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The biotech industry witnessed a rebound in 2017 despite facing some odds in the previous year. The industry faced some challenges like rising competition, pipeline setbacks, slowdown in growth of mature products and generic competition for certain key drugs in 2016.

However, we have seen the trend reversing in 2017 with more FDA approvals, new product sales ramp up, R&D success and innovation, strong clinical study results and continued strong performance of some legacy products. These positive factors are expected to continue to contribute to the sector’s growth through the rest of this year and maybe the next.

The NASDAQ Biotechnology Index has gained 25.6% so far this year. This is in sharp contrast to last year’s performance when the index was down 22%.

Some major recent events that contributed to the rally were the announcement by Gilead Sciences (GILD - Free Report) to acquire immunotherapy focused company Kite Pharma , and the second was the FDA approval of the first gene therapy in the United States – Novartis AG’s (NVS - Free Report) Kymriah.

Recently, the FDA also approved the first cancer biosimilar – Amgen (AMGN - Free Report) and Allergan’s Mvasi, a biosimilar version of Roche’s (RHHBY - Free Report) blockbuster cancer drug, Avastin.

Though the momentum in the biotech sector is likely to continue, it’s a good idea to avoid a few stocks in the industry which will not prove to be prudent additions to your portfolio.

4 Sell-Rated Stocks to Avoid

Getting rid of underperforming stocks at the right time helps maximize portfolio returns. It will be tricky to avoid stocks from an industry which is doing well. However, we have taken the help of the Zacks Stock Screener to shortlist the stocks that should be dumped from the vast universe of biotech sector. We have picked stocks that carry a Zacks Rank #4 (Sell) or 5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further we narrowed down the list, and selected those which have a VGM Score of D or F. Under no circumstance should one buy a stock with a Zacks Rank #4 (Sell) or #5 (Strong Sell) and a VGM Score of D or F.
We have also taken into consideration stocks that witnessed negative estimate revisions for the current year as well as the next year over the last 60 days as these are likely to see further negative estimate revisions and should be dumped.

Clearside BioMedical, Inc. (CLSD - Free Report) : a late-stage clinical biopharmaceutical company is developing first-in-class drug therapies to treat back-of-the-eye diseases. The company has been incurring losses since its inception and also expects to incur losses over the next few years. Currently, this Alpharetta, GA-based company carries a Zacks Rank #4 and has a VGM Score of F.

Further, over the last 60 days, the Zacks Consensus loss Estimate has widened by 19.8% for 2017 and 15% for 2018. Shares of the company have declined 14.4% year to date, underperforming the industry’s gain of 16.4%.

Abeona Therapeutics Inc. (ABEO - Free Report) a clinical-stage biopharmaceutical company focused on developing novel therapies for life-threatening rare genetic diseases.  The company currently carries a Zacks Rank #4 and has a VGM Score of F. Over the last 60 days, the Zacks Consensus loss Estimate has widened by 24.5% for 2017 and 21.7% for 2018.

Reata Pharmaceuticals, Inc. (RETA - Free Report) a biopharmaceutical company currently carries a Zacks Rank #4 and has a VGM Score of F. Over the last 60 days, the Zacks Consensus loss Estimate has widened by 39.5% for 2017 and 23.8% for 2018.

Urogen Pharma Ltd. (URGN - Free Report) is a clinical-stage biopharmaceutical company developing treatments to address unmet needs in the field of urology. The company currently carries a Zacks Rank #4 and has a VGM Score of D. Over the last 60 days, the Zacks Consensus loss Estimate has widened by 43.3% for 2017 and 21.9% for 2018.

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