Penny stocks across all sectors have been popular with investors active on Reddit’s r/WallStreetBets subreddit. But, one area, in particular, they’ve found many of their favorites has been in the biotech space. Not only a lot of penny, or low-priced stocks, are in this industry. The high-risk, high-potential return nature of biotech investing makes it no surprise retail speculators online are active in this area.
Earlier this year, Reddit investors sent many low-priced biotech names “to the moon.” But, in recent weeks, many of these popular names have pulled back from their highs. For some, this is justified. There was little going on to justify their inflated valuations. For others, though, there’s more in their corner than just online hype.
For biotech names, things can be very make-or-break. News of Food and Drug Administration (FDA) approval can turn a stock parabolic. But, one hiccup, misstep, or stumble can send a biotech stock down 50%, 60%, even 75% in a day.
In short, this isn’t an area you should bet the ranch on one opportunity. Yet, for those with an adequate risk appetite, and the discipline to size positions? You can find many opportunities where the potential for gains more than makes up for the high risk.
So, which biotech penny stocks, popular with the Reddit set, offer such opportunity? Consider these seven as ones with potential to live up to online enthusiasm:
- 180 Life Sciences (NASDAQ:ATNF)
- Citius Pharmaceuticals (NASDAQ:CTXR)
- Jaguar Health (NASDAQ:JAGX)
- Ocugen (NASDAQ:OCGN)
- Savara (NASDAQ:SVRA)
- Timber Pharmaceuticals (NYSEAMERICAN:TMBR)
- Zosano Pharma (NASDAQ:ZSAN)
Penny Stocks: 180 Life Sciences (ATNF)
With its epic run over the past month, ATNF stock has rallied far above penny-stock status (less than $5 per share). But, with pulling back to single-digit prices, you may want to keep it on your radar.
What’s been behind the dramatically increased interest in 180 Life Sciences? Increased awareness of the potential of its therapeutic candidates by Reddit investors helped to fuel its initial surge starting in March. But, recent news of insider buying helped this former penny stock rally above $10 per share.
So, why could shares pull back? And, why may it be a great opportunity at lower prices? Namely, its possibility in bringing fibrosis and anti-TNF (anti-tumor necrosis factor) therapies to market. However, recent developments have been minimal. In turn, it’s hard to tell whether shares can continue to climb. Or, if there’s risk of a selloff just around the corner.
Yet, if the company down the road makes progress with its pipeline, such news could give shares yet another boost. With Reddit investors onto something here, keep ATNF stock on your radar.
Citius Pharmaceuticals (CTXR)
As has been par for the course with Reddit penny stocks, CTXR stock peaked during February’s madness. But, while news of a dilutive capital raise, along with fading enthusiasm for meme stocks, has resulted in shares pulling back nearly 39% off their highs, it may be premature to say it’s time to throw in the towel.
What’s the “story” behind Citius? As InvestorPlace’s Louis Navellier broke it down March 22, the company has three promising candidates in its pipeline. These are blood infection treatment Mino-Lok, Mino-Wrap, a product to be used for preventing infections that can occur during breast reconstruction surgery, and Halo-Lido, an anti-inflammatory treatment for hemorrhoids.
As discussed in its March 2021 investor presentation, Mino-Wrap and Halo-Lido have yet to move far down the pipeline. But, Mino-Lok is already in Phase 3 clinical trials. Further news signaling Mino-Lok’s eventual approval and commercialization will definitely be a needle-mover for CTXR stock. With a total addressable market of $1.5 billion, the financial rewards for this company could be massive.
While down from its February highs, shares at today’s prices (around $1.66 per share) are still up big from the start of 2020 (when it traded for around $1 per share). Yet, given the possible game-changers in its pipeline, consider it well worth the risk.
Jaguar Health (JAGX)
What’s the story with JAGX stock, once one of the most popular penny stocks among Reddit investors? It’s a biotech name with a novel coronavirus catalyst. No, it doesn’t have a vaccine in its pipeline. As I discussed back in February, the company is one of many names focused on chronic Covid treatment.
How? Via its Mytesi treatment. Mytesi was first created for HIV/AIDS patients with antiretroviral therapy-related chronic diarrhea. But, it may have potential as a treatment for those suffering from long-term Covid-19 symptoms.
Before, Reddit investors got carried away with JAGX stock. Its valuation rose to levels way beyond the possible Covid-related upside. But, now, the stock has fallen by more than 50%. That’s not to say the stock is cheap, by any means. But, following its selloff, any positive news on Mytesi may be enough to fuel a rebound.
