Biotech Investing Guide: 3 Stocks To Buy And 3 To Avoid

3 Names to Avoid

We recommend avoiding names that offer little growth or opportunity for a take-out or are developing drugs that are likely to face regulatory hurdles, and which carry a Zacks Rank #4 (Sell) or Zacks Rank #5 (Strong Sell).

Tarrytown, NY-based Regeneron Pharmaceuticals, Inc. (REGN - Analyst Report), a Zacks Rank #5 stock, delivered disappointing fourth quarter results and is witnessing downward revisions in earnings estimates.The company’s recently launched PCSK9 inhibitor, Praluent, performed well below expectations and its launch trajectory is slated to be slower than expected. Moreover, the growth trajectory of the company’s key drug, Eylea, is expected to slow down this year.

San Diego, CA-based Arena Pharmaceuticals, Inc. (ARNA - Analyst Report) is facing challenges growing sales of its obesity treatment, Belviq. Although there is significant unmet need in the obesity market, certain issues remain. These include the tendency of healthcare providers to treat symptoms of obesity rather than the disease itself, a narrow focus on certain patient types for treatment and historically low third-party insurance coverage. All these factors could limit uptake of the drug.

In fact, on the third quarter 2015 update, Arena’s partner Eisai had acknowledged challenges in the U.S. anti-obesity market - Arena said that Eisai expects slow growth in the obesity market in general with Belviq expected to continue to grow slowly until results from the cardiovascular outcomes trial (CVOT) are out and included in the product label, if positive. But results from the CVOT study are not expected until 2018. Moreover, competition in the obesity market is increasing with the entry of treatments like Saxenda and Contrave. This Zacks Rank #4 stock has been witnessing downward estimate revisions.

Cambridge, MA-based Momenta Pharmaceuticals Inc. (MNTA - Analyst Report), a Zacks Rank #4 stock, is facing challenges in growing sales of Glatopa, its generic version of Teva’s once-daily Copaxone 20 mg. Teva has switched about 75% of its 20 mg patients to the thrice-weekly 40 mg formulation of Copaxone. Moreover, with Teva aggressively defending the remaining share for the 20 mg formulation, it may be a while before Glatopa sales pick up.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or ...

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