2020 saw many analysts and investors explore penny stocks. These stocks, which trade at less than $5 per share, lure investors as even a small price gain can translate to a massive return in percentage. That said, due to the high level of speculation and significant risk involved, many feel that penny stock investing is akin to gambling.
However, that’s not always true as there are several penny stocks which analysts believe have strong potential to grow into promising businesses. So, it is prudent for investors to understand that while the potential for gains is massive, they could possibly lose their entire investment if things go wrong.
Keeping in mind the high rewards and risks involved, our focus shifted to two penny stocks, Medicenna and Aileron. Using the TipRanks Stock Comparison tool, we wanted to see which one offers a more compelling investment opportunity.
Medicenna Therapeutics (MDNA)
First up is clinical-stage immunotherapy company Medicenna. The Canada-based company is focused on unlocking the full potential of biological molecules called interleukins (a subset of a larger group of cellular messenger molecules called cytokines) and developing engineered interleukins called Superkines for treating cancer.
The company is working on creating its therapies using interleukins from three major families: IL-2, IL-4 and IL-13. Medicenna’s lead programs are MDNA11 and MDNA55.
The IL-4 empowered Superkine, MDNA55, has completed a Phase 2b clinical trial for recurrent glioblastoma (rGBM), the most common and uniformly fatal form of brain cancer. It has obtained fast-track and orphan drug status from the US FDA and FDA/EMA (European Medicines Agency), respectively. MDNA now intends to execute a partnership for a registration trial and commercialization of MDNA55 for recurrent GBM. (See MDNA stock analysis on TipRanks)
Meanwhile, MDNA11 is a long-acting IL-2 Superkine that has been designed to preferentially bind the IL-2 beta receptor (IL-2Rβ) on immune cells and become a powerful switch for activating and proliferating the immune cells needed to fight cancer. The company anticipates that MDNA11 will be ready for the clinic in 2021.
Covering Medicenna for Oppenheimer, Matthew Biegler noted that Medicenna is developing a pipeline of next-generation cytokines that are designed to be “safer and more efficacious” than Proleukin, as well as many competing new IL-2 variants.
Biegler recently initiated coverage of Medicenna with a Buy rating and a price target of $12 and stated that the company’s lead product, MDNA11, has a best-in-class preclinical profile that could set it apart from a pack of competing cytokine therapies.
“As a base case, we assume MDNA11 could be successfully developed in indications where Proleukin is already approved, but see many opportunities for upside. A second asset, MDNA55, has been evaluated in a Phase 2 trial in glioblastoma multiforme (GBM), where it delivered encouraging responses and prolonged survival relative to historical controls, which we think justifies further development,” added Biegler.
The Street has three other analysts aside from Biegler who are bullish on Medicenna. Overall, the stock scores a Strong Buy analyst consensus and an average price target of $9.94, which implies a 158% upside potential from current levels.
Aileron Therapeutics (ALRN)
Aileron Therapeutics Inc is a clinical-stage biopharma company that is focused on developing a novel chemoprotective medicine to protect against multiple chemotherapy-induced side effects.
The company is advancing ALRN-6924, its investigational dual MDM2/MDMX inhibitor currently in clinical development, to provide a single medicine to protect multiple healthy cell types in the body from chemotherapy while ensuring that chemotherapy continues to destroy cancer cells.
In October, Aileron presented positive clinical data from the trial, demonstrating clinical proof-of-concept that treatment with ALRN-6924 resulted in a protective effect against severe anemia, thrombocytopenia and neutropenia in patients with p53-mutated small cell lung cancer (SCLC) treated with topotecan. It plans to report additional results from the ongoing Phase 1b proof-of-concept clinical trial of ALRN-6924 in patients with SCLC receiving topotecan in the first quarter of 2021.
The company now expects to initiate a Phase 1b randomized, placebo-controlled clinical trial of ALRN-6924 in patients with advanced non-small cell lung cancer (NSCLC) receiving first-line carboplatin doublet chemotherapy in the second quarter of 2021, thus advancing ALRN-6924 clinical development into a large cancer indication. (See ALRN stock analysis on TipRanks)
In a research note to investors, Jones Trading analyst Soumit Roy recently pointed to G1 Therapeutics’ TNBC trial, in which trilaciclib showed improved myelopreservation by moving from 3L (third-line) to 1L (first-line) SCLC. Roy expects to see a similar degree of clinical improvement in Aileron’s ALRN-6924 as it migrates from 2L/3L in SCLC to 1L NSCLC.
Roy noted, “Latest data set presented at this Triple meeting is from – 24h dosing schedule, and allowing for ALRN-6924 administration 6h prior to chemo infusion could significantly help with the adoption rate. We would like to see if there is any additional protection from severe neutropenia at -6h dosing schedule.”
The 5-star analyst reiterated a Buy rating on Aileron with a $5 price target given “the risk/benefit at current low implied valuation.”
Overall, Aileron scores a Strong Buy analyst consensus based on 4 unanimous Buys. Shares have risen a staggering 85% year-to-date and the average price target of $4 indicates a major upside potential of 277% from current levels.
Conclusion
Both Medicenna and Aileron are working on promising therapies in the field of oncology. These companies are expected to report additional favorable data on their lead candidates in the coming year. Based on higher upside potential, Aileron looks to be the better pick among the two penny stocks. That said, a word of caution for investors would be to consider the high risk involved in penny stock investing.
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment
