![[Top 3] Best Biotech Penny Stocks to Buy in 2023](https://assets.finbold.com/uploads/2023/09/best-biotech-penny-stocks-to-buy-1.jpg)
Summary: Biotech stocks can be high-risk, high-reward investments. The research and development processes for new drugs or therapies are expensive, lengthy, and fraught with regulatory hurdles. However, if a company successfully brings a new product to market, it could mean significant returns for investors. In the following paragraphs, we present 3 of the best biotech penny stocks to buy in 2024 on major exchanges and can be accessed with online brokers like eToro and Interactive Brokers.
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What is a biotech stock?
What are penny stocks? Penny stocks are the low-priced shares of small companies, typically trading for less than $5 per share. Due to their low price and limited liquidity, they are considered high-risk speculative investments and can be subject to large price swings.
Investing in biotech — What to consider
When considering an investment in biotech, take the following factors into account:
- Product pipeline: Examine a company’s pipeline of products under development. A diverse pipeline can help mitigate risks associated with any single product’s failure. Pay attention to products in late-stage clinical trials, as they are closer to potential commercialization;
- Clinical trial results: Positive results can be a strong catalyst for biotech stocks. Conversely, negative or mixed results can send a stock price plummeting;
- Regulatory approvals: Approval by regulatory bodies, especially the U.S. Food and Drug Administration (FDA), is crucial for a biotech company’s success. A company’s track record of regulatory approvals, as well as any upcoming decisions, can influence the stock price;
- Long development cycles: The time frame from initial research to bringing a drug to market can be lengthy, often taking a decade or more. This long cycle can make biotech investing require a different sort of patience and risk tolerance than other sectors;
- Financial health: Given the lengthy and costly drug development process, assessing a company’s financial health is essential. Look at cash reserves, burn rate (how fast a company uses its cash), and debt levels. Companies with strong financials can fund operations and research for extended periods without raising additional capital;
- Partnerships: Collaborations with larger pharmaceutical companies can provide smaller biotech firms with additional resources, expertise, and credibility. Such partnerships can also signify confidence in a product or technology;
- Intellectual property (I.P.): Patents and other I.P. rights are critical in the biotech industry. Ensure the company has strong I.P. protection for its key technologies and products, as this can offer a competitive edge and potential revenue streams;
- Management and expertise: A company’s leadership and scientific team are vital. Experienced management with a track record of success in the biotech or pharmaceutical industry can be a positive sign;
- Market potential: Consider the potential market size for the company’s products. Treatments for widespread diseases or conditions with few existing solutions often have a larger market potential;
- Competitive Landscape: Examine the competition. If several companies are developing similar products, it can impact the market share and profitability of each;
- Mergers and acquisitions (M&A) potential: Some investors are attracted to smaller biotech companies with promising drugs or technologies because of the potential for acquisition by larger companies;
- Valuation: As with any stock, consider the company’s valuation metrics. However, traditional metrics like Price-to-Earnings (P/E) ratios might be less useful for non-profitable biotech companies.
3 best biotech penny stocks to buy in 2024
For investors willing to do their research and embrace calculated risks, biotech penny stocks may provide a window for potentially high returns.
Keeping in mind that the industry’s future-focused nature means that any investment carries inherent speculation, here are three biotech penny stocks that might be worth considering:
- Cue Biopharma (NASDAQ: CUE);
- Compass Therapeutics, Inc. (NASDAQ: CMPX);
- Allogene Therapeutics, Inc. (NASDAQ: ALLO).
But before you explore penny stocks, consider investing in some of the more established biotech companies that can not only offer stability to your portfolio but also bring a proven track record of success. Here are a few prominent players in the sector:
- Pfizer (NYSE: PFE);
- Moderna (NASDAQ: MRNA);
- Sanofi (NASDAQ: SNY);
- Eli Lilly (NYSE: LLY);
- Biogen (NASDAQ: BIIB);
- Amgen (NASDAQ: AMGN);
- Gilead Sciences (NASDAQ: GILD);
- Bayer (FWB: BAYN);
- Thermo Fisher Scientific (NYSE: TMO).
