Summary: Pharmaceutical investing spans a broad spectrum. On one end, you have stable large-cap companies with extensive product portfolios and substantial research and development budgets. On the other, you find smaller, often penny stocks, which, despite their inherent risks, have the potential for significant returns, especially when they make groundbreaking scientific discoveries. To help you navigate this space, we present 3 pharma penny stocks to buy in 2024 using Interactive Brokers as our preferred platform for trading.
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What are pharma stocks?
What are penny stocks?
Investing in pharma – key points
When investing in pharmaceutical stocks, consider the following factors:
- Pipeline strength: It’s essential to evaluate a company’s “pipeline,” which indicates how many drugs a company has in development and their respective stages of clinical testing. A strong and diverse pipeline can be a sign of potential future revenue;
- FDA approval process: Understanding the FDA’s rigorous and lengthy approval process is crucial. A company’s ability to navigate this process and obtain FDA endorsements for its drugs can significantly influence its success;
- Track record: Look for companies with a history of successfully bringing drugs to the market and passing FDA scrutiny. Past performance can be indicative of (but won’t guarantee) a company’s ability to manage future challenges;
- High R&D costs: It costs around $2.6 billion to bring a drug from conceptualization to the market. When considering investment in this sector, it’s essential to identify companies with the financial robustness to weather these substantial costs. A company’s resilience in managing and navigating the financial demands of drug development can often be a strong indicator of its potential for long-term success and stability;
- Duration of investment: The drug development process isn’t just costly; it’s also prolonged. In fact, it can take up to a decade (or even longer) for a drug to transition from the research phase to pharmacy counters. During this time, the company incurs ongoing costs without any guarantee of eventual revenue from the drug:
- Risk of failure: A significant portion of drugs that enter clinical trials never make it to market due to inefficacy, safety concerns, or other issues. The associated costs of these failed projects are absorbed by the company and can strain its financial resources;
- Patent lifespan: A new drug patent lasts for 20 years. After this, generic producers can introduce competitive products. Companies heavily dependent on a single drug’s profits could face challenges when the patent expires;
- Recall history: Even if a drug wins FDA approval, there’s a possibility it may be recalled later due to unforeseen issues. Regularly checking the FDA’s list of drug recalls can offer insights;
- Potential for acquisitions and partnerships: Established pharmaceutical companies often partner with or acquire promising startups. Small firms with a history of successful collaborations or those that are potential acquisition targets can be appealing;
- Specific focus Aaeas: Companies that target distinct illnesses, demographics, or conditions can reduce head-to-head competition. This specificity can lead to higher market share and profitability in niche segments;
- Company size and stability: Larger, established companies typically offer more stability than startups. However, startups with breakthrough drugs or technologies can provide significant returns if they succeed;
- Diversification within the pharma sector: Investing in multiple companies focusing on various diseases or demographics can help spread risk and potentially offer better returns.
Before we proceed
3 pharma penny stocks to buy in 2024
For investors ready to delve into research and shoulder the associated risks, pharma penny stocks can offer avenues to potentially significant gains.
Recognizing the inherently speculative nature of this pioneering industry, here are three pharma penny stocks worth exploring in 2024:
- Wave Life Sciences Ltd. (NASDAQ: WVE);
- Ardelyx, Inc. (NASDAQ: ARDX);
- Cidara Therapeutics, Inc. (NASDAQ: CDTX).
To securely invest in any of these pharma penny stocks, we suggest using Interactive Brokers (IBKR), which offers:
- Commission-free stock trading;
- Global stock-trading on 90+ market centers;
- Fractional shares available;
- Extra income on fully paid shares;
- Lowest financing rates for margin accounts in the industry;
- No account minimum.
Best Platform for Worldwide Stock Trading & Investing
-
Highly trusted multi-asset broker with clients in over 200 countries
-
Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
-
Low commissions starting at $0 with no platform fees or account minimums
-
Easily fund your account and trade assets in 26 currencies
-
IBKR pays up to 4.58% interest on cash balances of $10k or more
Instead of venturing into the unpredictable waters of penny stocks, consider directing your investment toward more established players in the pharmaceutical industry. These well-grounded companies often provide a more stable investment landscape backed by a proven track record, significant R&D infrastructure, and a diverse product pipeline. While the potential for astronomical returns might be lower, the reduced risk associated with blue-chip pharma stocks can offer a safer, long-term growth potential for your portfolio.
Here are a few you might like to consider:
- AbbVie (NYSE: ABBV);
- Novartis (NYSE: NVS);
- Merck (NYSE: MRK);
- AstraZeneca (NASDAQ: AZN);
- GSK (NYSE: GSK);
- Roche (SIX: ROG);
- Novo Nordisk (NYSE: NVO);
- Johnson & Johnson (NYSE: JNJ).
