One of the oldest maxims in investing is that higher risk produces greater returns. That maxim holds particularly true across penny biotech stocks. Developing therapeutics to cure diseases is a complex business model fraught with the potential to fail at many points.
Developmental and regulatory time frames are long, introducing multiple potential points of failure. The capital necessary for research and development is substantial. So on and so forth. The result is that many upstart biotech firms fail to commercialize, taking their equity down in the process.
Those firms that make it through and reach commercialization are rewarded with the spoils of success. They pay shareholders handsomely with returns that can turn a small investment into a fortune. The firms discussed below still have reasonable chances of commercialization and the potential to reward investors handsomely. Even if they don’t ultimately reach success, they can still reward investors handsomely as they pass milestones in the development process.
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FibroGen (NASDAQ:FGEN) continues on the path toward commercialization for multiple drugs, targeting multiple diseases. The firm’s leading candidate drugs include Pamrevlumab, Roxadustat and several other oncology therapeutics.
Pamrevlumab is currently in Phase 3 clinical trials for the treatment of a certain form of pancreatic cancer. It is also concurrently being studied in phase 2/3 clinical studies for metastatic pancreatic cancer. Roxadustat is a drug that induces the production of red blood cells and is approved in multiple countries for use in treating anemia in chronic kidney disease populations. A supplemental New Drug Application (sNDA) has been submitted in China for the drug. It has been accepted for review by the China Health Authority.
One of the more compelling aspects of FibroGen as an investment in financial performance. During the first quarter, revenues approached $56 million, up from $36 million a year earlier. The increased revenues allow the company to slash its net losses from $76.7 million to just below $32 million this quarter. Shares currently trade for $1.30 with a consensus target price of $5 and analyst targets ranging as high as $11.
Nuvectis Pharma (NVCT)
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Nuvectis Pharma (NASDAQ:NVCT) is another oncology-oriented biotech stock. It’s particularly interesting as a potential investment because while it is in the pre-revenue stages, it is also highly regarded and priced higher than one might expect.
Shares currently trade for $6.21, which is quite high for a pre-revenue biotech firm. Those shares have coverage from a single analyst who expects their value to rise to $22 in the future. Investors who look at the company’s financial statements will see that it is basically treading water. NVCT has more than $19 million in liquidity and loses roughly $4 million a quarter on R&D and administrative costs.
The reason for optimism surrounding Nuvectis Pharma is simple: Lead candidate drug NXP800 has been granted fast-track designation by the FDA in platinum-resistant ARID1a-mutated ovarian cancer. It’s currently in Phase 1b studies and has the potential to pass through multiple milestones moving forward that, if successful, will reward investors with strong and immediate returns.
Relmada Therapeutics (RLMD)
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Relmada Therapeutics (NASDAQ:RLMD) is one of many promising late-stage biotech firms developing therapeutics to address diseases of the central nervous system. Those diseases include disorders with high unmet needs including major depressive disorder (MDD), a primary focus of the firm.
REL-1017 is one of the company’s lead candidate drugs. The drug is in late-stage development for the treatment of MDD. It is being studied to understand the potential of the drug as a fast-acting, once-daily antidepressant treatment. It is currently being studied in two Phase 3 double placebo-controlled studies.
The company also acquired the rights to a psilocybin and derivatives program in 2021. That program has been rebranded as REL-P11 and is being studied for its efficacy in both neurogenesis and in ameliorating the effects of neurodegenerative conditions.
Psilocybin and other psychoactive drugs are currently a hot area of research. Although Ralmada Therapeutics is in the pre-revenue stages and shares trade for $3.04, the sole analyst with coverage believes those shares could be worth as much as $25 in the future.
Anixa Biosciences (ANIX)
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Anixa Biosciences (NASDAQ:ANIX) develops treatments and vaccines to address unmet needs in ovarian cancer and breast cancer. Shares currently trade for less than $3, while the single analyst with coverage believes the stock will rise to $12 in value.
The company very recently commenced treatment on the 5th patient in an ovarian cancer CAR-T clinical trial. The company is enrolling patients in its first-in-human trial who were unresponsive to at least two prior therapies. Safety was confirmed in the first three-patient cohort. The company is tripling the dose in patients four and five in order to establish dosage tolerability.
The company also recently expanded its partnership with the Cleveland Clinic to develop cancer vaccines. That partnership aims to further the development of vaccines targeting rare and aggressive forms of breast and ovarian cancer. Anixa Biosciences will continue to be an interesting stock for investors, especially in light of strong positive news on multiple fronts.
Genenta Science (GNTA)
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Let’s begin discussing Genenta Science (NASDAQ:GNTA) stock in relation to its safety as an investment overall. Readers have noticed that multiple recommendations above have only one analyst rating. I don’t have to explain why that introduces a lot of risk overall. The thing I want to note about Genenta Science is that it has two target prices, one at $15 and the other at $25. Thus, the consensus price is $20. Genenta Science shares trade at $3.30.
While the company is attractive for its raw return potential, I should also note that there are a lot of unknowns with this company. It is an Italian company and doesn’t provide a lot in the way of information. It’s a lot easier to find updates on domestic companies. The information we do have is a financial report dating from the end of 2023. It simply shows the company is not producing much in the way of revenues.
The stock offers so much potential because the company is developing a stem cell platform for the safe treatment of solid tumors. It has demonstrated the potential to reprogram the cells of glioblastoma patients.
Affimed (AFMD)
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Affimed (NASDAQ:AFMD) continues to develop therapeutics for the treatment of lymphoma, a grouping of blood cancers that originate in the lymphatic system.
The stock is interesting for a number of reasons both operational and developmental. The company reduced its workforce by 50% in 2023 in an effort to streamline operations.
AFMD is redirecting its resources to three lead candidate programs following the restructuring. That leads me to my next point: The company is doing well from a developmental perspective. Each of those three candidate programs progressed in 2023. Affimed awaits further data readouts from those programs in Q2 and expects dose escalation. That implies current safety and will be used to establish the upper tolerability for those respective programs.
As with any penny biotech stock, failure is a distinct possibility. However, Affimed is well regarded and benefits from a consensus target price of $32. It currently trades for just over $4.
Lipocine (LPCN)
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Lipocine (NASDAQ:LPCN) stock trades for $6.89 but is expected to rise to $33. Like so many other stocks on this list, Lipocine only has coverage from one analyst. That introduces risk to what is already a risky biotech stock. However, that’s the game investors must be willing to play in the risk-fueled world of pharma stock investing.
As you may have guessed by the firm’s name, Lipocine does work in the obesity management space. Candidate drug Lpcn2401 is currently in Phase 2 studies and is showing promise in reducing obesity in patients with at least one co-related morbidity.
However, the company is also developing treatments outside of the weight loss realm. Those programs span disease areas, including postpartum depression, cirrhosis, essential tremors and testosterone replacement therapy.
What’s particularly good about the company is that it actually produced positive net income in the most recent quarter. Lipocine reported $3.5 million in net income in the first quarter, reversing a $3.9 million net loss 12 months prior.
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On the date of publication, Alex Sirois did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.