One way to get through downturns is to focus on the future. Equities won't stay down forever; in fact, bull markets tend to last far longer than bear markets. That means there will be plenty of time to recoup losses incurred during this period -- but only if you pick the right stocks.
Companies with questionable prospects are less likely to provide solid returns even when the market recovers from what it has gone through this year. With that in mind, let's look at three stocks that aren't worth buying right now: Biogen (BIIB +0.64%), Inovio Pharmaceuticals (INO +0.00%), and Ocugen (OCGN 2.18%).
NASDAQ: BIIB
Key Data Points
1. Biogen
Biogen has been grabbing headlines as its potential Alzheimer's disease (AD) drug, lecanemab, reported positive top line results from a phase 3 clinical trial. It was a rare win in the area of AD research, and Biogen itself is well-accustomed to how difficult it is to develop successful therapies that target this elusive illness.
After all, despite earning approval from the U.S. Food and Drug Administration (FDA) for Aduhelm, the AD medicine has not lived up to expectations. The U.S. Centers for Medicare and Medicaid Services (CMS) restricted Aduhelm's coverage, one of the many reasons it has not been generating the kind of sales Biogen would have hoped.
Will lecanemab avoid Aduheml's issues? Maybe, but it is worth noting that Biogen has a lot riding on this medicine. The rest of the company's portfolio is struggling due to the combination of patent cliffs and stiff competition. In the third quarter, Biogen's total revenue of $2.5 billion decreased by 10% year over year.
The company's shares skyrocketed following the news regarding lecanemab, but given the state of its approved drug lineup, the reverse could happen if there is any hiccup with this potential new medicine. After all, the company's stock price has skyrocketed or plunged in a short period several times over the past four years, and that was almost always a result of news related to its AD portfolio.
In my view, investors should wait for more news regarding lecanemab before purchasing shares of Biogen. If this new potential AD therapy earns the green light and can avoid the coverage issues Aduhelm has encountered, that will undoubtedly improve the biotech's prospects. But until then, there is still too much risk involved with this drugmaker.
NASDAQ: INO
Key Data Points
2. Inovio Pharmaceuticals
Inovio Pharmaceuticals has been on a wild ride over the past three years. In early 2020, it became a serious candidate in the race to develop a coronavirus vaccine thanks to its candidate, INO-4800. And even though it eventually fell behind due to regulatory headwinds, it decided to switch its strategy and target the COVID-19 booster market instead.
But recently Inovio decided to drop the INO-4800 booster project given the state of the coronavirus vaccine market, which is highly competitive. Inovio has a handful of other candidates. The most advanced is VGX-3100, a potential vaccine that targets HPV-associated cervical dysplasia, a precancerous condition.
Unfortunately, there are issues with VGX-3100 too. Although it reported positive results in a phase 3 trial in March 2021, these results weren't impressive enough. Inovio planned to conduct another late-stage study for VGX-3100, and hoped that it would be enough to submit an application for the potential vaccine.
But regulators in the U.S. informed the company that even this second phase 3 study would be insufficient to support approval for VGX-3100. The company will have to run another trial at the very least. That makes it unlikely that VGX-3100 will hit the market anytime soon, if it does at all. And given that it is Inovio's most advanced non-COVID candidate, that does not bode well for the company. Further, funding may become an issue.
Inovio Pharmaceuticals had $281.9 million in cash and equivalents as of the third quarter, compared to $401.3 million at the end of 2021. The company expects its cash runway to extend until 2025. Still, small-cap biotechs aren't shy about raising funds through dilutive forms of financing, especially if their expenses rise due to increased clinical efforts.
One should expect Inovio Pharmaceuticals to resort to such forms of financing well before its cash reserves deplete, especially considering it has no products on the market. Given all these challenges, investors had better stay a safe distance away from Inovio Pharmaceuticals right now.
NASDAQ: OCGN
Key Data Points
3. Ocugen
Ocugen also tried to enter the coronavirus vaccine market. It bought the rights to develop and market its candidate, Covaxin, in North America from an Indian company called Bharat Biotech. But the company's plan to earn authorization for Covaxin in the U.S. fell through as regulators urged Ocugen to pursue full approval instead, a much longer process.
Ocugen is currently running a phase 2/3 clinical trial for Covaxin in the U.S. By the time it earns approval (if it does), demand for COVID vaccines will likely have dropped substantially, and most of whatever remains will be highly competitive. Meanwhile, Ocugen applied for authorization for Covaxin in Canada over a year ago, and it still has yet to earn the nod.
Regulators north of the border are in no hurry to add Covaxin to the list of approved vaccines, which speaks volumes. Covaxin is authorized in Mexico, but it is doubtful whether Ocugen will generate enough sales from the country to justify the effort and investment it put in.
Note that the company isn't giving up on the coronavirus vaccine market. In September, it announced a deal with Washington University in St. Louis. Ocugen will develop and commercialize an intranasal COVID-19 vaccine candidate initially created by the university. The biotech will target various regions with this vaccine, including the U.S., Europe, and Japan.
Does this improve Ocugen's hopes in this space? If it does, it's not by much. Ocugen will still have to jump through various clinical and regulatory hoops while other companies continue to dominate the market.
Further, most of the company's other candidates are still years away from earnings approval. Ocugen generates little to no revenue, and is consistently unprofitable. In short, this vaccine maker is far too risky, especially as there are more attractive biotech stocks to consider.
