There are two sides to every coin. For penny stocks, or tickers that trade for less than $5 per share, this rings especially true. As some of the most divisive names on the Street, they are either met with resounding praise or forceful discontent.
Going beyond the argument that you get more for your money, even minor price appreciation can result in massive percentage gains. However, some investors prefer to avoid these stocks entirely, as the fact that shares are trading at such depressed levels could signal insurmountable headwinds or weak fundamentals.
The nature of these investments presents somewhat of a dilemma. How are investors supposed to separate the penny stocks that are ready to take off on an upward trajectory from those set to remain down in the dumps?
To help with the due diligence process, we used TipRanks’ database to zero in on only the penny stocks that have received bullish support from the analyst community. We found two that are backed by enough analysts to earn a “Strong Buy” consensus rating. Not to mention each offers up massive upside potential, as some analysts see them climbing to $30, or more.
89bio, Inc. (ETNB)
The first penny stock we'll look at is 89bio, a clinical-stage biopharmaceutical company focused on severe diseases of the hepatic and cardio-metabolic systems. In layman’s terms, that’s chronic liver and heart disease. The company has one drug candidate in the development pipeline, but it has apparent applications across a fairly wide spectrum. That candidate, called pegozafermin, is undergoing two clinical trials, one for the treatment of non-alcoholic steatohepatitis, or NASH, and one for the treatment of severe hypertriglyceridemia, or SHTG.
Pegozafermin operates through the FGF21 pathway. This is an endogenous metabolic hormone tied to energy expenditure and the glucose and lipid metabolism. Acting through the FGF21 function, pegozafermin has potential to become a best-in-class therapeutic agent, with particular efficacy in liver conditions. Pegozafermin has demonstrated clinically meaningful reductions in hepatic fat in patients, as well as reductions in triglyceride levels.
The NASH track is more advanced of 89bio’s two ongoing clinical trial programs. The ENLIVEN Phase 2b trial is enrolling patients, with that stage expected to be completed during the third quarter. Topline data from the Phase 2b trial should be ready for release in 1H23. The ENLIVEN trial is targeted to enroll approximately 200 patients.
On the SHTG track, pegozafermin is currently the subject of the ENTRIGUE Phase 2 study, which is progressing according to schedule. The company expects to release topline data this month. ENTRIGUE is designed as a proof-of-concept study, with 85 patients enrolled. A successful outcome from this trial will pave the way for a Phase 3 study to be conducted in 2023, post discussions with regulatory authorities.
Based on potentially significant clinical catalysts as well as its $3.02 share price, several members of the Street think that now is the right time to pull the trigger.
Among the ETNB bulls is SVP analyst Thomas Smith, who writes, "We continue to expect pegozafermin will demonstrate positive results that could enable a clear line of sight into a streamlined and established regulatory pathway in SHTG. Meanwhile, ETNB has implemented several changes to the ongoing Phase 2b ENLIVEN study of pegozafermin in NASH... ETNB believes these changes will increase the likelihood of success in the study by maximizing enrollment in the higher dose cohorts, adding composite endpoints to further elucidate a treatment effect vs. placebo, and utilizing a consensus methodology among three pathologists to interpret liver biopsy slides."
"Overall, we continue to view the FGF21 class as one of the more compelling therapeutic targets for the treatment of NASH and metabolic diseases, with pegozafermin well-positioned as a potentially best-in-class compound based on the drug's competitive efficacy profile and emerging differentiation on safety/tolerability and dosing frequency," Smith added.
Smith backs up his bullish stance with an Outperform (i.e. Buy) rating on the stock, while his $50 price target suggests a whopping upside potential of 1,550%. (To watch Smith’s track record, click here)
While Smith may be exceedingly bullish here, Wall Street generally is on his side. This stock has 9 recent analyst reviews, and they are unanimous to the upside, giving ETNB its Strong Buy consensus rating. The average price target, among these analysts, is $29.63, suggesting a one-year potential growth of ~878%. (See ETNB stock forecast on TipRanks)
Marinus Pharmaceuticals (MRNS)
Now we’ll turn to Marinus Pharma, a company laser-focused on the treatment of seizure disorders. Marinus has one drug candidate, ganaxolone, developed in both oral and intravenous infusion versions. The drug was approved by the FDA in March of this year for the treatment of seizures due to cyclin-dependent kinase-like 5 (CDKL5) deficiency. This is a rare form of epilepsy with genetic causation, and appears in early childhood; ganaxolone was approved for patients aged 2 and up in an orally dosed formulation.
That FDA approval is the major factor in Marinus’ outlook for now, as it gives the company potential for a revenue take-off. The company’s previous quarterly revenue postings have mostly come from collaboration payments with other drug companies. Now that ganaxolone is scheduled for a commercial launch, under the brand name ZTALMY, in July of this year, Marinus has the opportunity to develop a regular, reliable income stream. The company has already prepped a leadership team for the launch, and has begun putting sales reps in place.
On the clinical trial side, Marinus has two Phase 3 studies underway. The RAISE trial is studying ganaxolone as an intravenous infusion for the treatment of refractory status epilepticus – that is, as a ‘big gun’ to treat severe seizures that do not abate – and target sites for the study have been expanded to include the US, Canada, Australia, and Israel. Topline data is expected in 2H23.
The company has also begun selecting sites and enrolling patients in TrustTSC, a Phase 3 trial of orally dosed ganaxolone in the treatment of seizures from Tuberous Sclerosis Complex. Data from this study is expected in 1Q24.
These are the key points noted by Baird analyst Brian Skorney, who writes: “We continue to be encouraged by management's commercial preparedness ahead of the Ztalmy launch, which is on track to begin in July. Notably, the field force is fully on-boarded, with efforts also made to bolster the market access team as they work to drive interactions with payers and physicians..."
"We see upside potential for shares on strong initial uptake signals, given the valuable liquidity this program can provide as management drives continued progress in other indications. To that end, we continue to see a crucial catalyst in the RAISE readout, which remains on track for 2H23," the analyst added.
In Skorney’s view, the liquidity potential here must be substantial, as he rates the stock an Outperform (i.e. Buy) and sets a $32 price target. At current price levels, this target suggests an upside of ~613% over the next 12 months. (To watch Skorney’s track record, click here)
Getting a new drug onto the commercial market is the ‘holy grail’ in the world of clinical-stage biopharma firms – and Marinus’ success in that has earned it 10 positive analyst reviews recently, for a Strong Buy consensus rating. The stock’s $29.50 average price target and $4.49 current trading price combine to indicate room for 557% upside growth in the year ahead. (See MRNS stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.