Penny stocks may not necessarily look appealing, but they could be hidden gems waiting to be discovered. Penny stocks are shares of small or emerging companies that trade for less than $5 per share - and while they are frequently associated with higher risk, if these businesses succeed, their growth potential can be significant. That can result in substantial long-term returns on investment. Furthermore, they enable investors to purchase a good number of shares with a modest amount of capital.
Here are two penny stocks trading under $10 that Wall Street believes will skyrocket by 303% to 918% over the next 12 months. Such massive price increases over the course of a year might seem unrealistic now. However, let's look into the reasoning behind Wall Street's optimism.
#1. Protara Therapeutics
Protara Therapeutics (TARA), previously known as ArTara Therapeutics, is a clinical-stage biopharmaceutical company dedicated to developing transformative therapies for rare and severe diseases.
Currently trading under $3, TARA stock has climbed an impressive 50.9% year-to-date, outpacing the S&P 500 Index’s ($SPX) gain of 11.4%.
Artara's pipeline includes several promising candidates for treating rare cardiovascular and metabolic diseases. It has made significant progress in advancing its lead candidate, TARA-002, through clinical trials. It is being developed as a novel treatment for lymphatic malformations (LM), a rare congenital disorder that causes cyst-like lesions in the lymphatic system. These malformations can cause serious complications and reduce patients' quality of life. It is also being tested to treat non-muscle invasive bladder cancer (NMIBC).
The company recently reported its first-quarter results, highlighting the progress of its pipeline. TARA-002 has shown promising results in early-phase trials, demonstrating both safety and efficacy, boosting analysts' confidence in the company. By the second half of 2024, the company expects to present interim results from the ADVANCED-2 trial of TARA-002 in NMIBC patients.
Furthermore, the company is collaborating with the FDA on the development of its investigational phospholipid substrate replacement therapy, Intravenous Choline Chloride, for the treatment of intestinal failure-associated liver disease (IFALD) in patients who require parenteral nutrition. The advancement of these candidates through the clinical stages is critical for long-term success and a global market opportunity.
At the end of the first quarter, TARA had $55.2 million in cash, cash equivalents, and investments in marketable debt securities, including $42 million raised through a private placement in April.
The company has not yet generated any revenue. The net loss for the quarter stood at $11.1 million, which is not uncommon for a clinical-stage biotech company until its products are on the market.
Nonetheless, Wall Street optimism could be due to the fact that Artara Therapeutics operates in a highly profitable market. Because of its focus on rare diseases with unmet needs, the company can benefit from orphan drug designations, which frequently include market exclusivity, tax credits, and premium pricing.
Overall, experts are bullish, with all five analysts who cover the stock rating TARA as a "strong buy." The average target price of $27.80 for TARA represents a 918.3% premium over current levels. In addition, the stock has a high target price of $50.
#2. Opthea Limited
Opthea Limited (OPT) is a clinical-stage biotechnology company working on developing treatments for retinal diseases. Its promising pipeline and recent clinical trial progress have given Wall Street hope for the company's long-term prospects.
Valued at $186 million, Opthea stock has gained 10.2% year-to-date, not far behind the returns of the broader market.
Opthea's flagship product, OPT-302 (Sozinibercept), is a novel VEGF-C/D 'trap' therapy intended to treat wet age-related macular degeneration (AMD) and diabetic macular edema (DME), the two leading causes of blindness.
In its half-year results, the company said that OPT-302 has shown promising results in a Phase 2b clinical trial for wet AMD. The trial found that patients who received OPT-302 in combination with standard anti-VEGF-A therapy (ranibizumab) had "significant improvements in visual acuity" when compared to those who received standard therapy alone.
Based on the positive results of the Phase 2b trials, Opthea has launched Phase 3 clinical trials to assess the efficacy and safety of OPT-302. The company anticipates that Phase 3 trial enrollment will be completed in the second quarter of 2024, with top-line clinical test results available by mid-2025. The success of these trials is critical to the therapy's approval and commercialization.
As of December 2023, the company's cash and cash equivalents totaled $157.1 million, with $58 million raised through private placement and rights equity offerings.
The global market for treatments for wet AMD and DME is large and growing, due to an aging population and an increasing prevalence of diabetes. Positive clinical trial results have increased confidence in the potential approval and commercialization of OPT-302, which could explain Wall Street's high price target forecasts for the stock.
Overall, Wall Street is optimistic, rating OPT stock as a "strong buy" unanimously among all five analysts in coverage. The average target price for OPT is $12.80, representing a 303.7% premium over current levels. Furthermore, the stock's Street-high estimate of $18 indicates a potential gain of 467.8% over the next 12 months.
The Key Takeaway
For those interested in the future of rare and life-threatening disease treatments, clinical-stage companies such as Protara and Opthea are the stocks to watch. While the prospects appear promising, potential investors should be aware of the inherent risks associated with clinical-stage biotech stocks. These risks include clinical trial failures, regulatory approval delays, and a highly competitive biotech industry.
As penny stocks, both companies present a high-risk, high-reward opportunity for investors with a high risk tolerance and patience.
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.
