How to Find The Best Biotech Penny Stocks to Buy in 2021
Biotech penny stocks have become some of the most popular stocks to watch in 2021. This began at the start of the pandemic after many leading penny stocks in the biotech industry fell in value substantially. While this made sense given the nature of the pandemic, it was disheartening for all investors. Quickly, however, many leading companies involved in either a treatment or a vaccine began to push up in value.
This includes non-penny stocks like Johnson & Johnson (NYSE: JNJ), Moderna Inc. (NASDAQ: MRNA), and BioNTech ADR (NASDAQ: BNTX). Additionally, penny stocks like Enzolytics Inc. (OTC: ENZC) and more. Since that time, many investors have switched their focus from Covid-related biotech stocks to other stocks in the biotech industry regardless of their involvement in Covid. Because of this, it’s worth understanding what makes them different from the entire list of penny stocks, and how to trade them.
While it can be self-explanatory if you already buy and sell small caps, there are some nuances for every investor to consider. This includes what to look for in a biotech penny stock, current market trends, and understanding what makes them move. So to go further into depth, let’s take a look at three trading tips and seven biotech penny stocks to watch.
3 Trading Tips For Biotech Penny Stocks Investors
- What to Look For in a Biotech Penny Stock
- Current Biotech Market Trends
- Understanding Why Biotech Stocks Move
What to Look for in a Biotech Penny Stock
When looking for a biotech penny stock to watch, there are a few things to keep track of. The first and arguably the most important is what’s in its pipeline. Does it have any compounds or medical tech devices that are approved? How far are they in the approval process and are any of them commercialized? These are extremely important as they tell how far a company is from profitability or at least a consistent revenue stream.
The next factor to consider is what its financial situation is. Most biotech companies will not turn any revenue until a product is either fully commercialized or licensed out to another company for production. So you might be wondering how they operate in the meantime? The answer is simple.
Through either dilutive or non-dilutive financing measures, biotech companies can raise substantial amounts of capital. We often see large share sales, bought-deal offerings, or share offerings that bring in hundreds of millions of dollars. While capital is important to any company, biotech businesses need it in order to keep operations running. And, if we consider how expensive and time-consuming the FDA approval process is, this makes even more sense. So, both of these factors should always be in mind when looking for a biotech stock to watch.
Current Biotech Market Trends
Biotech Companies Involved in a Covid Treatment or Cure
One of the leading market trends over the past year and a half has been biotech penny stocks involved in a Covid treatment or cure. This makes sense given the massive effects of the pandemic on the biotech industry and the stock market as a whole. But, while the first thought may be vaccine-related companies, there are plenty of others working on treatments that are not as well known.
This includes those such as Atossa Therapeutics Inc. (NASDAQ: ATOS), which only just left penny stock territory, as well as many others. Atossa produces a compound known as AT-301, which is an intranasal spray given to those recently diagnosed with SARS-CoV-2. This could be a major breakthrough for early Covid cases, and ATOS stock is only recently getting the attention it deserves.
One thing to keep in mind is that companies involved in Covid are highly speculative in relation to any Covid related news. This makes sense and could be quite obvious, but it is something to consider. Of course, there are less volatile Covid-related stocks, but the majority of them tend to trade with at least some degree of correlation to the pandemic.
Non-Covid-Related Biotech Companies
This category includes all other biotech companies and has received a great deal of attention as the focus has shifted onto biotech as a whole. As stated earlier, it’s important to keep in mind all of the normal factors we consider when investing in penny stocks. However, with biotech, this can differ greatly. One of the largest ways that we can break this huge category down is by size.
On one hand, we have the bigger biotech penny stocks. This includes those with several commercialized products, large partnerships and acquisitions, and sizable revenue streams. These companies tend to be quite popular and are always worth watching.
But, on the other side, we have less well-known biotech penny stocks. These could be younger companies or those with only one or two products in the pipeline. The small companies can be worth looking into, but they do tend to be highly speculative based on any and all recent news.
With these, investors should understand what the potential market size for a product is, and how close that compound is to commercialization. Or if not commercialization, at the least, how close it is to progressing through the FDA trials. Whether big or small biotech penny stocks are your thing, there is no doubt that there is a lot of potential in the biotech industry as a whole. It all comes down to knowing where to look.
7 Biotech Penny Stocks to Watch
- vTv Therapeutics Inc. (NASDAQ: VTVT)
- Opko Health Inc. (NASDAQ: OPK)
- Intec Pharma Ltd. (NASDAQ: NTEC)
- Ocugen Inc. (NASDAQ: OCGN)
- Citius Pharmaceuticals Inc. (NASDAQ: CTXR)
- Jaguar Health (NASDAQ: JAGX)
- Zosano Pharma (NASDAQ: ZSAN)
Are Biotech Penny Stocks Worth it or Not?
The short answer to this question is that it all comes down to what type of trader you are. On one end of the spectrum, those who are more risk-averse may want to avoid smaller-name biotech penny stocks. These tend to be highly volatile, and riskier than most.
However, if risk is what you’re after then these companies may be right for you. As you can see, understanding what your portfolio goals are, and how to use them to your advantage, will always be your best friend in the stock market. Considering all of this, are biotech penny stocks worth it or not?