These 2 Stocks Have Skyrocketed in 2026. Here’s Why I’d Stay Away

It's not that rare to see stocks in the volatile biotech industry that quadruple (or more) in value over a relatively short period. That's what has happened to Moderna (NASDAQ:MRNA) and Iovance Biotherapeutics (NASDAQ:IOVA) this year. Shares of the former are up 570%, while the latter has gained 433%. The question for investors is whether these companies are still worth investing in after their impressive runs this year. My view is that they aren't. Here is why.

1. Moderna

Moderna achieved a significant milestone this year. The company reported positive Phase 3 results for intismeran autogene in certain patients with melanoma. Intismeran autogene is an investigational personalized cancer vaccine, a category of products designed to target mutations specific to patients' own tumor cells.

This factor could lead to improved efficacy and long-lasting immunity. And until Moderna's recent achievement, no such candidate had posted strong Phase 3 clinical trial results. So, this was a breakthrough for the biotech leader, and intismeran autogene should become a commercial success.

However, Moderna's shares may have risen too much, too fast following this clinical win. The company's market cap is now $77 billion. Do intismeran autogene's prospects justify that? In my view, even taking into account Moderna's recently approved influenza vaccine, the answer is no.

Let's assume Moderna can generate $5 billion in profits by 2031, and suppose we require a 12% rate of return. The company would need a forward price-to-earnings ratio of 27.1 by 2031 for its market cap to be justified at today's levels. Will Moderna really command a forward earnings multiple that high by then, a factor based on expected growth?

For that matter, will the company generate $5 billion in profits by 2031? Note that Moderna developed intismeran autogene with Merck (NYSE:MRK), and the two companies will share the profits from this product equally. And according to some projections, intismeran autogene could generate over $1 billion in annual sales by 2031. For Moderna to rack up $5 billion in profits, it will have to launch more products -- its influenza and coronavirus vaccines won't allow it to make that much. But Moderna could face significant clinical setbacks.

The bottom line is that Moderna appears priced for perfection, and any problem with the company, especially related to intismeran autogene, will send the share price down significantly. That's why it's best to stay away from the stock.

2. Iovance Biotherapeutics

Iovance Biotherapeutics is an innovative company. The biotech developed Amtagvi, a medicine approved to treat certain patients with melanoma. Amtagvi is manufactured from patients' own cells. It is approved in the U.S. and several other countries, and its commercial rollout is going better than many expected.

In the second quarter, Iovance Biotherapeutics' revenue, mostly from Amtagvi, grew almost 66% year over year to $99 million. Importantly, the company's loss per share narrowed to $0.11, much better than the $0.33 reported in the prior-year quarter.

Iovance Biotherapeutics is getting closer to profitability, and the company still has significant expansion opportunities with Amtagvi. Iovance Biotherapeutics is seeking approval for this medicine in markets such as the U.K. and Switzerland.

The therapy could also eventually earn label expansions, including in lung cancer. So, Iovance's sales could grow at a good clip over the next few years while the company turns profitable. But would that allow Iovance Biotherapeutics to offer competitive returns? Not necessarily.

Note that the company now has a market cap of $6.6 billion, despite generating just $324.9 million in revenue over the trailing 12-month period and remaining unprofitable. Iovance's market cap is based on expected earnings, but despite the company's progress this year, significant uncertainty and risk remain regarding the timing and amount of future cash flows.

That partly stems from the fact that Amtagvi is a complicated medicine to manufacture -- the process takes about a month. It is also challenging to administer. It is offered only in dedicated authorized treatment centers and is given after patients have undergone chemotherapy.

There is also significant clinical and regulatory risk and uncertainty. Iovance Biotherapeutics may overcome all these challenges, expand its commercial footprint, launch Amtagvi in new markets, and generate consistent revenue and earnings over the medium term.

At current levels, that's what would need to happen for the stock to outperform the broader market, and there is little room for error. I am skeptical that Iovance Biotherapeutics can perform that well over the next five years. That's why I wouldn't buy the stock right now.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Iovance Biotherapeutics, Merck, and Moderna. The Motley Fool has a disclosure policy.