of 38.60% and 21.31%, respectively.
IMUX's EPS is expected to decrease marginally year-over-year to negative $2.81 in 2023. Over the nine months, the stock has lost 14.5% to close the last trading session at $9.68.
IMUX's overall D rating equates to a Sell in our POWR Ratings system. It has a D grade for Quality. The stock is ranked #198 in the same industry. We've also rated IMUX for Value, Growth, Momentum, Stability, and Sentiment. Get all IMUX ratings here.
DNA shares were trading at $2.47 per share on Wednesday afternoon, down $0.19 (-7.14%). Year-to-date, DNA has declined -70.28%, versus a -21.99% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
2 Biotech Stocks to Take off Your Watchlist in 2022 StockNews.com
