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 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
Teva Pharmaceutical


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

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.

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The article Why NewLink Is Poised to Underperform originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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