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The biotech industry could benefit from the growing demand for healthcare solutions. However, not all biotech stocks are well placed to take advantage of industry tailwinds. Investors may therefore seek to avoid fundamentally weak biotech stocks Bicycle Therapeutics (BCYC), CorMedix (CRMD) and 22nd Century Group (XXII). keep reading.
The innovative nature of the biotechnology industry offers investors the opportunity to collect significant returns when companies make breakthroughs. The biotech industry is expected to take advantage of the tailwinds as demand for healthcare solutions increases.
However, not all biotech stocks are well positioned to make a profit. To that end, a fundamentally weak biotech stock, Bicycle Therapeutics plc (BCYC), Comedix Co., Ltd. (CRMD), 22nd Century Group Co., Ltd. (XXII).
Before we dive deeper into the fundamentals of these stocks, let’s talk about what’s happening in the biotech industry.
Over the years, advances in scientific knowledge and technology have fueled the growth of biotechnology companies. Investments in the biotechnology sector are increasing rapidly. As the world’s population grows, so does the need for treatments and medicines. Rising chronic diseases and rapidly aging populations are driving demand for healthcare solutions.
Biotech companies are working to solve critical medical challenges such as cancer, diabetes and Alzheimer’s disease. This requires huge investments in research and development, clinical trials, manufacturing and marketing. These companies are also subject to intense scrutiny from health regulators, making their businesses vulnerable to external factors.
This often destabilizes biotech stocks. This volatility is a double-edged sword, and if a drug doesn’t work or isn’t brought to market, stocks can make huge gains and suffer significant losses. Given the number and complexity of regulations, investing in this area comes with a surprising reward/risk ratio.
Given these factors, it may be prudent to avoid fundamentally weak biotech stocks BCYC, CRMD and XXII. These stocks are currently trading at a premium.
Let’s take a closer look at those basics.
Bicycle Therapeutics plc (BCYC)
Headquartered in Cambridge, UK, BCYC is a clinical-stage biopharmaceutical company developing medicines for diseases that are not adequately treated by existing therapies. In addition, we work with biopharmaceutical companies and organizations to develop therapeutic programs.
In terms of future EV/sales, BCYC’s 17.44x is 375.3% higher than the industry average of 3.67x. 26.08 times Price/selling price 496.7% higher than the industry average of 4.37 times.
BCYC’s last 12-month asset turnover ratio of 0.03x is 90.1% lower than the industry average of 0.35x.
BCYC’s operating loss for the first quarter of the fiscal year ending March 31, 2023 increased 52.7% year-on-year to $41.8 million. The company’s net loss expanded 41.7% year-on-year to $39.06 million. Additionally, net loss per share widened to $1.30, up 39.8% year-on-year.
BCYC’s EPS is expected to continue to be negative for the quarter ending June 30, 2023. The company has a history of bleak earnings surprises, with three of his four quarters underperforming consensus EPS estimates. Shares have fallen 17.1% since the beginning of the year to close at $24.54.
BCYC’s Weak Fundamentals power rating. The overall rating is F, which corresponds to a strong sell in our own rating system. POWR Ratings values stocks by 118 different factors, each with its own weighting.
Within F rating biotechnology The industry ranks 376 out of 378 stocks. The stock receives a D grade for Growth, Value, Momentum, Stability, Sentiment and Quality. click here Access all BCYC ratings.
Comedix Co., Ltd. (CRMD)
CRMD is a biopharmaceutical company focused on developing and commercializing therapeutics to prevent and treat infectious and inflammatory diseases worldwide. Its lead product candidates are DefenCath and Neutrolin.
In terms of EV/Sales over the last 12 months, CRMD’s 2,905.68x is well above the industry average of 3.96x. In addition, 3,547.69x price/sales over the last 12 months is well above the industry average of 4.15x.
CRMD’s operating loss for the first quarter ended March 31, 2023 was $11.02 million, up 56.7% year-on-year. The company’s net loss increased 50.2% year-on-year to $10.57 million. Net loss per common share increased 33.3% year-over-year to $0.24.
CRMD’s EPS is expected to remain negative for the quarter ending June 30, 2023. Shares have fallen 1.4% over the past month, closing at $4.91.
CRMD’s POWR rating reflects its challenging outlook. The overall rating is F, which corresponds to “strong selling” in our own rating system. The stock ranks lowest in the industry. It has an F grade for quality and a D grade for growth, value, momentum, stability, and sentiment.
To check your CRMD’s POWR rating, click here.
22nd Century Group Inc. (XXII)
XXII is an agricultural biotechnology company focused on reducing tobacco harm, reducing tobacco nicotine and improving health and wellness through plant science for the life sciences and consumer products industries.
The company develops very low-nicotine tobacco and cigarette products under the names VLN King and VLN Menthol King, and also develops SPECTRUM research tobacco for use in independent clinical studies.
In terms of EV/Sales over the last 12 months, XXII’s 2.12x is 25.8% higher than the industry average of 1.69x. Similarly, the company’s expected price/sales of 1.45x is 27% higher than the industry average of 1.14x.
XXII operating loss increased 118.8% year-over-year to $17.82 million for the first quarter of the fiscal year ended March 31, 2023. The company’s net loss widened to $18.18 million, up 103.9% year-on-year. Adjusted EBITDA increased 122.9% year-on-year to $14.72 million. In addition, net loss per common share increased 60% year-over-year to $0.08.
XXII is expected to continue to post negative EPS for the quarter ending June 30, 2023. The company has a history of grim earnings surprises, falling short of consensus EPS estimates in three of its four subsequent quarters. Over the past year, the stock has fallen 61.4% and closed at $0.69 in last trade.
XXII’s bleak outlook is reflected in its POWR rating. This stock has an overall rating of F, which equates to a strong sell on our proprietary rating system. It ranks 377th in the biotechnology industry. It has an F grade for quality and a D grade for growth, value, stability, and sentiment.
In total, we assess XXII at eight different levels. In addition to the above, we gave XXII a Momentum grade. Get all XXII ratings here.
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BCYC shares were trading at $24.60 a share Wednesday morning, up $0.06 (+0.24%). Year-to-date, BCYC is down -16.89%. In comparison, the benchmark S&P 500 Index over the same period rose 7.86% for him.
About the Author: Malaika Alphonsus
Malaika’s passion for writing and interest in financial markets prompted her to pursue a career in investment research. With degrees in Economics and Psychology, she intends to help investors make informed investment decisions.
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