What kind of stocks stir up controversy like no other? Penny stocks. These tickers trading for less than $5 per share have earned a reputation as some of the most divisive names on Wall Street, with these plays either met with open arms or given the cold shoulder.
It’s understandable why some investors are wary. Those opposed are quick to point out that there could be a very real reason these stocks are changing hands for pocket change, with the low share prices often masking obstacles like weak fundamentals or troubling headwinds.
That said, others are drawn in by the sheer growth potential of penny stocks. The fact is that even minor share price appreciation can mean huge percentage gains, and thus, serious returns. What’s more, your money goes further with these bargain names.
No matter which side you take, one thing is certain, due diligence is necessary before making any investment decisions. That’s where the experts come in, namely the analysts at Oppenheimer. These pros bring experience and in-depth knowledge to the table.
With this in mind, our focus turned to two penny stocks that have received a thumbs up from Oppenheimer analysts. Running the tickers through TipRanks’ database, both have been cheered by the rest of the Street as well, as they boast a “Strong Buy” analyst consensus. Not to mention substantial upside potential is on the table.
Agile Therapeutics (AGRX)
We’ll start in the healthcare niche, where Agile Therapeutics aims to meet women’s reproductive health needs. The company focuses on women’s health, specifically reproductive health and birth control. The company has an active research pipeline of hormonal treatments for menstrual issues along with contraceptive patches. Agile’s Twirla product, a hormone-based, once-weekly contraceptive patch, was approved for use early last year.
This past summer, Agile has entered a partnership with telehealth company Pandia to improve women’s access to Twirla. Pandia can bring opportunity for online prescriptions and home delivery of the product. Between 20% and 25% of women who use contraception reported using telehealth channels to obtain the prescription, making this mode too important for Agile to pass up.
The other main news item came in October, when Agile raised capital through a sale of stock. The company put 22.666 million shares of common stock on the market, along with warrants for 13.333 million shares, at a price of 85 cents for one share and one half of a warrant. The company raised nearly $22.67 million in gross proceeds from the sale. This would likely have passed under the radar – except that billionaire hedge fund manager Joseph Edelman snapped up more than 5.7 million of the shares. Edelman has been an investor in Agile since 2019; this purchase increased his holding by 36%.
After all of this, Agile reported its Q3 financial in early November. The company showed a continued slow increase in revenue as Twirla begins to make inroads to the market. The company’s top line came in at $1.29 million, the highest yet, but still 13% under analyst estimates. Prescription demand for Twirla grew 61% in Q3, while the refill rate increased to 86%.
With shares changing hands for $0.59 apiece, Oppenheimer analyst Leland Gershell sees an attractive entry point for investors.
“Recent telehealth partnership activation as well as DTC campaign rollout, consisting of several online strategies targeting key user segment, should strengthen business in 4Q and beyond. Preferred drug formulary placement on California's Medicaid program (serves ~15M) notable as ~one-third of contraceptive patch market is supplied through Medicaid. While AGRX's first few commercial quarters have been slow to hit their stride, we believe Twirla's growing momentum among patients and providers will translate into robust sales growth in 2022+," Gershell opined.
"We expect contraceptive patch Twirla to address unsatisfied demand within the ~$4.1B US contraceptive market and to achieve 2025E sales of $260M. We encourage investors to build a position at current levels," the analyst summed up.
To this end, Gershell rates AGRX an Outperform (i.e. Buy), and his $4 price target suggests a robust upside of ~569%. (To watch Gershell’s track record, click here)
Turning now to the rest of the Street, 4 Buys and no Holds or Sells have been published in the last three months. Therefore, AGRX has a Strong Buy consensus rating. At $2.83, the average price target implies ~373% upside potential. (See AGRX stock analysis on TipRanks)
The second stock we’ll look at, Synlogic, is a biopharma company working on synthetic medicines. These are a new class of therapeutics, using synthetic biology to design a new approach to microbial engineering. The company’s medicines target the underlying biology behind conditions to treat diseases in new ways.
Synlogic has a wide-ranging pipeline with research tracks in the treatment of phenylketonuria (PKU), enteric hyperoxaluria, homocystinuria, and inflammatory bowel disease. For investors, right now, the key is the phenylketonuria program. There are two drug candidates here, SYNB1618 and SYNB1934, and both are part of the Phase 2 SynPheny clinical trial. SYNB1934 is an optimized version of the parent drug candidate, 1618, and the trial model was adapted to incorporate both versions.
SYNB1618 has, to date, shown effectiveness in breaking down phenylalanine (Phe) in the GI tract, reducing symptoms in PKU patients. The SynPheny-1 study aims at reducing the Phe levels in the bloodstream. The company announced in September that SYNB1618 has passed its proof-of-concept trial, showing a clinically significant reduction in Phe levels. The company is now testing SYNB1934, a strain of 1618 optimized for greater effect; the 1934 strain has already demonstrated a two-fold increase in biomarkers of Phe metabolism compared to SYNB1618 in a head-to-head healthy volunteer study.
Results from the amended SynPheny-1 study are expected in the first half of next year. Pending those results, the company is preparing for a Phase 3 clinical trial. Which strain will be used – SYNB1618 or SYNB1934 – will depend on the published results from SynPheny-1.
Oppenheimer analyst Mark Breidenbach has been following Synlogic, and is impressed with the PKU program.
“While we already knew that 50% (4/8) of patients responded to treatment, the oral ICIEM presentation highlighted new data not included in the company’s September press release—including the magnitude of the responses. Given more granularity on the study population and SYNB1618’s efficacy, we are increasingly convinced that the drug can induce meaningful, sustained reductions in serum Phe—and we believe SYBN1934 could do even better. In light of these data, we believe Synlogic’s PKU program could become a viable alternative to SoC drugs including Kuvan [competing treatments],” Breidenbach noted.
In line with these comments, Breidenbach rates SYBX an Outperform (i.e. Buy), with a $7 price target that indicates potential for ~198% upside going forward. (To watch Breidenbach’s track record, click here)
Again, we’re looking at a stock with a unanimous Strong Buy consensus rating – Synlogic’s stock has garnered 5 reviews, all positive. The shares are trading for $2.42 and their $7.67 average price target shows a 226% upside going forward. (See SYBX stock analysis 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.