Every investor is looking for a good return in the stock market, and some want to make it big with penny stocks. That’s the bottom line, and while it may sound straightforward, the difficulty is to pick companies that are ripe for profits, while still making the inherent risk worthwhile.
Risk cannot be avoided in the markets, and it usually rises in direct proportion to a stock’s potential return. And few stock categories provide a larger potential return for the risk involved than penny stocks, which are securities priced at $5 or less.
We are not exaggerating when we suggest high return possibilities. The low prices allow investors to buy more shares than they would if they invested in more well-known companies. Furthermore, even minor increases in share price might result in enormous percentage returns.
However, there is a real reason why some investors are apprehensive of penny stocks. The danger associated with these trades frightens the faint of heart because very significant difficulties such as weak fundamentals or strong headwinds could be concealed by the low share prices.
So, how should investors go about considering a penny stock investment? By following the lead of the analyst community. These professionals bring extensive knowledge of the sectors they cover as well as extensive experience to the table, and according to them, these are the penny stocks with strong potential to reach $10.
Autolus Therapeutics (AUTL)
We’ll begin with Autolus Therapeutics, a clinical-stage biopharmaceutical company focused on the development of new cancer therapeutic medicines. The company’s development method makes heavy use of programming capabilities in the generation of enhanced autologous T cells, which have the potential to be life-changing against malignancies that have proven resistant to earlier treatments.
The method is based on chimeric antigen receptors, which are designed to revitalize the patient’s own T cells for increased anti-tumor activity.
Obe-cel, the company’s primary medication candidate, is an autologous CAR T cell treatment with a new fast-off rate designed to increase T cell activity against tumors while reducing immunotoxicity.
The therapeutic candidate employs a novel CD19 CAR, and early trials have shown that this design results in greater T cell persistence, decreased T cell exhaustion, and longer-lasting remissions. Obe-cel is present in three of Autolus’ eight current pipeline products and is the subject of the majority of the ongoing clinical trials.
The Phase 2 FELIX study, which Obe-cel recently revealed fulfilled the primary interim endpoint, is the company’s flagship clinical investigation. A 70% overall remission rate (ORR) was achieved in 50 individuals with relapsed/refractory adult acute lymphoblastic leukemia.
The trial’s intermediate success sparked a series of milestone payments from Blackstone Life Sciences, with whom Autolus is collaborating on obe-cel.
The payments totaled $70 million, including one for development and one for manufacture.
Analysis from Mizuho
Autolus has big coffers and ample cash reserves to fund its therapeutic projects. Mara Goldstein of Mizuho acknowledges this, as well as the obe-cel program’s excellent position.
“We consider AUTL as mostly neglected, as cell therapy has typically underperformed given risk profile and financial requirements. Based on the outcome of the FELIX study testing obe-cel, a CD19 CAR-T with competitive efficacy and a better safety profile in adult ALL, the company plans to file a BLA in 2023. (aALL). AUTL’s CAR-T incorporates ‘rapid off’ kinetics, which improves the safety profile… The most important near-term catalysts are pivotal FELIX trial readouts at ASCO [June 2-6] and ASH [December 9-12]…. At the end of 4Q22, AUTL had $380+ mln (unaudited), providing estimated cash runway into 2025 and removing runway as an overhang,” Goldstein stated.
All of this convinced Goldstein to name AUTL as one of her Top Picks in the biotech sector. The analyst rates the company as a Buy and sets a price target of $18, implying a 787% one-year upside potential.
Decibel Therapeutics, Inc. (DBTX)
Decibel Therapeutics is the second penny stock we’ll look into. It’s a clinical-stage biotech firm discovering new medicines for inner-ear diseases that cause hearing and/or balance loss.
The company is pursuing gene therapy in order to develop therapeutic candidates that will cure inner ear issues at the genetic level. Decibel’s pipeline includes seven research tracks, with the majority in pre-clinical phases and two in human clinical trials.
The main possibility is DB-OTO, a gene therapy candidate developed to address OTOF gene abnormalities that cause significant, congenital hearing loss. The gene produces OTOF, a protein that connects the cochlear hairs to the auditory nerve; without it, patients cannot hear even if their ears are equipped with sound-detecting structures. Decibel’s medication candidate tries to replace the faulty gene in targeted cells, permitting protein expression and connecting the patient’s ear to the neurological system.
Decibel is now preparing for a Phase 1/2 clinical trial of DB-OTO and announced a step toward broadening its planned trial late last month. The UK Medicines and Healthcare Products Regulatory Agency has cleared the study for a clinical trial, which is set to begin in the United States in 1H23.
DB-020, a medication candidate being studied to prevent hearing loss caused by the common chemotherapy drug cisplatin, is also in clinical trials. Cisplatin has a well-known deleterious influence on hearing, although it is nevertheless used for anti-cancer purposes. DB-020, a novel sodium thiosulfate formulation, can reduce hearing loss without reducing cisplatin effectiveness – a win for patients. Decibel is now undertaking a Phase 1b trial of DB-020, with findings expected in the first half of this year.
Analysis from Baird
Baird analyst Jack Allen is intrigued by the scope and potential of the impending DB-OTO clinical study program and has recommended this company.
“We remain very excited about the potential of DB-OTO, and expect Decibel shares to grind higher in the next quarters as DB-OTO enters the clinic and investor interest in this program rises ahead of critical proof-of-concept data, which is expected in 1Q24. We estimate that this possible proof-of-concept evidence will be critical to the firm’s objectives in otology gene therapy, and hence we anticipate that this readout will be a key catalyst for the company. Furthermore, given the current price, we feel that shares could outperform this dataset significantly if investor interest in this initiative rises in the future quarters/months,” Allen said.
Overall, all 5 recent analyst reviews of this stock were positive, confirming Wall Street’s optimistic outlook and a uniform Strong Buy consensus rating.
Decibel shares have an average price target of $15.40 and a current selling price of $3.67, meaning a 319% gain over the next year.
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