Investing in biotech stocks can be a lucrative opportunity as the biotech sector is a hub for innovation. Artificial intelligence (AI) has also turbocharged the industry, creating new opportunities in drug discovery and treatment.
Clinical-stage or development-stage biotech stocks, in particular, can offer substantial rewards, but they also come with significant risks. These companies focus on developing drugs or therapies that are still undergoing clinical trials or are awaiting regulatory approval.
The success or failure of a single clinical trial can have a significant impact on a biotech stock. While positive trial results and a successful product can cause stock prices to skyrocket, negative trial results or the failure of a new drug can result in sharp declines – and even cause a company to collapse. That is why some investors choose to follow the pros when navigating a high-risk, high-reward sector like biotech. And Wall Street analysts are bullish on the prospects of two rapidly growing biotech companies: SC Pharmaceuticals (SCPH) and Tscan Therapeutics (TCRX).
Let’s find out why analysts rate these penny biotech stocks a “Strong Buy.”
Biotech Stock No. 1: SC Pharmaceuticals
SC Pharmaceuticals is a biopharmaceutical company that focuses on developing solutions for outpatient care. FUROSCIX, its flagship product, treats congestion caused by fluid build-up in patients with heart failure (HF). The company also offers an outpatient therapy in which patients can receive antibiotics through a central catheter.
SC Pharmaceuticals’ stock has dipped 50.08% year-to-date, underperforming the S&P 500 Index’s ($SPX) gain of 27.5%.
The global pandemic has highlighted the importance of at-home healthcare services. The U.S. Food and Drug Administration (FDA) approved FUROSCIX (furosemide injection) in October 2022. It is administered via a wearable pump for an 80-miligram dosage. It is the first and only FDA-approved at-home subcutaneous loop diuretic treatment for congestion in patients with chronic heart failure.
Following the commercial launch of FUROSCIX in the first quarter of 2023, the company has reported consistent revenue growth, indicating strong demand.
FUROSCIX generated $10 million in revenue in the third quarter of 2024, representing a 164% increase year-over-year. In September, the company increased FUROSCIX's price by 5.5%, which it believes will have a positive impact on revenue.
As a growing biotech company, SC Pharmaceuticals is not profitable yet. It reported a net loss of $0.75 per share. Management stated that the net loss included a one-time charge of $0.47 per share “related to the extinguishment of debt and accounting for the new financial instruments.”
The company has raised $175 million in concurrent equity, debt, and royalty financings, which it expects to use to fund operations until profitability is achieved. It ended the third quarter with $91.5 million in cash and cash equivalents.
In July, the FDA accepted the company's supplemental new drug application (sNDA) to expand the use of FUROSCIX for the treatment of edema caused by fluid overload in patients with chronic kidney disease.
According to the company, the number of heart failure cases could rise to around $8 million by 2030. FUROSCIX has the potential to significantly reduce healthcare costs while providing patients with a less invasive and manageable treatment option. Furthermore, expansion into international markets could create significant opportunities, particularly in areas with rising heart failure prevalence.
SC Pharmaceuticals is at a critical point in its growth trajectory. While FUROSCIX is already on the market, its success could not only transform the company's fortunes but also change the way heart failure is managed.
Analysts who cover SCPH expect revenue to rise by 167.3% to $36.3 million in 2024, followed by a 131.4% increase in 2025. SCPH, trading at 4.3x forward 2025 sales, is a cheap biotech growth stock to buy right now.
What Does Wall Street Say About SCPH Stock?
Overall, Wall Street analysts are strongly bullish on SC Pharmaceuticals stock. All six analysts covering the stock have a “Strong Buy” recommendation.
The stock’s average analyst target price of $17.50 suggests upside potential of 446% over the next 12 months. The high price target estimate stands at $25.
Biotech Stock No.2: TScan Therapeutics
TScan Therapeutics is a clinical-stage biotechnology company focused on using T-cell receptor (TCR) therapies to treat cancer. TCR-T therapy candidates, Its lead candidates TSC-100 and TSC-101 are being studied for us in patients with hematologic malignancies – a type of blood cancer – after they have received cell transplants.
TScan stock has fallen nearly 50% year-to-date, underperforming the overall market.
The company announced in the third quarter that both TSC-100 and TSC-101 are entering Phase 2 trials to be evaluated for safety and efficacy by the end of 2024. It also announced that its lead candidates have received the FDA's Regenerative Medicine Advanced Therapy (RMAT) designation, which will expedite their approval. TScan also intends to provide updates on its solid tumor program by the end of 2024.
As an early stage biotechnology company, TScan is still in the pre-revenue phase. The company invests heavily in R&D to advance its pipeline. While this adds to operating losses, it is an essential cost for long-term expansion. Its net loss for the quarter totaled $29.9 million.
The company's cash, cash equivalents, and marketable securities totaled $271.1 million in Q3, which it expects to fund its current pipeline until the fourth quarter of 2026.
TScan's focus on solid tumors fills a gap in current immunotherapy offerings, creating a significant opportunity in the oncology drug market. However, the success of TScan's therapies is not guaranteed, and failure in clinical trials could significantly negatively impact the company's prospects.
As a clinical-stage biotech company, TScan is risky. As a result, despite analysts' bullish views on the stock and the company's growth prospects, investors should consider the pros and cons before grabbing the stock.
What Does Wall Street Say About TCRX Stock?
Overall, Wall Street analysts rate TCRX stock a “Strong Buy.” Out of the eight analysts covering the stock, seven rate it a “Strong Buy,” while one recommends a “Moderate Buy.”
The stock’s average analyst target price of $12.14 suggests upside potential of 303% over the next 12 months. The high price target estimate stands at $15.
