Penny stocks are thought of negatively by many investors because of the potential for fraud and manipulation. Because most penny stocks trade on pink sheets, oversight and disclosure tends to be elusive at best. These sorts of penny stocks are to be avoided at all costs.
That said, penny stocks should not be avoided entirely. Many penny stocks are legitimate companies that trade on legitimate exchanges. For whatever reason, these stocks trade below $5 per share, making them penny stocks according to the Securities and Exchange Commission.
In the biotech space, very real companies with exciting prospects fail to attract investors. The reasons are simply that these biotech penny stocks are losing money on an operating basis. The research-and-development nature of these companies dictate that profits come later. In an unforgiving market, these biotech penny stocks trade below $5 until they can prove beyond a shadow of a doubt that they can be profitable.
The time to buy these stocks is before that happens. Here are four biotech penny stocks to consider for your portfolio:
AEterna Zentaris (NASDAQ:AEZS) has a market capitalization of $170 million, and the volume of shares traded daily is strong. Those are positive attributes that indicate there might be more to this biotech penny stock than meets the eye. The company is a late-stage drug development company that is focused on the cancer treatment market.
Shares are up this year even after multiple days of selling in the market. AEterna has gained 3.5% so far this year. As one might expect, the company is losing money, but the losses are expected to be smaller in the coming year. Given the promise of its drugs and the proximity to actually coming to market, the risk/reward is strong. I would buy this biotech penny stock.