Benzinga published a list of six biotech penny stocks, identifying Evelo Biosciences, Vivo Therapeutics, Molecular Templates Vaccinex, Sonnet BioTherapeutics Holdings, Minerva Surgical, and Precigen as potential investment opportunities. The article by Chris Davis frames this selection against a backdrop of intense market speculation driven by the COVID-19 pandemic, noting that investors are actively seeking profits in the sector despite the high risks associated with low-priced shares.
The publication argues that the current climate mirrors the rapid growth seen in the 1990s internet boom, suggesting that the next major industry leader could emerge from biotechnology. Davis points to large-cap firms like Novavax, Co-Diagnostics, Inovio, Moderna, Pfizer, and Johnson & Johnson as examples of companies that capitalized on media attention and clinical trial updates. While these larger entities are not penny stocks, the article posits that their success inspires smaller firms to pursue rapid growth, initial public offerings, and increased funding.
Historical context provided in the piece traces modern biotechnology to 1973, when scientists used recombination to genetically engineer an antibiotic-resistant strain of Escherichia coli. This development led to the founding of Genentech in 1976, the first publicly-owned biotech company. Genentech began as a research initiative without marketable products but eventually produced a human-based form of insulin. The founders started with an investment of $1,729 and took the company public in 1980 by raising $35 million. In 2009, Roche acquired Genentech for $46.3 billion. This trajectory is used to illustrate the potential for small startups to become significant industry players.
The Biotechnology Innovation Organization (BIO), formed in 1993 when investors began recognizing biotechnology as a distinct market sector, is cited as the largest biotech trade organization in the world. BIO has lobbied the U.S. government for small business inclusivity and intellectual property rights, policies that directly affect small-cap and penny stocks by allowing startups more room for speculative research and development.
Davis cautions that penny stocks are notoriously volatile and that the combination of this volatility with the biotech industry creates significant risk. The article warns that while some stocks may appear to be sure things, they are closer to zero than to the valuations of large-cap peers. It advises investors to look past coronavirus headlines and evaluate a company's management team and research process instead. The text notes that not every company will succeed and that the vast majority of biotech penny stocks are not winners. Investors are urged to be patient and prepared to exit positions if necessary, as companies can cycle in and out of relevance quickly depending on health emergencies or other market factors.