In the past year, some investors believe that biotech penny stocks have entered into a golden age. With the increased attention on the sector due to Covid, investors have flooded into biotech stocks. While big names like Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) are popular, hundreds of smaller name biotech firms are working on novel breakthroughs in science.
Thanks to the massive focus on the industry, progress is being made like never before. Even though all of this is positive news, there are still some things that everyone should consider. First, the valuation of small-cap biotech companies is based on a few different factors besides EBITDA.
Since many are pre-revenue, the value comes into play with the companies’ pipelines. For example, what regulatory approvals have they received, and what approvals are they working on? This can be a long and arduous process taking years to accomplish in some cases. Next, do they have any compounds nearing the commercialization stage? With little to no revenue, the market likes to speculate on things like commercial launch timelines.
These are just a few of the many different things to consider when looking for biotech penny stocks to buy. With the large focus on the industry right now, here are four that investors are watching. Will they be top stocks to buy, or should you avoid them heading into Q2?Biotech Penny Stocks to Buy [or avoid]
- Novan Inc. (NASDAQ: NOVN)
- Tyme Technologies Inc. (NASDAQ: TYME)
- Titan Pharmaceuticals Inc. (NASDAQ: TTNP)
Novan Inc. is considered to be one of the more popular biotech penny stocks right now. This is due to having several days of double-digit percentage gains in the past few months. On March 30th, shares skyrocketed by almost 20%, alone.
The most likely reason for this is CEO Paula Stafford purchased roughly $100,000 worth of shares. This is usually a good sign and shows both confidence in the leadership and the business model.
A few weeks ago, Novan announced complete enrollment in its B-SIMPLE4 pivotal trial concerning SB206 for molluscum contagiosum. The company states that it should have toppling results before the second quarter of this year. In 2020, Novan brought in almost $5 million in revenue. The majority of this came from its agreement with Sato, which involves collaboration/licensing revenue and milestone payments.
Additionally, Novan managed to lower its operating expenses by around 13% compared to 2019, to $31.1 million. With almost $36 million in cash at the end of last year, Novan looks like it could be in a decent cash position.
Right now, the main focus of Novan is on SB206. It states that there is a large clinically unmet need for treating molluscum, and SB206 could be a viable option. In light of the bullish insider interest and streamlined focus, NOVN could be one of the penny stocks to watch going into April.2. Tyme Technologies Inc. (NASDAQ: TYME)
Since announcing a 40 million share offering only a month ago, TYME stock has seen more attention than usual. This fundraising will likely bring in gross proceeds of around $100 million.
With this, Tyme can continue to study its TYME-19 therapy for Covid-19. The company states that this Covid treatment could prevent infection altogether. It could also have equally high efficacy with the new variants of the pandemic. In its Q3 2021 financial report, Tyme gave investors some exciting insights into its business. During the quarter, TYME-19 was granted patent claims to treat infections caused by the Covid-19 virus.
Richie Cunningham, CEO of Tyme, stated that “Tyme is at an exciting juncture in its history. As I am getting acquainted with the many facets of the company, I am deeply impressed with the spirit of innovation and dedication towards the development of products that improve the lives of people.”
At the end of this quarter, Tyme held around $13.5 million in cash. It states that all of its current trials will lead to a cash run rate of around $6 million per quarter. With its new patent for TYME-19, Tyme Technologies holds over 200 globally granted and or pending patents. The company states that these should cover it until at least 2032.
With so much going on right now, Tyme looks like an advantageous player in the biotech industry. Now that more of a focus has been placed on Covid-related stocks, it will be interesting to see how Tyme adjusts to meet the demands of the market.3. Titan Pharmaceuticals Inc. (NASDAQ: TTNP)
Another popular biotech penny stock right now is Titan Pharmaceuticals. Titan develops a range of proprietary therapeutics used in treating numerous chronic conditions. It utilizes its clinically proven, ProNeura platform, a drug delivery method that allows for long-term and continuous delivery of compounds to the body. This has been a major issue with biotech companies in the past.
How can drug delivery occur consistently and beneficially? With the ProNeura platform, many drugs can be delivered to the body with a high rate of consistency around the clock. Last month, Titan announced highly positive early study results for its JT-09 ProNeura development program.
This is a compound used in the treatment of chronic to severe pruritus (itching). COO of the company, Kate DeVarney Ph.D., explained that “these additional early positive data provide strong support for us to move forward with our planned non-clinical proof-of-concept study of JT-09 ProNeura implants in this animal itch model. This is an important next step for Titan towards developing a new treatment modality for moderate to severe chronic pruritus that is effective, patient-friendly, and convenient.”
While JT-09 looks promising, a lot of the potential for TTNP is with its ProNeura platform. If it can prove that this platform has high efficacy in a range of compounds, it could be a big deal for the company. Furthermore, analysts have gotten behind the stock this year. Maxim Group upgraded TTNP stock from Hold to Buy and issued an $11 price target.Penny Stocks Are Starting To Heat Up
If there’s one thing we’ve see recently, it’s the resiliency of small-cap stocks. Even with the recent sell-off, most small-caps are still green on the year. With momentum starting to build in biotech again and in light of this recent momentum in penny stocks, there could be a one-two punch to be on the lookout for heading into April.
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