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Why NewLink Genetics Corp (NLNK) Is Poised to Underperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, biotechnology company NewLink Genetics Corp (NASDAQ:NLNK) has received the dreaded one-star ranking.

With that in mind, let’s take a closer look at NewLink and see what CAPS investors are saying about the stock right now.

NewLink facts

Headquarters (founded) Ames, Iowa (1999)
Market Cap $259.8 million
Industry Biotechnology
Trailing-12-Month Revenue $1.7 million
Management Founder/Chairman/CEO Charles Link
President/COO/Chief Medical Officer Nicholas Vahanian
Return on Capital (average, past 3 years) (79.6%)
Cash/Debt $28.3 million / $1.5 million
Competitors Astellas Pharma
Eli Lilly & Co. (NYSE:LLY)
Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)

Sources: S&P Capital IQ and Motley Fool CAPS.

Eli Lilly & Co. (NYSE:LLY)On CAPS, 41% of the 22 members who have rated NewLink believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those bears, All-Star zzlangerhans, listed a few reasons to remain cautious about the opportunity:

NewLink’s most advanced clinical program is HyperAcute Pancreas, but virtually their entire clinical pipeline is dependent on the principle of HyperAcute Immunotherapy. …

1. The progression to a phase III trial of HyperAcute Pancreas followed flawed phase I and phase II trials that were controlled and failed to adequately establish dose optimization. Further details about this argument can be found at this link. …

2. NewLink raised [$49M] in a dilutive financing earlier this month three weeks ago. While it is not uncommon for a developmental biopharma to dilute in advance of phase III trial results, it is unusual for one to do so to such a marked degree just a month before an interim futility analysis.

3. Feuerstein-Ratain rule. I can already hear the shrieks. The rule is not applicable! The market cap has to be less than [$300M] four months before the topline data, not interim data! Once again, the point isn’t the rule itself but the foundation of the rule. There is no large pharmaceutical partner for HyperAcute Immunotherapy and institutional ownership is only 16%. That demonstrates a lack of interest from the true experts who depend on their ability to evaluate phase III candidates to maintain employment. …

4. HyperAcute Immunotherapy is facile. This is the hardest plank to defend, but it is what made me skeptical of NewLink even before I looked at the early trials and they diluted. … Scientists have been struggling with cancer immunotherapies for at least thirty years and aside from rare and limited successes there hasn’t been much of an impact.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

The article Why NewLink Is Poised to Underperform originally appeared on and is written by Brian Pacampara.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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