The dog days of summer have come to a close, and investors want to know what the fall has in store for the market. August was kind to the stock market, with the S&P 500 gaining more than 7% in the month. This impressive performance marked the index’s best return for the month since 1984. But have stocks surged enough for now?
No, so says one investment firm. Oppenheimer, which earns a top spot on TipRanks’ list of Top Performing Research Firms, has locked in on what it argues are exciting opportunities among penny stocks. These penny stocks are names that won’t break the bank, and boast colossal growth prospects for the 12 months ahead.
These tickers going for less than $5 apiece are tricky, so some due diligence is necessary. Using TipRank’s database, we got all of the details to see why these penny stocks are so compelling even with the risk involved.
- Baudax Bio (NASDAQ:BXRX)
- aTyr Pharma (NASDAQ:LIFE)
- Amyris (NASDAQ:AMRS)
Penny Stocks: Baudax Bio (BXRX)
Source: luchschenF / Shutterstock.com
First up we have Baudax Bio, which is a pharmaceutical company focused on developing and commercializing innovative products for acute care settings. With shares changing hands for around $3.23, Oppenheimer believes that the share price presents an attractive entry point.
Writing for the firm, analyst Leland Gershell tells clients that following its June 1 launch, Anjeso (IV meloxicam) “is showing signs of early but clear commercial progress in the face of COVID-19 headwinds.” To back up this statement, he cites formulary wins, a supply agreement with a major group purchasing organization (GPO) and a deal with a large integrated delivery network (IDN).
Looking more closely at Anjeso’s initial uptake, outpatient centers represent the majority. According to Gershell, this bodes well for the company as “the approval process tends to be simpler and faster vs. large hospital systems, and reflects BXRX’s ‘outside-in’ detailing strategy.”
The analyst added, “Operating room anesthesiologists and surgeons (including general and orthopedic), as well as interventional pain specialists, are expressing interest in Anjeso as a differentiated non-opioid analgesic for moderate-to-severe acute pain that can be readily incorporated into multimodal combinations.”
As for the GPO agreement, Vizient’s network is comprised of more than half of U.S. acute care providers, 95% of academic medical centers and over 20% of ambulatory care providers, with this representing over $100 billion in annual purchasing volume. “Agreements with additional GPOs should follow. Direct purchase agreement with a top-3 IDN lays the groundwork for Anjeso inclusion into standard surgical order sets for member institutions,” Gershell commented.
Adding to the good news, starting Oct. 1, a unique HCPCS J-code assigned to Anjeso is set to take effect. This code will be used by all physician’s offices, ambulatory surgery centers (ASCs) and hospitals for reimbursement, standardizing and simplifying product access.
If that wasn’t enough, data from a Phase 3b study of Anjeso given just prior to colorectal surgery showed that there were statistically significant reductions in opioid use, as well as time to bowel function recovery and hospital discharge, which resulted in cost savings. To this end, even though the pandemic has “slowed P&T committee reviews as well as decreased rates of certain procedures,” he is optimistic that BXRX will outperform over the next 12 to 18 months beyond penny stocks.
It should come as no surprise, then, that Gershell stayed with the bulls. He puts an “outperform” rating and $11 price target on the stock. Should this target be met, a 12-month gain of 207% could be in the cards.
Turning now to the rest of the Street, other analysts echo Gershell’s sentiment. Three buys and no holds or sells add up to a “strong buy” consensus rating. Based on the average price target of $11.67, the upside potential comes in at a whopping 226%.
aTyr Pharma (LIFE)
Using an innovative approach, aTyr Pharma translates biology into cutting-edge therapies designed to improve patient outcomes. Given the resumption of some of its clinical activity and its $3.95 share price, it’s no wonder Oppenheimer is pounding the table.
Five-star analyst Hartaj Singh points out that the Phase 1b/2a trial of lead candidate, ATYR1923, in pulmonary sarcoidosis (PS) has resumed enrollment, with LIFE expected to announce a readout timeframe when the enrollment wraps up. “We anticipate a topline proof-of-concept (PoC) readout in 1H21. Kyorin Pharmaceutical (aTyr’s partner) also initiated ATYR1923 in (P1) healthy volunteers in Japan this week,” the analyst stated.