To securely invest in any of these biotech companies, we suggest using:
1. eToro
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Now, let’s look at our pick for the top 3 biotech penny stocks to buy in 2023 in more detail.
1. Cue Biopharma
2023 Q4 Market capitalization: $128.15M
Cue Biopharma, Inc. (NASDAQ: CUE) is a US-based clinical-stage biopharmaceutical company that develops injectable biologics to target and regulate disease-specific immune cells linked to various cancers, chronic infections, and autoimmune diseases. This variety makes it one of the best biotech penny stocks to buy in 2024.
Cue Biopharma is listed on the Nasdaq Exchange under the ticker CUE.
Cue Biopharma stock price
Your capital is at risk.
2. Compass Therapeutics
2023 Q4 Market capitalization: $561.40M
Compass Therapeutics, Inc. (NASDAQ: CMPX) is a Boston-based clinical-stage oncology-focused biopharmaceutical company that develops antibody-based therapeutics to treat a variety of human conditions.
Compass Therapeutics is listed on the Nasdaq Exchange under the ticker CMPX.
Compass Therapeutics stock price
Your capital is at risk.
3. Allogene Therapeutics
2023 Q4 Market capitalization: $550.26M
Allogene Therapeutics, Inc. (NASDAQ: ALLO) is a California-based clinical-stage immuno-oncology firm that develops and commercializes genetically modified allogeneic T-cell therapies to combat cancer. The company has license and collaboration agreements with notable entities in the biotech sphere, such as Pfizer Inc., Servier, Cellectis S.A., and Notch Therapeutics Inc.
Allogene Therapeutics is listed on the Nasdaq Exchange under the ticker ALLO.
Allogene Therapeutics stock price
Your capital is at risk.
Risks of investing in biotech penny stocks
Investing in biotech penny stocks carries several risks, some of which are inherent to the biotech industry, while others are more specific to penny stocks. Here are some of the key risks to consider:
- High operating costs: Biotechnology companies usually have high operating expenses due to their extensive research, development, and testing processes, which often take years;
- Regulatory challenges: New biotech products can encounter various regulatory issues. Some countries may ban certain biotech products, like genetically modified plants. Also, acquiring approval from institutions like the FDA can be both time-consuming and costly;
- Long time to profitability: Many biotech firms do not show immediate revenues because they allocate large funds towards R&D. In fact, new drugs or products can take years, even decades, to reach the market – if they make it to the market at all;
- Risk of failure in clinical trials: A drug can fail at any stage in clinical trials, making the investment inherently riskier than companies in many other industries;
- Competition: The biotech sector is highly competitive. Even if a company has a promising drug, there’s always the risk of a competitor developing a better, more effective, or cheaper alternative;
- Liquidity risks: Penny stocks typically have lower trading volumes, which can make it harder to buy or sell shares without affecting the stock price;
- Lack of history: Many biotech penny stock companies are relatively new and may lack a track record. This makes it challenging for investors to gauge their potential success;
- Challenges in valuation: Valuing biotech companies can be complex. They may not have earnings, but they might have a pipeline of potentially groundbreaking drugs under development. Traditional valuation measures may not accurately capture their potential value;
- Long development time: On average, a new drug might take between 10 to 15 years from the start of development to reach the market. This timeline post regulatory approval itself can span eight years.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about the best Biotech penny stocks to buy in 2024
What are the best biotech penny stocks to buy?
Biotech penny stocks worth considering include Cue Biopharma (NASDAQ: CUE), Compass Therapeutics, Inc. (NASDAQ: CMPX), and Allogene Therapeutics, Inc. (NASDAQ: ALLO).
How to invest in biotech penny stocks?
First, register with an online brokerage platform to invest in biotech penny stocks. Once you’ve set up your account, add funds. Then, using the ticker symbol, locate the desired stock. Decide the amount you want to invest, choose your order type, and then confirm and place the order.
Where to buy biotech penny stocks?
You can invest in biotech penny stocks with regulated online brokers like eToro and Interactive Brokers.
Highly Rated Stock Trading & Investing Platform
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
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Copy top-performing traders in real time, automatically.
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eToro USA is registered with FINRA for securities trading.