For a more specialized approach to investing in the pharmaceutical sector, considering the disease focus can be insightful. Here are some guides that offer a deep dive into investing based on specific illnesses:
- Top 3 Alzheimer Drug Stocks to Buy;
- 3 Best Cancer Drug Stocks to Buy;
- Top 3 Obesity Drug Stocks to Buy.
Up next, we dive deeper into our pick for the top 3 pharma penny stocks to buy in 2023.
1. Wave Life Sciences
2023 Q4 Market capitalization: $602.20M
Wave Life Sciences Ltd. (NASDAQ: WVE) is a clinical-stage genetic medicine company that specializes in the design, optimization, and creation of cutting-edge stereopure oligonucleotides (short, single- or double-stranded DNA or RNA molecules designed to pair with a strand of DNA or RNA to modulate gene and protein expression), aiming to combat diseases with few treatment alternatives, with lead programs addressing Duchenne muscular dystrophy, Huntington’s disease, and alpha-1 antitrypsin deficiency.
Wave Life Sciences is listed on the Nasdaq Exchange under the stock symbol WVE.
Wave Life Sciences stock price
Your capital is at risk.
2. Ardelyx
2023 Q4 Market capitalization: $1.49B
Ardelyx, Inc. (NASDAQ: ARDX) is a US-based biopharmaceutical company dedicated to uncovering, advancing, and bringing to market medicines targeting the gastrointestinal and cardiorenal therapeutic areas.
Ardelyx is listed on the Nasdaq Exchange under the stock symbol ARDX.
Ardelyx stock price
Your capital is at risk.
3. Cidara Therapeutics
2023 Q4 Market capitalization: $73.07M
Cidara Therapeutics, Inc. (NASDAQ: CDTX), situated in California, is a biotechnology company committed to elevating the care standards for individuals battling severe illnesses. Their suite of solutions encompasses innovative strategies intended to revolutionize traditional treatment and prevention methods, including drug-Fc conjugates (DFCs) derived from their unique Cloudbreak® platform, which targets both oncological and viral conditions, followed by its once-weekly antifungal candidate, rezafungin.
Cidara Therapeutics is listed on the Nasdaq Exchange under the stock symbol CDTX.
Cidara Therapeutics stock price
Your capital is at risk.
Risks of investing in pharma penny stocks
Investing in pharma penny stocks carries several inherent risks, including:
- Volatility: Penny stocks are known for their price volatility, often seeing large percentage swings in a single trading day;
- Limited financial history: Many companies represented in the penny stock market are relatively new and may lack a substantial track record or financial history;
- Regulatory hurdles: The pharmaceutical industry faces rigorous testing and approval processes, primarily from entities like the FDA. An adverse decision or delay can severely impact stock value;
- Low liquidity: Pharma penny stocks might not be traded in high volumes, making it harder to buy or sell shares without affecting the stock price;
- Potential for dilution: Companies may issue more shares to raise capital, which can dilute the value of existing shares;
- Competition: The pharma industry is fiercely competitive, and smaller companies often struggle to compete against well-established giants with more resources;
- Dependency on one product: Many smaller pharma companies rely on the success of a single product or therapy. Any setbacks related to that sole product can harm the company’s valuation;
- High failure rate: The process from drug discovery to market approval is complex and has a high failure rate. Most drug candidates never make it past clinical trials.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about pharma penny stocks stocks
What are the best pharma penny stocks to buy?
Pharma penny stocks worth considering include Wave Life Sciences Ltd. (NASDAQ: WVE), Ardelyx, Inc. (NASDAQ: ARDX), and Cidara Therapeutics, Inc. (NASDAQ: CDTX). Given the volatility and limited information available for these stocks, there’s a real possibility of losing a substantial portion or even all of your investment. Approach with caution and consider seeking advice from a financial advisor before investing.
How to invest in pharma penny stocks?
First, sign up with an online brokerage that offers access to the pharma penny stocks you’re after. After setting up your account, deposit funds. Then, search for the stock using its ticker symbol, select the amount to invest, pick your order type, and finalize your purchase.
Where to buy pharma penny stocks?
You can invest in pharma penny stocks with regulated online brokers like Interactive Brokers.
Best Platform for Worldwide Stock Trading & Investing
-
Highly trusted multi-asset broker with clients in over 200 countries
-
Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
-
Low commissions starting at $0 with no platform fees or account minimums
-
Easily fund your account and trade assets in 26 currencies
-
IBKR pays up to 4.58% interest on cash balances of $10k or more
