The phrase “penny stocks” refers to shares of companies trading under $5. These stocks can be a low-cost alternative to blue-chip stocks. Recently, investors have seen a lot of bullish interest in the market and, specifically, with biotech. The focus on biotech stems from the coronavirus pandemic, which has put many new eyes on the stock market in general.
In April, biotech stocks continue experiencing volatility, with the latest trend being consolidation. Does this mean penny stocks aren’t worth it if they’re involved with the biotech industry? Not necessarily, and many traders have begun looking for names that have followed this consolidation trend.Will Biotech Penny Stocks Rebound?
Take a look at some of the benchmark ETFs like the Nasdaq Biotechnology ETF (NASDAQ: IBB) and the S&P Biotech ETF (NYSE: XBI). While the broader indexes, including the Nasdaq and S&P, rallied on Friday – albeit on light volume – both XBI and IBB pulled into their 200-day moving averages. This level (200DMA) has acted as an area of support for both biotech ETFs in 2021.
The biggest question now is, will the latest consolidation trend in the broader sector end up becoming an opportunity to capitalize on consolidation? Also, will this trend reverse heading into the second quarter? Furthermore, since the 200DMA has previously acted as support, will it do so once again? All things to keep in mind if you’re looking at the bigger picture right now from a technical perspective.
When trading penny stocks or even investing in them, a few things need to be noted. Companies with solid prospects will be much more attractive to investors. It would help if you also looked at current trials and how close they are to commercialization. If the company is producing something related to the pandemic, it can also be useful to note. That’s the hot trend right now and one that traders continue reacting to.Penny Stocks To Buy [or avoid]
No matter what, proper research is fundamental when buying any stock, let alone penny stocks. Many experienced traders will tell you that volatility comes with the territory. Yes, the risk can be high, but so can the reward.
This article will highlight three biotech penny stocks that have seen some consolidation in April after a strong start to the year. After reading, I’ll leave it up to you to decide whether or not you should avoid these entirely or if they’ll become good penny stocks to buy in the second quarter?
- Citius Pharmaceuticals (NASDAQ: CTXR)
- Asensus Surgical Inc. (NYSE: ASXC)
- Genetic Technologies Limited (NASDAQ: GENE)
This company develops and commercializes critical care products. In early March, Citius showed off some of its product candidates. One of these was stem cell therapy for COVID-19 related acute respiratory conditions. This was presented at the H.C. Wainwright Global Life Sciences Conference in early March.
Executive Chairman at Citius Pharmaceuticals, Leonard Mazur, told website Benzinga that he had invested $26.5 million of his own money into the pharmaceutical company now. Another announcement made by Citius is its phase 3 clinical trial of Mino-Lok. This is an antibiotic lock solution to treat patients with catheter-related bloodstream infections.
Leonard Mazur, Executive Chairman, added, “This pivotal trial is progressing according to plan, and we expect full enrollment this year. The antibiotic lock solution market is large and substantially underserved, with an estimated market opportunity of $750 million in the U.S. and over $1.5 billion worldwide.”
While CTXR stock is experiencing some ups and downs, the company has several things in its pipeline. Furthermore, with a Phase 3 clinical trial product on deck, any positive updates or progress reports could be important, especially if CTXR is on your list of penny stocks to watch. Since the company expects full enrollment this year, it will be interesting to see how much headway is made on the road to the Mino-Lok platform’s potential commercialization.Asensus Surgical Inc.
For some, when the volume is low for a penny stock, they will avoid trading it entirely. This is not always the best decision to make, as large companies with a lot going on can see lower volume on certain days. Asensus could be a perfect example of this. While it has experienced a rough month in the market, it is still up significantly in 2021. Asensus is a medical device company that researches, develops, and sells medical robotics that enhance minimally invasive surgery.
In mid-March, Asensus reported its operating and financial results for the fourth quarter and full year of 2020. Some of the highlights were significant for investors to note. This includes performing the first pediatric trials utilizing its Senhance Surgical System. This is the first time that 3 mm instruments have been used in robotic pediatric surgery.
The CEO and President of the company Anthony Fernando said, “This momentum continued into the early part of 2021 where we have already accomplished a number of significant milestones, including the bolstering of our balance sheet, the rebranding of the organization, and the introduction of our vision for Performance-Guided Surgery.”
The company plans to continue the adoption of Senhance and to expand the capabilities of its surgical assistance framework. For those with this on their list of penny stocks to watch, there could be a few milestones to consider during the first half of 2021. One of these was outlined in its March earnings update. Specifically, the company plans on filing for FDA 510(k) clearance for articulating instruments and for next-generation ISU features. It also expects to publish clinical papers in peer-reviewed journals on its system in robotic surgery.Genetic Technologies Limited
As mentioned in the intro, companies related to COVID-19 developments have seen a large increase in attention over the last year. Genetic Technologies is a perfect example of this. Normally the company provides predictive testing and assessment tools for women’s health.
But now, Genetic Technologies has shifted its focus to COVID-19 risk tests. The company solidified co-exclusive production and distribution rights and license agreement with Infinity BiologiX LLC. In particular, Infinity is a leading central laboratory that offers processing and support services for the production, distribution, and sale of Genetic’s COVID-19 Serious Disease Risk Test in the US.
On April 9th, the company provided an update to the market on this test’s commercial availability. Genetic Technologies stated that it completed all validation and data-based analysis for the test in a recent update.
It is currently working towards making it commercially available all across the United States. What’s more, this test will allow people to know their personal risk of catching a severe case of COVID-19 is. The CEO of Genetic Simon Morriss added, “Alongside existing treatment options and vaccines, we believe this test will enable more insightful decisions for states, workplaces, and individuals on pathways forward in managing this pandemic.”
IBX must make minimum payments to Genetic, totaling $2.9 million over the initial 3-year term, to maintain exclusivity. This includes an initial upfront payment of $50k followed by minimum payments totaling $850k in the first year. Then $1.0 million is to be paid in each of the second and third years. Given the clear focus of traders on COVID stocks right now, GENE could be one to watch after this latest update.Are Penny Stocks Worth The Risk?
Obviously, anytime there’s a pullback, some questions get asked. Is this the end of the line? Will these penny stocks recover? Are these penny stocks actually worth the risk? Needless to say, when it comes to low-priced stocks, volatility will always play a role. But once you get past that, a lot can come down to fundamentals. When we’re talking about biotechnology companies, things like phase trials and pipeline developments are important things to consider when judging future potential.
[Learn More] Are Penny Stocks A Good Investment In 2021?
Considering this, it’s up to you to decide if the latest consolidation trends are tradable or if they should be avoided entirely. Just make sure to keep your risk tolerance in mind and have a clear understanding of what trading penny stocks like these entails.