Is Unity Biotechnology Stock a Sell? The drug game isn’t easy, and this is a lesson Unity Biotechnology Inc (NASDAQ:UBX) learned the hard way in August 2020.
The company’s stock price plummeted by 75% at the end of the month, after experiencing gains in the preceding quarter.
Unity Biotechnology is an anti-aging startup focused on senescent cells. It has two major product developments in clinical trials in 2020, and the results of these trials heavily impact the firm’s ability to get money in the aftermath of health tech failures like Theranos.
Now the company is experiencing all-time lows, and investor confidence is waning as one of its products, UBX0101, shows dismal results in its phase 2 clinical study.
While the company’s approach to developing a drug pipeline is nothing new, it was untested for decades due to insufficient life technologies. Now it’s time to decide is Unity Biotechnology stock overvalued, or has it deflated to its realistic worth based on the available information?
Why Did Unity Biotechnology Stock Fall?
The reason for Unity’s stock value falling is directly tied to the results of its second-phase clinical results for UBX0101. The drug is meant to treat moderate to severe osteoarthritis (OA) in the knee.
The theory is that by inhibiting p53/MDM2 cells through localized therapy, the drug could mitigate pain related to OA, ophthalmology, pulmonary, and musculoskeletal disease.
This small-molecule protein interaction destroys the senescent cells, which theoretically should reduce the pain.
But that’s not what the results are showing so far.
Midway through the Phase 2 study, the drug’s 12-week results on 183 patients failed to show any noticeable difference between the treatment at any dosage and placebo.
This means the company is abandoning its Phase 3 clinical trials, which means the company is going to focus on its ophthalmology, pulmonary, and neurology treatments that are still far behind clinical trials.
It will continue through the 24 weeks to complete the trial, but the outlook isn’t good so far. This pivot could leave the company many years from generating revenue and has investors feeling uneasy.
Is Unity Biotechnology Stock A Sell?
The problem with selling Unity Biotechnology stock at this point is you’ll be taking a huge loss. If you bought in at the May 2018 IPO, share prices were $17.00, with 5,000,000 shares being sold to the public.
It was already struggling to maintain that valuation for the past two years. Upon announcing this news dropped the stock dropped to the $3.00 range. This means if you invested $1000 in May 2018, your investment in Unity Biotechnology is now worth less than $180.
At this point, selling the stock to recover the pennies from your dollar may be pointless, especially if one of the treatments in the company’s drug pipeline shows positive results. You may never recoup your full investment, but there’s still a chance that researching the science behind senolytics creates a miracle anti-aging drug.
Selling Unity Biotechnology stock may be necessary to cut your losses, but you’ll need a buyer. Let’s look at why anyone would buy UBX.
Risks of Buying Unity Biotechnology Stock
Unity’s second product in its drug pipeline is UBX1967, and it’s a leading candidate to be studied in relation to a range of age-related eye diseases, like macular degeneration.
As we age, our cells eventually reach a state called cellular senescence. In this state, the cell no longer repairs or duplicates when damaged, and it’s often associated with a range of issues.
It’s still unclear whether this cellular state is actually related to them, though, so in many ways the emerging science is unproven.
The risk associated with buying Unity Biotechnology stock is that the underlying science proves false. As with most sciences, this is simply a strong theory until applied successfully in real life.
All science-based stocks have this risk, as underlying intellectual property (IP) is deemed worthless without a proven usage.
However, should even one of the proposed treatments Unity is researching show signs of efficacy, investors who buy in right now are much better positioned to gain a profit. Investing $1,000 at the $3 range would net you about 333 shares. Should it return to the IPO price, you’d be holding $5,666.67 worth of UBX.
At this point, Unity is essentially a penny stock. Should clinical trials fail, the company could still pursue foreign markets or pivot its research into some as-yet-undiscovered usage for non-FDA approved supplemental treatments. Until there’s more information, you’re investing in possibilities that may not materialize in our lifetime.
Can Unity Biotechnology Recover?
With all that said, a non-coronavirus pharmaceutical or biotechnology stock could be exactly what the doctor ordered for your investment portfolio.
Pain is a subjective matter – we all experience it in different ways, depending on our tolerance, treatments, lifestyle, diet, and other factors.
The pain scales used in FDA clinical trials are the best we have available, but they’re not an exact science. We simply don’t know yet how this cellular phenomenon can be leveraged for overall population health.
If it does prove efficacy for even one of its treatments, Unity has a chance to recover. The 2020 novel coronavirus pandemic was unprecedented, and there’s no telling what the future will bring.
Is Unity Biotechnology Stock Overvalued?
As of now, Unity Biotechnology is valued exactly where it should be. While it certainly has promise, its treatments are as-yet-unproven.
The early buzz has worn off, and the disappointing clinical results announced in August 2020 put investors off. The current price is only a fraction of the IPO price, meaning it appears like the IPO was overvalued at this time.
The price of Unity Biotechnology is exactly where it should be in the penny stock range until it proves efficacy of its drug pipeline.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.