NERV Stock Is on the Move, but Is It a Buy?

With a $49.24 million market cap, Minerva Neurosciences Inc. (NERV) is a clinical-stage biopharmaceutical company that develops drug candidates for the treatment of central nervous system (CNS) diseases.

The company’s lead candidates include roluperidone to treat schizophrenia and MIN-301 for treating Parkinson’s and other neurodegenerative disorders.

On August 22, NERV submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for roluperidone to treat negative symptoms in patients with schizophrenia. The company has been in talks with the FDA regarding the NDA evaluation of roluperidone following its Type C meeting in March 2022.

As a result of the NDA, the stock gained 263% over the past month to close the last trading session at $9.22.

However, NERV’s financial condition spells bleak prospects for the stock. For the second quarter of fiscal 2022, the company reported a net loss of $8.72 million. On a per-share basis, its loss stood at $1.63 for the period. As of June 30, its current and total liabilities came in at $3.41 million and $73.34 million, respectively.

Furthermore, investors should be concerned about the company’s cash burn situation. Currently, the company isn’t generating any revenue and is spending increasing cash to fund its growth. As of June 30, 2022, its cash and cash equivalents came in at $49.75 million, compared to $60.76 million as of December 31, 2021.

Here is what I think could influence NERV’s performance in the upcoming months:

Poor Financials

For the fiscal 2022 second quarter ended June 30, 2022, the company reported a loss from operations of $6.97 million. Its net loss amounted to $8.72 million, while its net loss per share amounted to $1.63. As of June 30, 2022, the company’s cash and cash equivalents came in at $49.75 million, compared to $62.20 million as of December 31, 2021.

In addition, as of June 30, 2022, NERV’s current liabilities and total liabilities stood at $3.41 billion and $73.34 million, versus $2.82 million and $69.15 million, respectively, as of December 31, 2021.

Bleak Growth Prospects

Analysts expect the company to report a loss per share of $1.41 in the fiscal 2022 third quarter (ending September 2022). The consensus loss per share for the fiscal year 2022 (ending December 2022) is expected to come at $4.29. Furthermore, Street expects the company's loss per share for fiscal 2023 to come in at $5.64, worsening 32.4% year-over-year.

Low Profitability

In terms of trailing-12-month gross profit margin, NERV’s 38.56% is 29.2% lower than the 54.49% industry average. And its trailing-12-month ROCE, ROTC, and ROTA of negative 352.65%, 128.49%, and 352.65% compare to negative 38.46%, 21.27%, and 29.63% industry averages, respectively.

POWR Ratings Reflect Bleak Prospects

NERV's overall D rating translates to a Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock is ranked #287 out of 468 stocks in the F-rated Biotech industry

Beyond what I have stated above, we have also given NERV grades for Stability, Quality, Sentiment, Growth, Value, and Momentum. Get all NERV ratings here.

Bottom Line

Biopharmaceutical company NERV reported disappointing financial results in the second quarter of 2022. Furthermore, NERV’s prospects look bleak as analysts expect the company’s loss to worsen in the fiscal 2022 and 2023.

Although the NERV stock surged significantly recently after the company submitted an NDA for a schizophrenia candidate, given its poor financials, weak growth prospects, and lower-than-industry profitability, we think it could be wise to avoid this stock now.

How Does Minerva Neurosciences Inc. (NERV) Stack Up Against its Peers?

NERV has an overall POWR Rating of D. One could also check out these other stocks within the Biotech industry with an A (Strong Buy) rating: Biogen Inc. (BIIB), Incyte Corporation (INCY), and Taisho Pharmaceutical Holdings Company Ltd. (TAIPY).

NERV shares rose $0.03 (+0.33%) in premarket trading Tuesday. Year-to-date, NERV has gained 43.88%, versus a -16.33% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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