2 Spiraling Drug Stocks at Risk for Downgrades

Despite steep 2018 deficits, analysts maintain mostly "buy" ratings on the biotechs

The U.S. stock market has rebounded sharply from last Friday's sell-off, as tariff tensions between Washington and Beijing once again recede. Among individual stocks making big moves are skin specialist Menlo Therapeutics Inc (NASDAQ:MNLO), Nuplazid parent ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), and gene therapy name Regenxbio Inc (NASDAQ:RGNX). Here's a quick look at what's moving the three drug stocks.

Menlo Therapeutics Itch Treatment Fails Mid-Stage Study

Menlo Therapeutics shares have plummeted 73.7% to trade at $9.27,a record low, after the drugmaker said its itch and cough treatment, Serlopitant, did not meet its goals in a mid-stage study. What's more, MNLO was downgraded to "hold" from "buy" at Jefferies, which also slashed its price target by $21 to $20, citing "greater level of risk for remaining programs."

MNLO stock first began trading publicly on Jan. 25, and settled the session at $28.71-- well above its $17 initial public offering (IPO). Since then, the shares have stuck to a $30-$40 trading range, closing last week right in the middle at $35.22. Analysts were upbeat, too. Heading into today, all four brokerage firms maintained a "strong buy," and the average 12-month price target was $35.50. This puts the sinking security at risk for more bearish brokerage notes, should this sell-off continue.

ACADIA Pharmaceuticals Stock Hits Five-Year Low

A scathing CNN report detailing the number of deaths that have been associated with ACADIA Pharmaceuticals' Parkinson's disease drug, Nuplazid, which is used to treat patients suffering from psychosis. In reaction, ACAD stock bottomed at nearly five-year low of $15.74 earlier, and was last seen down 26.2% to trade at $15.90.

The shares have been stair-stepping lower since topping out at an annual high of $41.20 last October. And while a late-February bear gap had the shares slicing through long-term support in the $26-$27 region, the recent floor near $21 was quickly broken in today's slide, with ACAD stock now down 47% on the year.

ACADIA Pharmaceuticals seems overdue for a round of bearish brokerage notes, too, which could send the shares even lower. All six covering analysts maintain a "strong buy" rating, and the consensus 12-month price target of $50.57 more than triples the stock's current price.

Regenxbio Shares Pop on $180 Million AveXis Payment

Regenxbio shares have shot up 17.1% to trade at $31.85, on news the $8.7 billion buyout of AveXis by Novartis will result in a $180 million licensing agreement payment to RGNX. Adding to the bullish backdrop is Mizuho's upwardly revised price target to $29 from $28 for the stock, though this still sits below the current trading price, as well as the average 12-month price target of $43.57.

It's been a choppy year of trading for RGNX, though the equity has added 89% in the past 12 months, thanks to several sharp bounces off its 200-day moving average. Short sellers are likely feeling the heat, too, which could be driving some of today's upside. More than two million RGNX shares are sold short, accounting for 8.5% of the stock's available float, or 4.2 times its average daily pace of trading.