(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Regeneron Pharmaceuticals Inc. (REGN), Alnylam Pharmaceuticals Inc. (ALNY), and Tesaro Inc. (TSRO) have struggled since late 2017. Since November 10, the three stocks have all fallen by more than 15 percent through February 12, while the S&P 500 and Nasdaq Biotech ETF (IBB) have risen by nearly 3 percent.
To make matters worse for these three floundering biotechs, a technical analysis of their charts suggests more losses lie ahead. Each company could be looking at additional losses of up to 25 percent.
Tesaro shares have fallen hard and are down nearly 70 since peaking at around $190 about a year ago, as the competition to treat ovarian cancer picks up. The bad news is that the technical chart suggests that more losses may lie ahead for the stock and could result in the price declining by another 16 percent to roughly $49, from its closing price of $58.60 on February 12.
There was a considerable gap created in the chart at the end of June 2016 after Tesaro first released positive data for its drug to treat ovarian cancer. But now, the stock looks to be making a roundtrip to fill that gap.
Additionally, despite the relative strength index (RSI) flashing oversold conditions on two occasions, the RSI continues to trend lower, indicating the stock is likely not finished falling. (See also: Overbought Or Oversold? Use The Relative Strength Index To Find Out.)
Shares of Alynlam have stalled at approximately $140 since November, and have since fallen to roughly $117. But the stock may not be finished dropping, and could decline another 25 percent to about $89 from its closing price of $117.30 on February 12.
The stock gapped higher at the end of September 2017 after presenting positive data for its RNAi therapeutic patisiran. But like Tesaro, Alnylam is also looking to fill the gap created. Additionally, the stock appeared to hit a wall of sellers around $140, while trading volume has continued to decline. Should Alynlam stock fall below $113, the next level of support comes at $89.
Regeneron shares have been a significant disappointment since peaking at the end of June 2017, having fallen by nearly 35 percent, as competition against its drug Dupixent has increased.
Regeneron recently fell through a critical support level around $352 on above-average volume. With a crucial support level broken, the stock has room to drop to around $275, a decline of 20 percent from its closing price of $342.67 on February 12.
For these three stocks, the risk continues to point in a lower direction for now.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company’s actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer’s bio and his portfolio’s holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.