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 Immunovant, Inc. (NASDAQ:IMVT) 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 closeup of a scientist working with a microscope in a biotech laboratory.
Immunovant, Inc. (NASDAQ:IMVT)
YTD Return: -30.52%
Immunovant, Inc. (NASDAQ:IMVT) is a clinical-stage immunology company focused on developing innovative therapies for autoimmune diseases. The company’s primary focus is on creating anti-FcRn (neonatal Fc receptor) antibodies, specifically IMVT-1402 and batoclimab, which aim to reduce harmful immunoglobulin G (IgG) autoantibodies in patients with various autoimmune conditions.
Immunovant, Inc. (NASDAQ: IMVT) has faced stock price challenges due to concerns over competitor argenx SE’s failure in pemphigus vulgaris, raising doubts about the FcRn class’s market potential. Coupled with significant cash burn, these factors have affected investor confidence.
However, Wall Street remains optimistic about Immunovant, Inc. (NASDAQ:IMVT)’s long-term growth, particularly after the company shifted its focus to IMVT-1402 as its lead drug candidate. Experts believe this decision is strategic, as IMVT-1402 has the potential to be best-in-class and is expected to enter 4-5 potentially registrational trials in the coming fiscal year.
Recently, Immunovant, Inc. (NASDAQ:IMVT) reported positive results from its Phase 2a trial of batoclimab for Graves’ Disease, further boosting market optimism about addressing this large unmet commercial need.
Baron Funds, an investment management company, released its first quarter 2024 investor letter. Here is what the fund said:
“Somewhat offsetting the above was adverse stock selection in biotechnology and health care supplies coupled with cash exposure amid favorable market conditions. Weakness in biotechnology was mainly due to disappointing performance from Rocket Pharmaceuticals, Inc. and Immunovant, Inc. (NASDAQ:IMVT), whose shares fell double digits in the period. Immunovant is focused on autoimmune disorders targeting the FcRn mechanism of action. A host of concerns weighed on Immunovant’s stock price, the most critical of which was competitor argenx SE’s failure in pemphigus vulgaris, which has raised questions about the addressable opportunity for the FcRn class. Overall, we continue to believe FcRn will command billions in revenue and that Immunovant has one of the two competitive offerings in the space. We are most optimistic about Immunovant’s development plans in Graves’ disease, a large commercial unmet need in which they currently have no competition.”
Immunovant, Inc. (NASDAQ:IMVT) was a part of 36 hedge fund portfolios at the end of Q3 2024, compared with 41 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of over $685 million.
Overall IMVT ranks 4th on our list of the worst performing biotech stocks in 2024. While we acknowledge the potential of IMVT 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 IMVT 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.