Stocks with share prices under $5 (aka "penny stocks") are typically too risky to consider. The current economic environment, however, has pushed several intriguing, innovation-oriented companies into penny stock territory.
Which beaten-down innovation stocks are worth checking out right now? Although these names are still exceedingly high-risk, I think aggressive investors may want to consider buying shares of Precigen(NASDAQ: PGEN), Rigel Pharmaceuticals(NASDAQ: RIGL), and 23andMe Holding Company(NASDAQ: ME) right now. Read on to find out why these three low-priced equities might be a tremendous wealth escalator for patient shareholders.
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Precigen
Wall Street analysts expect big things from clinical-stage Precigen in 2023. The reason? The company's two core platforms, UltraCAR-T and AdenoVerse, are designed to solve key hurdles in cell and gene therapy. UltraCAR-T, for instance, could slash the vein-to-vein delivery time for next-generation anti-cancer cell therapies from weeks to a single day. AdenoVerse, on the other hand, has the potential to generate powerful new genetic therapies for a wide variety of hard-to-treat indications. As a result, analysts covering the stock think Precigen's shares could appreciate by as much as 264% over the next 12 months.
What's the risk? Like nearly every development-stage biotech company, Precigen will have to find creative ways to finance its operations in this harsh economic climate. Most likely, this financing issue will result in either a public offering or a licensing deal for one of its lead clinical candidates at some point in 2023. Now, a licensing deal would be preferable from a retail shareholder standpoint. But such a move would likely reduce the biotech's deep value proposition, depending on the terms of the agreement. That being said, Precigen does have enough value drivers in the pipeline to possibly be a home run play for risk-tolerant shareholders.
Rigel Pharmaceuticals
Rigel is a commercial-stage biopharma which has been trending upward of late. Since the start of the year, the company's shares have gained a healthy 23% by the time of this writing.
Rigel's stock has started to turn heads on Wall Street for a few reasons. First, the company scored a key regulatory win last month with the FDA approval of Rezlidhia for adults with relapsed/refractory acute myeloid leukemia with a susceptible isocitrate dehydrogenase-1 mutation.
Although the drug will face entrenched competition from Servier's Tibsovo, its best-in-class profile might translate into approximately $90 million in annual sales, according to some analyst estimates. That's a decent amount for a company with a $320 million market cap.
Second, Rigel's first commercial-stage drug, Tavalisse for chronic immune thrombocytopenia, has been performing admirably in the marketplace. Taken together, Rezlidhia and Tavalisse could push the company to break even from a cash-flow standpoint as soon as 2024.
Lastly, Rigel sports multiple upcoming clinical catalysts that might cause its shares to rocket northward over the next 24 months. As things stand now, the average analyst estimate has this small-cap biotech stock appreciating by a handsome 98% over the next 12 months.
23andMe
23andMe is a well-known genetic testing services company. Even so, the company's ongoing expansion efforts, which include a genomic health services business and a clinical research wing, haven't exactly been a hit with shareholders. Since its initial public offering (IPO), in fact, 23andMe's stock has shed roughly two-thirds of its value at the time of this writing.
What went wrong? 23andMe's business expansion plan is a long-haul journey. The company's genomic health services unit, which kicked into high gear with the acquistion of the virtual care and pharmacy provider Lemonaid Health in November 2021, could take five to perhaps seven more years to transform into a major revenue generator.
The problem is that this platform, while cutting-edge, doesn't exactly have a home in today's somewhat antiquated medical services sector. 23andMe's management, however, firmly believes that the integration of personal genetic data, telemedicine, and pharmacy services will eventually evolve into a disruptive force in healthcare.
On the clinical side, 23andMe has been leveraging its massive consumer genetic data base to discover and develop novel oncology therapies. This effort led to a 2018 research agreement with GSK -- an agreement that was extended in January of 2022. Unfortunately, this third pillar of 23andMe's value propostion probably won't yield any needle-moving results in the short term.
What's the bottom line? Wall Street's consensus price target imples that this genomic healthcare stock could rise by 136% by 2024. The problem is that the company doesn't have any obvious catalysts within this time frame to achieve this goal. That being said, 23andMe does stand out as a strong buyout candidate thanks to its attractive valuation, industry-leading consumer genetic database, and foray into the realm of personalized medicine.
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George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends GSK. The Motley Fool has a disclosure policy.
