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 Cytokinetics, Incorporated (NASDAQ:CYTK) 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 lab technician using a microscope to examine the biopharmaceutical company's molecules.
Cytokinetics, Incorporated (NASDAQ:CYTK) is a late-stage biopharmaceutical company focused on developing muscle activators and inhibitors for diseases with impaired muscle function. The company specializes in muscle biology and performance, creating small-molecule drug candidates designed to enhance myocardial muscle function and contractility.
In Q3 2024, Cytokinetics reported revenue of nearly $0.5 million, which saw a 22.4% growth from the same period last year. The company's cash position also remained resilient as it ended the quarter with approximately $1.3 billion in cash and cash equivalents.
Cytokinetics, Incorporated (NASDAQ:CYTK) underperformed this year due to widening losses despite reduced R&D expenses, high cash burn, and regulatory uncertainties around Aficamten’s approval. However, the potential for improvement exists through a strong pipeline focused on cardiac muscle programs, a robust cash position for R&D, and a $575 million strategic collaboration with Royalty Pharma.
As of Q3 2024, 61 hedge funds in the Insider Monkey database held shares in the stock. The largest stakeholder in the company for that quarter was Polar Capital with stakes worth over $124 million. Despite Street analysts' consensus Buy rating on CYTK, it is one of the worst performing biotech stocks on our list with a year-to-date decline of nearly 35%.
Overall CYTK ranks 3rd on our list of the worst performing biotech stocks in 2024. While we acknowledge the potential of CYTK 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 CYTK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
