We recently compiled a list of the 10 Worst Performing Biotech Stocks in 2024. In this article, we are going to take a look at where BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) stands against the other biotech stocks.
Biotechnology Stocks: Navigating Volatility Amid Market Fluctuations and Industry Growth
Biotechnology stocks are among the most volatile in the market due to their high risk. The outcomes of FDA clinical trials and the effectiveness of their therapies in the real world might cause significant fluctuations in their pricing. The introduction of COVID-19 vaccinations in 2020 caused the biotech industry to soar to prominence. As Big Pharma started investing in acquisitions, investor interest increased in late 2023 and early 2024. But the enthusiasm faded, and for months, biotech stocks did not move. Few M&A transactions and initial public offerings (IPOs) broke the otherwise quiet period in the second quarter, which saw a steep fall in biopharma deal activity. Following a busy first quarter in which pharmaceutical companies finally began using their enormous cash reserves for acquisitions, there was a slowdown.
However, the reaction has been unexpectedly subdued, even though the industry was expecting a federal interest rate drop. The Federal Reserve lowered interest rates by half a percentage point earlier in September, which was a bigger drop than anticipated. Although it’s a good step, Mizuho Securities analyst Jared Holz thinks it’s unlikely that there will be a spike in fundraising, M&A transactions, or IPOs. A lot of biotech businesses have canceled programs and made large layoffs to save money in an attempt to survive in volatile markets. Although certain scientific projects may be revived as a result of the rate cut, Holz thinks it’s hard to gauge the effect. However, since the rate decrease, small-cap stocks have had “a bit more momentum,” the analyst noted, which is encouraging for the biotech industry.
Contrary to Holz’s perspective, 2024 has started off strongly for the biotechnology sector due to a rise in mergers and acquisitions as well as anticipations of falling interest rates. Therefore, estimates suggest that the worldwide biotechnology market might increase at a compound annual growth rate (CAGR) of around 14% from 2024 to 2033, reaching an astonishing $5.7 trillion. The market for agricultural biotechnology is also expected to develop at a 7.9% compound annual growth rate (CAGR) and reach $232 billion by 2032.
Despite the recent mixed results, Morningstar strategist Karen Andersen believes that biotechnology has a lot of potential and space for growth. Here is what she said about the sector:
“We still see tailwinds for the industry going forward. Smaller-cap names are still targets for acquisitions by bigger biopharma firms, and a wave of acquisitions has continued since late last year, particularly focused on oncology and immunology. We think obesity acquisitions are likely going forward, as big biopharma can bring development and commercialization expertise to multiple programs in midstage trials at small biotechs. Second, on a more fundamental level, new technologies and launches in new therapeutic areas are poised to boost productivity and drive biotech performance.”
In view of this, let’s take a look at some of the worst performing biotech stocks.
Our Methodology
For our methodology, we focused on stocks with a market capitalization exceeding $4 billion and evaluated their year-to-date (YTD) returns. We then identified stocks with poor YTD performance and ranked them according to their year-to-date returns, as of the close of October 22.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A pharmaceutical plant manufacturing a proprietary synthetic oral form of a C-type natriuretic peptide.
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)
YTD Return: -27.95%
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is a global biotechnology company founded in 1997 that focuses on developing and commercializing innovative therapies for rare genetic diseases, primarily affecting children. The company specializes in enzyme replacement therapies and other targeted treatments that address the underlying genetic causes of various disorders, aiming to serve small patient populations. The stock has fallen by nearly 28% since the start of 2024, which makes it one of the worst performing biotech stocks on our list.
In the latest quarter, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) achieved a revenue of $712.03 million, reflecting a 19.61% year-over-year increase, with earnings per share at $0.96. The VOXZOGO treatment is being administered to 3,500 children, particularly gaining traction in the U.S. among children under five, resulting in a 62% revenue increase.
Additionally, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) made progress in programs for hypochondroplasia, idiopathic short stature, Noonan Syndrome, Turner Syndrome, and SHOX deficiency. The company is focusing on ROCTAVIAN to support long-term revenue growth, aiming for profitability by the end of 2025 with a revised expense profile targeting annual expenses of around $60 million. The strong quarterly results and advancements in therapies underscore the company’s commitment to enhancing patient impact and shareholder value.
Parnassus Value Equity Fund stated the following regarding BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) in its first quarter 2024 investor letter:
“We also closed out two positions, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), to invest in other opportunities with more potential upside. BioMarin’s risk/return profile has become less attractive due to an ill-timed drug launch and increased competition. We sold our profitable position in BioMarin in favor of other higher-conviction positions in the portfolio.”
As of the third quarter of 2024, 54 hedge funds tracked by Insider Monkey held stakes in BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), up from 48 in the previous quarter. These stakes are worth over $1.77 billion in total.
Overall BMRN ranks 6th on our list of the worst performing biotech stocks in 2024. While we acknowledge the potential of BMRN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BMRN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.