Penny Stocks – How News Makes These Small Caps Soar or Plunge
Penny stocks, securities with share prices under $5, offer investors a chance at exponential returns with little upfront investment. However, investing wisely in penny stocks requires research as their prices fluctuate wildly around key events.
What Defines Penny Stocks?
Penny stocks typically trade outside major exchanges under $5 per share, with many priced below $1. The companies represent very small market capitalization levels, sometimes tens of millions instead of billions for large corporations. Over-the-counter markets like OTCQB and Pink Sheets offer easy listing access but have less regulation and financial transparency than major exchanges like Nasdaq or NYSE. However, there are plenty of cheap stocks on major exchanges to watch in the stock market today.
Rewards and Risks – Volatility Around Events
The highly speculative nature that allows penny stocks to jump or dive 50% or more in minutes cuts both ways for investors. On the upside, prices can exponentially surge at velocity unseen elsewhere over a single major contract, clinical trial, or strategic move. However, hidden deficiencies in management or financial reporting often emerge as well, triggering total loss. With tight stop losses essential, penny stocks epitomize the high-risk, high-reward investing ethos.
News Sparks Big Moves
The famous saying that a “small leak can sink a great ship” reflects penny stocks perfectly. While blue chips fluctuate 2-3% on significant news, cheap stocks regularly gap 20-30% overnight around pivotal events. Announcements like breakthrough lab data, surprise regulatory approvals or denials for core products, acquisitions talks, and quarterly results eclipsing or falling short of expectations can all massively impact share prices in low-priced stocks.
Finding the Next Big Movers
While penny stock investing feels like searching for pre-surge lottery tickets, certain resources help highlight opportunities. Screeners can filter by technical and fundamental indicators to spot uptrends right before public announcements. Meanwhile, penny stock forums on sites like InvestorHub offer raw insights and rampant speculation around future moves for undiscovered companies. Lastly, investor relations PR wires help surface the flurries of press releases that often slip under the mainstream radar.
Evaluating News in Penny Stocks
When evaluating penny stocks to buy around news events, exercise caution before investing and never risk more than you can afford to lose. Verify company management has integrity and capabilities to capitalize on catalysts, read the direct filings and data firsthand when possible, and set disciplined stop losses. While hits come rarely, the penny stocks that spike 1,000% or more on landmark achievements make the risks worthwhile for many.
Penny Stocks to Watch
- Aclaris Therapeutics (NASDAQ: ACRS)
- Checkpoint Therapeutics, Inc. (NASDAQ: CKPT)
- 2seventy bio, Inc. (NASDAQ: TSVT)
- G1 Therapeutics, Inc. (NASDAQ: GTHX)
Aclaris Therapeutics (ACRS)
The clinical-stage biopharmaceutical company develops novel drugs for immuno-inflammatory diseases. Aclaris has a diverse portfolio of drug candidates, primarily addressing unmet medical needs in this niche. One of the recent catalysts giving ACRS stock a bump is post-market news on Tuesday.
Aclaris announced an exclusive patent license agreement with Sun Pharmaceutical Industries. The agreement grants Sun Pharma exclusive rights to certain patents for deuruxolitinib and other forms of ruxolitinib. These drugs are used to treat alopecia areata and androgenetic alopecia. The deal includes a $15 million upfront payment, plus regulatory, commercial milestones, and royalties. Aclaris licenses these patents from a third party and owes a portion of the proceeds to them.
On the heels of this news, ACRS stock jumped during post-market trading. Coincidentally, the move also comes just a few weeks after HC Wainwright cut its price target from $43 to $9. Despite this as fact and the firm maintaining a Buy rating, the $9 ACRS stock price forecast is still considerably higher than current levels.
Checkpoint Therapeutics, Inc. (CKPT)
Another clinical-stage company, Checkpoint Therapeutics, is focusing on immunotherapy and targeted oncology. They specialize in developing novel treatments for various cancers, including cutaneous squamous cell carcinoma (cSCC). Something that has helped prompt momentum in CKPT stock is more news.
The U.S. Patent and Trademark Office issued a new patent to Checkpoint Therapeutics for a method of treating various cancers, including cSCC, using cosibelimab. This complements an earlier composition of matter patent specifically covering cosibelimab. These patents protect Checkpoint’s anti-PD-L1 antibody, cosibelimab, in the U.S. through at least May 2038, excluding any potential patent term extensions under the Hatch-Waxman Act.
Cosibelimab is currently under review by the FDA as a potential new treatment for patients with locally advanced and metastatic cSCC. A Prescription Drug User Fee Act (PDUFA) goal date for cosibelimab is set for January 3, 2024. With this date quickly approaching, it may have become a source of speculation for traders.
2seventy bio, Inc. (TSVT)
This immuno-oncology company develops therapies in immuno-oncology, focusing on a range of hematologic malignancies and solid tumors. Their research and development efforts are concentrated on next-generation cellular therapies, including the first FDA-approved CAR T cell therapy for multiple myeloma.
2seventy bio recently targeted its efforts around maximizing shareholder value. The company initiated a process to evaluate all options to enhance value, emphasizing a commitment to making their therapies available to patients, driving shareholder value, and supporting their employees.
This news comes after Bristol Myers Squibb (NYSE: BMY) and 2seventy bio announced an update on the FDA review of a supplemental Biologics License Application for Abecma (idecabtagene vicleucel). This application concerns earlier lines of therapy for triple-class exposed relapsed or refractory multiple myeloma (RRMM). The FDA’s Oncologic Drugs Advisory Committee (ODAC) will review data from the Phase 3 KarMMa-3 study.
G1 Therapeutics, Inc. (GTHX)
G1 recently presented new data from a post hoc analysis of their Phase 2 trial. It involves metastatic triple negative breast cancer (mTNBC) patients. This analysis focused on the long-term positive survival impact of treatment with trilaciclib in combination with cytotoxic chemotherapy (gemcitabine/carboplatin; GCb). The results were showcased at the 2023 San Antonio Breast Cancer Symposium (SABCS).
Dr. Raj Malik, Chief Medical Officer at G1 Therapeutics, highlighted that these findings demonstrate trilaciclib’s ability to protect the bone marrow and immune system from the adverse effects of cytotoxic therapy. This protection may lead to improved survival outcomes for patients receiving subsequent anticancer therapies.
The significance of these findings is underscored as G1 Therapeutics continues to evaluate the impact of trilaciclib on long-term endpoints, including overall survival, in their ongoing pivotal Phase 3 mTNBC trial, PRESERVE 2. The interim overall survival analysis from this trial is expected next quarter. As this period approaches, it has become a source of speculation for the market.
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