Jaguar Health has other promising candidates in its pipeline, including its Canalevia chemotherapy-induced diarrhea treatment for dogs. Yet, so much riding on Mytesti, exercise some caution. Any positive news could send it surging again. But, negative developments could send it back to prices well below $1 per share.
Penny Stocks: Ocugen (OCGN)
Like with ATMF stock, OCGN stock is a former penny stock that’s moved beyond $5 per share. Hype with this Covid-19 vaccine play may be off-the-charts. But, even with its vaccine contender a long shot, that doesn’t mean shares could again make another rip higher.
How so? While it’s a bit late to the party, with Moderna (NASDAQ:MRNA) and Pfizer (NYSE:PFE) now widely distributing their vaccines, Ocugen may find success, as it tries to bring India-based Bharat Biotech’s Covaxin candidate to the United States. With U.S. Government pausing distribution of Johnson & Johnson’s (NYSE:JNJ) vaccine, there may be opportunity for some of the also-rans to get emergency use authorization (EUA).
Initial news of the Covaxin deal sent it from around $1 per share to more than $19 per share. But, the stock has since sold off. So far, the JNJ vaccine news hasn’t done much to renew confidence in Ocugen’s prospects.
Yet, with this recent news possibly paving the way for this long-shot Covid-19 vaccine contender to get U.S. regulatory approval, it may be worth it to take a calculated bet on OCGN at today’s prices.
Since moving from around $1.20 per share to around $1.80 per share, Savara stock has traded sideways. But, this developer of respiratory therapies may have a shot of breaking out to substantially higher price levels. At least, that’s the view of Oppenheimer’s Francois Brisebois, who last month initiated coverage on the stock.
Giving SVRA stock the equivalent of a “buy” rating, and a price target of $4 per share, the analyst is bullish on the prospects of the company’s Molgradex candidate. This candidate is a treatment for aPAP, or autoimmune pulmonary alveolar proteinosis.
So, why haven’t investors been more excited about this stock? The on-the-fence view of Savara may have to do with its recent $130 million secondary offering. This transaction raised much-needed capital to sustain its operations. But, it’s come at the cost of heavy shareholder dilution.
This dilution could limit to what extent SVRA stock gains if Molgradex becomes a marketable product. Even so, with the high confidence this flagship candidate will live up to expectations, buying this stock, as investors remain on the fence, could be a profitable move in hindsight.
Timber Pharmaceuticals (TMBR)
Timber Pharmaceuticals is yet another of the Reddit penny stocks that’s been a roller-coaster ride so far this year. Shares in this developer of treatments for rare dermatologic diseases started the year off trading for around 80 cents per share. But, at the height of meme stock/Reddit stock madness, shares briefly hit prices above $3 per share.
But, except for another brief spike above $3 per share in March, shares have since fallen back to around $1.50 per share. As much of its Reddit hype has begun to fade, focus now returns to the underlying fundamentals of TMBR stock.
So, does Timber have potential to become a long-term winner? Or, will shares pull back to prior levels? Admittedly, it’s too hard to tell right now. With most of its pipeline still in Phase 2 trials, it may take some time to determine whether it has a marketable product in its hands.
But, biotech penny stocks remain popular with retail traders. This may be enough to keep TMBR stock steady. News related to its BPX-01 and BPX-04 candidates, currently in late stage clinical trials, could help fuel another rally back to $3 per share and above. Approach it cautiously, but this remains a Reddit biotech play to keep an eye on.
Penny Stocks: Zosano Pharma (ZSAN)
Zosano Pharma, which is developing a transdermal microneedle treatment for migraines called Qtrypta, grabbed the attention of Reddit traders earlier this year. Like many other biotech names, shares saw a dramatic uptick in February, followed by an extended cooling off period.
Today, ZSAN stock is down more than 65% off its highs. But, given shares were trading for around 60 cents per share at the end of 2020, at today’s prices ($1 per share) it’s still up substantially. That may leave some worried shares have more room to fall, as enthusiasm continues to cool.
But, to some extent, the story’s improved with Zosano. The company has made some progress obtaining approval for Qtrypta. Last fall, the FDA rejected Zozano’s initial application for Qtrypta. But, it’s not giving up on its flagship candidate. With plans for a new study, the company has high hopes the second go-around with the FDA will be a success.
Yet, this slight improvement in its prospects may already be factored into the stock price. More positive news will likely produce another outsized rally for ZSAN stock. It’s still a gamble, but it may be one that pays off in the end.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.