Penny stocks refer to shares of companies that typically trade hands for less than $5. They are frequently associated with small, lesser-known companies.
Biotech penny stocks, in particular, have the potential to generate enormous returns because they have more room to grow. One such penny biotech stock that Wall Street is strongly bullish about is Alto Neuroscience (ANRO). It is a clinical-stage biotech company that creates personalized treatments for mental health conditions such as depression, PTSD, and schizophrenia. The company believes that “complex problems demand precise solutions,” which means that approved medications for certain disorders may not work in the same way for each patient.
Alto uses data from brain scans and wearables, among other sources, and artificial intelligence (AI) to match patients with the appropriate medication, thereby improving treatment efficacy.
Alto stock has fallen 25% year-to-date. Nonetheless, Wall Street expects this stock to increase by about 270% over the next year. Let’s find out why.
Alto Neuroscience’s Differentiated Approach Could Do Wonders
Alto Neuroscience’s strategy involves identifying specific neurobiological markers associated with mental health conditions, allowing for the development of therapies tailored to individual patient profiles. Alto’s pipeline includes several promising Phase 2 candidates for various psychiatric disorders. ALTO-100 is a new type of oral medication that aims to improve brain flexibility, particularly in the hippocampus, a region of the brain that influences thinking and mood. It is currently in advanced testing (Phase 2b) as an additional treatment for bipolar disorder, with top-line results expected in 2026. Another candidate is ALTO-300, a drug intended to help people with major depressive disorder (MDD) who do not respond well to antidepressants. It works by influencing brain chemicals such as dopamine and norepinephrine, which improve mood. The drug is approved for depression treatment in Europe and Australia, but not yet in the U.S. Based on the promising results of the Phase 2a trial, a more advanced study (Phase 2b) is currently underway to further test its effectiveness using the brainwave (EEG) biomarker approach. Alto anticipates top-line data in the first half of 2025.
In addition, the company is conducting a Phase 2a trial with ALTO-203. It is a new oral medication being developed for people with major depressive disorder (MDD) who also have anhedonia, which means they may experience limited motivation and pleasure. Top-line data on the same is expected in the first half of 2025. Aside from these, Alto is testing a medication designed to help people with schizophrenia who struggle with thinking and memory. Unlike traditional pills, ALTO-101 is administered via a skin patch, which helps to reduce the common side effects associated with similar medications. The company anticipates receiving top-line data from the Phase 2 POC trial by the end of 2025.
As of the third quarter, Alto reported a cash position of roughly $182 million, which is expected to fund its planned operations through 2027 and support at least four additional clinical study readouts. Alto’s aggressive push in clinical trials for its psychiatric treatment candidates resulted in $13.1 million in research and development expenses (R&D). As a result, the company reported a net loss of $16.8 million in the third quarter. Biotech companies frequently remain unprofitable until they have a successful product on the market.
Looking ahead, Alto intends to continue its clinical development programs, with multiple study readouts expected in the next few years. The company’s cash position serves as a solid foundation to support these initiatives.
As a biotech stock, Alto’s share price performance will be influenced by the company’s clinical trial results, regulatory approvals, commercial success, and overall market conditions. While penny biotech stocks can provide significant returns, they are also extremely risky and speculative. Thus, stocks like Alto Neuroscience are better suited to investors with a long investment horizon and a high risk tolerance.
Is ALTO a Buy, Hold, or Sell on Wall Street?
Overall, Wall Street rates ALTO stock as a “Strong Buy.” Recently, JonesTrading analyst Justin Walsh maintained his “Buy” rating for Alto Neuroscience stock, citing the potential of its ALTO-300 treatment for MDD. Walsh believes that if successful, ALTO-300 will generate significant revenue by 2036, which supports his bullish stance and $18 price target.
Six of the eight analysts who cover the stock rate it as a “Strong Buy,” while two call it a “Hold.” The average target price of $10.75 suggests that the stock could rise by as much as 241% from current levels. Furthermore, the Street’s high estimate of $18 implies 470% upside potential over the next 12 months.
While the target may appear unattainable, some biotech stocks have a history of reporting significant gains after a drug candidate is approved.
