With the new year just days away, it’s time to start looking for the best portfolio picks for the future. Last year was a disaster for investors and leaving the 2022 bear market behind us will be a relief, but finding solid picks for big gains will still require a high risk tolerance.
Fewer equity segments are riskier – or more potentially rewarding – than penny stocks. Priced under $5 a share, these low-cost stocks offer investors the ability to double their money or more. The combination of a low share price and high upside potential means pennies are always worth a closer look.
Of course, there is also the risk. Stocks trade at extremely low prices for a variety of reasons, and sometimes those low prices are justified by poor prospects. Separating the wheat from the chaff here will take some effort, but Wall Street analysts are up to the task and have selected two penny stocks that are poised for outsized gains as we head into 2023.
According to the TipRanks database, these are Strong Buy stocks that offer tremendous upside potential of 200% or more. Let’s take a closer look.
Clearside Biomedical, Inc. (CLSD)
We’ll start with Clearside Biomedical, an eye health company that focuses on new treatments for eye diseases. The company has therapeutic agents in development, clinical and commercial stages, which gives it, from an investor’s perspective, more shots on target. The company has developed a new SCS injection technology, along with a line of small molecule therapeutic agents designed to make the most of this delivery route.
The commercial phase of Clearside, the FDA approved product is Xipere, an injectable suspension of triamcinolone acetonide. It is the first therapeutic agent approved for direct delivery into the suprachoroidal space and is marketed as a treatment for macular edema associated with uveitis. Clearside has seen several recent steps in connection with the commercialization of Xipere, including entering into a royalty agreement with HealthCare Royalty Partners and partner Bausch receiving a permanent reimbursement J-code used by commercial insurance companies and government payers in the US healthcare system – for provider billing in effect last July. The company is in the early stages of commercialization and revenues are, for now, mostly nominal.
Moving on to the pipeline, Clearside recently released very positive data on CLS-AX. This drug candidate is undergoing a Phase 1/2a study in the treatment of wet AMD; the data, based on cohorts 3 and 4, showed positive results in terms of safety, duration and biological effects, together with a significant reduction in treatment burden. The company expects to publish 6-month data from an extension study in 1Q23. Also, in the same quarter, Clearside plans to start a Phase 2 trial.
With Clearside shares changing hands at $1.00 each, Needham analyst Serge Belanger sees an attractive entry point for investors.
“In our view, the results from cohorts 3 and 4 of the OASIS study establish that CLS-AX is a bona fide TKI treatment candidate that is delivered via a safe and unique outpatient procedure (suprachoroidal release) and has demonstrated the ability to deliver durability and efficacy with a clean safety profile. CLSD ended 3Q22 with ~$53MM cash, which should fund the planned Phase 2 trial and provide the runway for 2024. We believe CLSD’s current valuation falls short of capturing the potential of CLS-AX and is significantly lower than peers with retinal disease activity in stage 2 development,” Belanger commented.
Numbering his optimism here, Belanger gives CLSD stock a $5 price target, suggesting a powerful 400% upside potential next year and fully supporting his Buy rating on the stock. (To look at Belanger’s track record, click here)
Overall, Clearside recently garnered 5 unanimously positive analyst reviews, for a Strong Buy consensus rating. The $6.40 average price target is even more bullish than Needham’s view and indicates 540% upside potential over a year. (See CLSD stock predictions on TipRanks)
Melting pharmaceuticals (FUSN)
We will now turn to the oncology field and look at Fusion Pharmaceuticals. This early-stage biotech researcher is working on new radiation therapies for cancer treatment. Fusion has a pipeline of three drug candidates in clinical stage plus one in preclinical development. The company uses a proprietary platform and technology, TAT, or Targeted Alpha Therapies, in its development work, and aims for a safer approach to radiopharmaceuticals.
The lead drug candidate in the pipeline is FPI-1434, under investigation as a treatment for solid tumors expressing IGF-IR. The company is investigating two dosing regimens in a Phase 1 study and plans to report safety, pharmacokinetic and imaging data, including antitumor activity trials, during 1H23. Once the phase 2 monotherapy dose is determined, the company expects to start a phase 1 combination study with Keytruda within 6 to 9 months.
Other clinical studies include an open-label Phase 1 clinical study of FPI-1966 as a treatment for FGFR3-expressing solid tumors. The study will examine safety, tolerability, and pharmacokinetics with the goal of determining the appropriate Phase 2 dose. Patient enrollment and dosing in the Phase 1 study is ongoing. Finally, the company remains focused on initiating a Phase 1 study for FPI-2059, which received FDA clearance for clinical trials last June. This drug candidate is a targeted alpha therapy for various solid tumors, with prostate, colorectal, and pancreatic cancers suggested as particular lines of study.
Maintaining a large and active clinical trial pipeline doesn’t come cheap, but Fusion is blessed with deep pockets. The company reported that it had $205.5 million in cash and other liquid assets on its balance sheet at the end of 3Q22, enough to maintain operations through the third quarter of 2024.
Wedbush 5-Star analyst David Nierengarten details multiple impending catalysts for Fusion, seeing them as the most important factor for investor consideration and says, in part, “The primary short-term catalyst for equities remains the Ph1 data, including safety, PK, and imaging data from its ongoing study of FPI-1434 in patients with solid tumors… We expect to see increased activity for FPI-1434 when the data is read at 1H23.. We continue to believe FUSN is significantly undervalued at current levels and see a favorable risk/reward ratio for equities in light of the upcoming reading for FPI-1434.”
Nierengarten goes on to assign FUSN stock an Outperform (aka Buy) rating, with a $12 price target implying a robust 336% upside over the next 12 months. (To look at Nierengarten’s track record, click here)
It’s clear from aggregated reviews that Wall Street generally agrees with Wedbush’s opinion on this stock. The Strong Buy consensus is based on 4 positive analyst reviews and the $9.50 average price target suggests a one-year upside potential of 245% from the current $2.75 share price. (See FUSN Stock Predictions on TipRanks)
To find good ideas for trading penny stocks at attractive valuations, visit TipRanks’ Penny Stocks screener.
Disclaimer: The views expressed in this article are solely those of the analysts featured. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.