Most successful businesses today were once penny stocks that few individuals trusted as worthy investments. Penny stocks typically don't attract much mainstream attention, because they're often extremely volatile and have lower liquidity than their large-cap counterparts. However, penny stocks have the potential to skyrocket once the underlying business gains traction and starts to thrive.
Here, we have two high-potential penny stocks that are clinical-stage biotech companies, Atossa Therapeutics (ATOS) and Ocugen (OCGN). Typically, biotech companies that treat rare and life-threatening diseases are always in demand.
Both stocks are rated a "strong buy" on Wall Street. This “outperform” equivalent rating reflects analysts' belief that both companies can significantly improve their financial performance in the coming years, which is expected to boost the stock price. Let's learn more about both.
Penny Stock No 1: Atossa Therapeutics
Atossa Therapeutics (ATOS) is a clinical-stage biopharmaceutical company focused on the development of new treatment therapies for breast cancer and other breast conditions.
Valued at $169.7 million, Atossa’s stock has surged 56.8% year-to-date, outperforming the S&P 500 Index's ($SPX) gain of 17.2%.
Atossa's pipeline includes several promising candidates, the most notable of which is (Z)-endoxifen. (Z)-endoxifen is an active metabolite of tamoxifen, a well-known breast cancer therapy that is being researched for both treatment and prevention.
The company has been conducting clinical trials to determine the efficacy of (Z)-endoxifen in reducing breast density, a risk factor for breast cancer, as well as treating tamoxifen-resistant breast cancer patients.
In addition to Endoxifen, Atossa is developing other therapies for breast cancer, such as immune modulation and direct tumor targeting. These developments are critical to the company's future, as positive trial results could significantly increase the stock's value.
In the second quarter, the company completed patient enrollment in the Phase 2 EVANGELINE study of (Z)-endoxifen. Furthermore, it completed Phase 2 of the Karisma-Endoxifen clinical trial dosing.
Atossa Therapeutics, like many biotech companies, is not yet profitable and relies on outside funding to support its research and development efforts. At the end of the second quarter, it had $79.5 million in cash and cash equivalents and no debt.
While Atossa has secured funding for the time being, the timing and outcome of its clinical trials will ultimately determine whether the company can achieve long-term profitability. The market potential for Atossa's therapies is significant, especially given the global burden of breast cancer, which is likely why Wall Street is optimistic.
In August, H.C. Wainwright analyst Emily Bodnar reiterated her “buy” rating for ATOS with a price target of $6. Bodnar is impressed by Atossa's clinical research and market potential.
Out of four analysts covering ATOS stock, three have a “strong buy” rating, while one recommends a “moderate buy.” Its mean target price is $5.42, which implies an upside potential of 292.7% over the next 12 months. Plus, its Street-high estimate stands at $6.25.
Penny Stock No 2: Ocugen
Ocugen (OCGN) is a clinical-stage biopharmaceutical company that has received a lot of attention, primarily for its involvement in developing and marketing a COVID-19 vaccine in collaboration with the Indian multinational biotechnology company Bharat Biotech. The company has also been working on gene therapy to develop treatments for a variety of eye diseases.
Valued at $342.2 million, Ocugen’s stock has surged 124.4% YTD, outperforming the broader market's gain.
Besides the COVID-19 vaccine, its ophthalmology pipeline includes treatments for retinitis pigmentosa and age-related macular degeneration. The company's lead product candidate in this space is OCU400, a gene therapy product that targets multiple gene mutations that cause blindness. OCU400 is undergoing a Phase 3 clinical trial. Concurrently, its other candidate for the treatment of geographic atrophy, OCU410, is entering Phase 2 clinical trials.
In the second quarter, Ocugen raised $32.6 million in a public offering, which it expects to fund its pipeline work until the third quarter of 2025. Its cash, cash equivalents, and restricted cash totaled $16.0 million at the end of the second quarter. As a clinical-stage company, Ocugen, like Atossa, is not yet profitable, and reported a net loss of $0.04 per share in the second quarter.
Ocugen's ophthalmology pipeline represents a potentially lucrative market, but is still in its early stages of development, with clinical trials currently underway. And, like all early-stage biotech ventures, this carries inherent risks - such as the uncertainty of clinical trial results and the lengthy regulatory approval process.
Recently, H.C. Wainwright analyst Swayampakula Ramakanth reiterated his “buy” rating on the stock with a price target of $7. The analyst is impressed by Ocugen's pipeline progress, and believes that the progress of OCU400 demonstrates the FDA's confidence in the therapy, adding that it will most likely be approved in the U.S. and the European Union by late 2026 if the ongoing trial is successful.
Three analysts covering Ocugen stock all have a “strong buy” rating. Its mean target price is $7, which implies an upside potential of 442.6% from current levels. Plus, the stock has a high target price of $8.
The Key Takeaway
While the upside potential for Atossa and Ocugen appears to be out of reach, it is not impossible. Once they have one or more successful products on the market, the stock price could skyrocket. Their stock performance will be driven by the results of their clinical trials, regulatory decisions, and the overall sentiment in the biotech industry.
Both ATOS and OCGN present high-risk, high-reward opportunities for biotech-focused investors. However, penny stocks are risky, and should only be considered after thorough due diligence.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
