Biotech and pharmaceutical stocks are some of the most fascinating and lucrative investments that an individual can make. Yet they can also be extremely volatile, taking investors on a roller coaster ride they may have never anticipated.

Fortunately, here at Motley Fool CAPS, we have a way of anticipating which companies are doomed to defeat and which are poised to pop. Our investing community of 165,000 people aggregates intelligence and ranks stocks according to their ability to outperform the market moving forward. A one-star stock is least likely to outperform, while five-star stocks are the true studs of the investing universe.

Today, we'll look at seven pharma companies that have a five-star ranking yet have been on a constant freefall and are trading at P/E's of less than 20. I've listed the most beaten-down stocks in rank order; hopefully we can gain some clarity to see if they have any chance of maintaining their status:


13-Week Price Change

P/E Ratio

CAPS Rating (out of 5)

SuperGen (Nasdaq: SUPG)




Myriad Genetics (Nasdaq: MYGN)




Teva Pharmaceuticals (Nasdaq: TEVA)




Immucor (Nasdaq: BLUD)




Johnson & Johnson (NYSE: JNJ)




Gilead Sciences (Nasdaq: GILD)




Tianyin Pharmaceutical (NYSE: TPI)




Data from Motley Fool CAPS as of 8/11/10.

The Foolish bottom line
There could be any number of reasons why some of these companies have been floundering the past couple of months. An FDA rejection, a failed drug trial, or a depleted drug pipeline could all be possible explanations for low P/E's and battered-down prices. Considering that earnings season is just about over, it'd be a smart move to check out the quarterly reports and see if there's good reason for the share prices moving lower -- if not, you may have an opportunity to grab some stellar five-star stocks at dirt-cheap prices.

Do you know why some of these stocks have been taken a hit? If so, share in the comment section below!

Jordan DiPietro owns no shares. Johnson & Johnson is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended buying calls on Johnson & Johnson. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.