That being said, the therapy’s potential goes even further. The Phase 2 trial of ATYR1923 in novel coronavirus patients with severe respiratory complications is progressing on track, with a top line readout set to come by YE20.
Part of what makes the therapy stand out is its unique mechanism of action, which makes it well suited for use in treating severe respiratory complications, in Singh’s opinion. Importantly, based on the therapy’s preclinical model in ARDS, the analyst argues LIFE could potentially establish PoC efficacy data in Covid-19 prior to PS.
This prompted Singh to comment, “We believe ATYR1923’s ‘blue sky scenario’ in COVID-19 patients looks promising, given the lack of novel targeted therapies for severe respiratory complications by SARS-CoV-2 and other triggers… We see a likelihood that, under such a rigorous trial design, positive data could potentially get ATYR1923 an emergency use authorization without having to expand into a full Phase 3.”
If that wasn’t enough, Singh thinks LIFE’s NRP2 science has “significant opportunities beyond the current pipeline. This could be expanded into additional inflammatory/fibrotic lung diseases and cancers in 2021.”
Expounding on this, Singh said, “Expected by YE20 is an IND monoclonal antibody aTyr will declare from its Neuropilin-2 (NRP2) antibody program. Multiple NRP2 antibodies demonstrated anti-tumor effects; one of them (aNRP2-10) blocked VEGF-C binding to NRP2, exhibiting increased sensitivity to chemotherapy in preclinical models of triple-negative breast cancer (TNBC).”
All of this led Singh to keep his bullish call and $12 price target as is. This target conveys Singh’s confidence in LIFE’s ability to soar 204% in the next year, putting it on this list of penny stocks.
What do other analysts have to say? Only “buy” ratings, three to be exact, have been received in the last three months, so the consensus rating is a “strong buy.” The $13.33 average price target suggests 237% upside potential.
Amyris Inc. (AMRS)
Amyris, which engineers, manufactures and sells sustainably sourced products into the health and wellness, clean skincare and the flavors and fragrances markets, takes the last spot on our penny stocks list. Based on its impressive bio-manufacturing platform and $3.40 share price, Oppenheimer thinks it’s time for investors to get in on the action.
The firm’s Colin Rusch tells clients the “underlying growth story driven by the technology platform and product offerings remain intact.” This is evidenced by its 36% year-over-year recurring revenue growth in Q2 despite Covid-19-related production and demand headwinds.
Rusch added, “AMRS still expects to grow revenue 80% year-over in 2020 as the company is seeing a healthy balance of ingredient demand as well as consumer activity with its clean beauty brands. We will be looking for evidence of adjuvant customer activity, which may prove transformative for AMRS.”
Reflecting another positive, AMRS is managing costs in a number of ways. On top of reducing cash interest expense by roughly $30 million per year with the recent debt retirement and restructuring, the company has seen the low-point on manufacturing margins with the Covid-19 related shutdowns and low utilization now behind it, in Rusch’s opinion. “Last, we believe the company has flattened OpEx and will enjoy significant operating leverage going forward,” he also said.
This combined with the fact that AMRS is still expected to become EBITDA positive in Q4 2020 keeps Rusch “constructive on shares.”
But what else makes AMRS so promising? “Besides the core ingredient and clean beauty growth, we are encouraged to see traction in its Purecane product as well as progress in discussions for its adjuvant capabilities for the vaccine market,” Rusch said.
Through its Advanced Strain Engineering (ASE) platform and its relationship with Infectious Disease Research Institute (IDRI), the company is looking to enter a large new market, namely the vaccine market. Amyris is getting exclusive license and rights to IDRI’s RNA platform covering Covid-19 and three other indications.
Rusch noted, “We will be looking for continued progress in product sales and reaching key milestones in its development agreements to trigger revenue recognition.”
To this end, Rusch remains optimistic about the company’s long-term growth narrative. As a result, he reiterated his “outperform” rating. The price target was kept at $9, implying shares could gain 165% in the next 12 months.
Looking at the consensus breakdown, two buys and no holds or sells have been published in the last three months. Therefore, AMRS gets a “moderate buy” consensus rating. The $10 average price target indicates shares could skyrocket 194% in the next year.
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