When looking for risk/reward games, look no further than penny stocks. These names that trade at less than $5 a share are considered some of the most controversial on the street and divide market watchers into two factions: critics and fans.
The first brings a valid argument to the table. Stocks aren’t just trading at such low levels; usually there is a very real reason for their bargain prices. It can be weak fundamentals or headwinds too strong to overcome.
As for the latter, the potential for an investment worth only small change to appreciate even a seemingly insignificant amount, the result of which could be massive percentage gains, is too attractive to ignore. Not to mention, the low share price means you can carve out a bigger stake for less money up front.
The implication for investors? Due diligence is key, as some penny stocks might not have what it takes to rally.
With all of this in mind, we used the TipRanks database to identify two penny stocks that garnered enough analyst support to earn a “Strong Buy” consensus rating. On top of the good news, each pick offers over 300% upside potential.
Codexis, Inc. (CDXS)
We’ll start with Codexis, a biotech company and a leader in enzyme engineering technology. Enzymes are proteins that facilitate chemical and biological reactions in living cells, allowing these reactions to take place within the confined spaces of cells. They are essential for metabolic functioning, helping in the synthesis of necessary substances and the breakdown of others. In short, enzymes play a vital role in life processes, making them a natural target for biotherapeutic and pharmaceutical companies.
Codexis has a proprietary platform called CodeEvolver, which is used to discover, develop and improve new enzymes to address challenges associated with the biopharmaceutical industry. Small molecule pharmaceutical manufacturing, nucleic acid synthesis, and gene sequencing all offer potential therapeutic applications that can benefit from enzymatic actions. Codexis is focused on creating enzymes that improve therapeutic production yields, reduce energy consumption and waste in manufacturing processes, and improve the sensitivity and efficacy of final therapeutic products.
The company is currently pursuing two major lines of research. The first of these, the construction of the RNAi synthesis platform, has great potential for improving efficiency and reducing costs for pharmaceutical companies. Over 300 RNAi therapies are being developed in the biotech ecosystem, making it a rich area for Codexis.
The second major avenue of research concerned the clinical trial program of CDX-7108. It is a potential treatment for pancreatic exocrine insufficiency, being developed in partnership with Nestlé Health Sciences. The company has already published positive interim results from the Phase 1 trial and is preparing for a Phase 2 trial, scheduled for the first half of next year.
With key catalysts ahead, Piper Sandler analyst Allison Bratzel believes that at $2.60 each, now is the time to pull the trigger on CDXS.
“We see the opportunities in the company’s RNAi synthesis capabilities and biotherapeutic efforts, rather than the legacy business, as the primary drivers of value and reasons for owning CDXS… Specifically, we believe that bringing November update where management expects to demonstrate gram-scale synthesis capabilities and/or a possible R&D day ~YE23/early-’24 will provide a more comprehensive view of the opportunity/ market strategy for [RNAi synthesis] platform. As for biotherapeutics, the IND filing for CDX-7108 is on track for YE23, which will allow the launch of the P2 trial in 1H24. We view the presentation/publication of the full clinical data from the P1 proof-of-concept trial in 2H23, as well as the finalization of Nestlé’s commercialization agreement as key enablers ahead of the expected reading of ~2025 P2,” noted Bratzel.
“We continue to believe the stock can work as these key drivers become more focused over the coming quarters. Stay buyers,” the analyst summed up.
Bratzel confirms its bullish stance with an overweight (i.e. buy) rating on the stock, while its price target of $14 suggests solid one-year upside potential of 438%. (To see Bratzel’s track record, click here)
Likewise, other analysts are in the corner of CDXS. 4 buys and 1 hold given in the last three months add up to a strong buy consensus rating. With an average price target of $14.67, the upside potential stands at 464%. (See CDXS Stock Forecast)
CorMedix (CRM)
The second penny stock we will look at is CorMedix, another biopharmaceutical company. CorMedix works on new treatments for infectious and/or inflammatory diseases, with particular attention to the prevention, reduction and treatment of infections due to intravenous catheterization. Intravenous catheters are used in a number of medical procedures and carry a significant risk of infection at the needle site – CorMedix’s lead product, DefenCath, is a proprietary combination of two drugs, taurolidine and heparin, intended for use as a catheter-lock solution for the prevention of catheter-related bloodstream infections (CRBSI).
CorMedix is studying DefenCath for use in patients on hemodialysis with the use of central venous catheters. It is a life-saving procedure for patients with kidney failure, but the central venous catheter (CVC) carries a serious risk of systemic infection.
DefenCath uses broad antimicrobial activity to prevent catheter infection and has been shown to be effective in clinical trials. However, CorMedix made multiple NDA submissions to the FDA and received two Complete Response Letters (CRLs) due to “deficiencies” at a contract manufacturing facility for the required heparin. The last release was in August 2022 and CorMedix has been working to resolve the cited issues. In May of this year, the company submitted its third NDA – and in late June received FDA acceptance of the NDA, with a PDUFA target date of November 15 next year.
The ubiquity of intravenous catheters in the medical field presents a rich opportunity for DefenCath, and the recent acceptance of the NDA by the FDA is an important step forward. This is the thesis developed by Jason Butler, in his note for JMP.
“We are encouraged by the continued progress towards DefenCath approval and remain confident that all outstanding CRL items have been fully resolved…Management noted that it continues to accelerate launch preparations, and we believe the compelling clinical results and market readiness activities the company has already advanced, including inpatient reimbursement and healthcare economic data, positions the launch well for success,” Butler said.
Looking ahead, Butler gives CorMedix an outperform (i.e., buy) rating, and he sets a price target of $19 to indicate ~393% upside potential over the next few months. next 12 months. (To see Butler’s track record, click here)
Butler isn’t the only analyst to see this as a solid upside; all three recent reviews of this title are positive, for a strong buy consensus rating. The shares are priced at $3.90 and the average target of $16.67 suggests an upside of around 327% from this level. (See CRMD Inventory Forecast)
To find great stock ideas trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that brings together all of TipRanks’ stock information.
Disclaimer: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.