Why NewLink Genetics Corp. Shares Swooned

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of NewLink Genetics (NASDAQ: NLNK  ) , a clinical-stage biopharmaceutical company developing immunotherapeutic options to help treat cancer, fell as much as 13% after receiving a downgrade.

So what: Before the opening bell, research firm R.W. Baird downgraded NewLink Genetics to neutral from outperform solely on a valuation basis, while keeping its price target on the company unchanged at $40. Shares of NewLink have doubled since the year began, which R.W Baird felt was a bit excessive given its current prospects.

Now what: As always, I'd remind investors that analyst upgrades and downgrades are short-term stock drivers that rarely have any bearing on our long-term investing thesis in a company. What matters is that NewLink has two very exciting clinical studies ongoing with tergenpumatucel-L, an immunotherapy aimed at treating non-small cell lung cancer, and algenpantucel-L as a treatment for resectable and non-resectable pancreatic cancer. NewLink's two lead products work by modifying cancer cell lines to express alpha-gal, a carbohydrate that we have a natural immunity to, but that trains our immune system to attack. If successful, NewLink's therapies could be a big hit in eliminating targeted cancer cells but avoiding healthy cells. But keep in mind, though, that if even one of these therapies fail, NewLink's $1 billion valuation could just as quickly be cut. It's a company I'd certainly suggest investors add to their watchlist.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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Related Tickers

9/2/2015 4:00 PM
NLNK $46.30 Up +2.94 +6.78%
NewLink Genetics C… CAPS Rating: **