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 Legend Biotech Corporation (NASDAQ:LEGN) 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 laboratory with workers in masks and lab coats focused on analyzing cell therapies.
Legend Biotech Corporation (NASDAQ:LEGN)
YTD Return: -28.39%
Legend Biotech Corporation (NASDAQ:LEGN) is a global biotechnology company focused on developing and commercializing cell therapies, particularly CAR-T (Chimeric Antigen Receptor T-cell) therapies. The company aims to create innovative cancer treatments, specifically targeting hematological malignancies and solid tumors. Its flagship product, CARVYKTI (ciltacabtagene autoleucel), is an FDA-approved CAR-T therapy for multiple myeloma. It is one of the worst performing biotech stocks on our list, falling by over 28% since the start of the year.
Legend Biotech reported strong earnings in the third quarter of 2024, with total revenue reaching $160.2 million, a 66.8% increase from the same period last year.
As of September 30, 2024, Legend Biotech Corporation (NASDAQ:LEGN) had $1.2 billion available in cash and cash equivalents. Its research and development expenses were $95.5 million, compared with $96 million in the prior year period. The company faces challenges, including ongoing losses, high R&D costs, dependence on collaborations—particularly with Johnson & Johnson for CARVYKTI, and intense market competition in the cell therapy sector.
Looking ahead, Legend Biotech Corporation (NASDAQ:LEGN) has potential for improvement by expanding its product pipeline with multiple CAR-T therapies, pursuing regulatory approvals that could boost sales, and leveraging manufacturing agreements with partners like Novartis to enhance production capabilities.
TimesSquare Capital U.S. Focus Growth Strategy stated the following regarding Legend Biotech Corporation (NASDAQ:LEGN) in its first quarter 2024 investor letter:
“We began buying shares in Legend Biotech Corporation (NASDAQ:LEGN), a biotechnology developer of cell therapies to treat blood cancers such as multiple myeloma and leukemia. The European Union approved the use of Legend’s Carvykti treatment of multiple myeloma and later the FDA followed suit. Some investors may have been concerned about possible delays as Legend ramps up production, and its price declined. Though with a long-standing agreement with Johnson & Johnson and a new partnership with Novartis, we see a long runway of growth ahead, so we initiated a position.”
Overall LEGN ranks 5th on our list of the worst performing biotech stocks in 2024. While we acknowledge the potential of LEGN 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 LEGN 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.